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The Dose - JK Wall

Welcome to The Dose, which tackles the finances behind local health care and life sciences and points to the most interesting national analysis. Your host is J.K. Wall.

Health Care & Life Sciences / Life Science & Biotech

Doctors, as well as patients, in the dark about prices

September 12, 2013

If you’re frustrated that health care prices are both unavailable and incomprehensible, you’re not alone.

Your physician is in the dark too.

That’s the excellent point made by Indy’s own Dr. Rick Gunderman over at The Health Care Blog.

Gunderman describes what he calls the “black box” of health care prices that lies at the heart of every single interaction between patient and physician, and ends up roiling the economics of the entire system.

“No one – not the patients, the physicians, the hospitals, or the payers – really understands in a thorough way the true costs of their decisions,” wrote Gunderman, who is a professor of radiology and pediatrics at the Indiana University School of Medicine. Speaking of physicians, he added, “Many do not know the retail prices of the tests, medications, and procedures they prescribe and perform.  Even the ones who do often have little idea how much will actually be collected for such services.”

Gunderman mentions that true price lists are hard to come by, and that leads even cost-conscious doctors to make costly decisions. He gives a hypothetical example where a teenager injures his knee and his physician, wanting to avoid a needless MRI scan that carries a retail price of $1,500, instead prescribes six weeks of physical therapy for $600.

Unfortunately, the amount the patient’s health plan would actually pay for the MRI is only $300. So that means the physical therapy, rather than being the cheap option, was actually twice as expensive and delayed an accurate diagnosis by six weeks.

That’s a classic example of high-cost, low-quality health care. And it resulted from a doctor and patient trying to be cost-conscious—but doing so in a system where prices are completely unknown.

Gunderman’s example rang true for me on Tuesday, when I sat in a meeting of the Employers Forum of Indiana. Several large employers—Purdue University, Indiana University, Cummins Inc. and the state of Indiana—described their experiences so far having their employees use a health care shopping tool made by Castlight Health.

Castlight, as I’ve written about before, has built an Expedia-like shopping experience using past medical claims processed by each employer’s health insurer. The large employers at the meeting had worked with Anthem Blue Cross and Blue Shield and Cigna Healthcare to feed the price information from past claims into the Castlight software.

Also, Castlight is trying to provide quality data through its software.

These employers, who collectively have more than 135,000 workers and dependents who can use the Castlight tool, said hospitals and doctors have noticed that their prices are now available and are reacting in clear ways.

These employers get frequent calls from doctors and hospitals wanting to submit new price lists—often with reduced prices—so the employees will see the lower prices.

The biggest example of this was a change made this spring by Indiana University Health, which reduced its prices on 38 imaging procedures by 60 percent to 80 percent, according to the employers.

But some doctors and hospitals want to go even further. They have inquired if they could use Castlight when consulting with their patients to see what the price would be for the procedure they’re recommending. That way, providers say, they could use their knowledge of medicine and the quality of other health care providers, to help patients achieve the best balance of low-cost and high-quality.

"Our physicians would like access to such information so we can influence referrals to quality providers which may be a lower cost to the patient and the employer," wrote Don Stumpp, manager of payer contracting at Indianapolis-based American Health Network, a large physician practice. He added, "If two facilities are equal quality, then cost should be part of the decision for the patient. Many people may be surprised that their family doctor does not know what the cost of services are at other providers. If Castlight or the employer could provide that to us, that would be terrific."

California-based Castlight so far has no service aimed at health care providers. And even if it wanted to start such a service, there are likely some contracting issues that would have to be worked through.

But it’s a tantalizing thought that, with the combination of a tool like Castlight and the medical expertise of physicians, the necessary information on cost and quality—which has been so elusive for so long—might be in view.

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