Price transparency reduces MRI costs and stimulates provider competition

When patients were notified of less expensive MRI options and allowed to switch to lower-cost providers, researchers found an average savings of 18.7% per exam, according to a new study. The study found that patients were responsive to the price transparency program, opting for higher value providers – those with similar or higher quality and lower prices. Providers responded, too – more expensive hospital-based MRI providers lost market share and started lowering their prices to compete with nonhospital providers.

“Price variation between hospital and nonhospital facilities for the intervention group was reduced by 30 percent after implementation.”

Sze-jung Wu and colleagues, Health Affairs

MRIs are one of the most common elective health services, and research indicates that significant geographic and facility-based variation exists in MRI prices. In 2010, a benefits management firm, AIM Specialty Health, began reaching out to people who had scheduled elective MRIs but could receive a better quality MRI or at least a $400 savings in the total cost of the MRI (their out-of-pocket cost plus their insurer’s share) if they scheduled with a different, similarly ranked provider. The study retrospectively examined pre- and post-intervention MRI costs among people who participated in the transparency program, compared with people who lived in areas in the same Census regions where no transparency initiative was implemented. Researchers found an average of $220 in savings per MRI.

The switch to lower-cost imaging also closed the price gap between nonhospital and hospital services by 30%, and in 2012, only 45% of imaging happened at more expensive hospital-based facilities, compared to 53% in 2010. In regions where the program was implemented, prices also decreased for consumers and providers not directly involved with the study – an indication, researchers say, of provider competition.

Several state and federal government programs have aimed to increase price transparency. The federal Rate Review program under the Affordable Care Act, for example, makes grant funds available to states wishing to publish provider price data in a consumer-friendly format. This study suggests that patients may respond best to price transparency programs that are also tied to reliable quality rankings of providers.

“Consumers are interested in the quality of health care along with its cost. Without additional contextual information on health care quality, some consumers believe the adage, “You get what you pay for.” A successful price transparency program provides understandable quality information to members in addition to cost data.”

Sze-jung Wu and colleagues, Health Affairs

The outreach aspect of this program may have also contributed to its effectiveness, according to the researchers. Unlike some previous initiatives that simply made price information available on websites, patients in this program were called and given personalized information over the phone, including prices specific to the provider and insurers’ negotiated rates.