Will doctors knowing the price really cut medical costs?

For several years there's been a growing movement toward more price transparency in health care. The belief is that with better cost information, patients will make smarter decisions about care, reducing health spending.

Early evidence shows that there is a benefit to extending that transparency to physicians. But along with that evidence comes questions of exactly how having physicians make decisions based on costs could affect quality of care.

A study that appeared online April 15 in JAMA Internal Medicine, formerly Archives of Internal Medicine, found that presenting physicians with lab test fee data at the time of order entry resulted in fewer tests being ordered. That comes just weeks after a separate study from a pharma consulting firm found that when physicians are given formulary information at the point of prescribing, they are more likely to consider lower-cost medications.

For the JAMA Internal Medicine study, the computerized physician order entry system at the Johns Hopkins Hospital in Baltimore was programmed to display the cost, based on the Medicare allowable fee, of 30 lab tests, including those that were among the most expensive, and those that were low-cost but frequently ordered. Researchers examined the amount of tests ordered over six months and compared the results to data collected from a six-month period a year earlier. Physicians ordered 9.1% fewer tests compared to a time when they were not shown the prices.

Recent research showed that patients equate high cost with high quality, and if they feel short on cash, they will avoid all medical care rather than shop for value. Proponents of more cost transparency said offering that information to physicians allows them to educate patients on different alternatives without making them feel like they're getting lesser care.

“This speaks to the importance of educating on both the doctor and the patient side,” said Neel Shah, MD, a clinical fellow of obstetrics and gynecology at Harvard Medical School in Boston. “There's been this movement to empower patients with this sort of information for 20 years, and there's been no similar movement to empower our physicians with this information. And at the end of the day, what you want is conversation between the doctor and the patient.” Dr. Shah also serves as executive director of Costs of Care, a nonprofit organization he founded in 2009 whose mission is to bring more price transparency to physicians.

However, the studies on doctors changing course when confronted with cost information have not gauged whether that produced any change in quality. Internist Leonard Feldman, MD, lead author of the study, said he believes the risk to patients was low, but an accompanying editorial in JAMA Internal Medicine warned of risks in making decisions based on prices.

Physicians told to consider cost

There has been a growing movement to get physicians to think about costs. For example, accountable care organizations are designed to give rewards to physicians for holding down health spending while increasing quality.

Part of the movement comes from a recognition that it's difficult to deliver quality care if patients feel they can't afford it. A 2012 report from the Commonwealth Fund found that when cost is a concern, instead of shopping for affordable alternatives, 41% of patients between ages 19 and 29 chose not to get needed medical care. The number jumped to 60% among uninsured adults. Other studies have found that as patients are more responsible for costs, such as by paying higher deductibles, they are more likely to delay care.

“Physicians are smart people, and they want to maintain their relationships with their patients. And patients are not going to be happy being sent away to get care or get prescriptions that are more expensive than they need to be,” said Suzanne Delbanco, executive director of Catalyst for Payment Reform, a nonprofit that works on behalf of employers to help control health costs. “I think as more consumers are expected to pay a greater share of their health care costs and their benefits are designed in such a way they are more the stewards of their resources, they're going to need their physicians to be partners in helping them make smart economic decisions.”

Dr. Feldman said he was encouraged the day the prices went live on the Johns Hopkins ordering system. “One day we didn't have costs on there, the next day we did, and I heard providers say, 'Wow, this is really great. It's really interesting to know what these prices are,' ” said Dr. Feldman, an assistant professor of medicine at Johns Hopkins University School of Medicine.

The greater use of electronic health records and electronic prescribing systems has made it easier to give doctors price information at the point of care. Health care consulting firm Decision Resources published a study in March for the pharmaceutical industry and found that 75% physicians who are presented with formulary and pricing information at the point of prescribing paid attention to costs in dispensing drugs.

“Physicians should have a full understanding of the implications of various treatment options, and price is an important part of that understanding,” said Robin Gelburd, president of FAIR Health, a nonprofit that maintains a database of health care charge information.

“The water level rises for all stakeholders in the system when we work from a common understanding of the efficacy of various treatments, the most effective way to provide those treatments and what alternative treatments cost,” Gelburd said.

How might cost decisions affect quality?

A thread running through the cost discussion is about making decisions that not only are based on price but also do not decrease quality of care. For example, the American Medical Association has policy calling on physicians to be “prudent stewards of health care resources” while also fulfilling their primary ethical obligation of promoting the well-being of each patient.

As the Obama administration found when it started its campaign for health system reform in 2009, any time health care cost reductions are discussed, questions are raised about rationing care. Similar questions arose from the JAMA Internal Medicine study in a commentary by William Tierney, MD, that ran alongside the Johns Hopkins study.

“My question is whether EHRs and [clinical decision support] will be an ax that indiscriminately reduces testing and treatment, regardless of its appropriateness, or a scalpel carefully carving off unnecessary or even hurtful interventions while sparing necessary interventions,” wrote Dr. Tierney, associate dean for clinical effectiveness research at Indiana University School of Medicine. He also is president and CEO of the Regenstrief Institute, an Indianapolis-based health research foundation.

Dr. Feldman said it would be impossible to know if negative outcomes were a direct result of fewer tests, since there's no scientific way to know what tests a physician thought of ordering but decided against. But the “risk is pretty darn low,” he said.

“Hopefully, what we do is rationally consider whether the test needs to be done, taking into account all of the different issues, including cost,” Dr. Feldman said. “But most importantly, is this the right thing for the patient, and will it change my management based on the results that I get?”

Proponents of physicians having cost information said patients might be more likely to consider less costly but possibly more effective alternatives if they talk about them with trusted doctors. A February Health Affairs study found that 22 focus groups of insured patients perceived high cost to be associated with high quality. Researchers also found a lack of interest among insured patients in the costs absorbed by insurers.

How quickly this movement of price transparency at the point of care spreads likely will depend on technology, Dr. Shah said. Three years ago, when the Johns Hopkins study was conducted, most ordering systems were proprietary and could not access information from other sources, such as health plans, to make it available at the point of care. But now physicians can use more mobile applications to access the information, he said.

As for Johns Hopkins, the prices that were added for purposes of the study are still in the system. But the program has not been expanded to include all lab tests, nor has it been updated to reflect the current fee schedules. Dr. Feldman said he doesn't think every test needs to have a price as to not desensitize physicians to a point of ignoring that it's there.

“I think it's much more of the symbolic nature that there's a cost associated than the actual cost that really matters,” he said.