It is expected that total health care spending in the United States will reach $4.8 trillion or nearly 20 percent of gross domestic product (GDP) by 2021. Increasing health care costs are straining family and government budgets. While medical billing companies and departments are working more to get all the claims out and paid the overall cost of healthcare is going up. A recent study published in the Journal of the American Medical Association (JAMA) says that the major reasons for high health care costs are the price of services, drugs and devices rather than the increasing health care demands of an aging population. John Hopkins researchers are also saying that the physician’s ignorance about the costs of medical tests is a one of the reasons for rising healthcare costs.
Physicians usually tend to order expensive tests because of clinical preference, medical defensiveness or due to the non-availability of past test results. According to the study published on JAMA Internal Medicine, providing the cost information to doctors for the tests they order can lead to cheaper health care choices and large savings. The researchers carried out a six-month experiment at Johns Hopkins Hospital and compared the buying behavior of the physicians there over a period of six months on the basis of 62 frequently conducted diagnostic blood tests divided into two groups – half of the tests with their price and the other half without. The research found a 9.1 percent decrease in orders for a group of 30 lab tests for which the physicians knew the price, leading to savings of more than $400,000 over six months. At the same period, orders for the other half of the tests which lacked pricing information rose 5.1 percent.
The study provides the following example of how providing the physician with test price information can lead to substantial cost savings. A blood test which checks a patient’s electrolyte status, blood sugar levels, and kidney and liver function cost $15.44 while a basic metabolic test that is $3.08 evaluates all of these except liver function. Patients who do not have a history of liver disease may need just basic metabolic test and do not need to check their liver enzymes. The study showed that when doctors knew the cost difference, they ordered 8,900 fewer comprehensive tests and 8,900 more basic tests with overall savings of $27,000 savings over six months.
The availability of pricing information also encouraged the doctors to re-evaluate the tests and provide optimal care. For instance, complete blood count with differential (CBC) which provides basic blood cell information as well as extra information on white blood cells costs $11.35 while the standard CBC costs $9.37. Doctors who knew this price difference were less likely to order the former test and did not compensate with more CBC orders either. This indicates that they decided to order CBC less frequently.
The main conclusions of the study are as follows:
- There are many situations where price comparisons could lead to more cost effective choices. For instance, displaying the Medicare allowable fee of diagnostic laboratory tests at the time of order entry can influence physician ordering behavior
- Pricing comparison may not influence the ordering behavior of tests ordered only once for each patient such as tests with no alternatives such as MRI exams
- Variations in patient situations would need different sets of tests and follow up procedures
With healthcare reform, medical practitioners are facing a rising influx of patients along with the need to provide more complex services. This places greater demands on them to stay informed about the prices of all types of medical tests, drugs and other interventions. Physician awareness about these matters can help bring down healthcare costs and meet the national goal of ensuring affordable care. However, physicians also need to ensure that they are properly reimbursed for services rendered. Proper documentation of medical records and accurate medical billing and coding are indispensable to maintain the medical practice’s financial condition, reduce errors, and achieve compliance.
Julie Clements, OSI’s Vice President of Operations, brings a diverse background in healthcare staffing and a robust six-year tenure as the Director of Sales and Marketing at a prestigious 4-star resort.
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