Research Analysis: Wide Spectrum of Prices for MD Services Unexplained by Quality, Cost Differences

May 16, 2020
A team of healthcare policy researchers has published a study in Health Affairs that finds that the huge range of prices for physician services cannot be connected to differences in outcomes quality or cost

A team of healthcare policy researchers has published a study that has examined the connection between quality and prices of the healthcare services provided by internal medicine physicians, and found no logical correlation between prices paid by commercial health insurers and the quality of the outcomes involved.

The article, which was published in the May issue of Health Affairs, is entitled “Physician Prices And The Cost And Quality of Care For Commercially Insured Patients,” and was authored by Mark A. Unruh, Yongkang Zhang, Hye-Young Jung, Manyao Zhang, Jing Li, Eloise O’Donnell, Fabrizio Toscano, and Lawrence P. Casalino.

As the authors write in their abstract, “We analyzed the relationship between prices paid to 30,549 general internal medicine physicians and the cost and quality of care for 769,281 commercially insured adults. The highest-price physicians were paid more than twice as much per service, on average, as the lowest-price physicians were. Total annual costs for patients of the highest-price physicians were $996 (20 percent) higher than costs for patients of the lowest-price physicians were, and this variation was not explained by differences in use. Physician prices were not associated with quality: Among physicians in the same hospital referral region, we did not find significant differences between patients of the highest-price physicians and patients of lowest-price physicians in the likelihood of experiencing an ambulatory care–sensitive hospitalization or being readmitted within thirty days of hospital discharge. There were also no differences between the highest- and lowest-price physicians for these quality outcomes for high-need patients. Policy makers need more information on the causes and consequences of the large disparities in prices paid to physicians.”

Looking at the strange lack of correspondence involved, the researchers write that “Previous research has examined aspects of the relationships between prices paid to physicians and the quality of care, as well as between those prices and the total cost of care—that is, the sum of insurer prices paid for the services of all health care providers (physicians, hospitals, and others) who deliver care to a patient. However, no study has analyzed the relationship between physician prices and both the cost and quality of care for commercially insured patients. Using 2014 claims data from FAIR Health for commercially insured patients, Eric Roberts and coauthors examined the relationship between commercial prices paid to physician practices in 2014 and the quality, use, and total cost of care for the practices’ Medicare fee-for-service patients in 2012. The results suggested an overall weak relationship between prices and the quality and efficiency of care.”

As one example of the unexplained price differences the researchers uncovered in their analytical study, they write that “After geographic adjustment, we found that the mean price for a CPT code 99213 visit to physicians in the highest quintile ($122) was more than double the mean price for physicians in the lowest quintile ($55) (appendix exhibit A2).17 After we removed outliers (the highest and lowest 1 percent of physicians), we found that the highest-paid physicians received payments that were nearly six times as high per CPT code 99213 visit as those provided to the lowest-paid physicians ($265 versus $47).”

As they note in their analysis, the authors write that, “In this national study of 769,281 patients collectively attributed to 30,549 general internal medicine physicians, we found that prices paid by commercial insurers to physicians varied greatly. The geographically adjusted mean price for a CPT code 99213 visit for physicians in the highest quintile ($122) was more than double the mean price for those in the lowest quintile ($55). Higher prices may be justified if they lead to lower total costs, but total costs for patients of the highest-price physicians were 20 percent higher ($996 per year) than for patients of the lowest-price physicians,” they note. “This cost difference was due primarily to higher prices paid for physician services, rather than to prices paid for inpatient or outpatient services. Analyses of patients with no prescription drug coverage showed that compared to patients of the lowest-price physicians, patients of the highest-price physicians had costs that were $673 more per patient for physician services and $204 more for outpatient services, but only $67 more for inpatient services. The magnitude of the difference for each service category and for total costs was even larger for patients in the highest-need category.”

What’s more, they write, “Although total costs based on actual prices were greater for higher-price physicians, total costs based on standardized prices—which reflect utilization—were not. This finding suggests that differences in prices paid for services, not differences in use, were responsible for higher total spending.” And, they emphasize, “Higher prices may be justified if they lead to higher quality. However, in our primary analyses that compared physicians within a hospital referral region, we found little evidence that high-price physicians were providing higher-quality care for patients overall, or by category of need, compared to low-price physicians. High-quality care is particularly important for the sickest patients, but we found that high-price physicians cared for a higher percentage of patients who were relatively healthy and did not have significantly lower rates of ambulatory care–sensitive hospitalizations or thirty-day readmissions for the highest-need patients attributed to them. In secondary analyses that compared physicians nationally, we found that patients of the highest-price physicians had lower rates of ambulatory care–sensitive hospitalizations and thirty-day readmissions. However, the amount of confidence that should be placed in these estimates is debatable, since they may reflect differences in practice patterns across hospital referral regions.”

In the end, given that “physician services represent at most 20 percent of national health care expenditures,” “If physician prices were greatly reduced—for example, by 20 percent—national health care expenditures would decline by only 4 percent, and the impact on physician morale would likely be large. Nevertheless, even modest cost reductions are important and could be achieved by reducing variation in physician prices.”