Does price transparency lead to better value in healthcare?

August 5, 2014

Meaningful, timely cost information leads consumers away from hospitals, towards freestanding and office-based procedures

Could greater price transparency for healthcare services lead to better value for patients? A new study suggests that it might.

The study examines the results of a health plan’s experimental program in which a group of patients due to undergo magnetic resonance imaging procedures (MRI) (the intervention cohort) received detailed information about the costs and outcomes of various MRI providers in their area. The result was a decrease of $99, or 9.4%, in the unadjusted average cost of an MRI between 2010 and 2012, the years during which the study was conducted.

By contrast, patients in the health plan with a demographic profile similar to the intervention cohort’s, but who were not given pricing data (the reference cohort) saw an increase of $97, or 10.5%, in the costs of their MRIs.

The authors attribute the cost decrease among the intervention group largely to a shift away from hospital-owned outpatient facilities in favor of freestanding or office facilities. The proportion of imaging that occurred in the hospital facilities for this group decreased from 53% to 45%, but remained unchanged for the group not receiving the value information.

The study also found that the price difference between hospital and non-hospital MRIs decreased by about 30% among the intervention group, and that the price decreases experienced by the intervention group extended even to health plan members whose employers had not participated in the program. The nonparticipating employer groups saw an average decrease of $57 per test.

Extrapolating from the results of the experiment, the authors say several elements are necessary to make a price transparency program successful, including:

  • Relevance to consumers. Rather than being directed to a website with general information, intervention group members received information specific to their procedure, and if they decided to go elsewhere for the MRI, were redirected to comparable facilities close to the first provider or to their home

  • Emphasis on quality and price “Without additional contextual information on healthcare quality, some consumers believe the adage ‘you get what you pay for,’” the authors note. “A successful price transparency program provides understandable quality information in addition to cost data.”

  • Up-to-date, accurate data

  • Timing. “Providing personalized cost and quality information on the care process…at a time when his or her choice of providers could be changed, makes the information instantly relevant,” the authors say.

The study, “Price Transparency for MRIs Increases Use of Less Costly Providers and Triggered Provider Competition” appears in the August issue of the journal Health Affairs.