With reference pricing, patients spend less on diagnostic testing

When employers and insurers use reference pricing for diagnostic tests, the average price paid for those tests dips by almost a third, according to a new U.S. study.

Under reference pricing, which is commonly used in Europe for medications, insurers reimburse up to a certain limit, depending on the medication or service, and the patient must pay the rest out of pocket if the price charged is higher. Patients have an incentive to choose medications or services as close to the reference price as possible to reduce their own spending.

"There's no reason to believe the quality of the tests varies across labs," said lead author James C. Robinson of the University of California, Berkeley.

Some insurers and employers in the U.S. already use reference pricing for surgical and diagnostic procedures. In the new study, the researchers investigated how laboratory prices and selection changed for employees of Safeway, the national retailer grocery chain, after the company implemented reference pricing for laboratory tests in March of 2011.

Anthem, the insurer managing Safeway's health plan, negotiated reference prices for lab tests based on the price distribution of those tests by region. Employees who chose a lab that charged less than or equal to the reference price had to pay their usual deductible but had no additional costs for the test.

In 2010, a basic metabolic panel cost between $6 and $126, and a lipid panel ranged from $9 to $75, depending on the lab.

The study team compared claims data for more than 30,000 Safeway employees from 2010 to 2013 to data on about 180,000 other people insured by Anthem but not subject to reference pricing. In total, they looked at more than 2 million claims and 285 diagnostic test types.

Researchers found that Safeway employees had an average of five to six tests per year, which did not change over time.

But before 2011, almost half of tests were at laboratories that charged more than the reference price, which declined to 16 percent of tests in 2013, and some of that decline was due to reference pricing, the authors conclude in JAMA Internal Medicine.

In the year after implementing reference pricing, the average price paid per test by Safeway decreased from $27.72 to $18.90, while the price stayed the same over time for Anthem enrollees not subject to reference pricing.

"Reference pricing can't be used across all types of healthcare," Robinson told Reuters Health. Aspects of urgent care and tests that take place in a hospital may not be appropriate for reference pricing, he said.

"While being treated for cancer, we don't expect the patient to shop the market," Robinson noted. But most of medicine is non-emergency, he said.

"People don't pay attention to price when their employer is paying," he said. Patients who shop around incentivize providers and labs to compete on the basis of price. Reference pricing puts some, but not most, of the cost of a service on the patient, so it should steer people to lower cost services rather than stopping them from seeking care at all, he added.

"It's often a good idea for consumers to let the insurer work harder for them as a purchasing agent through approaches like reference pricing," said Paul B. Ginsburg of the Brookings Institution in Washington, D.C., who wrote an editorial accompanying the new results.

But patients need to be informed that they are subject to reference pricing, he added.

"The biggest problem is the lack of awareness that there's a reference price in effect," which is really up to the employer or insurer to communicate, Ginsburg told Reuters Health.