When Dr. Peter Cram, the University of Texas Medical Branch’s chair of internal medicine, heard billionaire Mark Cuban bemoaning how difficult it is to figure out the cost of routine medical services, he thought he had good news to share.
Cram was listening to Cuban’s interview on Jon Stewart’s podcast, explaining his difficulty in pinning down a price for his own colonoscopy. So Cram reached out to let Cuban know about the new federal price transparency rules for hospitals. According to those rules, hospitals must post online prices for many or all of their services. But Cuban said he was skeptical that hospitals would give the same price when a patient called to check the price.
At that moment, Cram said, “a lightbulb went off in my head.”
We already know that shopping, ahead of time, for health care is harder than it should be. But despite the recent federal efforts to force more transparency for hospital prices, a new study to which both Cram and Cuban contributed reveals that it’s as difficult as ever to get a clear answer to what seems like it should be an easy question: How much is my MRI going to cost?
A simple study asked hospitals how much their services cost. The answer: chaos.
The new study, led by University of Texas Medical Branch student Merina Thomas and Cram and published in JAMA, compared the prices hospitals posted online (as required under new federal regulations) with the prices obtained in phone calls conducted by the team posing as potential patients.
They contacted 60 hospitals across the country, a mix of top-ranked facilities, hospitals that primarily serve low-income people, and the other hospitals in between. They asked about two procedures for which comparison shopping is more common: vaginal childbirth and a brain MRI.
The researchers went into their study optimistic, as Cram had been when he contacted Cuban, that things had changed since the price transparency rules took effect.
“I had hoped that perhaps things were improving with the new requirements around price transparency,” Cram told me over email. But: “Our results seem to show that we still have a long way to go.”
It was rare for the advertised price on the web to be the same as the price quoted over the phone. Less than 20 percent of hospitals provided the same price through an online price estimator as they did when someone spoke to a member of the billing department. In many cases, the disparity was significant, with more than a 50 percent price difference depending on whether you checked on a website or called for a quote.
And in a handful of cases, the price more than doubled depending on how you asked. At two hospitals, MRIs were listed online at $2,000, but “patients” were given a price of more than $5,000 when they called. Five hospitals offered a price of $10,000 for vaginal childbirth over the phone, but the price posted online were twice that much.
There didn’t seem to be a clear pattern of which quotes were higher. Sometimes they were higher over the phone, sometimes higher on the website.
The researchers said they took pains to make sure they were getting apples-to-apples comparisons, going so far as to give specific billing codes during their scripted calls with hospital staff. It didn’t matter.
They could not identify why exactly they found such a significant disparity. The authors theorized that, because a single “service” may involve multiple different billing codes, it was still difficult even under the transparency rules to communicate to the billing staff exactly what they were inquiring about. They also speculated hospitals are not adequately training their staff, though the authors noted a lack of research on that question.
The findings add to the evidence that US hospitals may not have “a cogent pricing strategy,” as the researchers put it, meaning hospitals set prices in a somewhat arbitrary manner.
Research had already found prices for the same services vary wildly at different hospitals. The top-line findings of this new study reveal that it can be difficult to even determine what the price for a given service is at a given hospital. That is a problem both for the 10 percent of the US population that is uninsured as well as people enrolled in high-deductible health plans, which are becoming more common.
On top of that, the researchers made one other note in their study: They found poor correlation between brain MRI and vaginal childbirth prices within an individual hospital. In other words, some facilities would have high MRI prices compared to others but low prices for delivering babies — with no discernible economic reason for that disparity. It’s chaos.
“This lack of correlation raises further questions about whether hospitals have a cogent pricing strategy akin to other businesses ... or whether this lack of correlation simply reflects a chaotic and disorganized pricing structure,” the researchers wrote.
Mark Cuban continues his quest for more transparent medical costs
These conclusions are familiar for another one of the study’s other coauthors: Cuban, entrepreneur, NBA owner, and founder of the Mark Cuban Cost Plus Drugs Company. Here, he continues to buff his bona fides as a health care provocateur by helping to conceive of the new study, and provide technical and material assistance to make it happen.
Cuban has been fixated on market failures in the health care industry for the better part of a decade, particularly for prescription drug prices.
Though he told me in 2016 that he did not have an interest in entering the market himself, he did start a drug company six years later, offering generic drugs directly to patients at a flat 15 percent markup. The company’s aim is to reduce the costs faced by uninsured people and people with higher out-of-pocket obligations under their insurance plan (a problem that can be exacerbated by the industry’s notorious middlemen, pharmacy benefits managers). Experts have compared it to a Costco business model.
The company has gotten a toehold in the market since its launch last year, selling 350 drugs to a customer base of about 1.5 million people. It is planning to begin manufacturing some generic drugs itself, similar to plans by the hospital nonprofit Civica Rx and states like California. It’s added pharmacy services, including mail orders. Researchers think it could save Medicare up to $1 billion a year if people start getting certain cancer drugs through Cuban’s company. It was named one of Time’s most influential companies of 2023.
Selling generic drugs at minimal markup is not a silver bullet for fixing America’s high drug costs, as experts are happy to point out. For one, that has no effect on new breakthrough medicines that are expensive but protected by patents. Still, most credit the company for offering genuine low-price options that particularly help people who face exorbitant costs otherwise.
Now with this hospital study, Cuban has lent support to exposing absurdities in another sector of the health care industry. Since he first started speaking out on drug prices during the scandals of the mid-2010s, as costs and public anger grew, Congress has finally started taking serious action to address the cost of medicine.
Hospital prices are another frontier for reform. Many experts see price transparency — a work in progress as Cram put it — as only the beginning. As the JAMA study’s authors observed in their paper, “absent improvements in customer service, public frustration with hospitals is likely to grow.”