Price transparency in the Dutch market-based health care system: did price dispersion for similar hospital services reduce over time?

Abstract

In market-based health care systems, insurers negotiate prices of hospital care products with providers. While few countries disclose these negotiated prices, in 2016, the Dutch government required the disclosure of insurer-provider negotiated prices for hospital products up to €885 - the maximum deductible in the Netherlands - to enhance price transparency. This aimed to increase price awareness among and price transparency for consumers, insurers, and providers, fostering price competition. We study if price dispersion for relatively homogeneous hospital care products decreased post-publication, resulting in price convergence. We used negotiated price data from three major Dutch health insurers on over 200 hospital products. Using descriptive statistics and linear regression, with the coefficient of variation (a measure of dispersion) regressed on the year, we examined the development of price dispersion and the occurrence of price convergence. Price dispersion for the studied sample of hospital products decreased by an average of 29% between 2016 and 2022. This decrease was not accompanied by a price level increase that was larger than expected based on general inflation. Regression analysis showed a significant negative association between year and the coefficient of variation, indicating price convergence. These findings support our hypothesis that price dispersion decreased after mandatory price disclosure. The government mandate potentially increased awareness of largely unexplainable price differences for products priced below €885, encouraging insurers and providers to reduce these through the negotiation process. The observed price convergence likely benefits patients, as it results in less random out-of-pocket payments across providers for the same hospitals products.