How much does an MRI cost? In D.C., anywhere from $400 to $1,861.

March 13, 2013

If you want to get an ankle MRI at one doctor's office in downtown Washington, the procedure will run you $400.

Head about two miles Northwest to another's doctor office, and the price more than quadruples to $1,861. Head out to the Virginia suburbs and the price jumps another $300.

This would reflect the kind of price variation that we see in other markets," says John Driscoll, president of Castlight Health, which created the map above. "I know we've definitely seen worse than this in a way that's really out of control."

Castlight is a relatively new company that works in the business of health price transparency. They sell software to employers, whose workers  can then compare the costs of various health-care providers.

"We realized people were paying more and more out of pocket," says Castlight CEO Gio Colella. "The average deductible is about $5,000 in an industry where people have little understanding of what they're paying for. We wanted to solve that problem."

Castlight's first study looked at the price of colonoscopies and found a huge variation. The same doctor's fees could vary five-fold depending on which hospital he performed the procedure at.

"That part blew me away," said Colella, a doctor by training. "It didn't make sense to me. My engineers started coming back with data, and I thought there were errors in it."

Castlight now works with employers who, collectively, cover 3.7 million workers. They have access to the insurance claims for all those people, which makes up one the larger troves of private health price data.

The clearest takeaway from the Castlight data is that there is huge, huge variation in what doctors charge. The map of Washington above, which shows the prices for ankle MRIs, is pretty much par for the course. Across the country, a number of cities see four-fold variation in how much providers charge for the same procedure.

There isn't anything special about ankle MRIs, either: Separate research has shown huge variation in the costs for everything from appendectomies to emergency room visits. Castlight's data show that, too; the costs for some of the most common tests can vary by as much as seven-fold. Their data, taken from hundreds of metropolitan areas, shows some doctors who charge $92 for a mammogram — and others who charge $314. 

I asked Colella about how health-care systems felt about having their prices posted online. Would the doctor who charges more than $2,000 for an ankle MRI want his price out there? Especially when a competitor down the street charged a fraction of the cost?

"I don't think they're a bad guy," he says. "They're using a system in which they believe this is what their value is. The ecosystem is complex."

Castlight has seen some health providers reduce their fees once the data became public. In one particularly extreme example, a Midwestern hospital cut their charge for outpatient radiation by 60 percent after Castlight made the price public.

But others don't necessarily see the need to compete on price. The Castlight site also includes information on quality, with rankings of various doctors' outcomes on given procedures. Some hospitals might feel emboldened to charge more if they can deliver better results.

"Cleveland Clinic is probably one of the most expensive providers in their state, if not the country," Colella says. "But the CEO, who is a visionary, says that train has left the station, and that they'll compete on quality."

Colella is optimistic that transparency can dramatically reduce costs — which isn't surprising, given that he is in the business of health price transparency. But the way he sees it is this: The government is unlikely to start regulating the price of health care any time soon. Encouraging consumers to push for lower prices is another approach.

"There's the hospital that literally dropped its rate by 60 percent," Colella says. "In a sense, a lot of hospitals are trying to figure out how to provide fair prices. That's why we think transparency is so critical."

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Evan Soltas | March 13, 2013