Study was published in Journal of the American Medical Association (JAMA) and showed how high-deductible healthcare plans are motivating consumers to use online transparency tools to search for providers that offer greatest value
Do consumers choose less expensive medical laboratories and imaging providers when they can see the prices in advance? The findings of a recently released study suggest that the answer is “yes”—that consumers will shop for the clinical laboratory with the cheapest test prices when they have access to price information!
This is one conclusion from a study of a half million consumers conducted by Castlight, Inc. (NYSE:CSLT), a San Francisco-based company that offers employers an online tool that enables their employees to compare healthcare pricing among their network providers. Researchers at Castlight confirmed that if consumers know the price of laboratory and imaging tests or physician visits in advance, they will choose the less expensive provider.
Castlight Study Published in the Journal of American Medical Association
This study on the impact of healthcare price transparency was published in the October 22/29, 2014, edition of the JAMA.
This finding should come as no surprise to pathologists and clinical laboratory professionals. Dark Daily and its sister publication, The Dark Report, have regularly published business intelligence about healthcare’s shift toward increased transparency for provider prices, including the prices for medical laboratory testing and anatomic pathology services.
Consumers Paying Higher Deductibles for Medical Laboratory Tests
One visible sign of this trend is the ever-larger deductibles and copays that are required by health insurers. It is believed that if consumers are responsible for a larger portion of their healthcare costs, they will be more careful about selecting providers based on cost and quality.
In parallel with the trend of higher deductibles and copays is the push of state and federal governments and nonprofits for increased transparency in healthcare prices. The goal is to lower healthcare costs. This trend is driving a shift to a consumer-driven healthcare system, while creating more competition among providers.
This map from the Healthcare Incentives Improvement Institute shows grading of states for level of healthcare transparency. Most states were given a failing grade by the researchers from the Healthcare Incentives Improvement Institute. (Image copyright Healthcare Incentives Improvement Institute.)
Claims Analyzed By Castlight Found Greatest Savings in Test Prices
Castlight analyzed medical claims of nearly 503,000 employees at 18 companies submitted between 2010 and 2013.
Researchers specifically focused on:
1) common medical laboratory tests, such as cholesterol;
2) imaging tests, like MRI and CT scans; and,
3) primary-care and specialist physician office visits.
Patients who compared prices prior to receiving medical services had the lowest claim payments. Their payments for medical laboratory tests were 14% lower. They also paid 13% less for imaging tests and 1% less for physician office visits compared to those patients who didn’t compare pricing in advance, stated Neeraj Sood, Ph.D.. He is Director of Research at the Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California.
Neeraj Sood, Ph.D. (pictured above), is Director of Research at the Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California. In collaboration with Castlight, he directed the study of how price transparency changed the way consumers select clinical laboratory and imaging providers. (Photo copyright University of Southern California.)
Sood directed the study in collaboration with Castlight researchers. He explained that savings for doctor visits were small because price variations were smaller than other clinical services analyzed by the researchers.
Opportunity for More Savings When Shopping for Clinical Lab Tests
“In some sense there’s just more room for savings in these commodity services rather than in office visits, where there’s much less price variation,” observed Christopher Whaley, Ph.D., a Data Scientist at Castlight. He is the study’s lead author and was quoted in a phone interview with Bloomberg Businessweek.
Internet-based transparency tools, such as Castlight, are enlightening consumers to the significant disparities in healthcare pricing among providers and the fact that higher pricing doesn’t necessarily translate to higher quality care. It’s no secret that prices charged by hospital-based and many private medical laboratories for lab tests, for instance, are significantly greater than charges by national corporate clinical laboratories for similar tests. (See Dark Daily, “Castlight Health Offers Employers a Cloud-based Price Transparency Tool to Help Employees Shop for Low-Cost, High Quality Health Services,” June 16, 2014.)
Consumers with High Deductibles Motivated to Search for Value
Along with efforts to boost price transparency employers are also shifting a greater proportion of healthcare costs to employees. An article published by Forbes noted that, according to the Los Angeles-based consulting firm Mercer Advisors, Inc., employees covered by consumer-directed health plans, which include a high deductible and medical savings account, rose from 16% in 2012 to 18% in 2014. Additionally, nearly two-thirds of large employers surveyed by Mercer say they expect to offer their employees a consumer-directed health plan within the next three year.
High deductibles and copays are motivating consumers to shop for value when seeking healthcare services, which can mean substantial savings. The Forbes report, for example, pointed out that a PET/CT scan at the University of California San Francisco Medical Center is priced at $3,845, while RadNet, a large outpatient imaging facility in Oakland, California charges just $1,599 for the same test.
Claim Payments Lowest for Consumers Shopping for Value
The Castlight study is the first to look at what motivates consumers to search for providers that offer the greatest value, even if it only saves them a few dollars. The study found that claim payments were lower for searchers regardless of their out-of pocket costs. “People still choose the lower-cost provider,” observed Jennifer Schneider M.D., M.S., Vice President of Analytics at Castlight. Claims of those using transparency tools to compare provider pricing, however, were out numbered 3 to 1 by consumers who did not compare pricing in advance.
Certainly additional peer-reviewed studies are needed to make the case for price-comparison tools, but ultimately, as suggested by Sood in the Forbes article, price transparency will force providers to become competitive.
Pathologists and clinical laboratory executives will want to incorporate the findings of the Castlight study on how consumers respond to provider prices in their strategic planning. Because of the trends described above, more patients will want to know the price of their medical laboratory test before having their specimens collected.
—by Patricia Kirk
Related Information:
Association Between Availability of Health Service Prices and Payments for These Services
Price Comparison Tools Can Lower Medical Costs, Says New Study
Castlight Health tool saves money for patients, JAMA study shows
