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Will Price Transparency Benefit Consumers or Facilitate Antitrust Violations?

This past June, President Trump issued an Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First (“Order”), intending to increase price and quality transparency for American health care consumers. According to the Order,

patients often lack both access to useful price and quality information and the incentives to find low-cost, high-quality care. Opaque pricing structures may benefit powerful special interest groups, such as large hospital systems and insurance companies, but they generally leave patients and taxpayers worse off than would a more transparent system.

But whether greater transparency has any beneficial effect on consumer choices is equivocal at best. In fact, a recent study concluded that “[t]here is minimal evidence that making prices more transparent for consumers will drive healthcare value.”

On the other hand, and as the Federal Trade Commission (“FTC”) previously concluded, “[t]oo much transparency can harm competition in any market, including in health care markets.” This is because “some types of information are not particularly useful to consumers, but are of great interest to competitors.” In particular, when competitors have knowledge of what their rivals are charging, it both decreases the incentive to offer a lower price and increases the likelihood of coordinated behavior leading to higher prices.

Furthermore, health care providers typically compete against each other to be included on a health plan’s list of preferred providers. According to the FTC, “When networks are selective, providers are more likely to bid aggressively, offering lower prices to ensure their inclusion in the network. But when providers know who the other bidders are and what they have bid in the past, they may bid less aggressively, leading to higher overall prices.”

While the high cost of health care continues to be an issue, “transparency” may not offer much of a solution—and perhaps might exacerbate the problem.

©2020 Epstein Becker & Green, P.C. All rights reserved.

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About this Author

John Steren, Epstein Becker Law Firm, Health Care Litigation Attorney
Member

E. John Steren is a Member of the Firm in the Health Care & Life Sciences and Litigation & Business Disputes practices, in the Washington, DC, office of Epstein Becker Green. Mr. Steren devotes a significant portion of his practice to helping health care organizations manage the antitrust risks of joint ventures and other business arrangements. He also focuses his practice on other complex commercial and civil litigation matters.

202-861-1825
Patricia M. Wagner, Epstein becker green, health care, life sciences
Member

PATRICIA M. WAGNER is a Member of the Firm in the Health Care and Life Sciences and Litigation practices, in the firm's Washington, DC, office. In 2014, Ms. Wagner was selected to the Washington DC Super Lawyers list in the area of Health Care.

Ms. Wagner's experience includes the following:

Advising clients on a variety of matters related to federal and state antitrust issues 

Representing clients in antitrust matters in front of the Federal Trade Commission and the United States Department of Justice, and state antitrust authorities 

Advising clients on issues related HIPAA Privacy and security

Advising clients on issues related to state licensure and regulatory requirements

202-861-4182