3.2.1 Pricing objective

The pricing strategy of hospitals varies depending on their purposes and objectives (Krentz and Jennings, Reference Krentz and Jennings1986). Krentz and Jennings (Reference Krentz and Jennings1986) identified several commonly used pricing objectives including profit maximisation, increasing market share, market skimming, maximising current revenues, target profit and promotional pricing. Establishing pricing objectives is a crucial and initial stage in the process of price development, regardless of the distinctive needs and resources available in hospitals (Benz, Reference Benz1988; Bonnici, Reference Bonnici1992). In the case of non-profit hospitals, the pricing objectives that financial managers aim to achieve are a reflection of their ambition to maximise net revenue, break even, generate target revenue and provide care for all patients requiring medical attention (Bauerschmidt and Jacobs, Reference Bauerschmidt and Jacobs1985). Benz's (Reference Benz1988) study acknowledges that an organisation's pricing objectives should align with its mission and goals and precede the pricing strategies of a hospital.

3.2.2 Pricing strategies

The importance of pricing indicates that pricing strategies are now a crucial element of any service delivery (Moore, Reference Moore1995). Increasing consumer price awareness, customer sophistication, deregulation and an expanding number of competitors have reignited interest in pricing strategies (McKinney, Reference McKinney1990). The healthcare sector has experienced a change in service pricing within the last decade. The three common pricing strategies are cost-oriented, demand-oriented and competition-oriented. The latter strategy can also be referred to as going-rate or imitative pricing (Krentz and Jennings, Reference Krentz and Jennings1986; McKinney, Reference McKinney1990). Various innovative pricing strategies have been discussed by scholars, including Illness Outcome Groups (IOGs) (Horowitz and Kleiman, Reference Horowitz and Kleiman1994), package pricing (Horowitz and Kleiman, Reference Horowitz and Kleiman1994; Tengilimoglu and Dziegielewski, Reference Tengilimoglu and Dziegielewski2000; Reinhardt, Reference Reinhardt2006; Tanwar et al., Reference Tanwar, Kumar and Mustafee2019) and reference pricing (Brown and Atal, Reference Brown and Atal2018; Nassiri et al., Reference Nassiri, Goodman and Mamani2020), marginal pricing and global budgets (Sutherland, Reference Sutherland2015; Malmmose et al., Reference Malmmose, Mortensen and Holm2018), pricing models for contracts (Teymourifar et al., Reference Teymourifar, Kaya and Ozturk2020), bundled payment pricing (Hellsten et al., Reference Hellsten, Chu, Crump, Yu and Sutherland2016) and cost accounting pricing models (Audibert et al., Reference Audibert, Mathonnat, Pareil and Kabamba2007; Thekkekara and Thiagarajan, Reference Thekkekara and Thiagarajan2019). Horowitz and Kleiman (Reference Horowitz and Kleiman1994) acknowledge that pricing strategies must reflect market competition realities and minimise financial risks for organisations. Therefore, if hospitals seek to progress in their pricing strategies, it is imperative that they focus more significantly on resolving operational, financial and information systems issues (Horowitz and Kleiman, Reference Horowitz and Kleiman1994).

3.2.3 Pricing practices

The service pricing literature frequently uses the terms ‘pricing strategies’ and ‘pricing practices’ interchangeably. As healthcare costs continue to rise, hospitals must have a defined strategic plan for analysing pricing practices. This requirement has been reiterated in the literature (Bonnici, Reference Bonnici1992; Kleimenhagen et al., Reference Kleimenhagen, Naidu and Pillari1994). Cross-subsidisation is the principal mechanism by which hospitals (David et al., Reference David, Lindrooth, Helmchen and Burns2014) subsidise unprofitable departments with profit-making departments. Mysterious within the literature, the pricing practice plays a critical role in compensating for inequities and distortions in existing health insurance coverage (Harris, Reference Harris1979). The literature provides anecdotal evidence of cross-subsidisation which is not thoroughly documented (David et al., Reference David, Lindrooth, Helmchen and Burns2014). Cross-subsidisation is defined by Harris (Reference Harris1979) as a kind of discriminatory pricing. This investigation reiterates that hospitals must deviate from the average cost pricing policy in a systematic way since it is not the most efficient pricing policy for them. Any optimal pricing policy should be based on marginal cost, co-payment rate, own price elasticity of demand, and the covariance between consumption and individual or social marginal utility of income. A study by Dittman and Morey (Reference Dittman and Morey1981) indicates that profit maximisation in a constrained hospital environment can cause cross-subsidisation.

Cost-shifting is a pricing strategy that has received extensive discussion in the literature on pricing (Dranove, Reference Dranove1988; Frakt, Reference Frakt2011; Robinson, Reference Robinson2011; Brown, Reference Brown2014, Malmmose et al., Reference Malmmose, Mortensen and Holm2018). This strategy involves using a differential pricing system to maintain profitability (Tompkins et al., Reference Tompkins, Altman and Eilat2006; Melnick and Fonkych, Reference Melnick and Fonkych2008). Research on cost-shifting within hospital settings has focused on price differences for insured and uninsured patients (Melnick and Fonkych, Reference Melnick and Fonkych2008; Woodworth et al., Reference Woodworth, Romano and Holmes2017). For cost-shifting to take place, the provider must have the ability to establish higher fees for some patients and lower fees for others (Freisner and Rosenman, Reference Freisner and Rosenman2009). A provider becomes restricted in doing so if an insurer decreases its reimbursement. However, providers shift costs solely when they cannot compensate their losses with cost or efficiency savings. The cost-shifting conduct is observable in hospitals that aim to maximise profits (Dranove, Reference Dranove1988). The practices have raised concerns among hospitals and insurance companies, although they are now less widespread than in past decades and not as significant a phenomenon of late (Frakt, Reference Frakt2011). It is important to note that the dynamic phenomenon of cost-shifting should not be confused with price discrimination, which is driven by differences in market power, as cost-shifting has a direct impact on prices charged (Frakt, Reference Frakt2011).

Cream-skimming is a practice that involves selecting patients based on characteristics other than their need for care and is well-documented in the literature (Newhouse, Reference Newhouse1984; Pauly, Reference Pauly1984; Matsaganis and Glennerster, Reference Matsaganis and Glennerster1994; Ellis, Reference Ellis1998; Barros, Reference Barros2003; Freisner and Rosenman, Reference Freisner and Rosenman2009; Berta et al., Reference Berta, Callea, Martini and Vittadini2010; Levaggi and Montefiori, Reference Levaggi and Montefiori2011; Cheng et al., Reference Cheng, Haisken-DeNew and Yong2015; Yang et al., Reference Yang, Chan, Cheng and Yong2020; Chen and Lang, Reference Chen and Lang2021; Kjøstolfsen et al., Reference Kjøstolfsen, Baheerathan, Martinussen and Magnussen2021). Cream-skimming involves selecting patients with lower-than-average costs in a prospective payment system such as a Diagnosis-Related Group (DRG), to maximise financial gains (Yang et al., Reference Yang, Chan, Cheng and Yong2020). Levaggi and Montefiori (Reference Levaggi and Montefiori2011) classify cream-skimming into horizontal and vertical categories. The limited evidence on cream-skimming practices highlights the need for further research to attain ample evidence.

3.3.1 Institutional factors

The hospital market is comprised of private for-profit, private not-for-profit and publicly owned and operated firms (Dranove, Reference Dranove1988; Duggan, Reference Duggan2000; Hsu, Reference Hsu2011). The pricing objectives differ depending on the hospital's ownership structure. For example, profit objectives can be attained by targeting either a return on investment or ‘satisfactory’ profit maximisation (Bonnici, Reference Bonnici1992), while non-profit objectives can be achieved by maximising net revenues (Heshmat, Reference Heshmat1992). Considerable emphasis has been placed on comprehending the pricing aims of non-profit healthcare facilities (Weisbrod, Reference Weisbrod1965; Bauerschmidt and Jacobs, Reference Bauerschmidt and Jacobs1985; Dranove, Reference Dranove1988; Heshmat, Reference Heshmat1992). A statistical analysis reveals that non-profit institutions charge more for their services than publicly owned hospitals (Hsia et al., Reference Hsia, Akosa Antwi and Weber2014). Additionally, for-profit hospitals charge more for interventions than any other facility (Hsia et al., Reference Hsia, Akosa Antwi and Weber2014). As public hospitals rely on tax funding to operate their services, pricing decisions are not vital for them.

Pricing practices for healthcare services are assessed according to the teaching and non-teaching status of hospitals, as evidenced by studies conducted by Newhouse (Reference Newhouse2003), White et al. (Reference White, Reschovsky and Bond2014), Burke et al. (Reference Burke, Khullar, Zheng, Frakt, Orav and Jha2019) and Kotwal et al. (Reference Kotwal, Abougergi and Wright2019). The findings suggest that teaching hospitals, which offer education and training for medical practitioners and treat complex cases, tend to be more costly than non-teaching establishments (Koenig et al., Reference Koenig, Dobson, Ho, Siegel, Blumenthal and Weissman2003; Hsu, Reference Hsu2011; Burke et al., Reference Burke, Khullar, Zheng, Frakt, Orav and Jha2019). Price variations also occur depending on the location where the service is provided. Prices differ depending on the services offered in various healthcare settings, including hospital outpatient departments. (Sledge et al., Reference Sledge, Tebes, Wolff and Helminiak1996; Hsu, Reference Hsu2011; Higgins et al., Reference Higgins, Veselovskiy and Schinkel2016; Babcock, Reference Babcock2019). Studies have shown that healthcare services provided in rural areas are generally less expensive than those in urban regions. However, in rural healthcare markets, prices can be higher due to lower patient volumes and increased overhead costs. Moreover, larger hospitals that offer numerous services may establish higher fees for their services in comparison to their smaller counterparts (Hsu, Reference Hsu2011). Therefore, the different fees for services can be attributed to variable pricing approaches based on the institutions' pricing goals.

3.3.2 Cost factors

To ensure efficient use of healthcare financial resources while maintaining price transparency, scholars have called for the development of strong cost accounting techniques (Tengilimoglu and Dziegielewski, Reference Tengilimoglu and Dziegielewski2000; Tompkins et al., Reference Tompkins, Altman and Eilat2006). Additionally, they have emphasised the importance of hospitals understanding their cost structures (Sutherland, Reference Sutherland2015). Much of the international evidence highlights the need for reliable cost-accounting techniques to support cost-based pricing (Raulinajtys-Grzybek Reference Raulinajtys-Grzybek2014). While Davis (Reference Davis1971) suggests that pricing should not always be based on costs, implementing a costing mechanism can facilitate transparent and efficient management of financial resources (Audibert et al., Reference Audibert, Mathonnat, Pareil and Kabamba2007). Additionally, such a mechanism is crucial for achieving revenue optimisation (Karaesmen and Nakshin, Reference Karaesmen and Nakshin2007). Therefore, there are current academic endeavours to implement costing methodologies comprising step-down approaches (Audibert et al., Reference Audibert, Mathonnat, Pareil and Kabamba2007) or bottom-up approaches (Sangwan et al., Reference Sangwan, Shankar, Sameer, Jagnoor, Pankaj and Rebecca2017; Thekkekara and Thiagarajan, Reference Thekkekara and Thiagarajan2019) and to construct cost models that encompass input expenses or service quantities to achieve the objective of cost-effectiveness in pricing (Tompkins et al., Reference Tompkins, Altman and Eilat2006). Activity-based costing in hospitals offers both value extraction and creation whilst enhancing healthcare service quality (Llewellyn et al., Reference Llewellyn, Begkos, Ellwood and Mellingwood2020).

Accurately measuring healthcare costs and gathering associated cost information is crucial for healthcare providers in both setting prices and arranging reimbursement (Krentz and Jennings, Reference Krentz and Jennings1986; Raulinajtys-Grzybek, Reference Raulinajtys-Grzybek2014). Hu (Reference Hu1971) studies the pricing behaviour of hospitals and uses maternity care as a case study to assess hospital costs. The provision of cost information for cost-plus pricing enables price setters to make informed decisions on resource allocation (Bahuguna et al., Reference Bahuguna, Guinness, Sharma, Chauhan, Downey and Prinja2020). Cost information comprises of fixed and variable costs, cost per care, costs related to outlier cases, costs specific to physicians, costs incurred per day of stay, payor-specific costs and so on (Horowitz and Kleiman, Reference Horowitz and Kleiman1994). Achieving pricing based on cost data is possible only when there is uniformity in cost calculation methods. However, cost-based pricing fails to consider the dynamics of a marketplace (Krentz and Jennings, Reference Krentz and Jennings1986).

3.3.3 Supply factors

Guerin-Calvert and Israilevich (Reference Guerin-Calvert and Israilevich2011) suggest that hospital prices are determined by both labour and non-labour factors associated with the supply of hospital resources. Provider service factors comprise of physicians providing specialty services at hospitals (Zuckerman et al., Reference Zuckerman, Waidmann, Berenson and Hadley2010) and physicians' practice type (Reschovsky et al., Reference Reschovsky, Hadley, Saiontz-Martinez and Boukus2011). Specialty physician services are a primary cost generator for hospital services (Feldstein, Reference Feldstein1970; Guerin-Calvert and Israilevich, Reference Guerin-Calvert and Israilevich2011). The rising costs of physicians have led to the proposal and development of pricing models to contain the expenses (Feldstein, Reference Feldstein1970) and to assess the impact of hospital–physician integration on costs (Baker et al., Reference Baker, Bundorf and Kessler2014). Various factors such as the structure of the healthcare delivery system, reimbursement systems, high consumer switching costs and differences in the training of physicians have been attributed to the increasing physician service prices (Sheiner and Cutler, Reference Sheiner and Cutler1999). Disagreements among medical professionals regarding treatments, financial incentives for physicians and the quantity of physicians in healthcare settings all have an impact on pricing for hospital physician services. Hospital costs also include the salaries and benefits of nurses, technicians and numerous other personnel (Guerin-Calvert and Israilevich, Reference Guerin-Calvert and Israilevich2011).

The provision of specialised clinical services by hospitals using high-tech services commands a higher price-cost margin, indicating an evident manifestation of price escalation (Dranove et al., Reference Dranove, Shanley and White1993). High and ever-increasing healthcare costs are mainly driven by ceaseless innovations in medical technologies for diagnosis and treatments (Bodenheimer, Reference Bodenheimer2005), invariably leading to price escalation. The pricing of hospital services is closely associated with the blend of services provided and the level and type of care offered by each hospital, thereby leading to regional variations in the costs of hospital services (Dranove et al., Reference Dranove, Shanley and White1993; Guerin-Calvert and Israilevich, Reference Guerin-Calvert and Israilevich2011).

3.3.4 Demand factors

The demand for healthcare services relies on a range of patient characteristics. Several quantitative studies have taken into account factors such as race, income, age, individual treatment preferences, marital status, education, employment and income levels. These characteristics influence demand and thus have an impact on healthcare pricing (Bonnici, Reference Bonnici1992; Sheiner and Cutler, Reference Sheiner and Cutler1999; Zuckerman et al., Reference Zuckerman, Waidmann, Berenson and Hadley2010; White et al., Reference White, Reschovsky and Bond2014). Moreover, scholars contend that specific geographical regions have comparatively weaker populations than others. The health status of a region's population can be evaluated based on various measurements, such as the percentage of smokers and individuals with hypertension, as well as rates of obesity, sedentary lifestyles, hospitalisation for hip fractures and incidences of heart attacks, strokes, gastrointestinal bleeding, surgeries for lung or colon cancers and myocardial infarction (Sheiner and Cutler, Reference Sheiner and Cutler1999; Zuckerman et al., Reference Zuckerman, Waidmann, Berenson and Hadley2010). The severity of a patient's health condition is a precursor to the level of care provided at hospitals and subsequently affects pricing.

The literature on hospital pricing of services based on case-mix has focused on payment reimbursements (Jencks et al., Reference Jencks, Dobson, Willis and Feinstein1984; Wiley, Reference Wiley1992; Oostenbrink and Rutten, Reference Oostenbrink and Rutten2006). For example, hospitals in developed countries have implemented prospective payment systems through DRGs that are based on the case-mix of patients. These classification systems have been found to lower healthcare costs (Lewis, Reference Lewis1984; Benz, Reference Benz1988; Corti et al., Reference Corti, Avossa, Schievano, Gallina, Ferroni, Alba, Dotto, Basso, Netti, Fedeli and Mantoan2018). Corti et al. (Reference Corti, Avossa, Schievano, Gallina, Ferroni, Alba, Dotto, Basso, Netti, Fedeli and Mantoan2018) have created a clinical group system that is risk-adjusted to account for variations in healthcare costs. Hof et al. (Reference Hof, Fügener, Schoenfelder and Brunner2017) posit that using case-mix to establish cost-efficiency highlights the uncertainty surrounding the price-setting protocols adopted by hospitals. This case-mix consists of a precise combination and number of patients, which, under the DRG pricing strategy, can potentially benefit healthcare facilities economically (Hof et al., Reference Hof, Fügener, Schoenfelder and Brunner2017).

3.3.5 Market structure

Hospitals demonstrate monopolistic market behaviour as they establish their prices by distinguishing their services on various parameters, including location, range of services, quality and level of sophistication (Dranove, Reference Dranove1988; Hsu, Reference Hsu2011). Scholars investigate how organisational changes, such as mergers and vertical integrations, impact the pricing of hospital services (Connor et al., Reference Connor, Feldman and Dowd1998; Melnick et al., Reference Melnick, Keeler and Zwanziger1999; Krishnan, Reference Krishnan2001; Haas-Wilson and Garmon, Reference Haas-Wilson and Garmon2011; Tenn Reference Tenn2011; Baker et al., Reference Baker, Bundorf and Kessler2014; Gowrisankaran et al., Reference Gowrisankaran, Nevo and Town2015). Connor et al. (Reference Connor, Feldman and Dowd1998) observe that merging hospitals horizontally and consequently changing their functions can lead to average cost savings, which, in turn, may have a dampening effect on the prices charged by such hospitals. Nonetheless, Tenn (Reference Tenn2011) verified an increase in inpatient prices post-merger. Anti-competitive mergers may cause prices for services to soar due to hospitals having increased market power (Baker et al., Reference Baker, Bundorf and Kessler2014). Prices for services in hospitals that have merged with different ownership types have increased, according to Melnick et al. (Reference Melnick, Keeler and Zwanziger1999). Therefore, mergers between hospitals can cause prices for the same services to be ambiguous compared to other hospitals. We found some evidence of vertical integration affecting hospital prices. However, Ciliberto and Dranove (Reference Ciliberto and Dranove2006) found no evidence of higher prices resulting from the vertical integration of hospitals. Baker et al. (Reference Baker, Bundorf and Kessler2014) demonstrated that hospitals which underwent vertical integration raised their service prices. Despite an increase in hospital prices and spending, the prices of physician services significantly reduced following vertical integration with physician practices (Baker et al., Reference Baker, Bundorf and Kessler2014).

Hospital concentration has no significant relationship with hospital service prices, according to Moriya et al. (Reference Moriya, Vogt and Gaynor2010). In contrast, Robinson (Reference Robinson2011) has found empirical evidence that hospitals in concentrated markets raise their prices to private insurers in case of payment shortfalls. The literature has evaluated the effect of competition on the pricing behaviour of for-profit and not-for-profit hospitals (Melnick et al., Reference Melnick, Zwanziger, Bamezai and Pattison1992, Reference Melnick, Keeler and Zwanziger1999). Non-price competitions based on factors such as the quality of care, features, amenities and location of hospitals contribute to the high cost of competing hospitals (Heshmat, Reference Heshmat1989). However, a shift from non-price to price competition has resulted in lower costs for hospitals (Melnick et al., Reference Melnick, Keeler and Zwanziger1999). The evolution of hospital market concentration has seen pricing become a key consideration (Keeler et al., Reference Keeler, Melnick and Zwanziger1999). The implementation of such a transition can potentially undermine the role of technology and specialised healthcare services in enhancing the quality of healthcare. It is worth noting, however, that the growth in productivity and advancements in technology must be assessed in the context of service pricing (Tengilimoglu and Dziegielewski, Reference Tengilimoglu and Dziegielewski2000; Tompkins et al., Reference Tompkins, Altman and Eilat2006). Based on the synthesis of literature, there is no clear consensus on the influence of market structures and strategic decisions on hospital pricing.

3.3.6 Pricing regulation

The healthcare sector is characterised by market failures, which necessitates the regulation of healthcare service pricing. One branch of literature on price regulation has investigated the impact of legislation on the fluctuation of hospital service charges (Liu et al., Reference Liu, Liu and Chen2000; Bai, Reference Bai2015; McClintock et al., Reference McClintock, Ye, Mahek, Benjamin and Steven2019). Thus, such regulations are involved in this pricing process. The literature on regulatory aspects of pricing presents evidence that healthcare providers do not strictly adhere to the regulated prices. For example, Liu et al. (Reference Liu, Liu and Chen2000) examined the impact of hospital pricing policies in China and identified that regulatory prices were inadequate in covering all the costs. Consequently, hospitals resorted to charging significantly more for services that used advanced technologies and drugs to offset the losses incurred by hospitals. Similarly, Bai (Reference Bai2015) evaluated the effect of the legislation on uninsured patients. The research uncovered that the legislation facilitated a decrease in prices payable by those without insurance. In a similar vein, McClintock et al. (Reference McClintock, Ye, Mahek, Benjamin and Steven2019) conducted a study that revealed how the extension of Medicaid under the Affordable Care Act (ACA) 2010 in the United States did not result in an increase of charges to private patients by safety net hospitals despite reimbursement reductions for those without insurance.

3.3.7 Third-party reimbursements

Price differences between insured and uninsured patients have been highlighted. Uninsured patients are charged higher prices and receive less comprehensive care (Reinhardt, Reference Reinhardt2006; Tompkins et al., Reference Tompkins, Altman and Eilat2006; Melnick and Fonkych, Reference Melnick and Fonkych2008; Robinson, Reference Robinson2011; Batty and Ippolito, Reference Batty and Ippolito2017). This indicates that a patient's ability to possess insurance affects the amount they are charged for hospital services and the level of healthcare services they receive at hospitals. A distinct pricing system is implemented for patients based on the third-party payer's identity (Reinhardt, Reference Reinhardt2006; Tompkins et al., Reference Tompkins, Altman and Eilat2006; Anderson, Reference Anderson2007; Bai and Andersen, Reference Bai and Andersen2018). Patients may be insured by public or private payers, resulting in dissimilar prices within and across hospitals depending on the contract type and the agreed-upon service costs between the payers and providers (Barros and Martinez-Giralt, Reference Barros and Martinez-Giralt2008; Bai and Anderson, Reference Bai and Anderson2016). Cooper et al. (Reference Cooper, Craig, Gaynor, Harish, Krumholz and Van Reenen2019) investigated the increase in insurer-negotiated physician prices for care rendered in hospitals, as well as the growth in hospital prices and found an increase in hospital prices. This highlights the need for policymakers to address hospital price hikes in the context of third-party reimbursement. Additionally, policymakers should tackle the issue of price disparities among insured and uninsured patients in hospitals.

Contracting. Contracting is the process of establishing agreements between hospitals and third-party entities. According to Oostenbrink and Rutten (Reference Oostenbrink and Rutten2006), reimbursement prices are determined by contracts between hospitals and insurers. Prior to negotiating contracts with third parties, hospitals first develop a pricing strategy (Barros and Martinez-Giralt, Reference Barros and Martinez-Giralt2008). Insurers, on the other hand, place significant importance on healthcare quality when establishing contracts with hospitals (Magid et al., Reference Magid, Murphy, Lankiewicz, Lawandi and Poulton2017). Price contracts may incorporate discounts on fees, case-based reimbursements, per diem reimbursements and capitated payments (Horowitz and Kleiman, Reference Horowitz and Kleiman1994; Wu, Reference Wu2009). Some literature suggests creating novel contract mechanisms and pricing strategies between private hospitals and governments (Teymourifar et al., Reference Teymourifar, Kaya and Ozturk2020). Contractual mechanisms can significantly enhance health system performance, especially when public hospitals face a reduction in capacity. In their 2012 publication, Robinson and McPherson discuss ‘centres-of-excellence contracting’, in which patients are directed towards hospitals that offer high-quality care at discounted rates in exchange for an increased volume of patients.

Reference pricing. Setting a reference price as the upper limit of charges to be reimbursed by the insurer is reference pricing, a recently originated phenomenon (Robinson and MacPherson, Reference Robinson and MacPherson2012; Brown and Atal, Reference Brown and Atal2018; Nassiri et al., Reference Nassiri, Goodman and Mamani2020). The literature on reference pricing centres around service prices, their link with insurer spending, as well as an analysis of the reference pricing payment system and its impact on patients, competing providers and insurers (Robinson and MacPherson, Reference Robinson and MacPherson2012; Brown and Atal, Reference Brown and Atal2018; Nassiri et al., Reference Nassiri, Goodman and Mamani2020). While reference pricing presents a promising payment system for shoppable healthcare services and incentivises patients to choose more economical options, it also has cost-reducing benefits for hospitals (Nassiri et al., Reference Nassiri, Goodman and Mamani2020). This pricing practice has led to a decline in total per-procedure expenditure for providers and subsequently impacts hospital pricing practices and their profitability. Nassiri et al. (Reference Nassiri, Goodman and Mamani2020) suggest that hospitals are viewed as value-based providers by insurers when they charge patients the reference price or less. This impacts the hospital's reputation and eventual profitability. The methodological reliability of reference pricing studies was assessed by Robinson et al. (Reference Robinson, Brown, Whaley and Bozic2015a, Reference Robinson, Brown, Whaley and Finlayson2015b) and Brown and Atal (Reference Brown and Atal2018). The impact of reference pricing was investigated on care outcomes, including the choice of care venue, overall costs and treatment complications, for procedures such as arthroscopy and colonoscopy (Robinson et al., Reference Robinson, Brown, Whaley and Bozic2015a, Reference Robinson, Brown, Whaley and Finlayson2015b). Future studies are needed to examine the effect of reference pricing schemes on pricing for hospital services.