Causal Price Discrimination: An Analysis of the Healthcare Costs Associated with Motor Vehicle and Transportation Collisions

Abstract

Because the prices paid for goods and services in the United States healthcare system are surprisingly opaque, hospitals could be indulging in unorthodox price discrimination practices. This study explores a specific brand of price discrimination in healthcare, one based on the cause of visit. Specifically, this study analyzes the healthcare costs associated with motor vehicle and transportation (MVT) collisions. Taking various cross-sections of the data, this study finds correlations between the characteristics of emergency room (ER) visits and the amount charged. Given control variables such as injury severity, insurance provider, hospital ownership, and procedure performed, the response variable, amount charged, is explored in terms of the observed variable, a binary indicator of whether the cause of visit is related to an MVT collision. MVT-related ER visits experience charges 220% higher at proprietary (private, for-profit) hospitals, as compared to at public hospitals, insinuating a price bias dependent on hospital ownership. MVT-related ER visits also experience charges 49.6- 56.4% higher than not-MVT-related ER visits, insinuating a price bias dependent on cause of visit. When MVT-related ER visits and not-MVT-related ER visits have the same injury severity, insurance provider, and procedure performed, MVT-related ER visits experience charges up to $10,000 higher { compelling evidence for causal price discrimination. By exploring causal price discrimination, this study allows for discussion on both hospital pricing behavior and the need for a consumer-centric, transparent healthcare system. Because the focus is on MVT-related ER visits, this study also addresses new technology, specifically Smart Driving Cars, as a solution for causal price discrimination specific to MVT collisions.