The Only Prescription is Transparency: The Effect of Charge-Price-Transparency Regulation on Healthcare Prices

66 Pages Posted: 22 Oct 2013 Last revised: 1 Nov 2018

See all articles by Hans Bonde Christensen

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: October 23, 2018

Abstract

We examine the effect of charge-price-transparency regulation (PTR)—a common policy solution intended to curb rising healthcare costs—on hospitals’ prices. We find that although PTR does not affect payments or consumer search, it does cause hospitals to reduce charges by approximately 5%. The reputational costs of perceived overcharging appear to be one impetus for the reduction in charges, suggesting that certain stakeholders who are able to impose costs on hospitals are unaware that hospitals can decouple charges from payments. The ineffectiveness of PTR policies in reducing payments and the apparent inability of some stakeholders to realize this fact could explain why charge-transparency polices have been widely adopted with little opposition. Overall, our findings provide a cautionary note—transparency regulation focusing on an indicator that can be decoupled from the construct of interest might placate some stakeholders without actually solving the underlying problem.

Keywords: Transparency Regulation; Healthcare; Pricing Policies

JEL Classification: A10, I11, K32, L15

Suggested Citation

Christensen, Hans Bonde and Floyd, Eric and Maffett, Mark G., The Only Prescription is Transparency: The Effect of Charge-Price-Transparency Regulation on Healthcare Prices (October 23, 2018). 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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