Price Transparency in Healthcare: Understanding the Impacts of the Price Disclosure Policy in Maine
Author(s) Information:
Minjung Kwon, Whitman School of Management
Lingling Zhang, China Europe International Business School
Journal (Year):
Production and Operations Management (2025)
Summary:
Price transparency lowers healthcare costs by prompting patient switching and stronger insurer negotiations, but it also widens market power gaps among insurers and providers.
Research Questions:
1. How does PTR (Price Transparency Regulation) change patient price sensitivity and provider choice?
2. How does PTR alter provider–insurer negotiations?
3. How much of the price reduction comes from patient switching vs. supply-side price cuts?
4. Who benefits most—and least—from PTR?
What What We Know:
U.S. healthcare prices are opaque, and stakeholders urgently need to know whether transparency actually lowers costs or creates unintended market distortions.
Novel Findings:
This study uniquely decomposes the price transparency regulation's impact into demand- and supply-side mechanisms and quantifies how competitive vs. non-competitive forces drive price changes.
Novel Methodology:
This study combines a natural experiment with a large-scale claim-level dataset and an integrated demand–supply modeling framework, enabling a causal, mechanism-level analysis of how transparency reshapes both consumer behavior and negotiated prices.
Implications for Practice:
Hospitals and insurers must adjust pricing, capacity, and contracting strategies to reflect more price-sensitive consumers and heightened competitive pressure.
Implications for Policy
Price transparency effectively reduces costs but also strengthens large insurers and popular providers, signaling a need for safeguards for smaller or less powerful stakeholders.
Implications for Society:
Consumers benefit from informed choice and lower costs, but unequal gains across the market raise concerns about fairness and access.
Implications for Research:
This work opens avenues to study transparency in other healthcare services and to explore how transparency interacts with quality information and market structure.
Full Citation:
Kwon, M., & Zhang, L. (2025). EXPRESS: Price Transparency in Healthcare: Understanding the Impacts of the Price Disclosure Policy in Maine. Production and Operations Management, 0(ja).
Abstract:
This research investigates the operational and competitive effects of Price Transparency Regulation (PTR) in healthcare through both theoretical and empirical lenses. We leverage the launch of Maine’s price transparency website as a natural experiment and construct a Difference-in-Differences model to identify causal effects. Our analysis links patient flow patterns, negotiation dynamics, and revenue management strategies, offering a unique opportunity to unpack the multifaceted impacts of PTR. We quantify three mechanisms. First, PTR reshapes patient flow: with access to price information, patients become more price sensitive and switch to lower-cost providers, explaining nearly half of the observed 2.74–percentage point reduction in average prices. Second, PTR reduces negotiated claim prices by intensifying market competition (the competition effect) while also interacting with non-competitive factors such as provider bargaining power. Competitive factors, particularly insurer size and provider appeal, explain 80.7% of these supply-side reductions, while non-competitive factors account for the remaining. Third, the benefits are unevenly distributed: larger insurers capture greater reductions, while providers with strong patient appeal or broad service portfolios preserve pricing leverage. Together, these findings show that PTR reduces costs through both consumer switching and negotiation dynamics but also amplifies existing market imbalances, privileging larger stakeholders.
Web URL for the Article:
https://journals.sagepub.com/doi/10.1177/10591478251408901