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Consumer Responses to Price Transparency Alone versus Price Transparency Combined with Reference Pricing

Christopher Whaley (), Timothy Brown and James Robinson
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Christopher Whaley: RAND Corporation, Berkeley Center for Health Technology, and School of Public Health, University of California, Berkeley
Timothy Brown: Berkeley Center for Health Technology and School of Public Health, University of California, Berkeley
James Robinson: Berkeley Center for Health Technology and School of Public Health, University of California, Berkeley

American Journal of Health Economics, 2019, vol. 5, issue 2, 227-249

Abstract: Efforts to spur patient price shopping by providing access to price transparency tools have been met with limited success. One potential reason is the absence of financial incentives. This paper uses data from a large employer that implemented a price transparency platform and subsequently implemented a reference pricing program for laboratory and diagnostic imaging tests. We find no price shopping effects when the price transparency tool is offered alone. However, combining price transparency with reference pricing leads to significant shifts in consumer choice of facility, resulting in a 27 percent reduction in the average price paid per laboratory test and a 13 percent reduction in price paid per imaging test. A variety of public and purchaser initiatives have sought to further the development and adoption of price transparency tools. Our results imply that these tools will capture the attention of consumers, and influence their behavior, only if patients have strong financial incentives to care about prices.

Keywords: price transparency; reference pricing; price variation (search for similar items in EconPapers)
JEL-codes: D83 I11 I13 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:ucp:amjhec:v:5:y:2019:i:2:p:227-249