No one wants to waste money. We shop around for the best price for a car, a TV and other big-ticket items. Some of us even drive out of our way to save a few dollars on groceries or gas. However, most of us don’t think about medical expenses that way. But you might waste money if you don’t comparison shop for healthcare services.
Although we might not even think about healthcare costs until the bill arrives, it’s worth some time in advance of receiving care. Prices can vary significantly among your area’s doctors, hospitals, pharmacies, treatment and testing centers. Yet, research shows very few patients check out prices before a procedure or appointment.
Finding a cheaper alternative with equivalent quality can save you hundreds, if not thousands, of dollars. But figuring out how much healthcare will cost you before you agree to a service is complicated. Yet, it is usually worth your time and energy. Once you’ve read this post and decided to shop around, read this blog post for tips on how to compare prices for healthcare services.
Healthcare pricing varies significantly.
Each hospital, doctor, testing facility, and lab sets their own prices for services. Additionally, each of these providers negotiate prices for each service with each health insurer. All of this can make it hard for you to determine your own expected costs.
For instance, hospitals charge patients significantly different amounts for the same basic services, depending on the prices negotiated with each health insurance company. Importantly, the pricing negotiations between hospitals and insurers do not always benefit patients.
A New York Times review of hospital data found numerous examples of major health insurers negotiating surprisingly unfavorable rates for their customers. In fact, insured patients often receive care at higher prices than they would if they pretended to have no coverage at all.
Furthermore, according to the NY Times article, some insurance companies refuse to provide pricing information when asked by patients and/or their employers. This lack of transparency allows hospitals to tell patients that they are getting “steep” discounts, while still charging them many times what a public program like Medicare pays.
Clearly, getting accurate price quotes for hospital services can be tricky. But it should be easier to learn expected costs for doctor services, prescription medications, and testing.
Why comparison shop for healthcare services?
Healthcare expenses are climbing. Having a good insurance plan through your job may not be enough to protect you from large medical bills. Employees must pay premiums and out-of-pocket expenses, including copayments. And employees choosing high deductible plans often pay thousands of dollars before their insurance coverage kicks in.
Additionally, if you pay a percentage of the bill instead of flat payments for expensive healthcare, such as outpatient surgeries and hospital admissions, you may face high out-of-pocket expenses.
Patients often don’t comparison shop for healthcare services.
Recent research studied patients with private insurance who needed lower-limb MRI scans. Despite a significant difference in out-of-pocket expense, patients often went to high-priced locations for their MRIs, even when lower-priced options were available.
It’s worth noting that MRI pricing can vary by a factor of 5 or more across providers in the same geographical region. In this study, all participants had access to a price transparency tool to compare MRI prices in their area.
Less than 1% of the patients chose to check out pricing before scheduling their MRI. And it’s not about finding a place that is conveniently located. On average, each patient bypassed 6 lower-priced options between his/her home and the location in which he/she received an MRI.
How much money could patients have saved by shopping around?
If patients chose the lowest cost MRI provider, they could have reduced their out-of-pocket costs by about 30% and saved their insurance company about 40%. That translates to a savings of hundreds or thousands of dollars from shopping around.
Why did patients choose a higher-priced option?
Simply put, their doctors. Patients were heavily influenced by their referring doctor, an effect more powerful than their wallet. Not surprisingly, patients of doctors in hospital-owned practices were more likely to have MRIs in a hospital, a costlier option.
Are patients likely to make decisions based on money in the future?
The study’s authors don’t think the influence of doctors will lessen over time. They feel it is unlikely that a significant number of patients will use apps or websites to make decisions; instead patients will continue to follow their doctors’ recommendations about where to receive services.
Are price transparency tools helpful?
Price transparency tools are designed to show the total expected price of a medical service, as well as the expected out-of-pocket expenses for patients. But people don’t take advantage of these tools as much as they could.
For instance, research published in 2016 evaluated the usage, and effectiveness, of an employer sponsored cost calculator. The tool was used by only 10% it in the first year of availability and by 20% after two years. Interestingly, this research found that employee sponsored price transparency tools did not lower health care spending.
Conversely, another study found that a price transparency platform was associated with lower payments for lab tests, advanced imaging, and office visits.
However, these tools only have value if people use them. And one study found that only 3.5% of patients took advantage of available price transparency tools.
What are the risks of high medical bills?
Unfortunately, your health and finances can be at risk due to rising copayments, high deductibles and high premiums for insurance coverage.
Unexpectedly, your health can suffer if you cannot afford appointments, tests, treatments and medications. Not surprisingly, research shows that people cut back on care when they have to spend more for it, even when the care is “necessary”.
In a survey by Bankrate, 25% of women and 18% of men stated they, or a family member living with them, avoided going to the doctor in the past year because of money concerns, even though they needed medical attention.
To make sure you can get needed care, comparison shop for healthcare services before you receive care, whenever possible.
Learn more about the impact of high medical bills in my blog post: The Impact of the High Cost of Healthcare
Surprise bills makes figuring out your expected costs even trickier.
Hospital bills are complicated and difficult to predict. There are charges for everything from the room itself, doctor charges, equipment charges, medications, procedures, and more.
You might think your insurance company will pay for an in-network hospital stay, minus your deductible and copay. But, an analysis of hospital bills for patients insured through employer health plans proves you’d be wrong.
Researchers found that even when patients choose an in-network facility, 15% of their hospital stays included a bill from an out-of-network provider. How does this happen? Even in a hospital in your network, you can receive care from a medical professional who is out-of-network because he/she doesn’t have a contract with your insurer.
These “surprise bills” charge patients higher than in-network rates. The analysis found that this issue is more common with anesthesia and pathology claims. And it goes without saying, this poses a big financial issue for patients. You generally don’t know, and cannot choose or control, who gives your anesthesia or which pathologist is analyzing your tissue.
Additionally, the analysis found that bills which included an emergency room claim, for both inpatient and outpatient patients, were more likely to include an out-of-network bill, even when patients used in-network facilities.
Good news on surprise bills.
Fortunately, there is some very good news. As of January 2022, the new No Surprises Act bans surprise medical bills by instituting a cap on the pay doctors, hospitals, and air ambulances can collect for out-of-network care. Simply put, if you receive care at an in-network hospital, they cannot bill you more than a negotiated, in-network rate for any out-of-network services you receive while there. Instead, the insurance company and the healthcare provider must work out how the bill gets paid.
Importantly, if you don’t know about this new law, you may pay more than you should. Unfortunately, it might be up to you to make sure your hospital or other healthcare provider follows the law.
The law does not apply to all providers.
Importantly, the law protects you if you receive care in a hospital, but it doesn’t apply to many other places you may receive care, including doctors’ offices, labs, birthing centers, or most urgent care clinics. Additionally, air ambulances, which often come with huge out-of-network bills, are covered by the law, but ground ambulances are not.
For more information…
Although you now understand why you should comparison shop for healthcare, there are other important things to know about money related matters. Read these posts:
- How to Save Money on Prescription Medications.
- Reduce Your Healthcare Expenses.
- Tips for Handling Medical Bills.
NOTE: I updated this post on 1-25-24.