A new study has reaffirmed that consumers don’t really shop around to find lower healthcare prices.
Researchers wanted to know where consumers with private health insurance, high out-of-pocket healthcare expenses and access to a comparison price tool received MRI scans. Notably, they found patients bypassed six lower-priced providers between their homes and where they were treated, on average. The findings were published in the Journal of Health Economics.
Within a 30-minute drive, the median patient has access to 16 MRI providers, underscoring just how many options are out there for patients. Still, patients tended to rely more heavily on referrals, even if they had to pay significantly more.
The study findings align with previous studies that only a low percentage of patients actually price-shopped in advance of a planned or routine visit. The results conflict with policies aiming to improve price transparency in order to help bring down healthcare costs.
For example, a mandate from the Trump administration in 2019 required hospitals to post their list prices online so patients could learn their financial responsibilities before receiving treatments. However, if patients don’t shop around for lower prices, and instead rely on physician referrals more frequently, these types of policies won’t lower healthcare costs through greater competition across providers.
“While consumer theory suggests that greater price transparency in health care could lead to large efficiency gains, realizing those gains is complicated by the centrality of the agency relationship between physicians and their patients,” wrote first author Michael Chernew of Harvard Medical School and co-authors. “Because of uncertainty over treatment and significant information asymmetries between patient and provider, patients often rely on the medical professionals treating them for advice.”
In the case of the study group, patients could have saved hundreds on average if they went to a lower-priced provider.
“If patients attended the lowest priced provider within the distance they already traveled for care, they could have reduced their out-of-pocket costs by $84.37 (27.49[%]) and lowered insurer spending by $220.49 (40.53[%]),” Chernew et al. wrote.
The findings should help inform rulemakers and economists how patients make decisions about where they receive care.
“While a patient’s distance to their provider does influence where a patient receives care, for care where individuals rely on the advice of their referring physicians, referring physicians’ preferences may outweigh the effects of cost-sharing and differences in travel time (particularly relatively short differences in distance across providers) in determining treatment locations,” the researchers concluded. “Our work suggests that economists should integrate the impact of agency into models of patient choice, particularly in non-emergent settings.”