Findings of this HCCI study, may increase pressure for more transparency in clinical laboratory and pathology test prices

Consumers in states with high healthcare costs may spend more than twice as much for common medical procedures as patients in other states. That’s a surprise finding in a milestone report from the Health Care Cost Institute (HCCI). The report also revealed that pathology and clinical laboratory tests are among the services with the widest price fluctuations. Prices also were shown to vary significantly within individual states.

The HCCI study is the latest salvo in the battle to provide consumers with healthcare price transparency and likely will increase demands on clinical laboratories and pathology groups to make lab test prices easy to find and understand.

HCCI Report Identifies Wide Variance in Prices of Clinical Laboratory Tests

The new report was published in April, 2016, in Health Affairs. The data analyzed included nearly three billion paid medical claims for 242 common medical services from Aetna, Humana, and United Healthcare. It covered the time from Jan.1, 2012 to Dec. 31, 2013. This constituted about 25% of the commercially insured market of patients younger than Medicare age. Prices were actuarially trended forward to reflect prices as of Sept. 1, 2015, by applying actuarial trend factors (similar to inflation rates) to service categories.

The study is accompanied by HCCI’s National Chartbook of Health Care Prices 2015, which illustrates differences in prices for 242 medical services in 41 states and the District of Columbia.

Study Showed Healthcare Prices are Highest in Alaska

HCCI’s research determined that Alaska has the highest average healthcare prices when compared with a national benchmark, followed by Wisconsin, North Dakota, New Hampshire, and Minnesota. In New Hampshire and Wisconsin, more than 20% of healthcare services cost twice the national average. In contrast, 90% of healthcare services are priced lower than the national average in Arizona, Florida, Maryland, and Tennessee.

“These data enable policymakers, payers, and consumers to see where prices for healthcare are highest compared to the national average and neighboring states, and begin to explore why these differences exist,” HCCI Executive Director David Newman, PhD, JD, said in an HCCI press release. “We hope states use this information to design appropriate solutions to address potentially unnecessary price variation.”

Clinical Laboratory Testing Among Healthcare Services with Highest Fluctuations

While some healthcare services, such as acupuncture, showed only small variations in prices, cataract removal, imaging radiology, and clinical laboratory tests fluctuated the most from state to state. For example, the national average for cataract removal (with lens) was $3,292, however, the study showed the price ranged from average of $8,182 (Alaska) to $2,300 (Florida).

David Newman, PhD, JD, Executive Director Health Care Cost Institute (HCCI), led an HCCI study that shows commercially insured patients in states with high healthcare costs spend more than twice as much for some medical services as consumers in other states. The HCCI report also revealed significant price variations across distances of only a few miles. Newman wants states to use this new information to find solutions to “potentially unnecessary price variation.” (Photo copyright: MedCity News.)

David Newman, PhD, JD, Executive Director Health Care Cost Institute (HCCI), led an HCCI study that shows commercially insured patients in states with high healthcare costs spend more than twice as much for some medical services as consumers in other states. The HCCI report also revealed significant price variations across distances of only a few miles. Newman wants states to use this new information to find solutions to “potentially unnecessary price variation.” (Photo copyright: MedCity News.)

Prices also fluctuated greatly within states. According to the HCCI press release, a Californian needing a knee replacement paid an average of $30,261 in Riverside, but the price soared to $57,504 in Sacramento. In Ohio, the average price of a pregnancy ultrasound in Cleveland was almost three times that of Canton ($522 and $183 respectively), even though the cities are only 60 miles apart.

In an article in Modern Healthcare, Newman joked that employers or insurers could drive a patient needing a knee replacement from Palm Bay, Fla. (where the average knee replacement price is $44,237) to Miami (where the same bundled procedure costs $27,115) for surgery, give the person a couple thousand dollars in casino chips, drive them home, and still come out ahead in cost.

“There’s lots of savings to be had,” Newman stated in the Modern Healthcare article.

Eric Barrette, PhD, MA, co-author of the study and Director of Research at HCCI, emphasized the importance of consumers knowing the price of specific procedures and services.

“We don’t pay for healthcare, we pay for a physical, or an ER visit,” Barrette said in the HCCI statement. “By drilling down into the price of individual services, we can better see where prices are higher than average and begin to unpack what is driving those higher prices.”

Lack of Transparency Key Factor Driving Disparity in Healthcare Prices

The study’s authors concluded that geographical variation in the price of common procedures may partly be justified by differences in wages or rent, but suggests “differences in underlying market dynamics, such as varying market power, a lack of transparency, or the availability of alternative treatments” may drive most variations in cost.

They also acknowledged “more systematic and consistent research” is necessary to understand the forces that make “prices for the same services differ markedly across distances of only a few miles, and what amount of that difference is justifiable?”

Eight states—Alabama, Hawaii, Idaho, Michigan, Montana, South Dakota, Vermont, and Wyoming—were not included in the report due to lack of data, or because state statutes discourage data sharing. Arkansas, which does not want its data compared to national data, also was excluded.

Newman criticized states that fail to release their data. “This byzantine behavior stands in the way of efforts to pursue transparency and understand the root causes of rising healthcare spending,” he said in the HCCI statement.

Online Tools Enable Consumers to Research Price and Quality of Care

The Centers for Medicare and Medicaid Services (CMS) accelerated the push for transparency in healthcare pricing in 2013 when it announced it was making available online a list of what 3,000 hospitals and major physician groups charge Medicare for healthcare services. (See Dark Daily, “Medicare Officials Post Prices of 3,000 Hospitals in Effort to Raise Consumer Awareness of Arbitrary Hospital Pricing,” May 31, 2013.)

In 2014, the nonprofit HCCI announced plans to work with some of the nation’s largest health insurance companies to provide consumers free access to online information about the price and quality of healthcare services. The organization’s healthcare price transparency tool was launched last year and can be found on the Web at Guroo.com.

The report from HCCI is a reminder to clinical laboratory executives and pathologists that they need to anticipate the interest of patients, employers, and payers for increased transparency in the prices of medical laboratory tests and anatomic pathology services by improving the ability of their lab organizations to make it easy for patients to see prices before their lab testing is performed.

Andrea Downing Peck

Related Information:

Prices for Common Medical Services Vary Substantially Among the Commercially Insured

National Chartbook of Health Care Prices 2015

Some States Pay Twice the Price for Health Care, Finds New Report

The Striking Variation of Commercial Healthcare Prices

Medicare Officials Post Prices of 3,000 Hospitals in Effort to Rise Consumer Awareness of Arbitrary Hospital Pricing