Highlights

• This study investigates why specialist physician fees vary.
• We consider variation between patients, physicians, specialties, and other factors.
• We find variation between physicians dominates other sources.
• Contrary to common beliefs, patient factors account for little of the variation.
• Our results inform policy to improve price transparency in specialist care market.

More context:

Although Australia has a publicly funded health system that provides universal health coverage, about 44 % of the population holds private health insurance. Specialist physician fees in the private sector are unregulated; physicians can charge any price they want, subject to market forces.

We find that patient risk factors account for a small portion of the variance in fees and out-of-pocket payments

Physician-specific variation, responsible for much of the variation in total fees and OOP payments, could include physician characteristics that patients value, such as bedside manner, experience or reputation, or factors related to physicians’ circumstances or preferences. A key physician-level factor that may drive the variation is the perception of quality or skill differences between physicians. This perception can come from either consumers or physicians themselves about their quality or skill levels in comparison to other physicians in the physician’s local market. […] which can lead to large price variation and non-transparency of fees.

Recommendations

The government, private health insurers and physicians themselves could all play a more active role than they currently do. The government, for example, could mandate the disclosure of price and quality information for all procedures that receive government subsidies, insurers could provide incentives for the disclosure of such information, and physicians could change their referral practice to give preferences to other physicians who are willing to be transparent about their prices and quality.