Despite Transparency, New Hampshire Health Care Price Variation Remains

Findings Attributed to Lack of Provider Competition, Few Incentives for Consumers to Compare Prices

News Release
Nov. 11, 2009

FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON, DC—Price variation for certain outpatient medical procedures has not decreased in New Hampshire since the state launched the HealthCost price transparency program in early 2007, according to a study released today by the Center for Studying Health System Change (HSC) and funded by the California HealthCare Foundation.

Conducted by HSC and the New Hampshire Insurance Department, the combined quantitative/qualitative research examined the impact of public reporting of the bundled price, including physician and facility payments, for about 30 common services, mostly performed in hospital outpatient departments and freestanding facilities. Unlike most other state price transparency initiatives that only report hospital charges, HealthCost reports more useful provider-specific, insurer-specific median cost estimates for each service based on insurer claims data.

Despite the attention that price transparency has received from policy makers, there has been a dearth of research to date examining what effects, if any, public price reporting has on overall price levels and price variation across health care providers. When prices are transparent-publicly reported and known to all parties-price differences across providers can be expected to decrease as low-cost providers are motivated to raise prices and high-cost providers come under pressure to lower prices.

However, the study found public price reporting had no impact on price variation across providers, a result attributed in part to the lack of competition among providers and few incentives for consumers to compare providers based on price. As part of the study, HSC researchers interviewed New Hampshire insurers, hospitals, ambulatory surgery centers, imaging centers and policy experts to gain their perspectives on the impact of the HealthCost program.

"The study confirms that market dynamics, fueled by the respective market shares of hospitals and health plans, trump transparency," said Maribeth Shannon, director of the California HealthCare Foundation Market and Policy Monitor Program. "Publicly reporting negotiated prices seems to have little effect on price variability."

"Despite the lack of hard evidence, some observers suggested that HealthCost—along with other state price transparency initiatives—has helped to focus employer and policy maker attention on provider price differences and caused some hospitals to moderate their demands for rate increases," said Ha T. Tu, M.P.A., an HSC senior researcher and coauthor of the study with Johanna R. Lauer, a former HSC health research analyst.

Researchers focused on price variation rather than price levels because it is difficult, if not impossible, to compare pre-transparency and post-transparency prices and ascribe any observed difference to a particular price transparency program, because there are a multitude of other influences that might impact price levels. Such factors include competitive conditions, technological innovation and other policy initiatives and developments.

The study’s findings are detailed in a new HSC Issue Brief—Impact of Health Care Price Transparency on Price Variation: The New Hampshire Experience—available online at www.hschange.org/CONTENT/1095/. Other key findings include:

• The quantitative findings showing no change in price variation were consistent with the views of most representatives of health plans, hospitals and other provider organizations interviewed about their perspectives of the HealthCost program. The majority of respondents said that they had not expected or observed any significant impact of HealthCost on price levels and price variation, primarily because of weak provider competition throughout the state.
• Besides the lack of competition, nearly all respondents noted another key reason for HealthCost’s lack of impact on price variation: Most consumers have little or no financial incentive to comparison shop for health services. While high-deductible health plans have grown in New Hampshire in recent years, they still constitute a small share-about 5 percent-of the commercial insurance base.
• Highlighting the significant price differences between hospital outpatient departments and freestanding facilities for the same services, representatives from ambulatory surgical centers and imaging centers reported a slight but noticeable increase in new patients who mentioned selecting the facility for its low costs in the wake of HealthCost’s launch.
• Despite a relatively weak negotiating position, most of New Hampshire’s major insurers reported attempting to use HealthCost data to extract rate concessions from hospitals-for the most part unsuccessfully. When insurers have tried to use HealthCost data as evidence of high costs, hospitals have typically responded that the data are not recent enough to reflect current rates; the data are not accurate enough to capture actual rates; and/or the data present an incomplete, misleading picture because HealthCost covers only a small subset of services.

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded in part by the Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research.