How to provide patients the up-front price of treatment

November 10, 2017

Physicians should consider revealing prices to meet.

Bradley Bullock, MD’s 12-year-old son injured his foot during gymnastics last year and needed an X-ray. Bullock, who practices internal medicine and pediatrics, took him to an imaging facility near one of his practice’s two locations in suburban Nashville. He’d referred countless patients to the facility, largely because of its convenient location.

A couple of weeks later, he got the bill: $225 for a simple foot X-ray.

“I was shocked,” says Bullock, who counts himself among the growing number of Americans-now about 30% of employees-who carry a high-deductible insurance plan. “I’m in healthcare, so if I’m shocked, I’m sure other people would be shocked.”

For everything they buy, from cradles to cars to condos, consumers have the ability to compare prices. Yet while pricing information elsewhere has grown more accessible, in healthcare it remains elusive, even as prices continue to rise.

 

An opportunity in crisis

Lack of price transparency is the biggest problem in American medicine today, says Joseph E. Scherger, MD, MPH, vice president of primary care at Eisenhower Medical Center in Rancho Mirage, California, and member of the Medical Economics Editorial Advisory Board. Early in his career, while in private practice, he offered patients easy price availability.

“We posted our fees,” he says. “Everybody knew what an office visit cost depending on how complex it was.” That was before the insurance companies began what Scherger calls their “game-playing” of working out deals with providers with little concern for a practice’s fee schedule.

Today, it’s not uncommon for two patients receiving the same treatment on the same day in the same location to pay different prices depending on their employer and insurance carrier. It’s also common for doctors not only to have no idea what an imaging referral might cost but even what their own services cost, Scherger says.

Yet in every crisis there is opportunity, and a physician able to offer price transparency today, in the form of listing self-pay prices (and perhaps provide a discount for those paying cash) can save patients money and stand out in the market, he says.

 

“I think it can give you a competitive edge to be more transparent about your pricing. It’s a smart practice today, because more and more healthcare costs are falling on patients, especially if they have this $5,000 or even $10,000 deductible to spend every year. They don’t want somebody taking advantage of that with excessive pricing.”

Physicians in smaller practices are in a unique, advantageous position when it comes to price transparency, says Neel Shah, MD, MPP, founder of Costs of Care, a nonprofit organization working to lower healthcare costs, and assistant professor of obstetrics, gynecology and reproductive biology at Harvard Medical School. 

“Small- to medium-sized practices often have more insight than large tertiary medical centers when it comes to the cost of services,” Shah says. “They’re running their own businesses, and they’ve got a good sense of what goes into providing services and what gets charged.”

When creating a price list, practices should take into account how much the most-used insurance carriers are reimbursing for the listed procedures along with what other practices in the market are charging, advises Scherger. They should examine relative value units for each procedure and consult the pricing and financial resources available from the American Medical Association and Medical Group Management Association.

“It’s complex, running a medical office, much more complex than any other retail store, but those things are available easily for you,” he says.

 

‘Mind-boggling’ savings

Bullock’s six-physician practice has a price list for services and shares it with patients who inquire. It gives a 25% discount to those who self-pay and offers a sliding scale to patients with limited incomes. 

The practice has also implemented price transparency with its referrals. Shortly after the shock of the bill for his son’s X-ray, Bullock says, a patient mentioned Healthcare Bluebook, a company that provides price information to large, self-insuring employers and third-party administrators. Bullock researched it and reached out to the company.

The result has been a pilot project started in early 2017 that gives Bullock and his staff access to Bluebook’s mobile app, allowing them to look up the prices of referral procedures. If one of his patients needs an echocardiogram, for example, he can compare prices throughout the area and refer them to a low-cost provider.

Bullock used to base his referrals on the quality of the providers and their location and convenience for patients; now price has become a major part of the equation, he says. “The first day, I used it three times,” he remembers. “It did change my referral patterns, and it probably made a difference of almost $2,000 between the three patients.”

Bullock did something else with the new app: He searched nearby imaging centers and discovered that he could have paid as little as $67 for his son’s X-ray. “I did pay too much,” he admits. 

Every physician in Bullock’s practice uses the app multiple times a day, he says. They know the locations that offer the most common procedures at the most affordable prices. The overall savings to patients is tough to estimate, he adds, but he’s sure that total would be “mind-boggling.”

Prices for the same procedure in the same ZIP code often can vary by a factor of four or more, says Bill Kampine, MBA, an economist and co-founder of Healthcare Bluebook.

The company has built its pricing database over 10 years, using commercial claims data, public records, government data and submitted pricing information. (Less-costly providers often are eager to share their prices.) A version of Bluebook is available for free to medical practices via an app.

 

One of Bullock’s favorite imaging facilities turned out to be costly and no longer gets his practice’s referrals. Bullock says he’s expecting a call soon from the facility’s general manager, asking where the referrals have gone. He’s told his staff to “tell the truth: They’re expensive.”

The practice had also been sending patients needing colonoscopies to a doctor whom Bullock calls superb: highly qualified, good service, prompt feedback. When they checked his prices on the app, they noticed the costs of the procedure varied significantly between the doctor’s two practice locations. 

When Bullock’s practice asked about it, the doctor wasn’t even aware of the difference. “We only refer to him at the less expensive location now,” Bullock says. “It let him know we’re paying attention.” That awareness-that physicians and even consumers are watching prices-offers the true potential of price transparency, Kampine says. 

Bullock estimates his practice has likely saved hundreds of thousands of dollars for patients. Scale that up to every practice in Nashville, in Tennessee, in all 50 states, and the savings will be substantial. “That is the great promise,” Kampine says. “In a free and transparent environment where patients get to see the cost before consuming the service, they will vote with their feet.”

And when the more expensive providers see their volume diminishing? They’ll have only one choice, Kampine predicts: find a way to lower their prices.

 

Ending the taboo

The price transparency problem may not exist much longer. Silicon Valley has invested tens of millions in data-driven healthcare pricing ventures, including the well-publicized Amino, which lets consumers search and rank nearby doctors using criteria such as patient outcomes and cost. Within months, not years, Shah says he expects a Yelp-like service that will provide consumers with a transparent list of practices’ prices and services. 

But physicians owe their patients much more than that, he says. Shah advocates not just for price transparency but for doctors proactively discussing costs of care with patients. His passion was ignited a decade ago as a medical student in Providence, Rhode Island, an area with many poor residents. He realized that doctors didn’t seem to consider how their decisions impacted patients’ financial health. 

Knowing the price of a procedure, thinking about how that price might affect a patient’s financial situation and then weighing the value of it all seemed like it should be the physician’s responsibility, Shah says, but the subject of discussing costs with patients wasn’t being taught in medical school.

“Not only was I not taught very much about healthcare costs in medical school, but I was actually specifically told that it was not my job to take that into account,” he says. “I think there was a legitimate concern that if you are thinking about costs while you’re caring for patients that you might skimp on necessary care.”

In reality, Shah says, patients want their doctors to bring up costs. 

A 2014 survey by CBS News and the New York Times reveals that 80% of adults believe that doctors should discuss the costs of recommended treatment ahead of time.

So how can doctors broach the topic? Shah urges physicians to screen for financial concerns with simple questions, such as: Are patients worried about healthcare costs? Do they have high-deductible insurance plans? And if patients have financial vulnerabilities, the physician needs to have resources-information on financial counseling, elder care, etc.-available to assist patients.

With surveys showing that most Americans don’t have enough savings to cover a $1,000 medical bill, physicians need to make a habit of discussing the costs of a treatment plan with patients, Shah says.

Bullock also knows this is now part of a physician’s job description. To properly fulfill his duty to his patients, he must not only care for physical and mental health but for financial health as well, he says. That is true holistic care, Bullock says.

“I can’t have tunnel vision and think that price doesn’t matter,” he says. “Of course it matters.”