Price Transparency Brought Lower Costs, More Competition, Study Says

August 8, 2014
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Summary: What happens when prices are visible? Well, prices go down, and providers compete. So: health-care marketplace, are you listening? Here’s a brand-new study about price transparency from the influential journal Health Affairs.

price transparency“Price Transparency For MRIs Increased Use Of Less Costly Providers And Triggered Provider Competition…”

Summary: What happens when prices are visible? Well, prices go down, and providers compete. So: health-care marketplace, are you listening? Here’s a brand-new study about price transparency from the influential journal Health Affairs.

price transparency“Price Transparency For MRIs Increased Use Of Less Costly Providers And Triggered Provider Competition…”

We often hear from people who want us to know that revealing prices will make prices rise: that providers, in other words, seeing high-priced competitors, will raise their prices to match those higher ones.

This flies in the face of logic, since we all know transparent marketplaces benefit consumers. Look at airline ticket sales, car sales, real estate sales — all much more transparent now that prices have become visible.

So we were interested in this recent study published in Health Affairs. Here’s the abstract; full article is behind a paywall.

“To encourage patients to select high-value providers, an insurer-initiated price transparency program that focused on elective advanced imaging procedures was implemented. Patients having at least one outpatient magnetic resonance imaging (MRI) scan in 2010 or 2012 were divided according to their membership in commercial health plans participating in the program (the intervention group) or in nonparticipating commercial health plans (the reference group) in similar US geographic regions.

“Patients in the intervention group were informed of price differences among available MRI facilities and given the option of selecting different providers. For those patients, the program resulted in a $220 cost reduction (18.7 percent) per test and a decrease in use of hospital-based facilities from 53 percent in 2010 to 45 percent in 2012.

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“Price variation between hospital and nonhospital facilities for the intervention group was reduced by 30 percent after implementation. Nonparticipating members residing in intervention areas also observed price reductions, which indicates increased price competition among providers. The program significantly reduced imaging costs. This suggests that patients select lower-price facilities when informed about available alternatives.” via Price Transparency For MRIs Increased Use Of Less Costly Providers And Triggered Provider Competition.

The authors: Sze-jung Wu, a senior research analyst at HealthCore, in Wilmington, Del.; Gosia Sylwestrzak, a research manager at HealthCore; Christiane Shah, a vice president for solution management at AIM Specialty Health, in Chicago, Ill.; and Andrea DeVries, a director for payer and provider research at HealthCore.

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