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

63 Pages Posted: 22 Oct 2013 Last revised: 11 Apr 2017

Hans Bonde Christensen

University of Chicago - Booth School of Business

Eric Floyd

University of California San Diego

Mark G. Maffett

University of Chicago - Booth School of Business

Date Written: April 10, 2017

Abstract

Using micro data on actual healthcare purchases, we provide evidence on the causal effects of charge-price transparency regulation (PTR). We find that, although PTR causes providers to reduce charges by approximately 6%, these reductions do not lead to lower actual payments. Variation in the estimated treatment effect across hospitals suggests that reputational costs of perceived overcharging, rather than increased consumer search, explain the observed reduction in charges. Taken together, our results indicate that providers can avoid the potential impact of PTR on profitability by altering charges without affecting payments, which suggests that price transparency regulation based only on charges could be a way for policy makers to give the appearance they are addressing rising healthcare costs without imposing significant costs on providers.

Keywords: Price Transparency Regulation; Pricing Policies; Nonprofit Accounting, Decoupling

JEL Classification: A10, I11, K32, L15

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 (April 10, 2017). Chicago Booth Research Paper No. 14-33. Available at SSRN: https://ssrn.com/abstract=2343367 or http://dx.doi.org/10.2139/ssrn.2343367

Hans Bonde Christensen

University of Chicago - Booth School of Business ( email )

5807 South Woodlawn Avenue
Chicago, IL 60637
United States

Eric Floyd

University of California San Diego ( email )

CA
United States

Mark G. Maffett (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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