The Market for Medical Care: Why You Don’t Know the Price; Why You Don’t Know about Quality; And What Can Be Done about It.

Policy Reports | Health

No. 296
Monday, March 12, 2007
by Devon M. Herrick and John C. Goodman

Transparency over the Internet

The marriage of the computer and telecommunications led to electronic mail and the Internet.  As a result, the cost of information to the average consumer has fallen dramatically - and continues to drop.  The resulting innovations are increasing economic efficiency and improving quality.  Entrepreneurs of consumer-driven health care are taking advantage of these developments and are utilizing the Internet in ways that will revolutionize how health care is delivered. 53

General Medical Information.  The growth of the Internet is leading to dramatic changes in consumer access to health care information. 54   In the past, most medical literature was available only at large libraries, medical schools or by subscription to expensive scholarly medical journals. Now, much of it is readily available to anyone with Internet access. 55   For instance, the United States National Institutes of Health placed its National Library of Medicine online for consumers to peruse.  And, a commercial Web site, provides consumers with up-to-date information on diseases and treatments.  Overall, there are approximately 20,000 health-related Web sites, 56 and about 80 percent of adult Internet users (or 93 million people) have searched for health information online. 57   This is a sharp break with the tradition of relying on doctors as the sole source for answers to health and medical questions.  According to a 2002 survey of patients visiting an internal medicine practice, more than half used the Internet to gather health information.  Of these, about six-in-10 rated what they found online "the same as" or "better than" the feedback they got from their doctors. 58

Information on Evidence-Based Protocols.   In normal markets, sellers cater to customer requests for clear, concise information about quality.  When objective evaluations are needed, independent third parties often provide data. 59   Several new Web-based tools are now available to help physicians and patients find the most appropriate treatment.

“Some Web sites offer information on treatment guidelines.”

MedEncentive is an Oklahoma-based firm that works with health plans to promote greater use of evidence-based, best-practice guidelines.  The company provides health insurers with Web-based tools that both doctors and patients can use to identify recommended treatments, and gives both parties financial incentives to comply with them.  Once physicians log on, patient treatment screens suggest a best-practice guideline for the diagnosed condition.  Physicians who agree to follow the best practices (or provide a good reason for deviating) receive a higher reimbursement.  They also receive more when they prescribe what is called "information therapy" to their patients - which may include having the patient read about procedures or protocols for taking medications or other treatments. 60   Once patients receive their prescriptions, they log on to a similar Web site that explains in lay terms the best evidence-based treatment.  Patients who do so earn rebates that lower their out-of-pocket costs.  According to MedEncentive, a recently completed year-long trial with several employers found participating firms reduced health care costs substantially, and both doctors and patients liked the program. 61

HealthDialog , a service offered through employee health plans, helps facilitate consistent use of evidence-based medicine by patients and doctors by providing personalized health coaching for chronic conditions and medical treatments.  The goal is to encourage patients to take a more active role in the decision-making process and collaborate with their doctors to better manage chronic conditions.  HealthDialog offers tools such as analysis of "unwarranted variation" from evidence-based protocols, based on academic research by John Wennberg from Dartmouth University: 62

  • HealthDialog claims to reduce enrollees' health expenditure by 1 percent to 3 percent per year.
  • Hospital admissions for a chronically ill, commercially insured population were reduced by 11 percent the first year and 17 percent the second year.
  • Hospital admissions for Medicare patients were reduced 7 percent the first year and 11 percent the second. 
  • Surgeries deemed inappropriate by reviewers were reduced 20 percent to 40 percent.

Information on Prices.  Some insurers are trying to remove the veil of secrecy that often surrounds health care costs.  One example is Dallas-based insurer HealthMarkets, which offers Web-based decision support tools that allow enrollees to compare out-of-pocket costs online for 20,000 procedures performed by about 400,000 doctors nationwide. 63 Enrollees can use these tools to reduce their out-of-pocket costs.  [See the sidebar "Using the Internet to Integrate Health Insurance and Consumer-Driven Health Care."]

Other health insurers are also taking steps to improve transparency - making price and/or quality information readily available to consumers.  Aetna discloses on the Internet the prices it pays for common physician services in the Cincinnati area.  It recently expanded this service to other cities and increased the number of procedures disclosed.  Humana, UnitedHealth Group and other insurers are improving their Web-based tools to assist enrollees. 64

There are also Internet services that offer medical price information directly to all consumers. recently announced a plan to sell price reports online; consumers can look up the approximate cost of 42 different surgical procedures - ranging from vasectomies to gastric bypass surgery - across the country. 65

Quality Information.  A few hospitals are posting quality information on their Web sites.  For example, Dartmouth-Hitchcock Medical Center (DHMC) discloses its performance indicators for virtually all of the procedures and conditions it measures.  DHMC also discloses the average costs of medical treatments and customer satisfaction ratings. 66   The Cleveland Clinic also discloses its quality indicators on a Web site. 67

“Some health insurers provide hospital and physician price and quality data to patients.”

Some health insurers are partnering with third parties to make quality information available to members.  For instance, HealthMarkets, Lumenos and other health plans contract with medical information providers like Subimo to provide quality indicators on hospitals and clinics across the country in a Web-based, consumer-friendly format.  On the Subimo Web site, each hospital's performance for a number of specific surgeries and treatments are rated in general terms (worse, average or better) compared to outcomes at hospitals nationwide.  Health care quality metrics are still being fine-tuned (and are arguably still confusing for the layperson), but for each condition include complication and mortality rates.  Additional quality indicators include the degree to which a hospital follows best-practices for treatment and prevention, and the level of technological services compared to the average hospital. 

Subimo also reports the approximate number of procedures performed in each hospital compared to benchmarks for the volume of procedures considered necessary to keep skills sharp.  Even if insurers do not make Web sites like Subimo part of their free Web-based services, consumers can access them directly by paying a nominal fee.

“Some Web-based services offer patients quality data.”

Medscape, owned by WebMD, recently created a Web-based hospital comparison tool called HospitalWise Professional . 68   HospitalWise Professional allows patients to view a variety of benchmarks for hospital quality, such as number of patients treated, mortality rates by procedure, major complications, number of days patients spend in the hospital and average hospital charges. 69   Medscape also has a directory that allows patients to sort physicians by travel distance, specialty, physician profile and/or hospital affiliation.  In most cases patients can even request, reschedule or cancel an appointment online through this service. 70

A Department of Health and Human Services Web site tracks quality benchmarks at hospitals across the country. 71   There are indicators of treatment quality for four conditions: heart attack, heart failure, pneumonia and surgical care.  The quality measures are based on the care recommended by the Hospital Quality Alliance (HQA), a collaborative effort of doctors, hospitals, federal agencies and health care accrediting organizations. To learn more about treatment quality for heart failure at a given hospital, for example, one can view data on the percent of patients who received an assessment of their left ventricular function; the percent given drug therapy for left ventricular systolic dysfunction; the percent given post-discharge care instructions; and finally, the percent of patients who smoke advised to stop smoking.  If a patient selects an individual indicator, the Web site displays that hospital's rates compared to hospitals across the United States, other hospitals in the same geographic region and the average score for the top 10 percent of hospitals across the nation.

Patients themselves can help create one form of a quality indicator:  Online forums for patient feedback.  The Internet makes sharing experiences more convenient than ever.  The Aetna Navigator Web site provides an easy way for enrollees to provide feedback on experiences with physicians. 72   The drug-rating Web site,, lets patients compare experiences with drugs therapies. 73   For instance, patients tend to rate antihistamines rather low.  Antihistamines received an average score of only 2.6 out of a possible 5 points.  By comparison, people rated Viagra 4.2 out of 5.

Shopping for Drugs.  Patients' access to prescription drug prices and information has improved markedly over the past few years.  Consumers can reduce the cost of some common drug therapies through the same techniques they routinely use when shopping for other goods and services.  These include comparing prices, buying in bulk and looking for low-cost substitutes.  Patients can also look for an over-the-counter or generic alternative or a therapeutic substitute in place of a high-priced, name-brand drug. 

“Patients can lower drug prices using smart-shopping techniques.”

Case Study: Cardiovascular Medications

In some cases, patients may be able to buy medications in double-strength and split them in half.  To find out about opportunities for lower-cost substitutes, patients can log on to and enter their prescription medications, prescribed strength levels and dose schedules. The Web site will produce a report that includes therapeutic and generic substitutes and over-the-counter alternatives for name-brand prescription drugs.  The report explains the patient's options and can be printed out to discuss with a physician. 

Armed with information about potential substitutes, a patient could then go to, a Web site affiliated with, to find the best prices for them at a number of highly competitive online pharmacies. 

Case Study: Cardiovascular Drugs. Patients who pay for drugs out of their own pockets can save a lot of money by using the Internet.  For example, patients prescribed 50mg of Tenormin daily can save money by comparison shopping for the best price and quantity. [See Table I.] For instance: 74

  • The price of 100 doses (50mg) of Tenormin ranged from $155.66 at to $125.49 75
  • Patients could save nearly 90 percent over the lowest-cost name-brand drug by switching to the generic alternative Atenolol; 100 doses of Atenolol ranged from $19.98 at to $8.29 at
  • Consumers could save another 15 percent - lowering the price from $8.29 to $5.65 - by splitting larger pills (100mg) in half.

Smart buying of this drug lowered the potential overall out-of-pocket cost by 96 percent - from a high of $155.66 to a low of $5.65.

“Patients can order diagnostic tests on the Internet.”

Online Savings for Seniors.'s technology is also used on the Web site to help seniors shop for a drug plan with the lowest annual out-of-pocket costs.   Seniors can utilize another tool, called the Part D Optimizer, to find out if there are therapeutic substitutes on their plan's formulary that have lower out-of-pocket costs.  The optimizer was designed specifically to help seniors avoid the coverage gap, or doughnut hole, in Medicaid Part D drug plans by finding the lowest prices. 76   [See the sidebar " Using the Internet to Lower Seniors' Drug Costs."]

Online Access to Laboratory Tests and Prices.   Physicians usually don't offer patients options when ordering laboratory tests.  But patients can gain by comparing the prices of different testing laboratories. Patients can even order some diagnostic tests on their own, without seeing a doctor.  Storefront locations or walk-in clinics are beginning to offer affordable lab tests in a convenient setting, providing results quickly and without a visit to a physician's office.  Here are a few Internet options:

  • MyMedLab offers over 1,500 tests and sells bundled packages grouped by age, sex and family history. Prices are 50 percent to 80 percent lower than identical tests ordered by a physician, and a general health screen of 30 blood metrics costs about $45.  Patients who order online save an additional 10 percent. 77
  • Direct Laboratory Services, Inc. ( offers bundled blood tests for as little as $89, available at more than 5,000 collection centers nationwide. 78   Patients receive a thorough biochemical assessment of more than 50 individual tests including: cell count, thyroid profile, lipid profile, liver profile, kidney panel, profile of minerals and bone, fluids and electrolytes and tests on diabetes.

Some labs also sell genetic tests that can determine a patient's risk for cancer or heart disease.  Prices for patient-ordered genetic testing for susceptibility to breast and ovarian cancer range from $586 for a single-point mutation to $3,312 for a complete sequence. 79

Patients can also order "virtual exams" using MRI or PET technologies to detect cancer, heart disease and other conditions. 80   Many physician groups oppose patient-ordered body scans for asymptomatic individuals because scans often yield ambiguous results that encourage patients to spend money on follow-up tests. 81   However, medical societies support doctor-ordered preventive screening for various conditions, at various ages, called for in medical protocols.  Patients can order many recommended screening tests themselves, for less than a doctor would charge.  The difference:  Patients typically have to pay out of pocket for scans they obtain without a doctor's written orders, whereas their insurance typically covers physician-ordered tests. 82


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