You Better Shop Around  

CHW LogoI found the same book on Amazon.com for prices ranging from ten cents to ten dollars.  All were new; the cheaper ones were publisher overstocks so they had a stamp on the inside front cover, but it was hard to argue that it was worth paying more than three times as much (after adding in the shipping) for something I would never notice in reading the book.  Even if I hadn’t been raised by an accountant, I would have picked the cheaper one (which I did).

So how can one justify the variability in costs for fairly standardized things in medicine, such as the more than ten-fold difference in prices for an echocardiogram, even within a metropolitan area?  Traditionally, providers of those services have relied on the fact that consumer choice was almost non-existent.  First, in the paternalistic world of medicine, patients frequently deferred to their doctor’s recommendation, asking few questions.  There was no incentive for shopping on price for those with insurance, and the costs were often too high for those without to even consider seeking care.  And even if one wanted to comparison shop, pricing information was at best difficult to obtain.

Recent studies provide a glimpse of the effect of consumerism – driven by the rise in high-deductible plans and other factors that have placed more financial risk on patients – on both prices and spending in healthcare.  A study in Health Affairs examined the effect of providing pricing information on MRIs without a connected financial penalty.  Members of health plans that provided price information on MRI options spent an average of $220 less than those who did not have access to the information.  Moreover, in those regions where the pricing transparency was implemented, the range in prices for MRIs among facilities in that region decreased by 30%, mainly due to lowering of prices by the most expensive providers.  No similar price change was seen in the control regions.  Another study in JAMA looked at variation in healthcare spending between people who did or did not use an on-line calculator to research out-of-pocket costs before seeking care.  Those who searched for information chose lower priced services for laboratory tests and imaging (but not for providers) than those who did not search for the information.  Interestingly, the difference was similar for those with and without cost sharing.  It was not clear that utilization was affected, only that given price information people seek lower prices.

These and other studies show that, despite what we providers might like to think, price does matter to patients, and even without punitive levels of cost-sharing, people will seek lower prices when they have the information.  But of course, price is not the only thing, or even the most important.  Quality matters.   In recent years we’ve referred to this as “the value proposition.”  But this concept has been around for a long time; the older and wonkier term is “cost-effectiveness.”  Which is why it is disappointing and puzzling that making data on cost-effectiveness available has been seriously hindered.  The ranting about “death panels” was a reaction to the idea that giving elderly patients information about cost-effectiveness of end-of-life options was at best “rationing,” and at worst one step away from the world depicted in the movie “Soylent Green.”  The Patient Centered Outcomes Research Institute (PCORI), established as part of the Affordable Care Act, was intended to be able to provide the sort of data to inform consumer choices in medical care.  Yet the law explicitly prohibits PCORI from funding or conducting cost-effectiveness research!  This is crazy.

Medical consumerism is here.  It is affecting the way patients choose, and it is affecting prices.  If people are to make good choices, we need more transparency, and more good data on cost-effectiveness.  If Amazon can do it, so can we.

2 Responses to You Better Shop Around  

  1. Michael Levas says:

    So what is children’s doing to be more transparent? Has there been any thought about listing our costs for certain services compared to the competition? I wonder where we stand?

    • The first thing we’re doing is trying to be more competitive. We’re reviewing our charges and making adjustments where we seem to be out of line with the market. For example, we cut the facility fee for clinic visits in 2014. One issue we face with “transparency’ is that while some of our unit prices appear high (mostly due to cost shifting to make up for Medicaid), the total cost of care is lower because we manage better, for example, doing less unnecessary testing. We have good data to this effect for the ED and for Children’s primary care. But that’s harder to convey easily than a simple menu of prices. So we’re trying to figure out how to put out information in a meaningful way.

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