Patient Power Puts Pressure on Prices

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by John R. Graham,

from NCPA,

A study recently published in Health Affairs describes how price transparency drove down the cost of MRIs by almost twenty percent from 2010 to 2012. Compared to patients who did not have the advantage of transparent pricing, cost per procedure dropped $220. Further, there was a significant shift from hospitals to outpatient facilities.

This result is just the beginning. It was not a result of true consumer-driven health policy, but an intervention by an insurer. When a physician referred a patient for an MRI, the insurer required prior authorization before paying for it. When the patient called for prior authorization, the customer-service rep was able to give the patient the choice of a lower-cost provider in the same area. Importantly, the insurer’s rep was able to tell the patient how much he or she would save by using the lower-cost provider.

This is something that providers resist mightily — for obvious reasons. As a consequence, more expensive providers, especially hospitals, dropped their fees significantly. This resulted in a 30 percent compression of prices.

It is a step in the right direction. The article notes that government dictating price transparency has no effect — something we have discussed previously at our blog. Nevertheless, there is a lot further to go. For example, one third of the patients had zero co-pay or deductible, so were completely insensitive to price. Also, it still requires too much bureaucratic intervention. Why should a patient have to call the insurer to figure out the best price for the service?

For reducing costs, imaging is probably low-hanging fruit. Nevertheless, this experience teaches valuable lessons.

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