Price transparency in healthcare: Bargaining incentives and patient responses

This paper studies the impact of price transparency on healthcare prices, using a natural experiment involving the gradual disclosure of medical procedure prices on a state-run website. The study finds that negotiated allowed amounts decreased by 5.1% for surgical procedures and 9.1% for radiology procedures, which have higher average allowed amounts and attracted more price requests on the website. In contrast, for lab procedures, the evidence is mixed and does not point to a clear effect. The observed reductions are primarily driven by provider-insurer negotiations rather than patient price shopping. Price reductions were consistent across all providers and insurers, regardless of whether their prices were listed on the transparency website, and extended to providers in neighboring states.