Case Study: Diagnostic Dollars
Employer & Advisor MaterialsCase Study
Diagnostic Dollars
The Overpricing Epidemic in Medical Imaging
We spent 3,078 hours looking at the medical claims of over 1 million patients
324,853 people or 1/3 of the population had some type of imaging done for a grand total of 592,835 imaging procedures and they spent a whopping $226,370,998 on imaging alone
With $226,370,998 you could buy a cup of starbucks every day for the next 45,274,199 days!
All in we found waste of $143,448,969. This is what we call price failure
Price Failure: A situation where the price of a good or service deviates significantly from its fair or expected value, often leading to inefficiencies in the market.
Yeah, welcome to U.S. healthcare
What causes price failure?
Market Power: When a single organizations or a group of organizations control a significant portion of the market, they can set prices above competitive levels.
Information Asymmetry: When sellers have more information than buyers, leading to prices that do not reflect the true value of the good or service.
Market Power: A small number of insurance companies and hospitals dominate the market.
Information Asymmetry: Your employees simply lack the necessary information to make fully informed decisions about their treatments, costs, and care options, leading to overpayments and suboptimal care.
The market and hospitals, in particular, used to be a lot different:
Focused on acute care, the treatment of serious injuries, childbirth, and life-threatening illnesses not the everyday stuff we see now.
Over the years there was a bunch of technical advancements like MRI machines, the rise in specialties like oncology and cardiology, and there was also a bunch of legislation.
Hill-Burton Act (1946): Provided federal funds for hospital construction, leading to the expansion and modernization of hospital facilities.
Medicare and Medicaid (1965): These programs provided health insurance to the elderly, low-income families, and disabled individuals, increasing access to hospital services.
Affordable Care Act (2010): Expanded healthcare coverage and promoted preventive care, further increasing demand for hospital services.
Today we simply use hospitals for a lot more things than we need to
Ending up at the wrong place just drives up cost for employers and employees.
The cost of medical imaging procedures at freestanding centers is 30-50% less than at hospitals. This is largely due to hospitals being allowed to charge facility fees, which add to the overall expense of the procedures.
| Hospital High Cost | $15,198 |
|---|---|
| Imaging Center Low Cost | $300 |
| Avg. Cost | $1,509 |
Code 74177 - CT Scan of the Abdomen and Pelvis
When we looked at all those claims and all those people we found 10,976 examples of this type of CT Scan and we saw wild price variation based on where people had things done...
But $1,509 is far above the fair price for that CT scan at $315 or another 79% cheaper!
Employers and employees spent $16,562,729 on this specific type of CT scan.
They should have spent only $3,4378,721.
That's $13,084,008 of wasteful spending.
We saw the same pricing failure across nearly 600,000 imaging procedures
| Procedures | 8,074 |
|---|---|
| High Cost | $40,500 |
| Avg. Cost | $1,766 |
| Fair Price | $475 |
| Cheaper By | 73% |
MRI of brain - we looked at 8,074 and found costs as high as $40,500 (not a typo - we actually found 4 employees who paid that much) with an average cost of $1,766. The fair price for that MRI is about $475 and 73% cheaper than that $1,766 average
| Procedures | 32,076 |
|---|---|
| High Cost | $13,498 |
| Avg. Cost | $217 |
| Fair Price | $125 |
| Cheaper By | 43% |
Ultrasound of the pelvis - we looked at 32,076 and found costs as high as $13,498 with an average cost of $217. The fair price for that ultrasound is about $125 and 43% cheaper than that $217 average
| Procedures | 13,323 |
|---|---|
| High Cost | $5,413 |
| Avg. Cost | $176 |
| Fair Price | $35 |
| Cheaper By | 79% |
Chest X-Ray - we looked at 13,323 and found costs as high as $5,413 with an average cost of $176. The fair price for that X-Ray is about $35 and 79% cheaper than that $176 average
Remember we looked at 1 million patients and found that 32% of the population had some type of imaging done
That means about 1/3 people you bump into in the break room likely overpaid for care driving up costs for both employers and employees!
But how do you get people to the right place at the right price and avoid all this waste?
Plan Design:
People should not be paying deductibles or copays if they are going to the right place.
There should be a $0 out-of-pocket benefit for things people can schedule.
This allows you to do 2 things:
- incentive employees and their employees to choose the right provider
- remove the financial barriers to care people need
Direct Contracting:
You might already be talking about this or even doing this and this is exactly what we do.
We call it Direct Contracting as-a-service and we already have over 1,200 imaging locations all at those fair prices.
And yeah we do all the admin work, the employee education and support and whole bunch of the busy work so you don’t have to. And we never charge a PEPM or PMPM - we don’t make money unless you are saving money!
Thanks!
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