Provider responses to online price transparency

Abstract

Price transparency initiatives have recently emerged as a solution to the lack of health care price information available to consumers. This paper uses the staggered and nationwide diffusion of a leading internet-based price transparency platform to estimate the effects of price transparency on provider prices. I find a 1–4% reduction in provider prices for homogenous services, laboratory tests, but find no price response for differentiated services, office visits. Price responses are driven by active consumer use of price information. This paper demonstrates how reducing consumer search costs can spur limited firm price competition in health care markets.