Health insurers have a long wait if they want patients to choose the less-costly alternative for the care they receive.
Or so one might conclude after reading a working paper by the National Bureau of Economic Research. Researchers with Yale, Harvard, and Columbia picked an easy target: where patients go to get nonemergency, outpatient MRIs of lower limbs. These are the aches and pains in the ankles and knees for which patients can take their time in choosing where to get an MRI.
“Lower-limb MRI scans are among the least differentiated health care services, are relatively expensive, and can generally be scheduled in advance of care,” the study paper says. “They should, therefore, be one of the most easily shoppable health care services.”
But instead of relying on price-comparison tools that insurers offer (less than 1% of patients used price-comparison tools), patients instead will go where their doctors tell them to go to get MRIs. In doing so, researchers found that patients drive by an average of six other places within a hospital referral region where the procedure could have been done more cheaply.
There were about 15 places where an MRI can be given within a half hour drive of where patients live. And—no surprise—there’s huge price variation. In one urban market, for instance, lower-limb MRIs can be as cheap as $280 and as expensive as $2,100.
Patients don’t even have to drive far to get a better price. The working paper says that if patients drove to the provider with the cheapest MRIs within the distance they drive for care, they could reduce their out-of-pocket costs by $83.93 (or 27%) and their insurer spending by $220.52 (41%).
The researchers, led by Michael Chernew of Harvard Medical School, looked at 50,484 MRIs for people covered by a large (and unnamed) health plan that covers millions of people across the United States.
They also answered the question: Is health care shoppable? “Our evidence suggests that at present, the answer is ‘no.’ … Given that we observe these results for patients consuming lower-limb MRI scans, it is even less likely that patients will actively price shop for more complex and differentiated services.”
They suggested that policymakers find ways to offer physicians incentives to refer patients to less-costly imaging sites.
They also talked about antitrust enforcement regarding the vertical integration of hospitals and physician groups. Chernew and colleagues said the effect of such integration on costs, treatment decisions, and referrals needs to be thoroughly studied.