Employees face 'ridiculous' price swings in healthcare choices

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With no guidance to choose high-quality, low-cost healthcare providers, employees are forced to make a tough choice with their employer’s money and their own health.

Healthcare prices are out of control, pricing abuse is rampant, pricing disparities are ridiculous, and quality is hit-or-miss. Despite the availability of cost and quality data, employees must navigate the healthcare system blind and alone, unaware of the potential for huge cost savings and the health risks from low-quality providers.

For example, a recent Consumer Reports survey of U.S. pharmacies found that a basket of five popular generic prescription drugs ranged in price from just $66 for all five medications at online mail-order pharmacy to $928 for the same five drugs at CVS/Target. That’s a price difference of over 1,300%…for the exact same drugs. The report also identified plenty of pharmacies charging a fraction of CVS/Target prices.

Yet no one alerts employees to these price differences and guides them to fill their prescriptions at lower-cost pharmacies, despite the epidemic of prescription non-compliance due to high drug costs.

Inpatient surgery

Hospital price and quality differentials are common in every U.S. city. In New York City, the facility fee for cardiovascular surgery performed at Mount Sinai Hospital, with the highest quality rating, is $64,336. Twelve miles away at NYU Hospital Center, with a lower quality rating for that procedure, the fee is $212,707. If employees were informed, would anyone choose the lower-quality hospital charging 230% more for the exact same procedure?

In Dallas, the facility fee for orthopedic back or neck surgery at the University of Texas Southwestern Hospital, boasting a top quality rating for this procedure, is $20,952. Less than 19 miles away, the Medical Center of Plano, rated lower quality, charges $81,114. Who, if made aware of the choice, would select a lower-quality facility with the attendant health and infection risks and pay 287% more?

Yet no one informs employees of these gross quality and price disparities, leaving them at risk of choosing a lower-quality, higher-price facility, potentially putting the member’s health in greater jeopardy and certainly costing both employee and employer an unnecessary and unwarranted greater expense.

Diagnostic imaging tests

Finally, the cost of diagnostic imaging tests such as CT scans and MRIs can vary within a city by as much as a factor of 10.

In Tampa, Florida, a head/brain CT scan ranges from a low of $224 to a high of $2,804, a more than 1,100% swing in price. In Buffalo, New York, the same CT scan is available for as little as $197 but at a nearby facility can cost as much as $1,105, a 460% cost difference.

Similarly, you can get a lower-back MRI in Fresno, California, for $859 or you can travel a couple of miles to pay as much as $4,395 for the exact same test. In Nashville, Tennessee, that same MRI costs just $453 at one facility but balloons to $2,552 across town.

Despite these absurd price disparities, just as with pharmacy prices and hospital fees, no one provides employees with guidance in shopping for diagnostic tests, regardless of the impact on the employee’s and employer’s wallet.

Smart employers are refusing to accept this disgraceful aspect of the benefits and healthcare status quo. Working with progressive, next-generation benefits advisers, these employers are moving from fully-insured plans to alternative funding arrangements that allow them to manage their healthcare supply chain to ensure high-quality, low-cost healthcare for their employees.

(Edited excerpt from the new book, NextGeneration Healthcare: Proven Secrets of Managing the Healthcare Value Chain to Improve Outcomes and Reduce Costs, which was edited by Nelson Griswold.)

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