Hannah T. Neprash B.A., Jacob Wallace B.A., Michael E. Chernew Ph.D., J. Michael McWilliams M.D., Ph.D.
To compare methods of price measurement in health care markets.
Truven Health Analytics MarketScan commercial claims.
We constructed medical prices indices using three approaches: (1) a “sentinel” service approach based on a single common service in a specific clinical domain, (2) a market basket approach, and (3) a spending decomposition approach. We constructed indices at the Metropolitan Statistical Area level and estimated correlations between and within them.
Price indices using a spending decomposition approach were strongly and positively correlated with indices constructed from broad market baskets of common services ( > 0.95). Prices of single common services exhibited weak to moderate correlations with each other and other measures.
Market‐level price measures that reflect broad sets of services are likely to rank markets similarly. Price indices relying on individual sentinel services may be more appropriate for examining specialty‐ or service‐specific drivers of prices.