A cash market for imaging in California

Two related trends in the health care industry could, in combination, reduce medical spending and improve the clinical and service quality of medical care.  The first trend is that patients increasingly have substantial “skin in the game” in the form of high deductibles, co-payments, and co-insurance rates.  The second trend is that health care prices are becoming more transparent. These two trends are complementary and self-reinforcing: patients who face substantial cost sharing will value and demand meaningful price information, and as meaningful prices become more accessible to patients at the point of care, health plans that require substantial cost sharing will become increasingly attractive to consumers.  This paper examines the extent to which greater price transparency, and patients acting on that transparency, could reduce medical spending on imaging services.  Stroll Health has developed a unique dataset by assembling claims data, cash prices, and private and public payer fee schedules for the greater San Francisco Bay Area.  A cash price is the amount a provider is willing to accept from the patient as payment in full, without any payment from the patient's insurer.  The data set includes more than 200 imaging facilities, 250 procedures (or CPT codes) in radiology, and every major health insurer in Northern California except Kaiser.  This paper examines two questions.  First, how much could privately-insured patients save, if anything, if they agreed to pay a facility’s cash prices instead of using their health insurance?  Would the savings be larger/smaller at particular types of facilities (e.g., freestanding facilities versus hospital centers)?  Second, how much could patients and payers save if it were legal to provide discounts to patients based on a patient's behavior (e.g., prompt pay discounts, discounts if a patient uses a price search tool)?