Source: Robinson JC, Whaley C, Brown TT. Association of Reference Pricing for Diagnostic Laboratory Testing with Changes in Patient Choices, Prices, and Total Spending for Diagnostic Tests. JAMA Intern Med. Published online July 25, 2016. doi:10.1001/jamainternmed.2016.2492.
When Safeway, a grocery store chain, introduced reference pricing for the most commonly used clinical laboratory tests, spending on those tests dropped by 32 percent over three years, according to a recent study.
Using reference pricing, Safeway saved $2.57 million over the three years of the study (2011 to 2013). Of that amount, $1.05 million (41 percent) went back into consumers’ pockets, and the remaining $1.70 million accrued to Safeway, the study showed. Also, reference pricing led to a 32 percent drop in the average price that consumers paid for 285 different lab tests.
The researchers concluded that reference pricing can lead to savings for employers, workers and family members. JAMA Internal Medicine published the study online on July 25. Continue reading
Uwe E. Reinhardt, Ph.D.
Last summer, Uwe E. Reinhardt, a health policy expert and economics professor at Princeton (and keynote speaker at Health Journalism 2009), predicted this would happen.
A contributor to the Economix blog for The New York Times, Reinhardt wrote, “In the arsenal now being assembled on the payment side of health care to address rising costs, reference pricing may well turn out to be the sleeper, because it is a potentially powerful method of ‘putting the patient’s skin in the game,’ the delicate phrase we use for ‘cost-sharing by patients.’”
Reference pricing is a sleeper no longer. It’s getting a lot of press lately and is the subject of a webinar at 1 p.m . ET today (see below for details).
It was mentioned in the big announcement from the Health Care Cost Institute (HCCI), which said on May 14 that it would work with three large health insurers to provide free consumer access to an online database of “the most accurate and timely information about the price and quality of health care services.” Starting early next year, HCCI said it will make price and quality data available from Aetna, Humana and UnitedHealthcare. Continue reading
If all employers adopted reference pricing for certain health care services, the potential total savings could reach $9.4 billion, according to a new report from the Employee Benefit Research Institute (EBRI). This amount would be 1.6 percent of all spending on health care services among the 156 million people under age 65 who have employment-based health benefits in 2010, EBRI said.
The research was done by Paul Fronstin, director of EBRI’s Health Education and Research Program, and M. Christopher Roebuck, Ph.D., president and CEO of RxEconomics LLC. The report is available for download from the EBRI site.
Under reference pricing, an employer or any health care payer would pay a set amount for specific health care services, such as hip or knee surgeries. Then the employees or health plan members using those services would pay the difference in price if they chose a more costly health care provider or service.
One issued we pursued during the AHCJ webcast last month (The cost of health care: Is transparency possible?) is whether price transparency will drive costs up or down.
The members of our panel reported that price transparency will cause providers to drop their prices, and now new research shows that when reference pricing is combined with price transparency, costs tend to decline as well.
A reference pricing initiative in California motivated hospitals to reduce prices for hip and knee replacements, according to a study released earlier this month by the Center for Studying Health System Change. HSC conducted the research for the National Institute for Health Care Reform.
The HSC report, “Potential of Reference Pricing to Generate Health Care Savings: Lessons from a California Pioneer,” showed that when the California Public Employees’ Retirement System (CalPERS) introduced reference pricing for patients seeking hip and knee replacements, the initiative had two positive results. First, it helped steer patients to lower-price hospitals, and second, it motivated hospitals to reduce prices for these joint replacement procedures. Continue reading