Doctors often do not know the cost of treatment alternatives

A new study asks orthopedic surgeons to guess the price of the devices they implant: “the amount your institution currently pays the vendor for the implant.” Despite a lenient grading system, in which the researchers counted as correct any guess within 20% of the actual price, surgeons estimated costs correctly only 1 in 5 times.

When I first glanced at this study, I wasn’t sure of its importance. But then I learned that orthopedic surgeons can often choose among a wide variety of devices to perform specific operations. There isn’t just one company making one type of pin, for example, to hold together a fractured fibula. Surgeons can choose between high cost and low cost alternatives. In a rational market, surgeons would consider whether the advantages of the high cost devices are worth the added price, a price, it should be noted, that is eventually paid for through tax dollars or insurance premiums, and in some cases is born by the patient receiving the procedure.

Health care markets cannot work rationally if doctors and patients do not know the cost of treatment alternatives. To make matters worse, the surgeons in this study were systematically biased in their cost estimates — they overestimated the price of less expensive devices and underestimated the price of more expensive ones:

Doctors often do not know the cost of treatment alternatives

This pattern of misestimates ends up minimizing the differences between high and low cost devices. These errors end up favoring expensive devices, which appear cheaper, relatively speaking, than they are.

I do not blame these surgeons for being so clueless about the cost of these devices. If I had been surveyed about treatments I have offered to my patients, I would also have failed the test, probably more miserably than the surgeons did. We physicians often have no incentive to know how much the treatments we prescribe cost our patients or our health care institutions.

To improve health care markets, we need to make price info more readily available. We also need to align incentives, so that patients and providers only choose high cost alternatives when those alternatives are worth the extra cost.

Peter Ubel is a physician and behavioral scientist who blogs at his self-titled site, Peter Ubel and can be reached on Twitter @PeterUbel.  He is the author of Critical Decisions: How You and Your Doctor Can Make the Right Medical Choices TogetherThis article originally appeared in Forbes.

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  • Frank Lehman

    So most of them do not know how much the devices cost.

    The next question should be “Do they know/have any idea which ones function better in various situations?”

  • Thomas D Guastavino

    If a cheaper implant is used, and a complication occurs, there are plenty of attorneys who would be more then happy to accuse you of trying to save money at the expense of the patient. Therefore, knowing the price of the implant, and accusing us of being derelict if we dont, is a waste of time.

  • Thomas D Guastavino

    With deference to Isaac Asimov, perhaps we can institute the three laws of Medonics:
    Law 1: A physician at all times must provide the most efficacious treatment
    Law 2: A physician must provide the safest treatment, as long as that treatment does not conflict with the First Law
    Law 3: A physician must provide the most cost effective treatment as long as that treatment does not conflict with the first two laws.