Editor's note: This story was updated on August 8, 2018.
While price transparency tools are becoming more comment, it turns out few patients are using them to shop around to find the lowest-cost, quality care—even in cases where a patient is seeking a non-emergent service, according to a National Bureau of Economic Research working paper published last week.
For the paper, a team of researchers from Harvard University, Yale University, and Columbia University observed over 50,000 people ages 19 to 64 who were told to get nonemergency, lower-limb, outpatient MRIs. According to the New York Times' "The Upshot," "This is the kind of imaging you might get if you're having some trouble with a knee or ankle, but not bad enough to need the image right away."
The researchers found that the most important factor the patients considered when determining where to get their MRI was their doctor's recommendation. A doctor's recommendation was more important than price or distance. In fact, less than 1% of the participants used a price comparison tool to shop for their MRI.
The researchers also found that, more often than not, doctors sent patients to an imaging center with higher costs. In fact, on their way to get their MRI procedure done, patients on average drove by six other places where their MRI could have been done at the same level of quality, but a lower price, the researchers found. In addition, the researchers noted that doctors who worked for hospitals were more likely to recommend an expensive, hospital-based imaging place for their patients to receive an MRI.
There's no evidence of any clinically meaningful difference in quality between cheaper and more expensive MRIs, according to "The Upshopt," and if patients had gone to the lowest-cost MRI in the same distance they had already driven, they would've saved an average of 36%. If they had been willing to drive within an hour, they would've saved an average of 55%.
Zack Cooper, a health economist at Yale University and co-author of the study, said, "Many patients are going to very expensive providers when lower-price options with equal quality are available."
The authors suggest a more effective way to cut waste might be for doctors to refer patients to lower-cost providers, as patients are likely to go where their doctors tell them to go.
So how do we reduce spending?
The paper's findings add to a growing body of evidence that consumers are not very good at shopping for their health care—even though they are taking on a larger share of their care costs, "The Upshot" reports.
Considering nonemergency, lower-limb, outpatient MRIs are among the easiest to shop for, "there's hardly a chance [patients] are going to [price shop] with other health care procedures that are more complicated and variable," "The Upshot" reports.
Instead, it makes more sense to influence what doctors advise their patients. If physicians were given the price, quality, and distance information for whatever services they recommend to their patients while also given financial bonuses as an incentive, doctors may identify and recommend lower cost care more often, "The Upshot" reports (Frakt, "The Upshot," New York Times, 7/30; Lagasse, Healthcare Finance, 8/1).
Advisory Board's take
What can providers do to help their patients with price transparency?
Robin Brand, Senior Director, Financial Leadership Council
While this paper shows evidence that patients often don't shop for care, it is important to a make a very clear distinction between procedures which are 'shop-able,' and those that aren't 'shop-able.' Our research has shown the likelihood of a patient shopping depends on the definition of "shop-able" care, as well as the type of patient. Our data shows those under 40, those with high-deductible health plans (HDHPs), and those who are self-employed (which often correlates to having a large out-of-pocket obligation) are more likely to shop for services. The industry should prioritize price information being made available to these types of patients.
However, providers should take into account that patients consistently say that their number one source of price information is their own personal physician. This physician, who most likely has absolutely no idea what the patient will owe, often struggles to help the patient with this information. Therefore, to truly help patients shop for price, hospitals and health systems need to either arm physician offices with pricing information, or have physicians reroute patients to an online tool or a call center or both.
“In our survey, the number one thing consumer survey respondents wanted was a pre-service bill”
Discussions of consumerism must also go one step further. Our research has found two critical phases of price transparency in terms of elective surgery: pre-scheduling (where estimate information just has to be made available) and post-scheduling (where providers should proactively offer the patient an estimate based upon their specific insurance information).
In our survey, the number one thing consumer survey respondents wanted was a pre-service bill itemizing exactly what they would owe, what insurance would pay if applicable, etc. That pre-service bill needs to be accompanied by a financial counselor and/or information on payment plans so that patients can manage financially.
Acting as though health care is another service and providing financial information and tools that other service providers and industries do is how to actually bring consumerism to health care. And this is not just good for the patient—providing price information is critical for the health of hospitals and health systems as well, since they are more likely to get paid by proactively providing information to patients.
Make sure to keep an eye out for the full results of our recent consumer financial experience survey, where we asked 1,000 consumers about how price and cost plays into their care experience, to learn more about how your organization can craft a price transparency strategy that meets and prioritizes patient's top expectations.
What can health plans do to help patients with price transparency?
This story is a great illustration of how far we are from true consumerism in health care—even when patients are provided with more cost-effective care options, and are given the time to evaluate them, they aren't making the 'rational' choice. Put simply, health care is a terrible environment for forcing people to make consumeristic decisions.
The reason for this is partly cognitive—health is an emotional experience, and there's a general taboo about putting a dollar amount on your care. But it's also practically difficult. These aren't situations that we encounter all the time, so most of the time, we're asking patients to make a decision about a totally new experience for them.
While training members to become savvy consumers is an uphill battle for health plans, there are some things health plans can do to help patients and reduce health care costs.
“Plans that have been most effective in working with provider partners just give their providers one simple thing to do”
We've seen some plans try to teach their members that everything they do in health care should start with a call to the plan, which can advise them appropriately. Other plans recognize that patients almost always just listen to what their doctors say. So they're working closely with select provider partners and making sure that these providers have the tools and information they need to help patients shop for care.
Our research has found that the plans that have been most effective in working with provider partners just give their providers one simple thing to do, such as telling patients to call the plan with any cost questions they have or looking up a specialist's average costs before making a referral.
To learn more about how plans can be successful in changing the decision-making environment, we suggest that our Health Plan Advisory Council members read our report on how to influence where members seek care.
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