Price Transparency in Healthcare: Understanding the Impacts of the Price Disclosure Policy in Maine

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 the negotiated claim prices by intensifying market competition (the competition effect) and through its interaction with noncompetitive factors such as provider bargaining power. Competitive factors, particularly insurer size and provider appeal, explain 80.7% of these supply-side reductions, while noncompetitive 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.