Last week, researchers associated with the University of Southern California and Castlight published a peer-reviewed study in JAMA showing early adapters of the company's pricing tools paid 14% less for laboratory tests and 13% less for advanced imaging compared with a control group that did not seek out price information.
In an accompanying editorial, Princeton University healthcare economist Uwe Reinhardt wrote “price transparency works as economists would expect it would.” People will look for ways to pay less when they are assured that the quality of the competitors is equal and, as Reinhardt noted, there is competition, which isn't a given in many communities.
A German native who came to the U.S. by way of Canada, Reinhardt writes with the clarity and insight that an outsider brings to our convoluted healthcare system. He noted that most advanced industrial nations keep patient cost-sharing low by using common fee schedules for all payers. The U.S., by contrast, uses multiple insurers with multiple prices; has large public payers (Medicare and Medicaid), which set prices but pay less than cost; and asks self-paying patients (the uninsured) to pay the highest prices.
Providers, for their part, say the cost-shifting that takes place under our fragmented payment system explains the wide variation in prices. But that can't explain why one facility charges private insurers or the self-insured two or three times the price of a nearby facility for the same procedure, especially when both are getting the same Medicare and Medicaid rates and have similar levels of unreimbursed care.
With price transparency, consumers can avoid those high-priced facilities. But it shouldn't all be on consumers. Reference pricing can also play a role.
Reference pricing gained wide attention in 2011 when the California Public Employees' Retirement System announced it would pay a maximum of $30,000 for a hip or knee replacement. If a patient wanted to go to a facility charging $80,000, they could pick up the difference.