The case for hospital price transparency rests on a model of market competition that most hospital markets do not resemble.
In introductory microeconomics, price transparency reduces information asymmetry and enables buyers to seek the lowest-cost supplier. Prices fall; allocation improves. But that model applies to markets with many sellers, easily substitutable products, and informed buyers. Hospital markets in the United States are, as the FTC’s hospital merger retrospectives have repeatedly documented, oligopolistic. Many metropolitan areas are dominated by two or three large systems. Procedures are not homogeneous. Buyers—employers, insurers, patients—operate under structural constraints that limit their ability to act on price information.
In this environment, economists have long warned that transparency can facilitate coordination. When oligopolistic competitors can observe each other’s prices, they need not communicate explicitly to maintain above-competitive pricing. Published rates become focal points around which competitors’ strategies converge. The mechanism is subtle and rarely provable in court—which is precisely why it is underappreciated in policy discussions of price transparency.
The empirical evidence on healthcare-specific transparency is mixed. A 2014 study of the New Hampshire HealthCost program found that price transparency in a market with low concentration reduced prices. Other analyses of transparency interventions in more concentrated markets have found price increases or no effect. The direction of the transparency effect appears to depend on market structure—which is exactly what economic theory would predict, and exactly what the architects of the CMS rule seem not to have adequately weighted.
MedPricer.org’s rate data, now spanning multiple years of CMS-mandated disclosures, provides a novel basis for examining this question empirically. If negotiated rates in highly concentrated hospital markets have risen faster since 2021 than rates in less concentrated markets—controlling for procedure mix, payer mix, and macroeconomic factors—that would be evidence consistent with the transparency-as-coordination hypothesis. The analysis is not simple. It requires linking MedPricer data to market concentration measures (typically derived from CMS enrollment and utilization data) and controlling for hospital-level characteristics that independently predict rate growth.
But the analytical infrastructure now exists to do it. Before 2021, researchers examining this question had to rely on claims data obtained through laborious data use agreements or on the limited transparency data available from states like New Hampshire, Massachusetts, and California that had their own disclosure regimes. National-scale analysis was essentially impossible.
The policy implications of the coordination hypothesis are uncomfortable for transparency advocates. If the dominant effect of rate disclosure in concentrated markets is upward price convergence rather than competitive discipline, then the appropriate policy response might be not more transparency but stronger antitrust enforcement—or rate regulation. These are not proposals that enjoy broad political support.
There is a separate phenomenon worth distinguishing from tacit collusion: the floor effect. When hospitals can observe that their peers are receiving higher rates from a given payer, they use that information in contract negotiations to demand parity. This is not coordination in the technical antitrust sense, but it is a mechanism by which transparency can inflate rather than deflate rates. The American Hospital Association’s own advocacy materials have noted that hospitals use benchmarking data to ensure their rates are competitive—a framing that elides the question of competitive with respect to what.
For MedPricer users who are journalists or policy analysts, this suggests a specific investigative frame: not whether a hospital’s rates are high, but whether its rates have converged toward competitors’ rates since transparency disclosure began. Convergence in concentrated markets—particularly convergence upward—is the signature of a coordination dynamic, and it is exactly what both antitrust enforcers and sophisticated health policy analysts should be monitoring.
The paradox is genuine and unresolved. Price transparency may simultaneously reduce prices in competitive markets and increase them in concentrated ones—which describes approximately the distribution of actual hospital markets in the United States.
