Price Transparency and Healthcare Cost: An Evaluation of Commercial Price Variation for Obstetrical Services

Price transparency has gained momentum in commercial healthcare markets in an effort to educate consumers and influence purchasing decisions. The presumed outcome is lower healthcare costs to the consumer and reduced variation in service pricing. This research evaluates regional and carrier variation in commercial insurance reimbursement amounts for routine obstetrical (OB) services across Texas. The existence of variation in prices for routine services between carriers and/or regions suggests price transparency may be able to influence healthcare costs through consumer awareness. Four common obstetric procedures are analyzed: vaginal and cesarean delivery, and ultrasound pregnant first trimester and post first trimester. Results from weighted linear mixed models show significant variation in reimbursement amounts across carriers. Regional price variation is significant for vaginal and cesarean delivery; however, both ultrasound procedures show less evidence of regional variation. The potential impact of carrier market share and the concentration of OB providers is evaluated and found to have no significant effect on mean payment for any of the services studied. Reimbursement amounts vary significantly by insurance carrier, irrespective of market share or concentration of OB providers. This suggests price transparency policies may provide the needed impetus for reducing healthcare costs by expanding consumer awareness that encourage prices to regress to the mean.