An all star crew of health economists looked at patient and provider behavior in the shopping for lower limb MRIs in an NBER working paper.
We observe that despite significant out-of-pocket cost exposure, patients often received care in high-priced locations when lower priced options were available. Fewer than 1 percent of individuals used a price transparency tool to search for the price of their services in advance of care. The choice of provider is such that, on average, individuals bypassed 6 lower-priced providers between their home and the location where they received their scan. Referring physicians heavily influence where their patients receive care. The influence of referring physicians is dramatically greater than the effect of patient cost-sharing. As a result, in order to lower out-of-pocket costs and reduce total MRI spending, patients must diverge from the established referral pathways of their referring physicians. We also observe that patients with vertically integrated (i.e. hospital-owned) referring physicians are more likely to have hospital-based (and more costly) MRI scans.
My wife and kids are seeing the grandparents and cousins on my wife’s side while I’m in Durham working this week. Last night, I was living my best life. I had cleaned both bathrooms, hand scrubbed the first floor and was folding laundry. As I was folding my laundry, I noticed that several of my athletic socks were full of holes or stretched beyond use. Since I feel economically secure right now, I was more than happy to go to Target and buy new socks.**
I don’t buy socks often, but I buy them often enough to know what I need. Buying socks, in medical terms, is a shoppable service. It is not an emergency, they are sold in plenty of places and I get to choose where and when to buy. Lower extremity MRIs are also shoppable services as they are a quasi-commodified service with numerous competing providers.
One of the major differences between me buying a six pack of ankle length Hanes athletic cut socks and scheduling an MRI is that I have expertise and experience in buying socks. I buy a bag of socks at least once a year and usually several times a year. I have learned that the cheap bag of store brand socks are not good socks as I destroy them in months. I have learned that calf length socks make me look like my grandfather. I have learned that I might not get the best price at Target but I’ll get close enough to the best price that the incremental difference is not worth stressing about. I am familiar with all of this. So I can go get low price, high quality socks.
I am not an expert at buying an MRI. I was told to get an MRI in my early twenties to confirm the diagnosis of a meniscus tear in my right knee. The deductible scared me away as that MRI would have cost me two months of post-tax income. I have never been referred for another MRI. I face a massive learning problem that I have already conquered when I buy socks.
There are two cohorts of people who have expertise in buying MRIs. The first are patients who routinely have at least one or more MRIs a year. And here their expertise is not too relevant in most cases because they are not likely to be under their deductible for the year. If individuals are having routine and regular MRIs, I am assuming that their other medical expenses will be significantly high enough to max their cost sharing out. At that point, their expertise in MRI shopping is based on hassle minimization, ease of use and the cost of parking (a cash outlay) rather than total cost. Their expertise and learning are directed to non-cost criteria.
The other group of people who are experts on MRIs are the prescribers and readers of MRIs. An orthopedist routinely orders an MRI. An orthopedist routinely reads an MRI. An orthopedist knows that the MRI in the mini-mall next to the good Indian buffet does a more than decent job while the location at the professional medical building four blocks away requires too many re-dos. They might not know costs, but they know quality as they have learned who is bad, who is good enough and who is great. There is a clinical judgement on whether or not good enough or great is required, but that is a reasonable judgement to make. But their expertise is seldom focused on cost as they are seldom asked to think about cost.
How much of the MRI shoppability problem is really a learning problem?
** The state of my sock drawer is probably the best slightly lagging personal indicator of my assessment of personal economic security.
One other factor that the doctor hopefully knows about is timing. The physicians I work with know which site is able to accommodate the patient in a timely manner and which often (enough) have scheduling issues or communication issues. A prompt MRI is sometimes as desired as a great quality scan. Enough so that a day or two difference in scheduling can be the deciding factor.
I just had an MRI on my left shoulder. Previously had one on my right shoulder a year and a half ago. Before that… I forget, 2? 3? shrug
Does that make me an expert on MRI shopping? HAHAHAHAHAHAHAHAHAHAHA…. They sent me to a different place this time than the last. (when asked where I wanted to go for it, I said “Where ever it’s cheapest.”) The last one cost me a couple hundred. This one? Over $1000 and counting. Was the provider the reason the cost went up so much or is it because our insurance changed? Yeah, I’m blaming it on the insurer too. And hey, it works for them rather well. Because I am now slowly paying off the MRI, (and other med expenses) I have to put off the surgery for the torn rotator cuff they found while I try and save up for it. And how much do I need to save up? HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA………….
But I’m not supposed to worry about the cost.
Let me add another factor, which could be called the “just get it over with” factor or “I don’t want to think about it anymore” factor. In this case, the person is dismayed by his or her injury, worried that it could lead to further suffering or expense (i.e., a major operation), and would prefer not to think about it because that causes mental anguish. Calling a bunch of MRI operations for pricing, looping back to the doctor, and so forth adds to the mental anguish. But simply taking your doctor’s advice about which MRI service to use is simple — no more thinking, no more worrying.
Sure, there’s a financial trade-off — calling around to get MRI pricing might cause pain now but lead to reduced financial pain when the bill arrives.
(Yet another psychological factor is the “I’m a screw-up who can’t even stay healthy, so how can I evaluate MRI services.”)
I’m a semi-regular consumer of MRIs. I’ve discovered that the doctor refers me to the same MRI provider because he’s interested in consistent results.
But, I have a more pressing question: just what are you doing that chews through so many socks?
@Snoopy: I have always tended to beat up on my clothes. Right now, it is power lifting that wrecks my shoes and socks as when I get up on the balls of my feet, that is where the soft spot is and that is where the damage occurs.
Anonymous At Work
Here’s one for you, specifically on MRIs:
I was scheduled for an ultrasound at my local hospital about 12 years ago, but scheduling it was a nightmare. You had to call and leave a voicemail for the scheduler even during business hours, you never got a live person. They would return your call the next day, always when I couldn’t take it. Finally I was frustrated and called a different center, found out that the total cost would be 1/2 of the hospital cost and I could schedule one for my next day off. So I went there. If course, it was out of network, but since networks are to control costs I figured they would still approve it because 1/2 off. Nope, they denied it. I appealed pretty far up the food chain, but ended up just paying it about 6 months later.
I have a deep hatred for the entire medical industry in this country.
Most people buy socks off and on throughout their life. Getting an MRI is like buying a rocket. How much does a rocket cost? Who knows! Where do you get one? I don’t know! Are some rockets better quality than others? Does your insurance cover rockets from one place and not another? Can you even afford a rocket although you’ve now been told you need to have one? If you buy this rocket can you afford the next steps–rocket garage, rocket maintenance? So many unknowns!
For most people MRIs a rare occurrence. Many people will never have to have one and most people who do will only do a few times.
As satby alluded to above, it’s not like patients are just blindly following along with their referring physician, it’s that their insurance requires them to get a referral and only go to that place if they don’t want to pay out of pocket.
I’m getting freaked out right now because I need a referral for physical therapy after my knee surgery at the end of August, but I know that the place they refer me to has a waiting list of at least a month, so I need that fucking referral RIGHT ABOUT NOW, JACKASSES! I can’t figure out if the hold-up is at my doctor’s office or the HMO, because the doctor’s office isn’t returning my calls. Argh! ?
How much of this problem is that I don’t want to be an expert on MRIs, and even if I did, probably have limited potential to learn enough about MRIs? (I remind everyone I was an art major.)
In my mind, this is why we have doctors and other medical professionals. Just like, I know next to nothing about the inner workings of my car, that is why I have a regular mechanic; it is why I hire an arborist for my trees, an attorney for my will, etc. That is the way our complex, highly technological society functions, with diversification and delegation of expertise.
It strikes me as a bit of blaming the victim to put the responsibility for sorting out an economic inefficiency of our convoluted and corrupt system of financing medicine on the lowly patient who has need of an MRI.
Wow, I’m grumpy. Maybe I should have had a bigger, better breakfast. Really, I do appreciate all your posts, David.
Another factor I’ve experienced is a doctor who gets pissed if you don’t use the imaging center he told you to use.. Sure, it’s his power trip talking but it leaves you wondering if he’ll do a less than his best job in you because you weren’t “compliant”. A lot of ortho docs are pretty rigid up about patient compliance.
There’s something else to consider here — quality of service. I get a mammogram every year. The facility I use makes it as easy as they possibly can. They are easy to reach to make an appointment, they offer Saturday appointments, and once you get there it’s very efficient (in and out in a half hour). For screening mammograms, the tech does a quick read right there for reassurance and you get notice of the result from a radiologist within ten days even if it’s negative so you don’t have to wonder and worry. (Happily for me they are also included in my insurance network.)
Why would I go somewhere else?
@Annie: yeah, the quoted bits of the paper seem to assume that all MRIs are the same, so the only issue is price. Bad unstated assumptions are a huge problem in economics
Are they really experts. I had an MRI once and I just went where the doctor told me to go.
Interesting. I really didn’t know how doctors keep informed about this, or how they use it to determine where to send patients. But isn’t the doctor making the decision here, and the patient just following the doc’s directive?
I have had many MRIs due to all my back issues, and I have never shopped for a provider. I am always directed to go to the hospital adjoining, adjacent, or including the Back/Pain/Spine clinic where I go (there have been several), and get it done per doc’s orders. I never even thought of shopping. Is that a thing if you have a plain vanilla HMO, not a PPO ?
I’ve had a few MRIs also, and never really shopped for them – in my town, the only place to get an MRI is the hospital, so shopping doesn’t really enter into it. I mean, I guess you could go to the neighboring county, to the imaging facilities in their (smaller) hospital, but the facilities are owned by the same corporation, so I doubt there’d be much savings. Interestingly, the closest academic medical center (UVa) is in-network for my insurance, and I’ve had a couple of screening MRIs there rather than in town because that made it easier for the clinic at UVa that ordered the scans.
I confess to quite a bit of skepticism as to how well shopping for “shoppable” services will work in the US medical system. I’ve already mentioned the fact that in lots of places, there’s only one provider (again, unless we start asking people to drive for hours), so shopping isn’t going to help contain costs. There’s also the fact that, as satby mentioned, the cheaper provider may be out of network for many patients; I don’t think it’s fair to ask people to forego using their insurance in order to encourage providers to reduce prices (especially considering that going out of network means that you’ll take longer to satisfy your deductible).
Also, I’m not sure how much of an issue this is, but I would imagine that quality and consistency are also things that need to be taken into account. I’d imagine that if there’s much chance you’ll need repeat imaging, it might be better in terms of quality of care to have the scans done at the same facility, so they’ll be as comparable as possible. If you’re always chasing the cheapest price, that may not always be possible, and I’m hesitant to ask people to risk lower quality care to save the system a little money.
Thanks for a very interesting post. I have two questions: a learning problem for whom? and a learning problem about what?
If it’s the patient, I think the best characterization is that it would be learning problem about what is the cheapest MRI that had the minimum acceptable quality for the health issue at hand.
For the clinician it might be same as the patient, but if physician has interest in the MRI as a profit center, it might be how much can I make off a referral.
Overall, I think this research points out an ‘fourth leg’ of good health care reform, and that is transparent pricing that reduces local market power of monopoly providers and referral networks. The Swiss (“Go Swiis!, if we don’t go Medicare for all”) has solved this problem better than the Netherlands, one reason the Swiss health care system is less complicated and more stable.
Also, learning is an efficient economic mechanism when the cost of mistakes incurred during the learning process is cheap. Is that the case for many patients? I think depends on the medical conditions, but for many patients, a mistake can be deadly. Also, what is the mechanism by which learning is transmitted among the patient population? Fiddling with learning may be a case where an typical economist brings a spork where a self-propelled heavy duty buzz-saw tree-clearer is needed.
This seems to assume fee for service – not sure what the ramifications for ACO & HMO models would be – are integrated providers booking revenue against Rads services because of tax and depreciation considerations? Big picture: DICOM is capital intensive, and drifting from high margin to commodification.
Leaving the provider silo does create issues for the patient – scheduling, waiting another week or two for for the shoot, FedEx (or sneaker netting) the image DVDs to the doc, verifying they got them, etc.
Radiologists are experts in detecting anomalies in human anatomy – many do not have the first fucking clue in regards to the economics of the equipment or the department. Their malpractice underwriters don’t like them reading from older imaging machines – there is a resale market that filters down to standalone practices like Ortho, OB and strip mall imaging shops.
Somebody upthread talked about how convenient the place she goes for mammograms is. Which is important, if it is a hassle, a woman might skip hers.
But there are mamamograms and there are mammograms. If your breast tissue is dense, you might be better off with a three-D mammogram; that’s what I do, and I have to shell out about $50 of my own pocket to get it.
Dense breast tissue is white on the film, as are calcifications (which can indicate a malignancy) and tumors. In other words, what you are looking for is camouflaged. Three-D mammograms give a sharper image and that helps compensate for the camoflague issue. Also, dense tissue feels the same as other tissue, the only way to know if your tissue is dense is by a mammogram.
Now my internist thinks I’m fine with a regular mammogram. She says, why expose yourself to extra radiation? But my oncologist (left over from my bout with breast cancer five years ago) says, Get it. Though she won’t write the prescription that would make the insurance pay for it, because that is not the established protocol.
Maybe the reason I don’t want to learn about MRIs is that I’ve already learned more than I wanted to about mammograms.
Brinks Truck Driver
Great post. I’ve been thinking a lot about this issue recently. Obviously, we rely on doctors in ‘shopping’ for medical care and they don’t focus on price or cost effectiveness. But given the existing demands on their time and expertise, it may not be the best idea for them to fill this role.
Would issuers be able to fill this shopping gap, by providing someone who could ‘shop’ for you for specific services, based on your vague preferences and doctors recommendations? Obviously there are certain circumstances where they are starting to fill this role (w centers of excellence etc.) but would it be feasible for more routine services?
Wow! I had never heard of a “price transparency tool” until I read this post. I’ll bet most people are like me.
From the Abstract of the NBER Working Paper:
These people did not know that? These people are influential in how lawmakers create health insurance policy. These are the people who believe that markets solve everything, that people “consume” medical care in the same way they consume socks, and that it is, in fact, possible to shop for medical care.
Oh, thanks for a great post. Many of your posts digging into the details of insurance are over my head, but this one really impressed me.