There is almost no correlation between a patient’s out-of-pocket cost and the amount insurers pay or the overall price of a procedure, according to a Pioneer Institute study released Tuesday.
The study looked at the cost for an MRI at 14 Massachusetts hospitals and found that even if there was not much of a difference in what patients paid at each hospital, there was a higher utilization of expensive providers, ultimately driving up premiums, according to co-author and Pioneer Institute Senior Fellow Barbara Anthony.
For example, the total price for an MRI ranged from $476 at St. Vincent Hospital in Worcester, Massachusetts, to $1,423 at Boston Children’s Hospital.
“What’s definitely proven here in Massachusetts is that there are variations in price that are hard to explain because they are not based on patients’ quality of care so the conclusion we draw is that some institutions have market power to extract higher prices,” Anthony told FierceHealthcare. “And so yes, there is a likely connection between prestige, market power and price differences.”
The study’s authors recommend pairing price transparency with financial incentives so that consumers will choose the lower-cost provider.
Some insurance companies, such as Blue Cross Blue Shield (BCBS) of Massachusetts, already have programs to help members find these less expensive providers and then offer some of the savings to enrollees. The report notes that BCBS has a smart shopper program and Anthem offers a cash reward to members who select lower-cost providers.
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The authors also recommend a campaign to educate the public on the importance of healthcare pricing transparency.
Anthony notes that there are a lot of players involved in securing pricing transparency including payers, third-party benefits managers, providers and employers.
“This is an opportunity for payers and employers to work together to create appropriate incentives for lower cost, higher value providers,” Anthony said. If employers are willing to offer rational incentives to employees, it will start mitigating the high pricing power. “People are charging what they want because they can,” she added.
Anthony also noted that healthcare is the only market where consumers are blind to what they are paying because they are often given an out-of-pocket number but not the overall cost of the procedure at a specific provider.
“You can’t purchase any other service as a consumer and not know what the price is,” she noted.