Price Disparity + Price Transparency=Imaging-market Turmoil

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Buy a banana, and it will cost you less than a dollar per pound—unless you’re in a hotel, where it might cost you twice the grocery-store price. The prices of many items readily obtainable by the consumer usually fall within a well-defined range, according to supply and demand. This is not so in health care (in general) and in medical imaging (specifically), particularly for advanced imaging such as MRI and CT exams.

According to Ana Perez, marketing director for American Imaging Management (AIM®), Deerfield, Illinois, the price variation in imaging can be so dramatic that an MRI exam that costs $300 from one provider might, from a different provider, cost as much as $3,000. This tenfold difference, Perez adds, is “for MRI facilities that are, by all claims, the same for quality.” AIM is a national radiology benefit management (RBM) company.

The disparity in pricing for CT, MRI, and other imaging studies shows itself everywhere. Susan Cox, CPA, is vice president of financial operations at Outpatient Imaging Affiliates (OIA), LLC (Nashville, Tennessee), which operates 23 joint-venture outpatient centers in eight states. Cox says that within her network, depending on location and other factors, the same MRI exam’s cost can vary from $300 to $800. “The people in the $800 market don’t know they’re paying $300 in the other market,” Cox says. “You can’t compare state to state or city to city.”

In a 2011 study1 on health-care costs, Martha Coakley, Massachusetts attorney general, found that not just radiology, but health care as a whole, was plagued by widespread pricing disparity. Insurers were paying some physician groups as much as 230% more than others for the same services, while same-service payments to hospitals varied by as much as 300%. Coakley termed the health-care market dysfunctional, later adding that costs were not based on factors such as quality or value, but instead on the leverage of providers.

The Leverage Tool

Leverage is at the heart of pricing in health care, and radiology is not excepted. Many imaging providers will charge what they can; many others will try to get by on the lower fees that circumstances force them to accept. The situation in Massachusetts isn’t much different than it is in other states, but single cities also exhibit the pricing disparity. In Boston, for instance, the leverage-based disparity has been well documented.

Alexander M. Norbash, MD, MHCM, says, “Partners HealthCare (Boston) charges high rates for imaging because it has brand recognition.” The provider group was founded by Brigham and Women’s Hospital and Massachusetts General Hospital (MGH), both of Boston. Norbash adds, “It will make demands on insurance companies, and the patients want that brand. That puts Partners HealthCare in a strong negotiating position.”

Norbash is chair of radiology and assistant dean for diversity at Boston Medical Center (BMC), a 508-bed inner-city hospital affiliated with the Boston University School of Medicine, where he is also a professor. He says that for high-profile hospitals with brand recognition, radiology departments are often operated as profit centers, and their income helps shore up less profitable departments.

At BMC, Norbash says, the situation is just the opposite. “At the other end of the spectrum, we charge half what MGH charges. Our brand recognition may be seen as inferior. We can’t jack up our rates to hit the standard,” he says. “We are frozen in time, with maybe a gain of 2% to 3% from inflation, but we’re not making any money. At my hospital, we have to be underwritten.”

Radiology has to be subsidized at BMC through the revenue streams from other departments. “We only have 25% of our patients underwritten by insurance,” Norbash says. “The others are free care, Medicare, and Medicaid. Medicare is fantastic; Medicaid, not so much; and free care is a problem.”

The lack of revenue has a big impact on radiology at BMC. “Rather than radiology being what you use as much as possible, now, you try to minimize imaging as much as possible,” Norbash says. Some patients, such as sports-medicine patients who have access to suburban care, “may be encouraged to go elsewhere,” Norbash adds.

At some luminary institutions in Boston, imaging contributes a tremendous amount of revenue. “That same potential is not the case here, and there’s not the same level of support from the other clinical services,” Norbash says.
He continues, “If the profits are not there, then the loyalty