More Research on Health Care Price Shopping

A new study at the National Bureau of Economic Research finds little use of price comparison services for a specific, highly shoppable service, lower limb MRI scans.   (NBER Paper)   Lower limb MRI scans are pretty much a commodity, aren’t typically emergency services, so people have time to shop around, and are relatively expensive so people should be motivated to shop.  The prices for these scans can vary by a factor of 12 nationally and by a factor of 5 within a hospital referral region.  The researchers used data on commercially insured patients aged 19 to 64 to ascertain non-emergency, non-inpatient MRI scan behavior.  They were able to see if the patient used an available price-shopping tool.  Hospital-based scans are much more expensive than non-hospital ones; averaging $1475 versus $643.  Unfortunately the data indicates that patients rarely price-shop and that high-priced facilities are often also high-volume.  Only 36% of patients went to the lowest cost facility within the same drive time for the scanning center they did go to.  If they went to the lowest priced facility within an hour drive time, total MRI of the lower limb spending would decline by 55%.  Insurers would save 61%, or an average of $333 per scan and patients would save 44%, or an average of $135 per scan.  So we are not talking small dollars here.  But less than 1% of patients used the available price transparency and comparison tool before getting their scan and only 14% went to the lowest cost facility.

The average patient out-of-pocket cost was $305, but the size of the out-of-pocket was not associated with using a lower-cost facility.  The strongest factor was the referral pattern of the physician, and most of the physicians are orthopedists.  They almost never referred a patient to the low-cost facility and on average they made 80% of referrals to one facility.  And now, lets tie this to yesterday’s post about hospital acquisitions of practices and the harm that causes.  Well, lookie here, if an orthopedist is employed by a hospital they are much more likely, 27% so, to refer patients to a hospital for their MRI and that pattern causes costs to be 35% higher and the amount paid by a patient 32% higher.  The solution is obvious, other than not letting hospitals employ any doctors.  Orthopedists in particular should be forced to give patients full information on relative costs of any MRI center that is within a reasonable drive distance, should be required to tell the patients that there is no demonstrable quality difference among scanning centers and should encourage patients to choose low-cost centers.  Medicare and other payers should consider penalizing doctors whose patients go to higher cost scanning facilities.  Wouldn’t take long for prices to come down dramatically everywhere.