Abstract

http://ssrn.com/abstract=2343367
 


 



The Effects of Charge-Price Transparency Regulation on Prices in the Healthcare Industry


Hans Bonde Christensen


University of Chicago - Booth School of Business

Eric Floyd


Rice University

Mark G. Maffett


University of Chicago - Booth School of Business

September 30, 2015

Chicago Booth Research Paper No. 14-33

Abstract:     
Using micro data on actual healthcare purchases, we provide evidence on the causal effects of charge-price transparency regulation (PTR). Exploiting both between- and within-state variation to address endogeneity concerns, we find that PTR causes providers to reduce charges by approximately 6%. However, these reductions do not lead to lower actual payments, even for price sensitive patients or in cases where contracts often link payments directly to charges, indicating little (if any) welfare implications. Cross-sectional variation in the estimated treatment effect suggests that the reputational costs of perceived overcharging rather than increased consumer search explain the reduction in charges. While prior research finds that market-based transparency initiatives can lead to lower prices, our results illustrate how the healthcare industry’s complex, heterogeneous pricing structure makes it difficult to achieve similar benefits through regulation.

Number of Pages in PDF File: 55

Keywords: Transparency regulation, Healthcare prices, Search costs

JEL Classification: A10, I11, K32, L15


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Date posted: October 22, 2013 ; Last revised: October 13, 2015

Suggested Citation

Christensen, Hans Bonde and Floyd, Eric and Maffett, Mark G., The Effects of Charge-Price Transparency Regulation on Prices in the Healthcare Industry (September 30, 2015). Chicago Booth Research Paper No. 14-33. Available at SSRN: http://ssrn.com/abstract=2343367 or http://dx.doi.org/10.2139/ssrn.2343367

Contact Information

Hans Bonde Christensen
University of Chicago - Booth School of Business ( email )
5807 South Woodlawn Avenue
Chicago, IL 60637
United States

Chicago Booth School of Business Logo

Eric Floyd
Rice University ( email )
6100 South Main Street
Houston, TX 77005-1892
United States
Mark G. Maffett (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Chicago Booth School of Business Logo

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