Price Transparency in Health Care: Impact, Impending Transformation, Competition Strategy, and Policy Implications

Abstract

We are at the edge of an imminent massive transformation in an industry sector that accounts for about 20\% of spending today, namely health care. This transformation will occur on account of emerging technologies for price transparency which will give decision-making stakeholders (e.g., patients and their advising physicians) timely access to accurate and personalized information about costs of care. Price transparency technologies are (and will be) as revolutionary in health care as Google and Amazon have been to shopping in general. While these technologies are motivated by the pressing need to reduce health care spending through price competition and reduction in market prices, these effects are by no means guaranteed. Achieving them will require careful design and implementation, but also prudent management and regulation that reflects an understanding of how market forces will interact with price transparency technologies to cause transformation in the nature of insurance plans, quality and variety of products and services, and business models and competition within price transparency technologies.

Keywords: Pricing, Transparency, Healthcare, Platforms, Search