Announcement of Public Workshop, "Examining Health Care Competition" ("Health Care Workshop") Project No. P13-1207
If the FTC adopts a policy that entails granting direct incentives to healthcare providers for utilizing transparent pricing, both the consumers and providers of healthcare may ultimately benefit greatly through increased competition and reduced healthcare costs. The reasoning that drives this argument is primarily grounded in the evidence found in the price transparency efforts that have been made outside of the healthcare industry. In 2008, the Congressional Research Service (CRS) released a sweeping report titled "Does Price Transparency Improve Market Efficiency? Implications of Empirical Evidence in Other Markets for the Health Sector" and reviewed a number of price transparency studies emanating from outside of the healthcare industry and explained how those studies' findings are translatable to the healthcare industry. In one study, the CRS showed that, by using price obfuscation and personal data collected on their customers, Amazon.com secretly charged different prices to different people through a strategy known as "dynamic pricing". This discriminatory activity only changed when this practice was publicized and their customers expressed their outrage. This scenario shows the kind of consumer pricing abuse that can easily occur when there is no price transparency. In healthcare, this situation can be translated to the problem that exists when consumers approach hospitals for care and, due to a lack of price transparency, the consumers do not realize that their prospective bill may change depending on the type of insurance they have. The CRS also examined a study regarding the differential impact that is caused when the offering of transparent pricing to consumers occurs in one location but not in another location. Specifically, a study revealed that major market differences in grocery prices will arise in one city where there is a direct advertising campaign regarding the prices of groceries and in another city where there are no advertisements about grocery prices. This study showed that overall grocery prices will fall in the city with the price advertisements compared to the city without those advertisements. Not only do grocery prices decline with the increase in price transparency, but the variation in costs also declines because of increased competition that develops between grocers. This effect can also be applied to the problem of opacity in hospital services pricing. If hospitals offered their prices to the public, then people seeking care would shop around for the best deals and hospitals would have to lower their prices to remain competitive, and unnecessary price variations that presently exist would diminish. The problems generated by poor healthcare price transparency can be addressed by having the FTC adopt a policy that leads to the creation of a federal grant program with a renewable annual cap designed to directly incentivize healthcare providers to satisfy a series of universally agreed upon price transparency measures that are specifically crafted to promote competitiveness. This is an effective policy option because it involves the active cooperation of all stakeholders and encourages participation from healthcare providers in a way that will make them more amenable to adopting meaningful changes to their price transparency policies. Furthermore, this policy option is preferable because it does not require a controversial and burdensome mandate from the government that may create more problems than it would solve. The goal with this policy option is to convince so many healthcare providers to incorporate price transparency policies that those providers who resist adopting such measures are virtually compelled to in order to remain competitive in the healthcare market. Disclaimer: I am a student at Columbia University. However, this comment to the FTC reflects my my own personal opinions. This is not representative of the views of Columbia University or the Trustees of Columbia University.