How Physicians Respond To The Price Of Lab Tests Before Ordering Them

Healthcare prices in the U.S. are often hidden. Some people think this price opacity contributes to our nation’s high healthcare spending. If people don’t know how expensive healthcare is, they won’t have much reason to restrain healthcare utilization.

A recent study tested what would happen if physicians were immediately informed of the price of lab tests that they were planning to order for their patients. The study took place in three Philadelphia hospitals. The researchers randomized whether or not the electronic health record gave physicians price data on specific lab tests. For some lab tests, the computer never gave doctors price information; for other tests, they always got price information (after a baseline, so the researchers could establish how often doctors normally ordered the tests).

The researchers found no change in lab testing over the time of the study, even for tests where the computer provided price information. Here’s a picture of the starkly negative findings:




Effect of a Price Transparency Intervention in the Electronic Health Record on Clinician Ordering of Inpatient Laboratory Tests

Seeing pricing information didn’t influence physician behavior. Not one iota.

Here’s why I think this happened, and why I’m not concerned that this excellent study dooms price transparency efforts.

1. The EHR showed Medicare-allowable prices, not the prices charged to patients with private insurance. I’m not sure doctors will be blown away by those Medicare rates, which are often less than what hospitals and clinics actually charge for those tests.
   
2. Hospitals don’t charge Medicare for individual lab tests. They get paid a lump sum by Medicare depending on patient diagnoses, what’s known as the DRG system. That means that the Medicare fee for lab tests is generally a meaningless number for hospitalized patients—it won’t change what hospitals charge Medicare (or even private insurers) and won’t influence what they get paid.
3. The price information didn’t inform physicians about what those lab tests will mean for patients’ out-of-pocket expenses. I am on the record for advocating that physicians explicitly discuss out-of-pocket expenses with patients before making medical decisions. This study didn’t have anything to do with out-of-pocket expenses, and thus physicians had no reason to believe patients were being financially harmed by excessive lab testing.
4. Too much price information might undermine the effectiveness of that information. If a computer tells a physician what lots of things cost—including necessary things like the white blood cell counts they need to monitor their patient's infection—physicians are going to quickly learn to ignore the information.

We need more price transparency in American medical care, especially for very expensive healthcare interventions that might not be necessary parts of patient care.

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