The Truven Health Blog

The latest healthcare topics from a trusted, proven, and unbiased source.


Price Transparency for Medicare Services and Procedures Can Help Avoid Wasteful Spending

By Truven Staff
Mike Taylor imageI welcome the recent announcement from Centers for Medicare & Medicaid Services (CMS) that it is publicly releasing extensive data detailing how much Medicare part B pays physicians for more than 6000 services and procedures. I don’t share the American Medical Association’s position that this data release will be harmful. Medicare part B pays in excess of $77 billion annually for physician services, and the public should be able to see how those dollars are spent.

Truven Health research proves there is tremendous variation in price for hospital services and procedures, and I fully expect these new data will show the same level of price variation. I expect to see considerable variation in price for physician services (office visits, consultations, etc.), but I suspect the real story will be in the prices charged for procedures rather than just the physician services.
  • How much price variation is present for frequently performed services like EKGs and blood tests? I recently received a bill for a “Metabolic Panel Comprehensive.” The test costs pennies to run—and the bill was $145! In total, my lab bill was $1035.
  • Many physicians have invested in office testing equipment and can charge a wide range of prices for these tests. Bone densitometry equipment a good example: it’s marketed with a definite business plan. Doctors are told how many tests they need to do every month to pay for the equipment and guarantee a certain profit level.
Over the past months, several Truven Health articles and studies have highlighted the huge variation in prices for colonoscopies, a recommended screening test, ranging from several hundred dollars to thousands. The public has a right to see these prices before agreeing to the tests. That is the goal of the Truven Health Treatment Cost Calculator. Patients using this tool can see the actual charge for a given test in his or her community, compare costs and then make an informed decision. Our fee-for-service payment system drives wasteful spending on medical procedures, and full transparency is one way to better understand what is driving these high costs.

Michael L. Taylor, MD, FACP
Chief Medical Officer

No Going Back to the $20 Office Visit

By Truven Staff
Mike Taylor imageWhen I started my private medical practice, I priced an office visit at $20, because that was the prevailing rate in my town. I really had no idea of my cost structure, patient volume, or even practice viability. As we grew to a five physician practice, we updated our charges annually without any projections of the effect of the price increase. My patients had no interest in the cost of healthcare, and often requested unnecessary tests, knowing insurance would cover the cost. The hospital where I admitted patients had a sign in the emergency department listing the prices of various tests. That was price transparency in the early 1980s – very little transparency, very little understanding, and even less interest.

Fast forward to 2014 – the cost of healthcare is approaching 19% of GDP in the U.S., and we are all aware that per capita healthcare costs in the U.S. are more than twice the average of OECD countries. Payers have tried for years to control healthcare spending:

  • Employers started by including deductibles and co-pays in benefit plans. They tried HMOs, utilization review to limit services, disease and case management to control high-cost claimants, and wellness programs to decrease the need for services.
  • High-deductible health plans started several years ago, shifting more of the cost to consumers, and now payers are looking to exchanges to cap their portion of the healthcare spend.
  • Efforts by the Centers for Medicare & Medicaid Services (CMS) to control costs led to the sustainable growth rate (SGR) concept and to DRG-based payment in the inpatient environment. Now CMS is looking at bundled payments in both inpatient and outpatient settings.
  • Medicaid managed care plans are growing, and evidence suggests they may be cost effective for the Medicaid population.

Today, many plans require consumers to pay 25-30% of the cost so it’s not surprising that they are becoming very interested in healthcare costs. Consumers want to know the cost of suggested tests and treatments, and are starting to ask questions about the need for services.

Uwe Reinhardt, a well known and respected health economist, has noted the need for price transparency, and I would point out that transparency is becoming important not just for consumers, but also for hospitals and payers. Employers are not willing to continue writing “blank checks” without knowing what they are getting for the money. They view health benefits as an investment in workers, and want information about the price, but more importantly, about the value of their investment. Some employers are studying the idea of narrow networks to improve value, and hospitals are watching this move carefully as they begin to compete on value. The changes brought by the Affordable Care Act are accelerating the trend toward value.

At Truven Health, we have long recognized the need for, and support the notion of, price transparency. To serve this need, we have developed tools to help consumers. Our Informed Enrollment tool gathers a patient’s most recent year’s actual claims, inputs the elements of available benefit plans, and helps estimate the patient cost of each plan. The Truven Health Treatment Cost Calculator loads actual price data from the Truven Health MarketScan® database, and allows the user to compare prices based on actual data, not estimates. As an example, if I wanted to see the price of an MRI in my city, I could go to the Treatment Cost Calculator to learn the cost, location, and, when available, the relative quality of each option. I can even get directions. Both these tools use the patient’s real data, not estimates or models.

As the U.S. migrates from a fee-for-service environment to a value-based approach, health system and hospital costs and quality are being publicly measured and compared. As patients, we should be able to see the prices. As employers, we need to understand the cost. Price transparency is here to stay, and this is driving change for doctors, hospitals, the government, and all of us. There is no going back to the $20 office visit.

Michael L. Taylor, MD, FACP
Chief Medical Officer

When Patients Become Consumers, Price Matters

By Truven Staff
Mike Taylor image“How much is that x-ray?”

I read a recent commentary in which the author was struggling to understand the cost of a standard back x-ray. In the scenario described, the author had ‘pulled’ her back, so she went to the doctor who recommended a set of x-rays. The author went on to describe efforts to discover where the x-ray could be obtained and the price.

The result? Price information was nearly impossible to gather. Hospitals and imaging centers needed to know the insurance information and many other data points before determining the price.  Unfortunately this is an all too common scenario. Why does this happen, and how can this situation be resolved?  The “whys” are another topic, but I’d like to address the “hows”.

There is a definite trend toward developing tools to address this inability to learn about price of medical services. This trend is called “transparency,” and doctors, health plans and hospitals are facing more pressure to provide transparency tools to consumers.  With new insurance markets and exchanges using consumer driven health plans, patients are paying higher out of pocket costs for medical services, and are rightly asking questions about the costs of services.  In the past, patients paid very little of the healthcare bill and didn’t really care (or understand) the costs of the services they were receiving. In the post reform era, consumers are spending more of their own dollars and so are demanding price transparency. I think this is an important and timely trend. 

But consumers need to ask more than the cost of the service.  In our author’s situation, what are the questions she needs to ask about her diagnostic and treatment plan?  (All aspects of the plan, including radiology, lab tests, treatments and procedures, are subjected to similar questions.)  Here are the questions she needs to ask the doctor:

1.       What is the benefit of the test you are recommending?
2.       What is the cost, and what are the risks? For an x-ray, how much radiation exposure will I receive?  For a medication, what are possible side effects?
3.       Is this test or procedure even recommended for my situation? (In our back pain example, routine x-rays for this condition are not recommended, and shouldn’t be done in most cases.)
4.       How will the test results change my treatment?  If the results do not change the treatment, why do the test?
5.       If a procedure is recommended, what information is available to determine the quality of the procedure?
6.       Where is the best location for the test or procedure?

This seems like a lot of information, and will be less or more important depending on the cost or risk of a procedure. How can we expect the average consumer to be able to get these answers? To get back to the specific question of cost, however, at Truven Health Analytics, we understand consumers need this information and have developed a tool to provide answers. Our Treatment Cost Calculator uses our MarketScan® database, one of the largest of its kind, to provide the answers. Our research shows significant cost variation for the same test or procedure in different parts of the country, but surprisingly, also shows considerable price variation within a given market.  For example, the same test may vary in price by several-fold in the same city.  Our Treatment Cost Calculator allows the user to input the name of the test and the city where the test is offered; using MarketScan data, the tool shows the user all the locations for the test (including directions) and the range of prices for the test.  Our tool also includes quality information when available. 

Our intent is to arm the user with data about the necessity of the test, the range of prices being charged in the user’s location and data measuring the quality of the test.  We don’t expect patients to make clinical decisions, but we want the patient to be able to ask intelligent questions about their treatment plan.  We believe this level of transparency is necessary for a patient to be an active partner in their healthcare, not a passive recipient. This is the heart of patient centered care.

Michael L. Taylor, MD FACP
Chief Medical Officer

Provider Cost Competition Affected by Generational Characteristics

By Truven Staff
Linda MacCracken imagePricing transparency is more crucial to consumer provider selection, given more healthcare spending. Price and affordability are one of the top two factors defining quality for Generation Xers and Baby Boomers, and the third highest factor among the younger Millennials and older Generation Xers. The recent article, Disruptive Innovators: Cost Competition Puts Pressure on Providers underscores the future impact to providers. This is more apparent in outpatient care, where there are many more competitors for the same provider services. Providers wanting to keep the educated, informed and patients willing to act will need to engage around direct price competition – via payments, rates and payer channels. The Truven Health Treatment Cost Calculator integrates payer coverage benefits applied to any planned procedure, and gives the consumer more provider switching options than seen in the past. For the Millennial deciding between seeing the doctor or spending money on food, entertainment and cell phone fees, healthcare may be postponed. The Baby Boomers and Greatest Generation have higher loyalty to primary care providers, and may have a comparatively slower rate of defection for pricing purposes for planned procedures, such as the colonoscopies.

Complete a short form to download the Truven Health research brief, Matching the Market: Using Generational Segments to Attract and Retain Consumers, that explains the motivations behind four current generations:
  • Greatest/Silent Generation (adults born before 1942): Physician Directs Me
  • Baby Boomers (1943–1960): Engage Me
  • Generation X (1961–1981): Educate Me
  • Millennials (Adults Born Since 1982): Connect With Me
These generational attitudes affect how consumers view a variety of healthcare decisions.

Linda MacCracken
VP, Advisory Services