Arming the informed consumer

In most sectors of the economy, the more you pay, the higher quality you get. Medical diagnostics and imaging are an exception to this rule, with some tests priced at 10 times the cost of other facilities in the same region with no difference in quality. Yet, consumers are generally unable to comparison shop for prices due to a lack of freely available data.

Source: Flickr/CC

Source: Flickr/CC

In this study, researchers compared trends in the cost of MRIs through traditional insurance to an insurance plan which implemented a price transparency program within similar geographic regions from 2010 to 2012. The program focused on elective advanced imaging procedures such as MRIs because they are one of the most common elective procedures and the time for preauthorization allowed for cost comparison. Adult patients referred to an MRI facility were called by a customer service agent if there was a significant difference in price or quality between the referred provider and alternate local facilities. If the patient did not want to reschedule, there was no compulsion to take the recommendation as benefits were not impacted. This intervention differed from previous transparency efforts in that it was a direct telephone call to the patient rather than a static website.

The study reports an 18.7% price reduction per MRI after the program was implemented. During this period, the average adjusted cost of MRI for the intervention group decreased by $95 while it increased for the reference group by $124. Much of this decrease was due to the intervention groups’ decreased use of costlier hospital-based facilities in favor of freestanding or office facilities. Additionally, the price transparency program increased provider cost responsiveness through increased competition.  Average hospital based MRI pricing for the intervention group decreased from $1,488 to $1,313, decreasing price variation of hospital to non-hospital based imaging by 30 percent.

With an estimated under the Affordable Care Act, insurers are in a position to influence whether coverage expansion is ultimately sustainable. Increased transparency can lower costs for patients and increase competitiveness for providers. With the increased participation in the ACA’s high deductible, high cost-sharing plans, there may be an increased demand for price transparency, which may inject some free-market principles that are sorely needed in a free-for-all fee-for-service health care economy.

commentary by Rachel Solnick

 

Abstract

To encourage patients to select high-value providers, an insurer-initiated price transparency program that focused on elective advanced imaging procedures was implemented. Patients having at least one outpatient magnetic resonance imaging (MRI) scan in 2010 or 2012 were divided according to their membership in commercial health plans participating in the program (the intervention group) or in nonparticipating commercial health plans (the reference group) in similar US geographic regions. Patients in the intervention group were informed of price differences among available MRI facilities and given the option of selecting different providers. For those patients, the program resulted in a $220 cost reduction (18.7 percent) per test and a decrease in use of hospital-based facilities from 53 percent in 2010 to 45 percent in 2012. Price variation between hospital and non-hospital facilities for the intervention group was reduced by 30 percent after implementation. Nonparticipating members residing in intervention areas also observed price reductions, which indicates increased price competition among providers. The program significantly reduced imaging costs. This suggests that patients select lower-price facilities when informed about available alternatives. PMID: 25092841 Wu, SJ et al. Health Aff. 2014; 33(8): 1391-8.

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