Rachel Emma Silverman
The Wall Street Journal
Nov. 1, 2016
Why It Pays to Shop Around for That MRI
Employers give workers a cut of health-care savings
Consumers may drive across town to save a few bucks on a gallon of gas or $1 on a gallon of milk, but when it comes to health care, those same buyers aren’t as price-conscious.
That is a problem for companies as health costs continue to rise, and it’s increasingly a problem for workers, too, as high-deductible health plans force employees to spend more out of pocket.
A growing number of employers are trying to get employees into the habit of comparison-shopping by giving them a cut of the savings when they choose cheaper care. Employers like the states of Kentucky and New Hampshire and Jackson Health System, a large Florida hospital system, are using new tools that allow workers to compare prices for common procedures like MRIs and blood work, and get rewarded if they opt for lower-cost options.
Employees rarely shop around for health care, in part because it is hard to find out how much procedures cost, say health economists. And until recently, individual deductibles weren’t high enough for many workers to care about out-of-pocket expenses. A recent study published in JAMA, the journal of the American Medical Association, found that only about 10% of some 149,000 workers offered a comparison-shopping tool actually used it. Yet employers are betting shopping habits may change as large numbers of workers shift to high-deductible health plans and face more out-of-pocket costs. Workers on a single coverage plan have an average deductible of $1,478, up 49% since 2011, according to a recent study.
The state of Kentucky began offering a health-shopping service to its employees in 2013 to help contain rising health costs, said Jenny Goins, commissioner of Kentucky’s department of employee insurance. Around that time, the state began offering employees high-deductible health plans. Ms. Goins said the state opted for the shopping tool, made by Vitals Inc., to give employees extra motivation to spend wisely on health care. Of the $10 million the state saved between 2013 and 2015, $1.1 million went to employee rewards.
Most people aren’t aware of how health prices can vary, even in the same area. A single procedure like an echocardiogram can vary by thousands of dollars in a single city, said Bill Kampine, co-founder of Healthcare Bluebook, a health-care price shopping service that offers a rewards program. “Going to the doctor is one of the few instances where neither the buyer nor the seller know the price,” said Mitch Rothschild, Vitals’ founder and executive chairman. The company says that last year its eight employer clients, including state employees of New Hampshire, saved $12 million on procedures that are considered “shoppable,” like mammograms. Employees reaped $1.46 million in rewards by saving an average $625 per treatment, Vitals says.
Vitals uses data from millions of health claims to identify about 200 procedures with wide cost variation, such as MRIs, CT scans and blood work, said Mr. Rothschild. Procedures for which people are unlikely to base their decisions on price, such as cancer treatments or brain surgery, aren’t included. Vitals, along with competitors like Healthcare Bluebook, take quality of care into account,using government scores by the Centers for Medicare and Medicaid Services and patient ratings when available.
Employees can earn anywhere from about $25 to $500 for picking lower-cost providers, usually paid out in checks or gift cards. Employers typically pay the outside vendors a monthly fee of a few dollars per employee, or a cut of the total savings, to administer the rewards. Without rewards, workers are unlikely to comparison-shop on their own, said Devon Herrick, a health economist with the National Center for Policy Analysis. Patients typically choose providers referred by their primary-care physicians or opt for the most convenient location, added Paul Ginsburg, a health economist at the University of Southern California. “Workers will never do anything just for the benefit of the company,” said Mr. Herrick.
Shopping for health care remains difficult, however, because patients often lack specific details about medical procedures and insurance coverage to determine accurate pricing, said Mr. Ginsburg. And some kinds of care, such as emergency services, are unsuited to comparison-shopping; an analysis of 2011 claims by the Health Care Cost Institute found that 43% of total health-care costs was spent on so-called shoppable services.
Scott Weden, benefits and wellness manager at HealthTrust New Hampshire, which administers health benefits for 47,000 public employees in the state, began offering Vitals last year. By the end of 2015, the system saved $1.5 million, and paid out $174,000 in incentives, he said. “It is very difficult to change someone’s behaviors in how they look at medical consumerism,” he said, but “the program took off much better than we had anticipated.”
In Kentucky, Ms. Goins said it has been hard to convince some of the state’s rural staffers to shop around, especially since some alternate providers might be a long drive away. So far, about 3,000 of the state’s 260,000 eligible employees and dependents have opted for the lower-cost provider and received a reward. Valerie Rich,a benefits coordinator for Kentucky’s Warren County public school district, used the shopping tool for a mammogram and discovered her imaging center was already a low-cost provider in her area. She got a $25 check in the mail, she said.