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Price Transparency and Competition

By August 28, 2014Commentary

Engaging consumers in their health care takes many forms.  One is encouraging them to understand the cost of services better and to consider shopping among providers on the basis of price and quality.    One such effort, in regard to magnetic resonance imaging (MRI) services is explored in a study published in Health Affairs.  (HA Article)   Health care services are notorious for the difficulty of identifying a specific price for a specific service.  While it is well-known that there is wide variation in price across providers, a single provider may have multiple prices for the same service, depending on the payer.  The patient’s benefit plan may also affect what the patient perceives as the price–what matter’s to the patient is what it costs him or her.  And, most importantly, patients vary widely in their economic and health sophistication.  Many patients either actually aren’t capable of absorbing information and making a good decision, or lack confidence in their ability to do so.  MRI services lend themselves to relatively easy price comparisons, so it is a good category to test.  Some past research suggests that just giving consumers price data doesn’t result in more use of less expensive services.  Where patients see some clear financial benefit, however, as in some reference pricing experiments, they do seem to respond by moving to lower-priced vendors.  In the current research, claims data from several Blue Cross plans was examined to see the effect of an intensive program to provide consumers with price data on MRIs and to support their decision-making on which provider to use.  Spending and use for members in these plans was compared with a control group that weren’t covered by a price transparency effort.  On an adjusted basis, the cost of a test decreased $95 for the intervention group, while increasing $124 for the control group.  One primary factor was less use of hospital-based MRIs, and more use of freestanding MRI facilities.  It also appeared that as a result of this shift, in the later years of the intervention, hospital-based facilities reduced their prices.  The research shows that at least for a relatively simple service like an MRI, it is possible to lower spending by giving patients relevant information and supporting their decision-making, particularly if the patients have a financial stake in the decision.

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