Managing Your Practice

Soaring Healthcare Expenses Draw Attention to Price Transparency As Cost Control


As efforts intensify to rein in the soaring cost of healthcare, greater attention is being paid to the cost-control potential of price transparency. Initially envisioned as a consumer-driven dynamic, price transparency beckons physicians to consider much more seriously the cost impacts of their diagnostic and treatment decisions.

Consumer-Driven Approach

The U.S. Department of Health and Human Services (HHS) regards price transparency as an important weapon in its armamentarium of “value-driven” approaches to drive down the cost of healthcare. By unleashing the energy of the savvy shopper and empowering consumers with the ability to compare the price and quality of healthcare services, they can make informed choices of their doctors and hospitals. In turn, HHS hopes to motivate the entire system to provide better care for less money.

That “empowered consumerism” principle is the guiding impetus for the Affordable Care Act’s state-regulated health insurance exchange apparatus, which, beginning in 2014, will present a side-by-side comparison of health plan choices, premium costs, and out-of-pocket copays in a way that is designed to help consumers shop for better-value health plans.

Some health plans are using price transparency to nudge consumers to choose lower-cost healthcare service options. Anthem BlueCross BlueShield, for example, has launched the Compass SmartShopper program (, which gives members in New Hampshire, Connecticut, and Indiana $50 to $200 if they get a diagnostic test or surgical procedure at a less expensive facility. Anthem notes that the cost for the same service can vary greatly. For example, hernia repairs range in price from $4,026 to $7,498, and colonoscopies range from $1,450 to $2,973.

New price transparency tools also are available ( and, for example) to help consumers who face high deductibles or out-of-pocket costs to find “fair prices” for surgeries, hospital stays, doctor visits, and medical tests—and shop accordingly.

Despite these developments, however, there is limited evidence that the “empowered consumerism” approach to price transparency will spur consumers to choose lower-cost providers. Some experts note that many consumers equate higher-cost providers with higher quality, and caution that healthcare cost-profiling initiatives might even have the perverse effect of deterring them from seeking these providers.1 Cost measures, they argue, must be tied to quality information in order to neutralize the typical association of high costs with higher quality.1

Provider-Driven Approach

There are healthcare price transparency initiatives that address the supply side of the healthcare cost equation. These initiatives seek to educate physicians about the ways in which their clinical decisions drive cost and affect what patients pay for care. Some believe that this approach has the potential to make a much bigger dent in cost containment than the empowered-consumerism approach.

“Ninety percent of healthcare cost comes from a physician’s pen, but a lot of that spending doesn’t help patients get better,” says Neel Shah, MD, a Harvard-affiliated OBGYN and executive director of Costs of Care (, a nonprofit aimed at empowering both patients and their caregivers to deflate medical bills. The challenge, he adds, is making physicians aware of how their decisions can inflate costs unnecessarily, and giving them the training and tools they need to take appropriate action.

“Just as the patient-safety movement helped caregivers think about how to prevent unintended harm, a new movement is needed to educate doctors, nurses, and other caregivers about the cost and value of their decisions, so they can avoid waste and protect patients from unintended financial harms as well,” Dr. Shah says.

Costs of Care recently launched its Teaching Value Project, which employs Web-based video education modules to help medical students and residents learn to optimize both quality and cost in clinical decision-making.

“We’re also developing an iPhone app to put cost and quality information at physicians’ fingertips at the critical moment when medical decisions are made,” Dr. Shah adds. “Just being able to see the price variation—an ultrasound versus a CT scan, a generic versus a brand-name medication, or the cost of a marginally valuable test—can help drive physician ordering behavior.”

Hospitalist Impacts

Robert A. Bessler, MD, CEO of Tacoma, Wash.-based hospitalist management firm Sound Physicians, says his hospitalists spend about $2 million a year “with their pen or computerized physician order entry.” A quarter of the cost is pharmacy-related, and the “majority of the rest is from bed-days.”

Dr. Bessler

“The most expensive thing we do is make the decision to admit,” Dr. Bessler notes. “With hospitals switching from revenue centers to cost centers in a population health/ACO [accountable-care organization] environment, an increasingly important part of the hospitalist’s job will be asking

questions, such as, ‘Could this patient go to a nursing home tonight from the ER?’ and ‘Can my colleague in the post-acute environment take care of this patient, with the same effective outcome, if we provide more intense services in the nursing home, going forward?’”

Because most diagnostic testing is done on the front end of an inpatient’s stay, the hospitalist’s main contribution to cost control is to get that diagnosis right and use consults to answer specific questions, Dr. Bessler explains. “There is a direct correlation between the number of consults and the volume of procedures which lead to higher inpatient costs,” he adds.

As hospitals convert to value-based care models, and pressure increases on hospitalists to ramp up their analysis and sharing of cost data and resource utilization, not all physicians will find that conversion easy.

Just as the patient-safety movement helped caregivers think about how to prevent unintended harm, a new movement is needed to educate doctors, nurses, and other caregivers about the cost and value of their decisions.

—Neel Shah, MD, executive director, Costs of Care

“We are trained to take good care of our patients, not to be financial stewards of the healthcare system,” says SHM Public Policy Committee member Bradley Flansbaum, DO, MPH, SFHM. “Now, physicians are being asked to do both—to watch our resource use without looking like we’re selling out to payors. You’re putting physicians in a difficult position. Will they say to patients, ‘You can’t have this service’? When does being pragmatic stewards of resources become rationing?” he cautions.

Dr. Shah concedes that there is a perceived tension between “what’s best” for my patient and “what’s best” for society. “We, as a profession, haven’t given serious attention to how to navigate those tensions,” he says.

Dr. Flansbaum, a hospitalist at Lenox Hill Hospital in New York City, says it’s time to start down the transparency road.

“Otherwise, we will have a centralized body making these decisions for us,” he says.

Christopher Guadagnino is a freelance medical writer in Philadelphia.


  1. Mehrotra A, Hussey PS, Milstein A, Hibbard JH. Consumers’ and providers’ responses to public cost reports, and how to raise the likelihood of achieving desired results. Health Affairs. 2012;31(4):843-850.

Reduce Wasteful Habits and Preserve Patient Obligations

According to Dr. Shah, hospital-based physicians must examine habits that add unnecessary costs, such as pre-empting future workload by ordering five tests now, or succumbing to workflow inertia by ordering daily lab draws on every inpatient, even though many of them never get read. “Part of cost awareness and value-based decision-making requires snapping out of these patterns,” he says.

On the other hand, physicians must balance cost stewardship with their professional obligation as patient advocate, Dr. Flansbaum cautions. “When you’re presented in the ER with a patient with three possible diagnoses, do you have them stay eight to 10 hours to get tests sequentially, or do you order all tests at once and take only two to three hours?” he says. “When you’re knee-deep in the ER, can you comfortably model cost-conscious ordering behavior and still hit your throughput targets?”

—Christopher Guadagnino

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