Transparent Prices Fail to Lower Health Spending, Study Shows

Marcia Frellick

May 12, 2016

For those who believe that healthcare spending will decrease if patients know the costs and can shop for what they want, findings from a new study in JAMA may be disappointing.

The study, by Sunita Desai, PhD, a research fellow in healthcare policy at Harvard Medical School in Boston, Massachusetts, and colleagues studied 149,000 employees of two large companies who were given an online tool to let them compare prices for healthcare services by physicians, a hospital, or another site.

Only 10% of the employees used the tool, despite aggressive marketing, and those who used it did not spend any less than those in a control group of nearly 300,000 employees from other companies who were not offered the tool. Users of the tool did not reduce outpatient spending, and patients did not switch to lower-cost settings for care.

After adjusting for demographic and health characteristics, being offered the tool resulted in an average $59 (95% confidence interval [CI], $25-$93) increase in outpatient spending and an average $18 (95% CI, $12-$25) increase in out-of-pocket spending for the employees.

Those with higher deductibles, who would seemingly be more likely to shop for care, also did not reduce their spending. Results were published online May 3.

Possible Reasons for Lack of Effect

In an accompanying editorial, Kevin Volpp, MD, PhD, of the Philadelphia VA Medical Center, University of Pennsylvania Perelman School of Medicine and Wharton School of Medicine and Health Care Management, says there may be several reasons for this. One is that patients, who are used to seeing that higher prices for cars and houses mean better quality, may think that higher healthcare prices mean better-quality care and may not necessarily be interested in the lower price.

Also, most patients who used the transparency tool searched for amounts higher than the highest deductible, amounts that would mostly be paid by the insurer: 53% searched for prices higher than $1250, and 68% searched for prices higher than $500. The top searches were for obstetric deliveries, colonoscopy, office visits, and gastric bypass surgery, the researchers explained.

"People are commonly purchasing with insurance as the middleman, and unless there are clear incentives to use these tools ― and validated ways of comparing price and quality of services ― just providing information on price alone is unlikely to induce people to pick lower-price providers," Dr Volpp told Medscape Medical News.

The online tool is the Truven Health Analytics Treatment Cost Calculator. It tells users how much they would pay out of pocket for services such as x-rays, laboratory tests, outpatient surgeries, or physician office visits. Out-of-pocket costs are based on the user's insurance and how much they have already spent during the year.

The two companies selected for the study were chosen because they did not change deductibles or copayments in the year before or after the tool was offered. Also, they had the highest rates of utilization, which highlights lack of use elsewhere.

More Than Transparency Necessary

Dr Desai said the results did not support the conventional wisdom that if you pair higher deductibles and transparency, people will use the information to go to lower-cost providers.

That does not mean price transparency does not work, she told Medscape Medical News, only that it does not of itself bring down costs.

She said there are dynamics in healthcare that make comparison shopping difficult. In urgent care, people likely do not have time to shop, or it may not be practical for them to drive to a lower-cost provider, Dr Desai explained.

"Healthcare's also relationship-based, and patients have loyalty to their doctors, and they don't want to change to save themselves a few dollars or save the health plan some money," she said.

Also, price is only one factor that goes into the choice, and it may be trumped by reviews, family experiences, and recommendations from friends.

Dr Desai said the study investigated primarily aggregate savings rather than individual savings because the researchers were looking at it from the employers' perspective of whether they should invest in the tool.

Price transparency tools still have benefit, she said, even if people do not spend less, because patients become more aware of their benefits and deductibles and identify which providers are in their network.

"Price transparency needs to be complemented with other features of health plan benefits," Dr Desai said.

One such factor might be for comanies to be more proactive in getting price information out to patients rather than waiting for them to access the tool, she said.

Future Studies Should Test Other Tools

Study limitations include the fact that it involved only two companies and examined the use of only one tool. Further research should look at other price transparency tools, the authors write.

Dr Volpp writes, "The effectiveness of such tools could vary considerably with how the tool is designed and how it presents prices. It would be difficult for a patient to interpret whether a particular price in isolation is a ‘good value.' "

More than half of the states in the United States have passed laws establishing price transparency websites or mandating that healthcare providers make price information available to patients.

"My sense is that these are being passed without full consideration of what is required to make this have the desired effects on improving higher value in healthcare service delivery," Dr Volpp said.

The study was supported by a grant from the Laura and John Arnold Foundation and the Marshall J. Seidman Program for Studies in Health Economics and Health Care Policy at Harvard Medical School. Dr Volpp has received research funding from CVS Health, Humana, Discovery (Vitality), Merck, Weight Watchers, and Hawaii Medical Services Agency and is a consultant to CVS Health and VAL Health. He is also a part owner of VAL Health, a behavioral economics consulting company. No other financial relationships were disclosed.

JAMA. Published online May 2, 2016. Abstract, Editorial