August 8, 2018

Despite the fact that most health insurance companies now provide a price transparency tool for beneficiaries, only a tiny minority of patients choose to shop for healthcare services or review provider prices before accessing services, a new study by the National Bureau of Economic Research has found.

Researchers analyzed data from a large private insurer on more than 50,000 MRI scans of the lower limb that were not delivered in the midst of an ongoing inpatient admission or emergency care.  They looked at the frequency with which patients shopped for and chose to receive care at lower-priced locations in favor of care by more costly providers.

“Despite significant out-of-pocket cost exposure, patients often received care in high-priced locations when lower-priced options were available,” according to the authors, healthcare policy experts from Harvard Medical School, Yale School of Public Health and Columbia University.  Less than one percent of patients used a price transparency tool to comparison shop for these services, despite wide variation in scan prices across multiple providers in a given area.

The study found that, by far, the most significant factor driving a patient’s choice of provider for MRI services was the suggestion given to them by their referring physician.  The influence of the referring physician far outweighed even the effect of cost-sharing on their decision of where to go for care.

The authors selected lower-limb MRI scans for the study because this procedure is one of the least differentiated medical services, is relatively expensive and can usually be scheduled in advance.  The analysis revealed potential reductions of 36 percent in total spending on the scans if patients had accessed the lowest-price provider within an equivalent distance from their homes rather than where they chose to receive care.  On average, patients bypassed six lower-priced providers between their home and the location where they went for the MRI.  Patients whose referring physicians’ practices were hospital-owned were also significantly more likely to be referred to and to choose hospital-based (and more expensive) scans.

The average cost of a hospital-based MRI scan was $1,474.35, while non-hospital-based scans were priced at an average of $642.82.  If patients had gone to the lowest-priced provider within a 60-minute drive from their homes, total MRI spending would have decreased by 55 percent, with insurer contributions decreasing by 61 percent and patient out-of-pocket costs decreasing by 44 percent.

An analysis of physician referral patterns by the researchers revealed that the referring orthopedic surgeons tended to send their patients to a narrow group of imaging locations.  Each surgeon in the sample sent an average of 79 percent of their referrals to a single imaging provider.

“In order to lower out-of-pocket costs and reduce total MRI spending, patients must diverge from the established referral pathways of their referring physicians,” the authors conclude.  “Patients often leave significant money on the table and attend expensive providers for services where clinical quality does not vary.”

The study also suggests that one approach to addressing this issue could be to equip physicians with more information on the costs of services at various locations and to incentivize them to make more cost-efficient referrals.

For more information on price transparency, see our eAlerts on the proposed Physician Fee Schedule for 2019, the proposed Inpatient Prospective Payment System for 2019, and efforts by legislators to increase price transparency for consumers.