Wholesale Lab Pricing: What a Blood Test Actually Costs

Key Takeaways:

• In a statewide analysis of 2011 hospital charge data, the charge for a standard lipid panel ranged from $10 to $10,169, a thousand-fold difference, and hospital and market characteristics explained at most 21 percent of the variation in blood test charges.
• In 2012, U.S. hospitals charged on average 3.4 times their Medicare-allowable costs, the fifty hospitals with the highest markups charged about ten times cost, and uninsured patients are commonly asked to pay those full charges.
• Among 502,949 insured employees, laboratory claims were about 14 percent lower for people who looked up the price on a transparency tool before the test than for people who did not.

A lipid panel is one of the most ordinary things in medicine: a tube of blood, an automated analyzer, a few minutes of machine time and reagent. What it costs the patient is anything but ordinary, and the reason is the hospital chargemaster, a master list of list prices that each hospital sets for itself. The gap between that list price and wholesale lab pricing, what the test actually costs a laboratory to run, can be enormous. When researchers examined 2011 charges for 10 common blood tests across every non-federal hospital in one large state, the charge for a lipid panel ranged from $10 to $10,169. Government and teaching hospitals tended to charge less, but after accounting for every hospital and market characteristic they could measure, the models explained at most 21 percent of the variation. The authors’ own word for the charge-setting process was arbitrary. Nationally, the pattern is the same at the level of the whole hospital. In 2012 the average U.S. hospital charged 3.4 times its Medicare-allowable costs, and the fifty highest-markup hospitals charged roughly ten times cost. Most insurers negotiate below those list prices, but uninsured patients are commonly asked to pay the full charge, and out-of-network patients are often billed a large share of it.

Direct Primary Care takes a different route to the same tube of blood. Because the practice is paid by a flat membership rather than by billing insurance for each service, it can contract directly with a reference laboratory for cash wholesale rates and pass those rates through to patients at cost, with no facility markup layered on top. The price of a metabolic panel, a lipid panel, a thyroid test, or an A1c is known before the needle goes in, and it is the same the next time. That predictability is not a small thing, because price information changes behavior on both sides of the exam table. Among 502,949 employees whose employers offered a price transparency platform, people who searched before a laboratory test paid about 14 percent less for it than people who did not. And when a large academic hospital simply displayed the fee for selected lab tests at the moment physicians ordered them, orders for those tests fell by 8.6 percent while orders for comparison tests without displayed fees rose. Seeing the price makes both patients and clinicians ask whether a test is worth doing, which is the right question.

Why does wholesale lab pricing change whether people get tested?

Because uncertain cost is one of the quiet reasons people skip care. In a survey of families with chronic conditions, adults enrolled in high-deductible health plans were far more likely to report delaying or forgoing care because of cost, including checkups and tests: among lower-income families, the predicted probability was 40 percent in high-deductible plans versus 15 percent in traditional plans. A person who is watching a hemoglobin A1c, a kidney function panel, or a lipid response to a new diet needs repeated measurements, and repeated measurements only happen when the price is predictable and small enough not to require a second thought. Some honest limits belong here. The thousand-fold figure describes hospital list charges, not what every insured patient ends up paying, and insured patients usually pay negotiated rates that vary on their own. Wholesale pass-through pricing applies to the routine tests a primary care practice draws in the office, not to every specialized send-out test, and a membership practice does not replace insurance for hospital care. Within those limits, transparent at-cost lab pricing removes one of the easiest reasons to put off monitoring a chronic condition.

References:

1. Hsia, R. Y., Akosa Antwi, Y., & Nath, J. B. (2014). Variation in charges for 10 common blood tests in California hospitals: a cross-sectional analysis. BMJ Open, 4(8), e005482.
2. Bai, G., & Anderson, G. F. (2015). Extreme markup: the fifty US hospitals with the highest charge-to-cost ratios. Health Affairs, 34(6), 922-928.
3. Whaley, C., Schneider Chafen, J., Pinkard, S., Kellerman, G., Bravata, D., Kocher, R., et al. (2014). Association between availability of health service prices and payments for these services. JAMA, 312(16), 1670-1676.
4. Feldman, L. S., Shihab, H. M., Thiemann, D., Yeh, H. C., Ardolino, M., Mandell, S., et al. (2013). Impact of providing fee data on laboratory test ordering: a controlled clinical trial. JAMA Internal Medicine, 173(10), 903-908.
5. Galbraith, A. A., Soumerai, S. B., Ross-Degnan, D., Rosenthal, M. B., Gay, C., & Lieu, T. A. (2012). Delayed and forgone care for families with chronic conditions in high-deductible health plans. Journal of General Internal Medicine, 27(9), 1105-1111.