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Patients are smart enough to choose, but price transparency is imperative

Patients are smart enough to choose, but price transparency is imperative

When it comes to magnetic resonance imaging (MRI) in the US, one can witness widest variation in the charges; often the prices vary by a factor of 10. According to a recent report by Change Healthcare, the cost of MRI can vary between $474 and $13,259. Why is this so?

Typically, hospitals charge the highest because of high overhead and the market position of the hospital. Many hospitals require its physicians to refer patients to in-house MRI scanning facility. If not so, physicians do it because of familiarity and access to quick results.

Also, the scan charges will include the radiologist fee and the cost of contrast dye in addition to the cost of procedure. All these charges are bundled into a single charge. Therefore, one might have to check for medical billing error due to bundling; bundling often is erroneous.

Nevertheless, hospitals and medical centers charge whatever they want, and in most cases there is lack of transparency.

To examine the effect of price transparency on patients’ decision of choosing value for their money, WellPoint, an insurance company, conducted a study that is published in the Health Affairs.

WellPoint provided patients undergoing an elective MRI test with alternative (cheaper) options that are available in that area; quality of the alternative providers was validated and patients were asked if they were willing to reschedule their appointment where there was a better value for money.

The study results revealed patients were skilled consumers of healthcare; when price transparency was affected, nearly 50% of the patients agreed to change their test centers. “We acted as a concierge and engaged consumers giving them information about cost and quality,” said Dr. Sam Nussbaum, chief medical officer of WellPoint.

Over a period of two years, the WellPoint program was able to bring about price reduction by 18.7% per test. The results were comparative; the cost incurred by patients enrolled into the WellPoint program was compared against the cost incurred by those who were not in receipt of such programs. Patients chose cheaper scans either because of reduced co-pays or because their annual out-of-pocket maximum was already met.

The indirect effect of the program was encouraging; many hospitals in the area where this program was carried out reduced their charges because of reduced referrals. The price variation reduced by 30% over two years.

Another interesting finding emerged from the combined results of this study and a study conducted many years ago by the WellPoint. The previous study was based on a price transparency program involving physicians. Nevertheless, in that study there was seen no change in the referral patterns.

In addition to price transparency, patients need better services. One of the parents who opted out of the hospital radiological scanning due to high price to a center that did the test for two-thirds of the cost says his experience was two-faced. He paid less for the test but the medical center and the hospital did not communicate and he had to personally receive the report and carry it to the neurologist.


References:

Why we should know the price of medical tests: http://well.blogs.nytimes.com/2014/08/05/why-we-should-know-the-price-of-medical-tests/?_php=true&_type=blogs&_r=0

Price transparency for mris increased use of less costly providers and triggered provider competition: http://content.healthaffairs.org/content/33/8/1391.abstract

Why does an MRI cost so darn much?: http://time.com/money/2995166/why-does-mri-cost-so-much/