In healthcare, transparency may affect prices, but not patients’ bills

Chuck Burke | Jul 27, 2018

Sections Public Policy

US hospitals are charging less in response to transparency regulation ...

Regulation of pricing transparency at US hospitals can give the appearance of lowering costs, but research suggests that the payments made by patients and their insurers for five representative medical procedures have not decreased, according to Chicago Booth’s Hans B. Christensen and Mark G. Maffett and University of California at San Diego’s Eric Floyd, a graduate of Booth’s PhD program.

Reduction in hospitals’ initial charges
Difference from hospitals unaffected by transparency policies, 2003–10

Illustration by Giorgio Donghi

... but patients’ bills aren’t shrinking accordingly

Christensen, Floyd, and Maffett argue that price-transparency policies focusing on hospitals’ initial charges ignore a more meaningful aspect of the billing process: the discounted rates for medical procedures that are privately negotiated between hospitals and insurance companies. Looking at billing data for more than 2 million instances of the medical procedures in the charts above, the researchers find that while initial charges decreased in places affected by transparency regulation, the negotiated payments ultimately paid by patients and their insurers did not significantly change—suggesting that the reduction in charges is being offset during that negotiation with insurers. The researchers say that while this practice might allow hospitals and policy makers to demonstrate responsiveness to public concern about rising health-care costs, it has little effect on the actual charges being paid.