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.