The Impact of Offering Price Transparency on Outpatient Spending

Price transparency initiatives seek to capitalize on large cost variation across providers by empowering patients to obtain care from lower-cost providers.  Given patients are bearing a larger fraction of costs through increased deductibles, patients may have a financial incentive to engage in price shopping. Numerous price transparency initiatives have emerged recently. Despite this enthusiasm for price transparency, little is known about whether such tools decrease overall spending.

In a quasi-experimental analysis, we study the impact of offering a price transparency tool on individual-level outpatient spending, outpatient out-of-pocket spending, and switching to lower cost providers. Our study setting is introduction of a price transparency tool, the Truven Treatment Cost Calculator, to employees (and their dependents) of two large employers. The tool was introduced on January 1, 2012 by one employer and April 1, 2011 by the second, and significant promotional initiatives were undertaken.

We use Truven Health MarketScan Commercial Claims and Encounters database which comprises de-identified health insurance claims for self-insured employers and health plans. We also use the Truven Treatment Cost Calculator web log file which contains search data from the website. It identifies time and date of search as well as procedures or conditions searched.

Using a propensity score, matched difference-in-differences design, we compare annual patient-level outpatient spending and provider selection among employees who were offered a price transparency tool to individuals who were not offered the price transparency tool. Our intervention population consists of 149,244 employees. The control population comes from markets that are similar to the intervention in health care spending levels and trends.  The controls are selected via exact matching on health plan type (PPO, HDHP/CDHP) and deductible category ($0-500, 501-2500), and propensity score matching incorporates demographic and health characteristics.

Our outcomes of interest are outpatient spending, outpatient out-of-pocket spending, and substitution to lower-cost providers. Substitution to a lower-cost provider is measured as increased usage of free-standing ambulatory clinics compared to hospital-outpatient departments.

We do not find evidence that offering a price transparency tool leads to reduction in outpatient spending, outpatient out-of-pocket spending, or substitution to lower cost providers. In sub analyses on populations that may be more inclined to use a price transparency tool (high comorbidity and high deductible populations), we also do not find an effect of offering price transparency.

Examining search data suggest several factors may underlie the lack of an effect. First, use rates were low at about 12% in the year after tool introduction. Moreover, even among searchers, most searched services were priced well above most individuals’ deductibles. This highlights that patients may have limited opportunity to realize cost-savings by using a price transparency tool.

Our results suggest that price transparency alone may not be sufficient to reduce health care spending, but should be complemented with additional reforms. For example, alternate benefit structures such as reference-based pricing that expose individuals to the marginal cost of care may provide greater incentive to incorporate price information in their health care decision making.