Open Access Journal Article

Does Higher Price Transparency Imply Lower Prices and Less Price Dispersion in Healthcare Markets? An Empirical Analysis of the Effects of Compliance with the Hospital Price Transparency Final Rule in the Greater Los Angeles Area

by Sebastian van Baal a,* orcid  and  Jordan M. Strang a
a
CBS International Business School, Cologne, Germany
*
Author to whom correspondence should be addressed.
JIE  2024, 24; 2(1), 24; https://doi.org/10.58567/jie02010003
Received: 8 February 2024 / Accepted: 30 March 2024 / Published Online: 24 April 2024
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Abstract

The Hospital Price Transparency Final Rule aims at reducing the cost of healthcare in the United States by making information about the prices of medical services more readily available to market participants. The economic rationale is that higher price transparency should reduce the level and the dispersion of prices by disincentivizing hospitals from charging higher prices than possible. Using data on 3789 prices for three diagnostic imaging procedures and on the compliance with the rule for 86 acute care hospitals in the Greater Los Angeles area, we test the hypothesis that price levels and price dispersion are lower among hospitals that are more compliant. We do not reject this hypothesis, although we do not observe strictly decreasing relationships in all analyses. Prices are lower at hospitals with high or medium compliance than at hospitals with low compliance, but there is not a clear difference between hospitals with high and hospitals with medium compliance. Prices are less dispersed among hospitals with high compliance than among hospitals with low compliance, but the evidence for hospitals with medium compliance is less clear. We conclude that high compliance with the Hospital Price Transparency Final Rule implies lower prices and less price dispersion among hospitals.

Keywords: Healthcare; Price Transparency; Information Provision; Market Results; Empirical Study;
Copyright: © 2024 by van Baal and Strang. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

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ACS Style
van Baal, S.; Strang, J. M. Does Higher Price Transparency Imply Lower Prices and Less Price Dispersion in Healthcare Markets? An Empirical Analysis of the Effects of Compliance with the Hospital Price Transparency Final Rule in the Greater Los Angeles Area. Journal of Information Economics, 2024, 2, 24. https://doi.org/10.58567/jie02010003
AMA Style
van Baal S, Strang J M. Does Higher Price Transparency Imply Lower Prices and Less Price Dispersion in Healthcare Markets? An Empirical Analysis of the Effects of Compliance with the Hospital Price Transparency Final Rule in the Greater Los Angeles Area. Journal of Information Economics; 2024, 2(1):24. https://doi.org/10.58567/jie02010003
Chicago/Turabian Style
van Baal, Sebastian; Strang, Jordan M. 2024. "Does Higher Price Transparency Imply Lower Prices and Less Price Dispersion in Healthcare Markets? An Empirical Analysis of the Effects of Compliance with the Hospital Price Transparency Final Rule in the Greater Los Angeles Area" Journal of Information Economics 2, no.1:24. https://doi.org/10.58567/jie02010003
APA style
van Baal, S., & Strang, J. M. (2024). Does Higher Price Transparency Imply Lower Prices and Less Price Dispersion in Healthcare Markets? An Empirical Analysis of the Effects of Compliance with the Hospital Price Transparency Final Rule in the Greater Los Angeles Area. Journal of Information Economics, 2(1), 24. https://doi.org/10.58567/jie02010003

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