The Making of Medical Prices: An Ethnography of a Committee That Helps Shape Billions of Dollars in American Healthcare Spending

Soaring healthcare spending in the United States is a major policy problem.  During the past ten years healthcare spending almost doubled and during the recent recession the percentage of the nation’s GDP committed to healthcare reached 17.6%.  For years, economists have mostly assumed that “market failure” was an inevitable outcome in healthcare, while political scientists largely contend that various cartels (e.g. doctors or hospital groups, drug makers, and insurers) have captured the market.  However, using the analytic framework of “price realization” – or the analysis of price formation at the ground level – developed by economic sociologists reveals a different story.  Unbeknownst to many a single committee of the American Medical Association — a trade association of medical doctors — helps shape billions in government spending and billions more in private insurer spending.  This committee of thirty-one physicians convenes confidentially three times a year to assess the time and intensity required to preform new medical procedures and – through deliberation – assign values to those procedures.  In the first ethnographic study of this group I illustrate five preliminary facets that, in part, help define the internal character of “price realization” in the medical market: 1) valuation in the context of extremely low levels of information (e.g. valuing medical codes not yet in widespread use); 2) the disappearance of conflicts over prices at each stage of the decision-making process; 3) the valuation of third-parties (in this case, patients) as simultaneously both a resource cost and moral concern; 3) the valuation of technological advances as simultaneously both labor saving and labor intensifying; and 4) the local production of truth – or how the committee weighs survey instruments, experience, common sense, procedure, institutional memory, work-group norms, and, among others, negotiation – as it deliberates and attempts to come to fair prices.  In describing these five aspects we can begin to sketch out a sociology of the peculiar American healthcare market and its wider lessons for the sociology prices.