How Medical Cost Information Affects Physician Behavior

Many studies have documented the lack of correlation between health care spending and health care quality.[1] One reason is that thirty percent or more of U.S. healthcare spending is wasteful, a large portion of which is caused by overtreatment.[2] This not only makes healthcare unnecessarily expensive, but it also harms patients by causing side effects, complications, discomfort and lost productivity.

Knowledge Gap

A number of studies have been conducted to determine whether physicians and other medical professionals have a sufficient level of knowledge about, and the ability to correctly estimate, healthcare costs. One study found that costs of prescription drugs were estimated correctly less than half of the time.[3]

Another study revealed that eighty percent (80%) of physicians were unable to accurately estimate the cost of medical tests and none of the physicians estimated with greater than fifty-percent (50%) accuracy.[4] Further, the level of experience or seniority of the medical provider has been shown to have no effect on the ability of the provider to accurately estimate costs.[5] One report concluded, that while most physicians indicated they “should consider cost in their decision making,” they “have a limited knowledge of cost estimates.”[6] The lack of understanding on the costs of tests is a primary reason behind physicians prescribing multitudes of tests which are not necessary.[7]

A study was conducted to understand the effect of cost information on physicians’ behavior, and it was found that the average number of diagnostic tests ordered was significantly lower in the price-information group than in the control group.CUMMINGS KM, FRISOF KB, LONG MJ, HRYNKIEWICH G. THE EFFECTS OF PRICE INFORMATION ON PHYSICIANS' TEST-ORDERING BEHAVIOR. ORDERING OF DIAGNOSTIC TESTS. MED CARE. 1982 MAR;20(3):293-301.

Influence at the Time & Place of Decision

A number of studies conducted over the years have concluded that physicians are willing to use pricing information to reduce the overall healthcare cost if they have access to that data.[8]

When physicians are shown drug costs, they order cheaper medications.[9] Displaying costs of labs decreased lab costs by 10.1%.[10] A computerized system that informed physicians of costs of tests at the point of care decreased utilization of testing by 10% to 15% without compromising quality of care received by patients.[11] Cost revelation of labs on surgical ward saved up to 27%.[12]  Providing information to physicians about the charges for selected diagnostic tests at the time of ordering, produced a 10% to 30% decrease in test ordering and total charges.[13] Price lists decreased costs of radiology tests by 21.4%.[14]  Displaying a price list of the 39 most common radiological tests reduced radiology costs by 20.59%.[15]


Provider spending reductions after cost is shown at the point of care.

Regarding cost information and test ordering behavior, Dr. Leonard Feldman, an assistant professor of medicine at Johns Hopkins, said, “We generally don’t make decisions based on what is cost-effective or what is known to be absolutely necessary for our patients, but knowing the cost of things appears to make us more thoughtful about what we think might be best for their health. There’s a lot of waste in medicine because we don’t have a sense of the costs of much of what we do.” (Doctors Order Fewer Lab Tests When They Know the Cost. April 2013).

Take the Quick Tour

In less than two minutes we can show you how IllumiCare uses the power of cost data at the point of care to reduce spending.

[1] Davis K, Schoen C, Stremikis K. Mirror, mirror on the wall: how the performance of the US health care system compares internationally: 2010 update. The Commonwealth Fund. Publications/Fund-Reports/2010/Jun/ Mirror-Mirror-Update.aspx. Accessed December 19, 2013. Fisher ES, Wennberg DE, Stukel TA, Gottlieb DJ, Lucas FL, Pinder EL. The implications of regional variations in Medicare spending. Part 2: Health outcomes and satisfaction with care. Ann Intern Med. 2003;138(4):288-298.
[2] “Health Policy Brief: Reducing Waste in Health Care,” Health Affairs, December 13, 2012.
[3] Stebbins MR, Frear ME, Cutler TW, el. Al. Pharmacy students teaching prescribers strategies to lower prescription drug costs for underserved patients. J Manag Care Pharm. 2013 Sep;19(7):534-41 (citing Codgill B, Nappi JM. Assessment of prescribers’ knowledge of the cost of medications. Ann Pharmacother. 2012;46(2):200-07.)
[4] Broadwater-Hollifield C., Gren L., Porucznik C., Emergency physician knowledge of reimbursement rates associated with emergency medical care. The American Journal of Emergency Medicine. 2014 Feb.
[5] Rock TA, Xiao R, Fieldston E. General pediatric attending physicians’ and residents’ knowledge of inpatient hospital finances. Pediatrics. 2013 Jun; 131(6):1072-80.; see also Allan GM, Innes GD. Do family physicians know the costs of medical care? Survey in British Columbia. Can Fam Physician. 2004 Feb;50:263-70.
[6] Id.
[7] “Doctors order fewer tests when they know prices: study.” April 2013. Retrieved on June 04, 2015 from <>
[8] Rock TA, Xiao R, Fieldston E. General pediatric attending physicians’ and residents’ knowledge of inpatient hospital finances. Pediatrics. 2013 Jun; 131(6):1072-80.; see also Allan GM, Innes GD. Do family physicians know the costs of medical care? Survey in British Columbia. Can Fam Physician. 2004 Feb;50:263-70.
[9] Hart J, Salman H, et al. Do drug costs affect physicians’ prescription decisions? J Intern Med. 1997 May;241(5):415-20.
[10] Feldman LS, Shihab HM, et al. Impact of providing fee data on laboratory test ordering: a controlled clinical trial. JAMA Internal Medicine. 2013;173:903-908.
[11] Computerized system alerts docs to costs. ED Manag. 1999;11(9):100-2.
[12] Stuebing EA, Miner TJ. Surgical vampires and rising health care expenditure: reducing the cost of daily phlebotomy. Archives of Surgery. 2011;146:524-527.
[13] “Internal Medicine Physicians’ Knowledge of Health Care Charges.” June 2011. Retrieved on June 04, 2015 from <>
[14] Miyakis S, Karamanof G, et al. Factors contributing to inappropriate ordering of tests in an academic medical department and the effect of an educational feedback strategy. Postgrad Med Journal. 2006;82:823-829.
[15] Schilling UM. Cutting costs: the impact of price lists on the cost development at the emergency department. Eur J Emerg Med. 2010; 17: 337–339.

Additional Guidance
Riggs KR, Decamp M. Providing price displays for physicians: which price is right?. JAMA. 2014;312(16):1631-2.
Smith CD. Teaching high-value, cost-conscious care to residents: the Alliance for Academic Internal Medicine–American College of Physicians Curriculum. Ann Intern Med. 2012;157(4):284-6.
Allan GM, Lexchin J, Wiebe N. Physician awareness of drug cost: a systematic review. PLoS Med. 2007;4(9):e283.
Goetz C, Rotman SR, Hartoularos G, Bishop TF. The Effect of Charge Display on Cost of Care and Physician Practice Behaviors: A Systematic Review. J Gen Intern Med. 2015.