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Reference payment for colonoscopy saved California millions of dollars
September 8, 2015 / 3:43 PM / 2 years ago

Reference payment for colonoscopy saved California millions of dollars

(Reuters Health) - Two years after offering colonoscopy patients full coverage for their screening if they had it done at lower-priced facilities, the California Public Employees’ Retirement System (CalPERS) saved $7 million, according to a new study.

The initiative sought to counter the unpredictable, but generally rising, prices for the procedure at different facilities while also making sure members kept access to colon cancer screening.

“Prices for many tests and procedures vary widely within local markets; colonoscopy is not unusual in that respect,” said lead author James C. Robinson of the University of California-Berkley.

“The reason is that most consumers are indifferent to price is because they are well covered by insurance,” Robinson told Reuters Health by email. “They often must pay some part of the charge, but this typically is only a small part of the total prices, and once they have exceeded their deductible or annual maximum they don’t pay anything.”

Prices can mount higher and higher because facilities do not compete based on price, since patients do not “care” about it, he said.

Under the reference payment system, CalPERS would cover the full cost of a colonoscopy if a member chose to have it at an ambulatory surgery center, but would cover only $1,500 for the same procedure at hospital-based outpatient departments.

If a patient had a specific clinical need for the procedure to happen at an outpatient facility, or if they lived more than 30 miles from an ambulatory care center, they were exempt.

Researchers used data on more than 21,000 CalPERS members who had a colonoscopy three years prior to the 2012 initiative and on more than 13,000 members who did so after the initiative. They were compared to a group of similar colonoscopy patients who were covered by Anthem Blue Cross insurance, and not subject to the reference pricing.

CalPERS patients selecting lower-priced ambulatory care centers increased from almost 70 percent before 2012 to 90 percent after 2012, the researchers report in JAMA Internal Medicine.

Average colonoscopy price peaked in 2011 at $1,716 and declined to $1,508 by 2013. For Anthem patients in 2013, the average price per colonoscopy was nearly $1,800. On the whole, this saved CalPERS $7 million over two years.

The complication rate for CalPERS patients did not change after implementing the reference payment system.

“In the short term, the major beneficiary of reference pricing is the employer and insurer, as they are paying most of the cost and hence reap most of the savings,” Robinson said. “In the long term, the consumer is the beneficiary, since their premiums don’t rise as fast as they would otherwise and, perhaps more importantly, providers begin to moderate prices in hopes of retaining their customers.”

A number of leading insurers and employers now use reference payment for services like knee replacement surgery, arthroscopy, cataract removal, laboratory tests and drugs, he said.

“Reference pricing enables patients to have choice of providers which can be much broader than a limited network approach, in which a health care system or insurers contract with relatively few providers,” said Dr. David Lieberman of Oregon Health and Science University in Portland, who coauthored a commentary alongside the new results.

“Patients choosing colonoscopy settings (charging) below the reference price have no co-pay, which may be attractive to patients,” Lieberman told Reuters Health by email. “However, patients can choose a more costly setting (with co-pay), if they believe that the value is worth the additional cost.” 

Some questions remain, for example, will insurers tend to lower the reference price over time, increasing the likelihood of co-pay and discouraging patients from having important procedures, he said.

SOURCE: bit.ly/IZGqPC JAMA Internal Medicine, online September 8, 2015.

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