Doctors Go Shopping: Price Comparisons Lead MDs to Lower Testing Costs

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It’s a basic tenet of smart shopping — compare prices so you can find the best deal. Doctors, however, are often in the dark about what medical tests cost.

In a commentary accompanying TIME’s recent report “Bitter Pill: Why Medical Bills Are Killing Us” detailing out-of-control health care costs, Cleveland Clinic CEO Dr. Toby Cosgrove described one of the sources of escalating costs — doctors who aren’t informed about how much tests and supplies and other medical services actually cost.

Now, a new study by Johns Hopkins researchers published in the journal, JAMA Internal Medicine shows that alerting doctors to the costs of the tests they’re ordering can lead to cheaper choices and hefty savings.

The scientists conducted a six-month experiment at Johns Hopkins Hospital to see if showing doctors test prices, and giving them the opportunity to comparison shop for tests they frequently ordered, would change decisions about services used at the hospital. The researchers identified 62 commonly ordered diagnostic blood tests and split the tests into two groups. Half of the tests came with their price, while the other half did not.

The researchers compared the buying behavior of the physicians and found that showing the pricing information resulted in a 9% cut in use of the tests overall and a savings of over $400,000 over the six months. By comparison, there was a 6% increase in the use of the tests without pricing information over the same time period.

(MORE: Bitter Pill: Why Medical Bills Are Killing Us)

“We generally don’t make decisions based on what is cost-effective … for our patients, but knowing the cost of things appears to make us more thoughtful about what we think might be best for their health,” said study author Dr. Leonard S. Feldman, an assistant professor of medicine at the Johns Hopkins University School of Medicine in a statement. “There’s a lot of waste in medicine because we don’t have a sense of the costs of much of what we do.”

The researchers say the savings can be largely credited to the simple principles behind comparison shopping. For example, while a $15.44 blood test can check a patient’s electrolyte status, blood sugar levels, and kidney and liver function, a more basic metabolic blood test that’s $3.08 cheaper, evaluates all of the same things except liver function. Most patients without a history of liver disease or who aren’t on multiple medications may not need a regular check of their liver enzymes, and indeed, when information on the cost difference was available, doctors ordered 8,900 fewer of the comprehensive test and 8,900 more of the basic tests. This resulted in a savings of $27,000 over the six month study period.

The pricing information also forced doctors to re-evaluate what tests were actually necessary to provide optimal care for their patients. The researchers reported that a test called complete blood count with differential (CBC), which offers basic blood cell information and extra information on white blood cells, costs $11.35 while the standard CBC costs $9.37. When the doctors saw the prices, they were less likely to order CBCs with differential, but they didn’t compensate with more CBC orders, which suggested that the physicians decided to order the test less frequently.

Pricing didn’t seem to make a difference in ordering behavior for all tests; some specialized diagnostics such as MRI exams were ordered at the same frequency even when their cost was made available. These tests generally don’t have many alternatives, and are typically ordered only once for each patient, say the researchers.

And that points to the fact that comparison shopping won’t, and can’t be the only answer to solving the problem of rising health care costs, since every patient situation will require different sets of tests and follow up procedures. But there are plenty of opportunities where price comparisons could lead to more cost effective choices, and taking advantage of those windows could still lead to substantial savings.

“Our findings suggest that simply displaying the Medicare allowable fee of diagnostic laboratory tests at the time of order entry can affect physician ordering behavior, even without any additional educational interventions,” the authors conclude in the study. And that in itself sounds like a cost effective way of altering behavior that could lower medical bills.

3 comments
MightyCasey
MightyCasey

This is REAL shared decision-making taking shape. The only way to truly activate and engage across the healthcare continuum is to make pricing and cost visible to everyone involved. Patients and clinicians can work together on this one - win!

Hermione
Hermione

I agree, more Americans need to be proactive in their healthcare, including shopping around for good, affordable healthcare.

We cannot depend on the medical industry, or the government, to do right by the general public.  It is nothing more than 'show me the money' these days.

One of the best ways to compare doctors/hospitals performances is to go online, and do research through the Internet.  Word of mouth from other patients is a good indication of whether one will get quality care at a particular establishment - and there are more local web-sites that are willing to post comments concerning local doctor's practices.  Play it smart, people, and don't just think that every doctor knows how much lab work and tests will cost, many of them don't keep up with this information.