Want to cut health costs? Show doctors a price tag.

April 18, 2013

In November 2009, the Johns Hopkins Hospital in Baltimore did something that hospitals rarely ever do. The hospital began showing doctors the prices of the medical procedures they ordered.

For six months, doctors ordering certain lab tests would see the window that you see below that includes both the type of test — and how much Medicare would reimburse for the procedure.


When doctors saw this information, they ordered 9.1 percent fewer tests for their patients. That, a new paper in the Journal of the American Medical Association finds, saved the hospital just about $400,000.

"Our study offers evidence that presenting providers with associated test fees as they order is a simple and unobtrusive way to alter behavior," the study authors, lead by Johns Hopkins professor Leonard Feldman, write. "Unlike the process in previous studies, no extra steps were added to the ordering process and no large-scale educational efforts accompanied this exportable intervention."

Here's a bit more of how the study worked. From November 2008 to May 2009, the researchers tracked how often doctors and other providers ordered 61 tests that were either the most common or more expensive. The hospital repeated those measurements a year later. That time though, they included price data for 30 of the tests (the other 31 served as a control in the experiment).

Providers ordered just over 1.1 million lab tests during the study period, and there was indeed a significant difference when the system displayed price information. For the 30 tests where providers saw cost data, the number of tests ordered dropped from 458,297 to 416,805.

That worked out to the hospital spending $3.79 less per person per day on medical tests.

Keep in mind, nothing changed for the doctors. The hospital would not penalize them for ordering more expensive tests; the costs would just get billed to the insurance provider. Still, the simple display of information suggests that "physicians can act in a cost-conscious manner even without direct incentives."

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Evan Soltas · April 18, 2013