Market characteristics that drive consumer shopping behavior: evidence from the launch of a statewide charge transparency tool

There is a growing consensus that the often high and opaque prices of health care services in the US both contribute to high overall health spending and impose direct burdens on consumers, especially those who intentionally or inadvertently use services outside their insurer networks. Price transparency has been touted to be able to lower costs by encouraging consumer choice of lower cost care and generating price competition amongst providers. In September 2017, FAIR Health (which was founded in 2009 to create a database of charge data for healthcare procedures) released a consumer shopping tool, NYHOST, which displays individual provider charges (list prices) for common procedures in each of New York State’s 3-digit geozips, as well as average insurer allowed amounts and educational resources on a publicly-accessible website. A randomized experiment was embedded within the website design to reveal provider-level information for a randomized set of geozip-procedure pairs. The launch of the tool provided an opportunity to examine the value of market-wide transparency tools that reveal list prices (charges) for out-of-network care. We utilized an extract of the FAIR Health claims database; the data represents claims from plans that cover 90% of the commercially insured population of New York State from January 1, 2016 through March 31, 2018, for the 104 codes for which information on provider level billed charges is available in either all or some geozips.

Of the searches, the majority of searches were for medical and surgical services while dental services accounted for 22% of all searches. Surgeries accounted for the largest share of procedures searched: orthopedic procedures, including hip and knee replacement, back surgery and fractures (14.4%), gastrointestinal procedures, including colonoscopy and endoscopy (5.3%), dermatology procedures (6.5%), cardiovascular procedures (1.5%), and other surgeries (9%). Of the codes searched on the NYHOST website, only about a quarter of searches were included in a published classification of “shoppable services,” while the majority of searches were for more emergent services not usually classified as shoppable.

We found that consumers appeared to use the tool strategically and market characteristics affected shopping behavior. Consumers searched more in procedure markets with provider-specific price information availability, more frequent out-of-network utilization, higher charges, significant charge dispersion, and substantial provider competition. Demographic characteristics of service users were also associated website use; there were more searches in a given geozip if users of that procedure in that geozip were disproportionately women and young adults (19-34). We found substantial evidence that provider-level price information is valuable; areas and procedures randomized for release of physician level charges were more likely to exhibit utilization of the tool.

In conclusion, consumers use the tool for shoppable services, which may help contain provider pricing, but even more to assess prices for emergent services, perhaps as an ex-post negotiating tool in response to surprise bills. In addition, shopping behavior appears to respond to the level and variance of costs of services in the market and the availability of local competitors offering the same service.