Does Transparency Matter? The Impact of Provider Quality and Cost Information on Health Care Cost and Preventive Services Use

Abstract

Background: We tested whether provider quality and cost information had a meaningful impact on health care quality and costs at two large employers that introduced a transparent provider profiling system in 2006. Using retrospective claims from enrollees representing 3,928 covered lives in these two firms where the insurer was the sole provider of health insurance, we addressed two questions: 1) Did patients switch to higher quality and more efficient doctors when the provider rankings became available? 2) What is the effect of switching on total expenditures, out-of-pocket expenditures, and use of preventive services? Methods: We used nonlinear regression to identify factors associated with improvement in quality and cost efficiency of providers seen by covered enrollees. We used difference-in-differences regression to test the impact on expenditures and use of preventive services of those who switched to higher-rated physicians. Results: Age, illness burden, and female are positively associated with improvement in provider quality and efficiency. Provider portfolio improvement had a negative impact on expenditures, but the story with respect to prevention is mixed: preventive visits go up when the patient has an improved provider portfolio, but utilization of diagnostic screening procedures goes down. Conclusions: A common concern in medical markets is the lack of information for consumers to shop for health care. We find consumers exhibit behaviors that suggest they use such information when it is available and useful. These results suggest that consumers could process additional price and quality information to gain more value from their health insurance benefits.