July 6, 2011

Wide disparity in costs for common medical procedures

All other things being equal, if you had a choice of paying $300 or $1800 for an abdominal CT scan just by going to a clinic or a doctor in a nearby town, would you? It seems like a trick question or a no brainer, but the reality is people are paying the higher cost every day... just because the transparency in health care costs just isn't there. And this lack of transparency gives rise to a situation where patients can pay as much as 683% more for the exact same medical procedure in the same town.

More and more people will begin to notice the cost differentials as the trend for consumers bearing increased responsibility for healthcare costs continues. Whether through insurance arrangements such as high deductible plans or through assuming a higher proportion of co-pays and other out-of-pocket costs in more traditional plans, more consumers have a direct stake in the cost of healthcare. Yet the average person with a healthcare insurance policy is in the dark about the costs for various procedures and treatments. First, many consumers have been insulated from the cost of anything beyond the price of the insurance policy itself. The unit cost of services and procedures has largely been a matter between the insurer the provider. Secondly, medical care is a highly complex service with little in the way of tools available for comparison shopping. It's complex enough that even the treating physicians themselves are often in the dark about costs about specific procedures, tests, or medications.

Change:healthcare, a national organization that is trying to establish more transparency in the cost of healthcare, recently released a cost comparison report for several common medical procedures such as MRIs, CT scans, ultrasounds and PET scans. The Q2 2011 Healthcare Transparency Index reports on what they learned about cost variations by examining claims data over the course of a year for 82,000 employees of small businesses. While it's been widely understood and acknowledged that price might vary greatly depending on what part of the country you are in, this study shows that the price can also vary greatly depending on which side of the street you are on: inter-regional costs fluctuate widely, too.

This wild divergence in pricing is probably less of a surprise to employers, many of whom who have been keeping a close and wary eye on skyrocketing workers' compensation medical costs. There are no co-pays or cost sharing mechanisms on the workers comp side of the house - the employer underwrites 100% of the associated costs of a compensable injury or illness. Many enlightened employers have been tackling costs on the macro level (outcomes) as well as on the micro level (unit costs) by seeking high-performing physician networks. But even with the buying power and the resources that a large employer can bring to bear, it can still be difficult to get it right when it comes to managing workers' compensation medical costs.

Whether in work comp coverage or in general health care, many employers have also recognized the role that the individual employee plays in helping to control costs and stem losses - through behaviors both on the job (safety compliance) and off the job (general wellness and healthy behaviors). Wellness and EAP benefits are widespread as a result. In a similar vein with a potential for a win-win outcome, employers should take every opportunity to help employees to become more savvy consumers of health care services.

Here are some consumer healthcare education tools / resources that might be useful in your wellness program:


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About this Entry

This page contains a single entry by Julie Ferguson published on July 6, 2011 1:12 PM.

Annals of Compensability: Death by Sitting in New Jersey was the previous entry in this blog.

Is OSHA's Voluntary Protection Program (VPP) broken? is the next entry in this blog.

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