Patient Access to Reference Pricing Prompts Choice of Lower-Cost Testing Laboratories, Cost Savings

A study by researchers at the University of California, Berkeley, found that patients who have access to both the prices charged by a testing laboratory as well as reference pricing, they choose lower-cost laboratories, resulting in overall cost savings.

A common practice in Europe, a reference price is the reimbursement limit set by insurers for medications and services, and anything above that limit is paid for by the patient as the out-of-pocket share. In the United States, some health plans are using reference pricing for surgical and diagnostic procedures, and for the current study, the authors sourced data from the health insurer Anthem, which provides health coverage for employees of the grocery store network Safeway. Anthem negotiates reference prices for laboratory testing based on the geographic region, and Safeway employees who choose a laboratory that charges less than or equal to the established reference price do not see any additional charges beyond their deductible.

With a large sample size of more than 30,000 employees, the study, published in JAMA Internal Medicine, documented changes in laboratory pricing and the selection of a testing laboratory by the employees following the implementation of a reference pricing policy. The comparator group included more than 180,000 policy holders of a large national insurer that did not implement reference pricing. The authors write that the grocery firm established an upper limit at the 60th percentile of the distribution for each laboratory in a particular geographic region, and policy holders were given access to information on pricing at all laboratories through a mobile digital platform.

For the period between 2010 and 2013, the authors analyzed 2.13 million claims for 285 types of in vitro diagnostic tests, with the primary outcomes of interest being patient choice of laboratory, price paid per test, patient out-of-pocket (OOP) costs, and employer spending. Safeway employees had an average of 5 to 6 tests per year, which remained the same over time. What changed after implementation of the reference pricing policy was the site where the tests were conducted—before 2011, 50% of tests were conducted at laboratories that charged more than Anthem’s reference price; by 2013, the number dropped to 16%

The results of the analysis were quite compelling. Within 3 years of implementing reference pricing, Anthem saw a 31.9% (95% confidence interval (CI), 20.6%-41.6%) reduction in the average price paid per test, with $2.57 million (95% CI, $1.59-$3.35 million) in savings from reduced spending. By choosing cheaper alternatives, patients reduced their OOP spending by $1.05 million (95% CI, $0.73-$1.37 million) and simultaneously saved their employer $1.70 million (95% CI, $0.92-$2.48 million).

James Robinson, PhD, professor and head of health policy and management at UC Berkeley’s School of Public Health, who led the study, told Reuters, “Reference pricing can’t be used across all types of healthcare. While being treated for cancer, we don’t expect the patient to shop the market.” But most of medicine is non-emergency, he said.

Robinson added that patients do not pay attention to the price being paid when their employer is paying for their healthcare. With reference pricing, when the patients have to share the cost burden, they are forced to shop around for lower cost services. However, it is important to ensure that patients are made aware that a reference price is being implemented on the service they seek. Communicating this information falls on the shoulders of the health plan.

Reference

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 [published online July 25, 2016]. JAMA Intern Med. doi:10.1001/jamainternmed.2016.2492.