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At the Intersection of Health, Health Care and Policy

Cite this article as:


Sze-jung Wu, Gosia Sylwestrzak, Christiane Shah and Andrea DeVries
Price Transparency For MRIs Increased Use Of Less Costly Providers And Triggered
Provider Competition
Health Affairs, 33, no.8 (2014):1391-1398

doi: 10.1377/hlthaff.2014.0168

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Price Transparency

By Sze-jung Wu, Gosia Sylwestrzak, Christiane Shah, and Andrea DeVries


doi: 10.1377/hlthaff.2014.0168

Price Transparency For MRIs


HEALTH AFFAIRS 33,
NO. 8 (2014): 1391–1398
©2014 Project HOPE—
The People-to-People Health

Increased Use Of Less Costly Foundation, Inc.

Providers And Triggered


Provider Competition
Sze-jung Wu is a senior
ABSTRACT To encourage patients to select high-value providers, an research analyst at
HealthCore, in Wilmington,
insurer-initiated price transparency program that focused on elective Delaware.
advanced imaging procedures was implemented. Patients having at least
one outpatient magnetic resonance imaging (MRI) scan in 2010 or 2012 Gosia Sylwestrzak is a
research manager at
were divided according to their membership in commercial health plans HealthCore.
participating in the program (the intervention group) or in
Christiane Shah is a vice
nonparticipating commercial health plans (the reference group) in president for solution
similar US geographic regions. Patients in the intervention group were management at AIM Specialty
Health, in Chicago, Illinois.
informed of price differences among available MRI facilities and given
the option of selecting different providers. For those patients, the Andrea DeVries (adevries@
healthcore.com) is a director
program resulted in a $220 cost reduction (18.7 percent) per test and a for payer and provider
decrease in use of hospital-based facilities from 53 percent in 2010 to research at HealthCore.

45 percent in 2012. Price variation between hospital and nonhospital


facilities for the intervention group was reduced by 30 percent after
implementation. Nonparticipating members residing in intervention
areas also observed price reductions, which indicates increased price
competition among providers. The program significantly reduced
imaging costs. This suggests that patients select lower-price facilities
when informed about available alternatives.

D
uring the past several years, in- bilities and stringent accreditation and regula-
creasing attention has been paid tory requirements.1 According to a 2009 Medi-
to the variation in pricing for care Payment Advisory Commission report to
health care services.1–6 The varia- Congress, hospitals can charge more for imaging
tion is found throughout health than other providers can, because hospitals use
care, but price variation for imaging scans has their market power to negotiate higher pay-
been more widely documented.1–4 For instance, ments from private insurers.8
the same magnetic resonance imaging (MRI) Among hospital-based facilities, prices may
scan can range from $300 to $3,000 within a vary further—by academic status, with teaching
given geographic area, with no demonstrated hospitals usually charging higher prices;9 by mix
difference in quality.7 of services provided; or by mix of population
A number of factors contribute to price varia- served, because of the need to cross-subsidize
tion, including the type of facility that performs across payers and services. Even within a single
the scan. Hospital-based outpatient departments commercial payer, cost sharing will vary by plan
typically charge higher rates than freestanding benefit designs. As a result, patients generally
imaging centers or physician offices because of are unaware of or unable to estimate the extent
costs related to hospitals’ emergency care capa- to which medical costs vary.7,10

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Price Transparency

Background tives would enable patients to make informed


Price Transparency In Health Care In con- choices and select lower-cost facilities, thus re-
trast to other competitive markets, it is often ducing overall medical costs. However, research
difficult for patients to obtain prices for health conducted by the New Hampshire Insurance
services and procedures from providers before Department several years after the state’s price
receiving a service.11,12 Health care prices typical- transparency initiative began found no such de-
ly reflect negotiations between providers and crease. That is, the existence of New Hampshire’s
payers. A provider may contract with numerous price transparency website had no impact on
health plans at different prices, which makes reducing price variations among providers.20
the disclosure of costs for specific procedures There are both patient- and provider-related
challenging in several ways. challenges to the success of price transparency
First, health care providers are accustomed to initiatives. It is difficult to engage patients when
negotiating prices. It is in providers’ interest to costs remain largely hidden behind insurance
keep these prices confidential or to publish only deductibles and copayments,7,20 costs of only
partial costs, such as facility fees but not profes- selected procedures or services are published,13
sional fees for a particular procedure.12,13 or portions of the total costs are not disclosed.13 If
Second, it is logistically challenging for pro- data are limited and obscured, patients remain
viders to supply useful insurer-specific price data uninformed about how much they will have to
to patients without information about the pa- pay for health care, and they have little incentive
tient’s benefit design. or opportunity to seek the lowest prices.
Third, not all patients possess sufficient medi- Insurance providers may be engaged in price
cal literacy to accurately compare all cost com- negotiations, but such efforts are weakened
ponents for different types of services or to pre- by a lack of competition among hospital-based
dict their cost-sharing responsibility.12 Even if facilities in many geographic areas. The simple
consumers are aware of actual medical costs, proximity of neighboring facilities does not
they might apply standard market principles guarantee competition. Aggressive negotiating
and misinterpret a higher price as an indication practices, limited capacity of potential compet-
of higher quality.14 This misinterpretation often itors, prestigious reputations, and affluence in
serves as a disincentive to shop for lower-cost the surrounding community all hinder competi-
services. tive pricing.20
Finally, patients have historically been respon- Fortunately, promising signs for price trans-
sible for only a small portion of a procedure’s parency have begun to emerge. A study on a
true cost.15–19 Thus, there is neither a strong ten- reference-based purchasing benefit design for
dency nor an established practice for patients to Anthem Blue Cross in California and the Califor-
verify prices before receiving a service. nia Public Employees’ Retirement System
Challenges Of Price Transparency Initia- (CalPERS) reported that combining reference-
tives In an attempt to redress this situation, based pricing with member outreach on cost in-
federal and state governments have imple- formation enabled members to select lower-cost
mented policies to increase transparency across facilities for elective surgery.23,24 In a separate
a broad range of providers and services. In some study of 1,421 consumers presented with multi-
cases, governments have engaged in efforts to ple scenarios, 80 percent selected the health care
publish health care prices in public reports or provider that had the highest value when they
online. were given access to well-designed reports on
In early 2007 New Hampshire became one of price and quality—for example, about avoidable
the first states to launch a price transparency complications.14 These findings indicate that
program.20 Costs of health care procedures— when patients are engaged in the decision pro-
including preventive services; emergency visits; cess, they are able to select facilities for non-
and radiological, surgical, and maternity proce- urgent care that provide high-quality service in
dures—were posted on the web-based New relation to the cost of care.14,20
Hampshire Comprehensive Health Care Infor-
mation System.21 In 2013 the Centers for Medi-
care and Medicaid Services published an online Informed Choice: Making It Simple
database containing the costs charged by indi- For The Consumer
vidual hospitals for the most common inpatient In late 2010 one of the largest specialty benefit
and outpatient services.22 In April 2014 Medicare management25 companies in the United States,
payments to individual physicians for fee-for- AIM Specialty Health, implemented a price
service beneficiaries were posted on the same transparency initiative that was focused on elec-
website. tive advanced imaging procedures in parts of the
Presumably, such price transparency initia- Northeast, Midwest, and Southeast.

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surer-initiated price transparency program and
The benefits of the determine whether the intervention prompted
program extended members to select high-value imaging providers,
resulting in a lower per image price than in the
beyond the members year before the intervention. This study is the
first evaluation of a large-scale private-sector
targeted for effort in price transparency and of its impact on
consumer response.
intervention.
Study Data And Methods
Data Source And Study Population This ret-
rospective cross-sectional study used adminis-
trative claims data from commercial Blue Cross
Advanced imaging was selected because it is and Blue Shield health plans in the Northeast,
one of the most common elective procedures: Midwest, and Southeast regions of the United
In 2010, 65 MRI scans and 149 computed tomog- States. Patients had at least one outpatient diag-
raphy (CT) scans were performed per 1,000 pa- nostic MRI scan during either the pre-implemen-
tients.26 In addition, the availability of multiple tation (2010) or post-implementation (2012)
imaging service providers in a given geographic year. Inpatient and emergency department
area made it feasible for price competition. MRI tests were excluded because they were not
Information on the quality of imaging services subject to the preauthorization and price trans-
was also available, based on an imaging facility’s parency program. All patients were age eighteen
capabilities. This enabled a quantifiable and or older, continuously enrolled in the health
defensible estimation of value for each test. The plan during the year of the MRI scan, and en-
capability score for an imaging facility was based rolled in either a preferred provider organization
on staff qualifications, accreditation, quality (PPO) or a consumer-directed health plan insur-
programs, equipment, and overall service levels. ance product.
The price transparency program was also sup- The intervention cohort was composed of
ported by the availability of timely imaging pre- members whose employers participated in the
authorization data for insurance plan members price transparency program. These members re-
in the program. The prior authorization process sided in the metropolitan hospital service areas
enabled the radiology benefit management staff of Atlanta, GA; Cincinnati, OH; Cleveland, OH;
to compare pricing information about the re- Indianapolis, IN; and St. Louis, MO. The refer-
ferred imaging provider with information about ence cohort consisted of patients residing in
other providers in the same geographic area. areas in the same census regions as the interven-
If there was a significant difference in price (at tion group (Albany, NY; Chicago, IL; Hartford,
least $400 per imaging study), quality, or both, a CT; Kansas City, MO; Lexington, KY; Louisville,
customer service agent telephoned the member KY; New Haven, CT; Richmond, VA; and
and suggested alternative facilities. If the mem- Rochester, NY) where no price transparency
ber accepted the recommendation to use a program was implemented. (for a map that
higher-value facility, the agent helped schedule shows the locations of the intervention and ref-
a new appointment. There was no effect on ben- erence groups, see online Appendix Exhibit 1).27
efits if the member did not accept the recommen- The areas in the two groups were similar in terms
dation. of significant Anthem or Empire Blue Cross and
This price transparency initiative was unique Blue Shield market penetration and provider
in that it engaged members through phone calls network characteristics such as the availability
when a high-value imaging facility was a practi- and quality of imaging services.
cal choice instead of referring members to static The primary outcome measure was the change
information on a website. The program used in average cost per image from 2010 to 2012
real-time member profiles and provider referral among members offered the price transparency
information to identify cases scheduled at low- program (the intervention cohort), compared
value facilities. Finally, because there was ap- to the change among members in metropolitan
proximately a five-day window between a pre- areas where no program was implemented (the
authorization request and the imaging test, reference cohort).28 The imaging costs analyzed
there was sufficient time for customer service were based on total costs per test—the amounts
agents to discuss other options with members. paid by the health plan and those paid by the
The objective of the study we report on here member.
was to evaluate consumers’ responses to the in- Statistical Analysis Unadjusted analyses

A u g u s t 2 01 4 3 3: 8 H ea lt h A f fai r s 1 393
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Price Transparency

are reported using summary statistics. We used program. One enhancement currently under
difference-in-differences regression to evaluate consideration would identify the actual out-of-
the impact of the price transparency program on pocket savings and prioritize for outreach those
unit cost. The impact was net of preprogram members with the greatest potential savings.
price differences between the intervention group Future research could evaluate the impact of this
and the reference group, common imaging cost or similar initiatives when patient cost sharing is
trends, and other covariates relevant to imaging. a more explicit component of the outreach effort.
Those covariates included type of imaging test
(such as imaging of the head, chest, abdomen, or
spine) and the Medicare geographic adjustment Study Results
factor, which measures operating expenses for Patient Demographics There were 61,271 pa-
health care facilities across regions. The geo- tients in the intervention cohort and 44,366 pa-
graphic adjustment factor was introduced into tients in the reference cohort, for a total of
the regression to minimize possible variations in 105,637 patients who had at least one MRI scan.
costs among metropolitan areas. Age and sex distributions were comparable in
Limitations This study had several limita- the two groups (see Appendix Exhibit 2).27
tions.We assumed that the pricing trend derived Fifteen percent of the patients were enrolled in
from the reference group was linearly applicable high-deductible health plans. The minimum an-
to the price transparency program. We also as- nual deductible defined by the federal govern-
sumed that the variation in baseline imaging ment for these plans was $1,200 for individual
costs among different cities would be reduced coverage and $2,400 for family coverage. The
through risk adjustment with the geographic remaining patients were enrolled in PPO plans,
adjustment factor. However, we cannot confirm and the majority of them had an annual deduct-
that the risk adjustment eliminated all baseline ible of less than $1,000 for an individual. The
differences. distribution of high-deductible health plans
The study did not include other socioeconomic and PPOs was also comparable in the interven-
or provider-level factors that could have affected tion and reference groups.
imaging costs in each of the cities included in the Impact On Imaging Cost From 2010 to 2012
study. However, these effects, if any, would likely the unadjusted average cost of an MRI decreased
be homogeneously distributed among both the by $99 (9.4 percent) in the intervention cohort
intervention and reference cohorts. Both co- (Exhibit 1). In contrast, the cost increased by $97
horts consisted of a limited number of metropol- (10.5 percent) in the reference cohort—a change
itan areas, and the results might not be general- that is in line with published data from the
izable to other regions. Bureau of Labor Statistics on price inflation
Lastly, about one-third of the patients in the for medical care services.29
study had no cost sharing for the imaging test. The results were consistent after we adjusted
In some cases, this was because they had no the imaging cost with the difference-in-differ-
deductible. In other cases, it was because they ences regression model (Exhibit 1).We observed
had reached their out-of-pocket maximum, an adjusted cost per test decrease of $95 (9.0 per-
which might limit their responsiveness to the cent) for the intervention cohort from 2010 to
2012 and an increase of $124 (14.3 percent) for
the reference cohort.
Exhibit 1 We compared the regression-adjusted change
from 2010 to 2012 in the intervention and refer-
Volume And Cost Of Magnetic Resonance Imaging (MRI) Scans In Intervention And
Reference Groups, 2010 And 2012
ence groups (Exhibit 2). The result of the price
transparency intervention was an adjusted $220
Intervention group Reference group reduction (18.7 percent; p < 0:001) in the cost of
2010 2012 2010 2012 an MRI scan.
Number Patients Shifted Away From Hospital-
Patients 33,349 27,922a 21,861 22,505 Based Facilities One factor driving the cost
MRI scans 44,050 36,213a 28,534 28,988 reduction was that a notable percentage of mem-
Average MRI scans per patient 1.32 1.30 1.31 1.29 bers in the intervention cohort shifted from hos-
Average cost per MRI ($) pital-based outpatient facilities to freestanding
Unadjusted 1,055 956 928 1,025 or office facilities. The proportion of MRI imag-
Adjustedb 1,053 958 868 992
ing that occurred at hospital-based facilities de-
creased from 53 percent in 2010 to 45 percent
in 2012 in the intervention cohort (Exhibit 3).
SOURCE Authors’ analysis. aNot all employer groups in the intervention area signed up for the price
transparency program. bAdjusted for type of imaging test (such as imaging of the head, chest, In contrast, the rate was essentially unchanged
abdomen, or spine) and the Medicare geographic adjustment factor. in the reference cohort (51 percent in 2010 and

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50 percent in 2012). This change in the interven- Exhibit 2
tion cohort indicated a shift by patients to facili-
Adjusted Cost Per Magnetic Resonance Imaging (MRI) Scan In Intervention And Reference
ties with lower average costs. Groups, 2010 And 2012
Hospital-Based Facilities Reduced Price
Prompting provider competition is a desirable
impact of price transparency.20 We found that
the unit MRI price for the intervention group
decreased, on average, from $1,488 to $1,313
in hospital-based facilities after the intervention
(Exhibit 4), while the price increased in non-
hospital facilities. (The price increase in non-
hospital facilities was also observed in areas
without the program.) This 30 percent reduction
in price variation between imaging locations in
the intervention group is consistent with the
findings of James Robinson and Timothy
Brown, who observed that high-price hospitals
reduced their prices after the implementation of
a reference-based pricing benefit design.24 SOURCE Authors’ analysis. NOTES The expected cost is the expected trend for the intervention group,
based on the trend in the reference group. It represents the projected per image cost in the inter-
vention group had there been no price transparency program for that group.

Discussion
In this real-world analysis of a health care price This study demonstrated that a price transpar-
transparency program, we found that when ency program can effectively trigger provider
similar-quality but lower-price alternatives were competition that goes beyond the participating
presented to health plan members by outreach, members. Such an effect was also observed re-
members were willing to select lower-price facili- cently in a study on elective joint replacement
ties. As a result, the price transparency program after patients shifted to less expensive facilities
greatly reduced the average price level, shifted and benefited from significant cost reductions.10
patients away from hospital-based facilities, and Sensitivity Analysis Using Computed
reduced the price variation between hospital and Tomography We repeated these analyses on di-
nonhospital facilities in the intervention group. agnostic CT scans in the same geographic areas
These positive findings were attributed to re- as a sensitivity test for the effect of the price
sponsiveness not only among members in the transparency intervention on different imaging
intervention group but also among providers. procedures. A coding change for CT scans in 2011
Evidence Of Price Competition By Pro- that integrated two separate CT procedures into
viders It appears that the benefits of the pro- one common Current Procedural Terminology
gram extended beyond the members targeted for
intervention to health plan members whose em-
ployers had not participated. A subanalysis of Exhibit 3
39,755 MRI patients residing in the same metro-
politan areas who were included in the study but Market Share Of Magnetic Resonance Imaging In Freestanding Or Office Facilities And In
were not part of the price transparency program Hospital Outpatient Facilities In Intervention And Reference Groups, 2010 And 2012
also showed a reduction in average cost per test,
although to a lesser extent than patients partici-
pating in the program. The nonparticipating em-
ployer groups experienced an average decrease
of $57 per test, compared with a $99 decrease in
the employer groups participating in the inter-
vention (and a $97 cost increase in the reference
group residing outside the regions of the inter-
vention program).
The cost reduction in the nonparticipating
employer groups provides evidence of universal
provider competition that was influenced by the
intervention. In fact, after the implementation of
the price transparency program, more than thir-
ty hospital-based imaging providers reportedly
negotiated to lower prices, to stay competitive. SOURCE Authors’ analysis.

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Price Transparency

Exhibit 4 ▸ QUALITY EMPHASIZED ALONG WITH PRICE :


Consumers are interested in the quality of health
Magnetic Resonance Imaging Costs At Freestanding Or Office Facilities And At Hospital-
Based Outpatient Facilities In Intervention And Reference Groups, 2010 And 2012
care along with its cost. Without additional con-
textual information on health care quality, some
Intervention group Reference group consumers believe the adage, “You get what you
2010 2012 2010 2012 pay for.”14 A successful price transparency pro-
Freestanding or office facilities $ 563 $ 668 $ 652 $ 672 gram provides understandable quality informa-
Hospital-based outpatient facilities 1,488 1,313 1,198 1,383 tion to members in addition to cost data.
Difference 925 645 546 711
▸ UP -TO - DATE , ACCURATE DATA : Up-to-date
and accurate member data and cost and quality
SOURCE Authors’ analysis. NOTES Between 2010 and 2012 the difference in the intervention group information are essential for successful consum-
fell 30 percent. In the reference group it rose 30 percent. er-engaged price transparency programs. For
this intervention, patients’ phone numbers en-
tered during an office visit were uploaded into a
(CPT) code resulted in a reduction in CT unit preauthorization database, enabling effective
costs for both the intervention and reference member outreach with a high contact rate. Qual-
groups. Despite the coding change, we observed ity scores were derived from provider-reported
that the net program impact on average unit cost capability data, and cost information about im-
was directionally the same as for MRI scans—an aging facilities was populated with average im-
adjusted net reduction of $102 in the interven- aging cost based on medical claims. All data were
tion cohort. updated periodically to provide the most current
Road Map To A Successful Price Transpar- data to members.
ency Program The price transparency initiative ▸ TIMING : To influence a decision, health care
has the potential to be effective for nonurgent decision support needs to be provided to patients
procedures, when there are at least several days at the time that decision is made.30,31 In clinical
between a patient’s decision to select the provid- decision support systems, which have been im-
er and the time when the procedure takes place. plemented throughout the health care field to
Procedures that could offer the greatest benefits promote better clinical decisions,32–39 the provi-
from member outreach would generally have a sion of well-timed support, in addition to access
preauthorization or prenotification component. to up-to-date information, is seen as a critical
These could include echocardiography or other factor.33 Providing personalized cost and quality
high-tech imaging, such as positron emission information on the care process before the mem-
tomography (PET) scans and nuclear cardiolo- ber enters it, at a time when his or her choice of
gy; sleep studies; preventive colonoscopy; ar- providers could be changed, makes the informa-
throscopy; and elective joint replacement sur- tion instantly relevant.
geries. ▸ INTEGRATED DECISION SUPPORT INFORMA-
In contrast to the more commonly employed TION SYSTEM : Lastly, health decision support
passive websites, this intervention program in- needs to integrate quality and cost data on rele-
cluded outreach to members when they were vant services and provider characteristics such as
scheduling an imaging procedure. The interven- location, contact information, and the availabil-
tion also included several elements that are key ity of appropriate equipment into one system to
to making a price transparency program suc- offer seamless, effective decision support.
cessful.
▸ RELEVANT TO CONSUMERS : This interven-
tion did not use a static price transparency Conclusion
website that exposed members to a plethora of The price transparency program we studied pro-
general information. Instead, the intervention vided timely and relevant information on cost
reached out to members with information spe- and quality to assist health plan members in
cific to their procedure types. It did not provide selecting high-value facilities for advanced imag-
members with the amount charged by facilities, ing procedures. Patients responded to price
which is usually of limited interest to consumers, transparency with increased use of less costly
but with the cost of the “negotiated” amount facilities, which were often not hospital based.
(insurer-specific and provider-specific costs). This program prompted higher-cost facilities to
Moreover, members were redirected to compa- respond and resulted in a 30 percent reduction in
rable facilities close to the original referred facil- price variation between hospital and nonhospi-
ities or their home. Providing customized infor- tal facilities in the intervention group. The effect
mation empowered members to respond more of price transparency extended beyond the inter-
effectively to the recommendation during the vention cohort and triggered large-scale provid-
outreach. er competition and cost reduction for non-

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participating plan members residing in the same MRI test. This suggests that a price transparency
region. initiative involving direct member outreach with
The price transparency program resulted in a integrated quality information can successfully
significant price reduction of 18.7 percent per reduce health care costs. ▪

Funding was provided by WellPoint Inc. Health, a wholly owned subsidiary of areas for the study and Eugene Chi for
Sze-jung Wu, Gosia Sylwestrzak, and WellPoint Inc. The authors gratefully assistance in providing program
Andrea DeVries are employed by acknowledge Phil Cochetti for definitions and member inclusion
HealthCore Inc., a wholly owned programming assistance. They also thank identification. The authors acknowledge
subsidiary of WellPoint Inc. Christiane Matt Beatty for his professional insights Cheryl Jones for assistance in preparing
Shah is employed by AIM Specialty on the selection of the metropolitan the manuscript.

NOTES
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