Price Comparisons---Bidding Turn

Koslov and Jex 15 (Tara Isa Koslov, Acting Director of the Federal Trade Commission’s Office of Policy Planning, Elizabeth Jex, attorney advisor specializing in biopharmaceutical health policy in the Federal Trade Commission’s Office of Policy Planning, J.D. from Georgetown University, Federal Trade Commission, July 2, 2015. “Price transparency or TMI?” https://www.ftc.gov/news-events/blogs/competition-matters/2015/07/price-transparency-or-tmi)

But transparency is not universally good. When it goes too far, it can actually harm competition and consumers. Some types of information are not particularly useful to consumers, but are of great interest to competitors. We are especially concerned when information disclosures allow competitors to figure out what their rivals are charging, which dampens each competitor’s incentive to offer a low price, or increases the likelihood that they can coordinate on higher prices. Too much transparency can harm competition in any industry, including health care. Typically, health care providers (hospitals, outpatient facilities, physician groups, or solo practitioners) compete against each other to be included on a health plan’s list of preferred providers. 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.