• Sunita M Desai, Laura A Hatfield, Andrew L Hicks, Michael E Chernew, Ateev Mehrotra, and Anna D Sinaiko.
• Department of Population Health, NYU School of Medicine, 227 E 30th St, New York, NY 10016. Email: sunita.desai@nyu.edu.
• Am J Manag Care. 2019 Jul 1; 25 (7): e204-e210.

ObjectivesHealthcare payers are increasingly using price transparency and benefit design to encourage patients to choose lower-priced providers. We quantify potential savings from shifting patients to lower-priced providers. If there is limited price variation or if higher-priced providers command little market share, savings could be minimal.Study DesignUsing 2013-2014 commercial claims for 697,381 enrollees in California, we characterized within-market price variation and the relationship between providers' market shares and relative prices for 3 nonemergent, shoppable outpatient services: laboratory tests, imaging services, and durable medical equipment (DME). In a stylized policy simulation that holds provider price and utilization constant, we computed potential savings if patients who visited providers with prices above the median price shifted to the median-priced provider in their geographic market for the same service.MethodsObservational analyses.ResultsOf the service categories examined, laboratory tests had greatest within-market price variation (median coefficient of variation of 100% vs 87% for imaging services and 43% for DME). Roughly half of services (53%, 47%, and 54% for laboratory tests, imaging services, and DME, respectively) were billed by providers with prices above their market median. Shifting these patients to the median-priced provider in their markets could save 42%, 45%, and 15% of spending on laboratory tests, imaging services, and DME, respectively, together representing savings of 11% of total outpatient spending and 7% of the sum of inpatient and outpatient spending.ConclusionsSteering patients from higher- to lower-priced providers within geographic markets in targeted service categories could generate substantial healthcare savings.

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