CalPERS Successfully Implemented Reference Payment to Save on Colonoscopy Costs

The California Public Employees’ Retirement System (CalPERS) has evidence—published in JAMA Internal Medicine—that reference payment, specifically used for colonoscopy, reduced spending without any associated procedural complications.

Price transparency issues have long-plagued the healthcare industry. Consumers and insurers are faced with price discrepancies for the same procedure, within the same geographic communities. Outpatient procedures in hospitals are especially expensive, both for private insurers and Medicare.

Of several models being evaluated to retain patient access while reducing associated costs, employers are establishing reference payments in their insurance benefit design—providing full coverage up to a defined contribution limit while requiring the patient to pay the difference between this limit and the price actually charged if they choose a high-priced facility.

Since CalPERS implemented reference payment in January 2012, the researchers in this study obtained data on 21,644 enrollees who had colonoscopy 3 years prior to implementation and on 13,551 patients who had the procedure during the 2 years after implementation. The control group used for the study was 258,616 Anthem Blue Cross enrollees who had a colonoscopy during the same 5-year period, but in the absence of a reference payment. The primary outcomes measures of the retrospective trial were consumer choice of facility, price paid per procedure, total insurer spending, consumer cost sharing, and procedural complications.

The analysis found about a 20% absolute surge in the use of low-priced facilities by CalPERS members, from 68.6% in 2009 to 90.5% in 2013; this increase changed to 17.6 percentage points after adjusting for demographic characteristics, comorbidities, and other factors. The average price paid per colonoscopy increased from $1587 in 2009 to $1716 in 2011 for the CalPERS members, and subsequently reduced to $1508 in 2013 for those who were subjected to reference payment—a 21% reduction after adjusting for relevant factors. The associated cost saving for CalPERS was a whopping $7 million.