Is Health Care Shoppable? Evidence from the Consumption of Lower-Limb MRIs

We study the extent to which health care services are shoppable by analyzing how privately insured individuals under age 65 consume non-emergent lower-limb MRIs. We focus on lower-limb MRIs, the most common MRI scan delivered to the privately insured, because they are a plausibly homogenous service that are regarded by many as one of the most easily shopped for services in health care. We use rich claims data that we are able to link to information on patients’ benefits design, data on whether patients accessed a price transparency tool before accessing care, and prior authorization data which allows us to identify patients’ referring physician. We begin by show that there is extensive variation in lower-limb MRI prices within cities. Much of this difference is a function of where MRIs are delivered. We find that hospital-based scans cost approximately double what scans cost at non-hospital locations. We find that, on average, if the patient attended the lowest-cost MRI provider within an hour drive from their home, she could save more than 30% on her out-of-pocket costs and her insurer could save more than 50% of their total spending. We then explore the barriers to patients accessing lower-cost scans. Approximately 70% of patients would save money if they were, by default, sent to their nearest MRI provider for care. Likewise, a significant amount of savings is accessible without patients travelling further than they already travelled for care. Patients with and without cost sharing do not differ on the costs of the MRI scans they receive. We find that fewer than 1% of individuals who received an MRI scan in our data looked up the prices of MRI providers before their scan. When we decompose the drivers of patients leaving money on the table, we find that the factor that explains the largest is the identify of patients’ referring physician. The modal location where the average physician refers their patients for an MRI scan receives 80% of the physician’s referrals. Patients referred by a vertically integrated physician leave more money on the table. We conclude that rather than focusing on consumer-directed price transparency, far greater effort should be made equipping referring physicians’ with price information and incentivizing them to make higher value referrals.