Monday, June 1, 2009

Putting Prices on Your Doctor's Menu

Over the last four years, I’ve had the opportunity to work at the best academic medical centers in the country, alongside some of the most competent and caring doctors one can imagine.

These doctors made every effort to address the needs of their patients, diligently and compassionately attending to each physical symptom.

But even the best doctors neglect something critical: the bill.

In a time when tightening belts and pinching pennies has become especially important, we too often pay exorbitant amounts—enough to bankrupt two million American families a year—on medical care we may not even need. As patients, we’ll spend hundreds of dollars on a medication we are prescribed, even when a generic version is available that contains the exact same stuff and is 90% cheaper. We might pay thousands of dollars for an MRI, even when its results are unlikely to be informative.

The reason is painfully simple. Information on the prices patients face is rarely available to doctors when they are deciding which tests and treatments will go on the bill. A 2003 American Medical Association study showed that fewer than one in five doctors understands how much their patients pay for care.

In fact, healthcare is the only sector in our market economy where we routinely contract for services without knowing what the costs are or even exactly what we are buying. For good reasons, we trust doctors to make purchasing decisions for us. But when doctors are looking at menus without prices, it’s easy for them to order filet mignon at every meal—even when their patients are the ones picking up the tab.

True, when we are sick, certain tests and treatments may be appropriate no matter how much they cost. Doctors weigh several factors when ordering tests, including how sick the patient is and how good the test is. However, the Congressional Budget Office has estimated that the United States spends $700 billion (an amount comparable to our total spending on the Iraq War) each year on medical tests and procedures that do not measurably improve health outcomes.

Given this evidence of wasteful spending, and the impact it has on Americans, it would be sensible to also make costs part of that calculus.

This is especially true given the potentially catastrophic impact of the rising costs of health care. Today, spending on health care is approximately 16% of GDP, up from 8% twenty years ago, and 4% twenty years before that. In the near future, Medicare and Medicaid, which account for half of this spending, will become unsustainable. Investment in other things that matter to us—roads, schools, security—will be crowded out.

To add insult to injury, we’re not even getting much bang for our buck. A 2008 Health Affairs report compared health care spending in the United States to other countries in the Organization for Economic Cooperation and Development (OECD). Per capita, the U.S. spends double the amount everyone else does, but we rank in the bottom half of developed countries for most health quality indicators.

Debates about this cost-quality discrepancy are inevitably abstracted to the population as a whole—the millions who cannot afford coverage, the staggering percentages of GDP. The underlying problem is often framed as an irreconcilable tension between the interests of individual patients to have everything possible done and the collective interests of all of us to have a sustainable system.

But there may be a simple solution.

Doctors are trained to focus entirely on the patient in front them. Unlike policymakers, they are not trained to assume responsibility for entire populations. And rightly so. If you were sick, you would want your doctors to make decisions about your care based on their assessment of you, and only you.

It’s no wonder that high-level policy discussions about the macroeconomic implications of health care sometimes fall flat at medical conferences. The debate must be reframed in terms of the potential financial burdens a doctor’s decisions may impose on the patient in front of them. The availability of price information at the point of care would do just that.

Putting prices on doctors’ menus offers an opportunity to move beyond the apparent tension between individual and collective interests. In the end, doctors, policymakers, and patients can all agree that we don’t always need to order the filet mignon.

Neel Shah recently completed the requirements for his medical degree and is the Executive Director at Costs of Care, a nonprofit organization aimed at preventing medical bankruptcy by providing doctors with price information.


  1. We're all about price transparency! Actually, a Seattle TV Station just had a short spot on how things are shifting: << make sure you Watch the Story. Let me know what you think @pricedoc


  2. Interesting...the market for your services seems clear, but how does your company determine pricing? What is the role of insurance companies?

  3. Neel,

    We don't actually determine any of the prices. We are solely a platform for creating price transparency and connecting with providers in the area. The doctors themselves set their pricing.

    The only way we might be able to help with pricing is our option to "Make a Lower Offer" where the patient can negotiate with the provider.

    As far as the insurance companies: we don't get involved at all with them. If someone has insurance than they would probably go about things the traditional way. However, if they have a high deductible of say 3k, then they would definitely want to use our platform.

    Right now we're only located in Seattle, but we'll be going nationwide in November!


  4. are you finding that there is a lot of variation in pricing between providers? do you think a platform like yours may encourage convergence?

  5. Neel,

    There is certainly a wide range of pricing for the different procedures, even among different doctors for the same procedure. As far as convergence goes, I think only time will tell!

    Right now we're bringing on providers nationwide. That could also influence convergence as more providers sign up.

    Have you had a chance to check out the site?


  6. Welcome to the club! It's great that doctors are getting on board with this. If patients paid you directly, you'd hear more about this and start taking costs into consideration when considering treatment options. We ARE all paying, whether it's out of pocket or through premium or taxes. We need to get high value for the high dollars being shelled out. You'll see some similar thinking at
    Susan at Regence

  7. Me too agree that the cost one pays for medical care may cut down 90%if doctor pay attention to the billing.the cost of same stuff may be too high or low depending on brand even if quality is same.So i think doctors should keep this thing in mind although we cant compromise health for money but we can manage same result at lower cost