Report: Knowing prices could slash health care spending

A cardiac catheterization laboratory, used to detect heart disease, at Adventist Medical Center in Portland in April 2009. A report released Tuesday found that giving patients, providers and insurers prices before health care decisions are made could reduce spending without compromising quality.

In the country’s free market, consumers are able to find out the price of almost every product and service before they decide to buy. Health care is one of the few exceptions.

Yet price transparency could help reduce health care spending by tens of millions of dollars per year in Oregon, according to a study released March 20 by OSPIRG (Oregon State Public Interest Research Group) Foundation and Frontier Group, a nonprofit based in Santa Barbara, Calif.

“Most of us wouldn’t buy a toaster without knowing how much it costs. But you might have to buy a new knee, or an expensive procedure, without any clue what your bill is going to be,” said Jesse O’Brien, OSPIRG Foundation policy director and co-author of the report. “Consumers have the right to know how much they’re going to have to pay, especially as their share of the medical bills keeps growing. Price transparency can help contain the cost of health care.”

The report recommends steps Oregon policymakers could take to allow patients, providers and insurers to be more informed about pricing before they make health care decisions.

State policymakers could use an existing all payer-all claims database to create a website where consumers and others could reference and compare prices for different procedures.

A study of patients insured by 18 large employers found that patients who used the insurer’s price transparency tool reduced their health care spending by 14 percent for lab tests and 13 percent for advanced imaging services, according one statistic cited in the report.

The report’s authors also recommend that lawmakers ban “gag clauses” and “most-favored nation” agreements between insurers and providers. Gag clauses prohibit insurers or providers from revealing prices they have negotiated with each other. Meanwhile, most-favored nation agreements bar providers from offering a lower price to a competing insurer and can inflate prices, according to the report.

Confidential negotiated prices have made existing third-party transparency websites, such as Castlight Health, HealthSparq and ClearCost Health, of limited use to consumers, the authors found.

“It’s that negotiated amount that’s considered a trade secret,” O’Brien said. “Insurers and providers both generally want to keep those negotiated prices secret because they believe the secrecy benefits their ability to negotiate a favorable rate. I believe that the consumer right to know how much they will have to pay ought to trump the industry interest in secrecy.”

The Federal Trade Commission and others have expressed concern that revealing such secrets could increase prices, “either through reduced willingness to negotiate discounts or through tacit price collusion,” the authors wrote.

They suggested that a way to avoid that outcome would be to release data that is more than a year old.

Another concern is that patients may erroneously believe that higher prices equal greater quality, an equation that does not bear out in research, according to the report.

The authors also recommend that hospitals be required to provide an estimated price for laboratory and imaging tests in electronic health record systems so that providers can see that information when considering what to do for a patient.

In a review of nine clinical studies between 1982 and 2013 by researcher Dr. Celine Goetz, seven showed price information prompted providers to order less expensive tests or reduce the number of tests they ordered. Goetz and her fellow researchers found that the reduction in test orders had no impact on the quality of patient care, according to the report.

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