Episode 655: Pay Patients, Save Money : Planet Money We shop around when we get a plane ticket or buy a couch. But we spend thousands of dollars on health care without shopping around. What happens if we pay patients when they choose the cheaper option?
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Episode 655: Pay Patients, Save Money

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Episode 655: Pay Patients, Save Money

Episode 655: Pay Patients, Save Money

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  • <iframe src="https://www.npr.org/player/embed/445371930/445391985" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

DAVID KESTENBAUM, HOST:

A while back, Chana Joffe-Walt and I went down to Pensacola, Fla., to talk to this guy, Brad Meyers. Brad was doing the simplest thing you can imagine - he was calling around to hospitals and clinics and asking how much does it cost to get an MRI done at your facility? And, you know, an MRI is an MRI. Prices can't vary that much, right? But they did. For instance, if you went to this one hospital down there, an MRI of the shoulder would set you back 800 bucks, but if you went just around the corner, there was this other place.

BRAD MEYERS: It's about half a mile south of Bayou Boulevard and get the MRI at this Pensacola open MRI center for $400 to $450.

KESTENBAUM: It was half the price.

CHANA JOFFE-WALT, BYLINE: And these two places are down the street from each other.

MEYERS: Within a mile.

KESTENBAUM: I thought the more expensive place probably had a fancier machine. But we visited both and the more expensive place had a worse machine. The cheaper place had a higher quality MRI with higher resolution for half the price. Brad was building a website to allow people to shop around for MRIs and other procedures, but it was hard going. Who was even going to bother to look at it? We shop around like crazy for airplane flights, for rental cars. I have two kids. I shop for diapers all the time. But for an MRI, it does not even occur to us. Hello and welcome to PLANET MONEY. I'm David Kestenbaum.

ROBERT SMITH, HOST:

And I'm Robert Smith. Today on the show, a place that is trying out an unusual solution. What would happen, they wondered, if we just out and out paid people to shop around, to choose the cheaper option.

KESTENBAUM: The MRI's so much cheaper at that other place, we will pay you to go there. The savings, they thought, could be enormous. They're trying it out right now.

(SOUNDBITE OF MUSIC)

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(SOUNDBITE OF MUSIC)

SMITH: Health care is this totally weird and different part of our economy. You know, if you're shopping for something like a couch, what are you going to do? You're going to go into the showroom. You're going to sit down. You're going to feel it, but you're going to look within the first 30 seconds at what the price of the couch is. And if you saw one that was $500 cheaper down the street, you're going to get that one.

KESTENBAUM: I spent a year - honestly, I spent a year looking for couch once. With health care, though, it is totally different. Rob Graybill lives in New Hampshire. He remembers going in to a doctor once to get a mole removed.

ROB GRAYBILL: And so I walked in, had an appointment scheduled, walked in to the front desk and I said, out of curiosity, how much is this going to cost me? And the lady at the front desk, she's like, well, I'll have to give you a call back because we don't know that information.

SMITH: Imagine that happening at a furniture shore, right? There's no price tags and you say how much does this cost? And they're like, I don't know. We'll call you.

KESTENBAUM: (Laughter) Graybill, at it happened, worked for a local health insurance company, Anthem Blue Cross and Blue Shield. And he says Anthem knew this was a problem, that there was no easy way for patients to figure out what something was going to cost. Anthem, like a lot of insurance companies, had set up these online tools so people could look and see what prices were at different places. They could shop around the way they do for everything else. But he says people just were not using them very much.

GRAYBILL: Ninety-eight percent of health plans have some level of cost information available to their members, but only 2 percent actually use it.

KESTENBAUM: Two percent of people look.

GRAYBILL: Well, they just don't know about it. It's hard to get to.

KESTENBAUM: And often, there is no reason for people to shop around because they are not paying. They have insurance. This is the core weirdness of our health care system. I like to call it the someone else's money problem. It always feel like you are spending someone else's money. Like, imagine if you were buying a couch, but you knew it was covered by insurance. You wouldn't care how much it cost. You'd just walk in, say I like that couch, I'll take it.

SMITH: So this is where the idea came from. Rob and a small group of other people got together and said what if we paid people money to shop around?

KESTENBAUM: They started a small company. It was in 2010. They called the product SmartShopper. And it's been chugging along since then, this quiet experiment in trying to bring down the cost of health care. I visited Rob at their offices up in Manchester, N.H. And to show me how it all worked, he walked me down to the hall to their call center where people call when, you know, their doctor has said, OK, it's time to get that gall bladder out or whatever.

GRAYBILL: Just for security measures.

(SOUNDBITE OF BEEPING)

KESTENBAUM: The room's locked because, you know, health care privacy is a thing they have to be really careful about. Like, I was only allowed to record certain things that were going on. I was expecting this big room with lots of people in it. It was a pretty small operation.

CATHY TROMBY: We have our coffee machine and our toaster. Oh, we have - we do have the yoga balls that we sit on occasionally if our chairs are bothering us.

KESTENBAUM: If you ever wondered who was on the other end of the phone when you call some health care place, meet Cathy Tromby. She's a former travel agent, mother of two, likes to take vacations on the lakes up here. And she likes this job, in part, because it is not your normal call center job. She is not handling complaints and angry people. She's trying to give people money.

TROMBY: Good morning. Thank you for calling SmartShopper. This Cathy. How may I help you?

KESTENBAUM: So this woman calling tells Cathy that she needs to get some blood work done. So Cathy looks up the places she can go on her computer.

TROMBY: What our system does is it searches a 20-mile radius from your home zip code.

KESTENBAUM: Even for something small like getting blood work done, there are huge variations in price. Like, one place might charge $300, another might charge just 75 bucks. Cathy tells the woman on the phone where the most cost-effective places are. She does not say cheapest places because cheap makes people think low-quality. She doesn't tell the woman to go there. She explains that it's her choice, but if she goes to - I'll say it - a cheaper place, she will get a check for 25 bucks. The woman says OK.

TROMBY: It's right on Route 101. Yeah, so it's - I think there's - next to Salzburg Square there's a Liberty Park.

KESTENBAUM: The whole thing takes just a few minutes.

TROMBY: Thank you. Bye-bye - another happy customer (laughter).

SMITH: You know, at first, this, like, sort of blew my mind that, like, she basically did nothing and got $25. But then I thought about there is, like, a lot of money being saved right in that little conversation, right? 'Cause if the woman had gone to the more expensive place, say, that would've cost $300. The cheaper place, we'll say $75. So going to the cheaper place saves $225. That's $225 less that the insurance company or whatever has to pay.

KESTENBAUM: It's a bargain. They are totally happy to pay this woman 25 bucks to go to the cheaper place.

SMITH: And a bit to Rob's company for making it all happen.

KESTENBAUM: Blood work is, of course, one of the cheaper medical procedures someone can have done. Cathy walked me through the system. You can't shop around for anything. Like, this is not for cancer treatments or for open heart surgery. It's for more routine things, but that covers a lot. She had this whole pull-down menu.

TROMBY: So we have back surgery, bladder scopes, bunionectomies, ear tubes, cataract removal - that's a big one that we do frequently.

KESTENBAUM: The size of the reward is tied to the size of the savings. So I said, what's the most money someone could make getting procedures done at the cheaper place? And she said, probably with Remicade infusions. And she goes Remicade is for - she can't remember, so she sticks her head over the cubicle wall.

TROMBY: The Remicade infusion - rheumatoid arthritis. So it's a procedure that they have done monthly and it's a very expensive procedure. And so then they might call us if they've heard about us. And we switch them to a different location. And then they get $500 every month, you know, just for calling us.

KESTENBAUM: A $500 check every month.

TROMBY: Yep.

SMITH: I could understand getting a check for $25 because it's, like, symbolic. Make the right choice. But $500 a month is real money. How can they afford to do this?

KESTENBAUM: Well, it's 'cause the savings on something like Remicade infusions - the savings are huge. Like, they told me about this one patient who was getting Remicade infusions done at a hospital, It was costing $22,000 per visit.

SMITH: Whoa.

KESTENBAUM: But on the other hand, there was a freestanding clinic not far away, which cost a lot less - $3,500 per visit. So the woman moved to that place, and as a result, over the course of a year, her insurance company or her employer was saving over $200,000 on this one patient for a year. And it's, like, the exact same drug, but it's $200,000 cheaper a year if you basically go down the street to get the needle stuck in your arm there.

SMITH: Oh, and when you put it that way, maybe that person should be getting a lot more than $500 a month. I mean, that person is saving the insurance company a ton of money.

KESTENBAUM: In the long run, the patients do save in a bigger way than just these checks because it's helping hold down the cost of health care and therefore helping hold down the cost of health insurance. Like, the way an insurance company decides what to charge for insurance is based on what they paid out last year. So if they pay out less then they're going to charge you less the subsequent year. It's actually a law. Like, they have to spend a certain amount of health care premiums that people pay for insurance on the health care claims.

SMITH: Still, if someone made this offer to me, I would wonder if there was a catch.

KESTENBAUM: Yeah, so I wanted to know what it was like to be on the other end of one of these phone calls. And for privacy reasons, I couldn't talk to any of the people who called in that day. But we looked around and we found some people nearby who had used the service. Here's one.

JONATHAN HALET: My name's Jonathan Halet.

KESTENBAUM: And what do you do?

HALET: I work for SYSC - the locked juvenile treatment facility - as a cook.

KESTENBAUM: What's your favorite thing to cook?

HALET: I like doing the chili, cooking a good chili up.

KESTENBAUM: Jonathan told me he has the sheet for the service tacked up on his refrigerator, you know, laying out how much money you can get for a colonoscopy or a knee surgery. About a year-and-a-half ago, he said he got to try it out for the first time with his first small thing. He had to get some blood work done. But he called up SmartShopper. He talked to somebody - maybe Cathy - who pointed him to a cheap place and told him if he went there he was going to get 25 bucks. He figured that was enough to take himself out to lunch and he said great.

When you went to the blood work place, how did it seem?

HALET: They were perfectly capable to do the job that my doctor told them to do.

KESTENBAUM: They basically just stuck a second needle in your arm.

HALET: Yeah.

KESTENBAUM: This is one concern you might have, right? When something is cheaper, you immediately think what's wrong? What's wrong with it, right? So SmartShopper says that all these places are high-quality. They're either approved by the person's insurance company or the employer. If you do the shopping through the website, you can actually see, oh, this facility has been accredited by this professional organization. In other words, these are exactly the places your doctor might send you if your doctor knew what things cost.

SMITH: Yeah, but it isn't your doctor sending it to you. It's someone being like, call this phone number. I'll save you some money.

KESTENBAUM: It does sound weird, right? Beth D’Ovideo works at the union that represents the state workers. I talked to her. She's been trying to get the word out explaining this whole thing.

D'OVIDEO: If a person has not heard of it before, they're incredulous. Well, what do you mean I'm going to get paid to go get my lab work done if I call this number? And...

KESTENBAUM: Who's on the other end of that number?

D'OVIDEO: Exactly.

KESTENBAUM: I can tell you, it's Cathy in that little room with the yoga balls. Beth says that once she's explained this whole thing, people like it. They like it a lot. She told me about these women who live up in northern New Hampshire who were shopping around for mammograms. And it's pretty rural up there. They call it the north country. And the closest cheap place to go for mammograms is far, far, far away, like miles and miles and miles away. But these women figured, well, we'll make a day of it.

D'OVIDEO: They get a limo and they all come down together and they go and they get their mammograms. And then they do a little shopping down here at the mall and then they go out to dinner. And then they go back up. They've probably paid out as much as they were going to get in the incentive checks, but they love it.

SMITH: I get that the patients love this, but what about the doctors? At some point, there is this weird conversation you have to have with your doctor, right, that says, yeah, thanks for the recommendation. I'm going to this cheaper place.

KESTENBAUM: Yeah, but sometimes the doctor says, here, go get this done. You can figure out where, but sometimes a doctor recommends a specific place. And then if you want to switch, like, that can be an awkward conversation. Beth told me about this one time she went in for her annual physical and the doctor ordered some routine tests.

D'OVIDEO: And he checked off all of the blood work and started to send me down stairs and I said, no, I'm going to - I'm not going to do that today. And he looked at me so funny. Like, I can't even explain to you the look on his face. It was sort of like, well, what do you mean you're not? And I said, you know we have this new program, and I said, so I'm going to go and I'm going to make a phone call and find out where they would like for me to go to get the blood work done. And, you know, what could he say at that point? I mean, the face wasn't all that great that he was making at me, but I had said what I was going to do and I did.

KESTENBAUM: Was it awkward having that discussion with the doctor? You're basically saying I'm not - your place is too expensive. I'm going to another place that's going to do just as good a job for less.

D'OVIDEO: I think pretty much that's what I was saying. And I think that perhaps some physicians would appreciate that approach as well. This topic, you know, health care, I think a lot of people are looking at how do we get a hold of this, like, Tasmanian devil that's just swirling and costing more and more and more?

KESTENBAUM: Is that what it feels like?

D'OVIDEO: It does feel like that.

KESTENBAUM: Beth told me the union is constantly trying to get better wages for its workers, trying to free up just a little money for a raise. And one way to do that is by saving some money on health care costs. So this does that, plus there is that check, which is nice. She remembers getting the first one.

D'OVIDEO: I've cashed it and put that check and all of my subsequent checks in this jar with a cork lid. And I'm not going to tell you where I keep it, but it's there for a rainy day.

KESTENBAUM: How much is the jar now?

D'OVIDEO: There is $275 in the jar. And it will be growing because I have to go get my annual mammogram pretty soon.

SMITH: This is a remarkable change of behavior for people. Those of us who have covered health care for a long time know that insurance companies and employers have tried all of these things to get people to choose the cheaper option. You know, they've said, oh, you can only go to these places, like, basically restricting people from the more expensive places.

KESTENBAUM: As the HMO idea.

SMITH: Yeah, but people hate that.

KESTENBAUM: There's this other thing insurance companies try, which is, you know, they say you can go to the more extensive place, but you're going to have to pay more. You know, there's, like, co-pays or co-insurance. People also hate that 'cause they're just like, you're charging me more to go to the place I want to go to. This is a third way. It maybe gets you to the exact same place, you know, people ending up with a less costly MRI, but the whole thing just feels different.

MITCH ROTHCHILD: There's just something magic about getting money in the mail.

KESTENBAUM: This is Mitch Rothchild. He is the founder and chairman of a company called Vitals. Vitals recently bought SmartShopper. He says the behavioral economics of this whole thing are just different from those other approaches. You know, the others can feel like punishment. This feels like a reward. It's more carrot and less stick. You know, pick the cheaper option if you want and this check will just appear in the mail.

ROTHCHILD: It's kind of like when you lost a tooth and there was money put underneath your pillow (laughter). You know, you believed the fairy did that. It's just - who gives money to people?

SMITH: SmartShopper does. In the first year, they gave out $43,000 in checks, which is a big amount. And then last year, they wrote over a million dollars in checks. That's 16,000 patients. They figure they saved $10 million in procedure costs.

KESTENBAUM: Mitch Rothchild told me he thinks that number could get much, much bigger. You know, they're only in a handful of states right now, so as they expand, you know, and they get a call center with more than five people...

ROTHCHILD: I'm a true believer that this a very powerful way to change behavior in a way that's going to cut costs out of the health care system. Down to my toenails I believe that.

KESTENBAUM: There is one loser in this whole thing, of course.

SMITH: Sure, the places that have been charging a thousand dollars for MRIs. I mean, they look out in the waiting room and there's nobody there. If everybody is getting a check to go to the cheaper places, what happens to the more expensive places?

KESTENBAUM: Often those places are hospitals. So I had one more call to make. I reached out to one of the higher cost MRI places - Catholic Medical Center in New Hampshire. I talked to William Goodman. He is the chief medical officer there. He told me he had heard of SmartShopper and he liked the idea.

WILLIAM GOODMAN: Yeah, I'm familiar with these services. I think they're a good idea.

KESTENBAUM: I thought you were going to hate this thing.

GOODMAN: Really?

KESTENBAUM: Well, it's not good for your business.

GOODMAN: Our business is taking care of people.

KESTENBAUM: He told me he agrees. Certain procedures can be done more cheaply in non-hospital settings. He says Catholic Medical Center actually owns a freestanding MRI center that is cheaper.

SMITH: But there was a but. One reason MRIs are so expensive at Catholic Medical Center is they're trying to cover all those other costs that hospitals have, right? The emergency room, helipad on the roof, and so if eventually everyone goes down the street to the cheaper place for their MRIs and their mammograms and their knee replacements, places like the Catholic Medical Center are going to have a problem paying for the whole operation.

KESTENBAUM: Yeah, he was a little frustrated 'cause he says basically those freestanding places, they're just cherry picking procedures. He says if you fixed the price of MRIs and all this other stuff so it actually makes sense, you got to fix all the other prices as well.

SMITH: It seems that there is a logical end to this whole thing, which is basically if you get everybody to go to the cheaper places, everyone lowers their prices. And all of a sudden, these guys, SmartShopper, they're out of business. All the places will have the same price for an MRI.

KESTENBAUM: Yeah, some hospitals actually have started lowering their prices. Brad at SmartShopper told me there is no way all the prices are going to get fixed. He says he thinks they're going to be around for a long, long time.

(SOUNDBITE OF MUSIC)

SMITH: Hey, tell us what you think of today's show. Email us at planetmoney@NPR.org. Or you can tweet us - @planetmoney. I'm @radiosmith and you are at - Kestenbaum - David Kestenbaum - D - you have no idea. Don't tweet @davidkestenbaum. Tweet at me - @radiosmith.

KESTENBAUM: Our show today was produced by Frances Harlow. Thank you, Frances. And if you're looking for another show to try, check out NPR's newest podcast, the "Hidden Brain." The latest episode looks at how near misses can motivate us in surprising ways. You can find it on the NPR One app or iTunes tunes or wherever you get your podcasts. I'm David Kestenbaum.

SMITH: And I'm Robert Smith. Thanks for listening.

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