Reference Pricing: Diagnostic Tests and Procedures

Diagnostic Tests and Procedures Overview

There is wide price variation for diagnostic tests and procedures, making them good candidates for reference pricing. They are common and very shoppable non-emergency services. BCHT has studied the impact of reference pricing on the following four tests and procedures:

Computerized Tomography(link is external) (CT(link is external)) scans, also known as CAT scans, use a special type of x-ray equipment to detect a variety of diseases and conditions. The procedure produces multiple images of organs, bones, and soft tissue that are more detailed than traditional x-rays. Some of the uses of CT scans include diagnosing musculoskeletal disorders, locating tumors, guiding surgical procedures, and detecting internal injuries (Mayo Clinic, 2015(link is external)). 

Colonoscopy(link is external) is a screening and diagnostic procedure which allows for examination of the inside of the large intestine. A physician uses a thin, flexible tube with a small camera attached to the end to capture images of the inside of the colon. Polyps or other types of growths can be removed and biopsied during the procedure (Mayo Clinic, 2017(link is external)).

Magnetic Resonance Imaging(link is external) (MRI(link is external)) scans, also known as nuclear magnetic resonance (NMR) scans, use strong magnetic pulses to generate images of the inside of the body. The procedure produces images of internal organs and soft tissues. MRI scans can be used to detect tumors, internal bleeding, injuries, and infections (WebMD, 2017(link is external)). 

Laboratory tests(link is external) typically analyze blood, urine, or body tissues to help health care providers diagnose or manage conditions. There are a wide array of available laboratory tests, including tests for blood glucose levels, cholesterol levels, HIV, and certain genetic conditions, to name a few. 

BCHT evaluated the trends in prices paid per procedure for Safeway(link is external) employees and compared the trends to prices paid per procedure for Anthem enrollees, over the same period, who were not subjected to reference pricing.

Reference Pricing: CT Scans

In November of 2011, Safeway, a national chain of retail grocery stores and food-processing factories, implemented reference pricing for imaging services for its self-insured health plan. 

Safeway established a maximum reimbursable amount for computerized tomography (CT) scans at approximately the 60th percentile of the distribution of prices in 2010.

Prior to implementation of reference pricing, prices varied substantially, with a 10-fold difference between the lowest and highest prices for each test. For example, prices paid for a CT scan of the abdomen with dye ranged from $75 to $1,241.

The Results

  • In 2013, the second full year following implementation, reference pricing was associated with a $66 (12.5%) reduction in prices for CT scans paid by Safeway.
  • On average, consumers saved $28 per scan in out-of-pocket expenses. This represented a 17% decrease in spending, from $164 to $136.
  • Safeway saved a total of $4,282 (22.1%), and Safeway employees saved $15,055 (77.9%) for CT Scans.

For more details on the CT study, read: 

Reference Pricing, Consumer Cost-Sharing, and Insurer Spending for Computed Tomography (CT) Scans

Reference Pricing, Consumer Cost-Sharing, and Insurer Spending for Advanced Imaging Tests

Reference Pricing: Colonoscopies

Due to wide price variation, the California Public Employees’ Retirement System (CalPERS(link is external)) implemented reference pricing for colonoscopy procedures. Prices at hospital-based outpatient departments (HOPDs) were especially high when compared to ambulatory surgery centers (ASCs). CalPERS set a $1500 maximum reimbursement, which was at approximately the 80th percentile of the ASC price distribution.

Prior to implementing reference pricing, HOPD prices for colonoscopy ranged from $552 to $8,883,  and ASC prices ranged from $500 to $6,003. 

Potential Savings from Reference Pricing for Colonoscopy Procedures by Hospital Referral Region (HRR)  

Visit the interactive map, then hover over a Hospital Referral Region (HRR) to see the projected savings for colonoscopy if reference pricing were implemented nationally, along with the key predictive market parameters used. 

Visit HRR Map Data Table for more information.

HRR Map

Projected cost savings for colonoscopy if reference pricing was implemented nationally

Reference Pricing: MRI Scans

In November of 2011, Safeway implemented reference pricing for imaging services for its self-insured health plan.

Safeway established a maximum reimbursable amount for magnetic resonance imaging (MRI) procedures at approximately the 60th percentile of the distribution of prices in 2010. 

Prior to implementation of reference pricing, there was a ten-fold different between the lowest and highest prices of the five most common MRI tests used by Safeway employees. For example, prices paid for a MRI of the brain ranged from $219 to $2,272 even after trimming the minimum and maximum outliers.

The Results

  • In 2011, the year of implementation, reference pricing for MRI scans was associated with a 6.9% reduction in the probability of a Safeway employee selecting a high priced facility.
  • The first complete year after implementation saw a price reduction of $103 (16.6%). There was an $84 (16.0%) price reduction in the second year after implementation.
  • The savings on MRI scans were shared by the employer and employees. Safeway saved $81,440 (59.1%), and Safeway employees saved $56,453 (40.9%).

For more details on the MRI study, read:

Reference Pricing: Laboratory Tests

In March of 2011, Safeway implemented reference pricing for laboratory tests as part of its efforts to sensitize employees to the level and variation in prices within each local market.

Safeway established the maximum amount it would pay for each test at the 60th percentile of the distribution of prices in 2010.

The chart on the right displays the range of prices charged for laboratory tests for Safeway employees.

The price for the most common test, the basic metabolic panel, ranged from $5.75 to $126.44, where the highest price was 22 times the lowest price. 

Non-emergency tests and procedures with large price ranges are good candidates for reference pricing. Reference pricing encourages patients to shop around for providers at or below the set limit, so that procedures are fully covered.

The Results

  • Following implementation only 16% of employees were still using laboratories that charged above the limit, compared to 46% before reference pricing.
  • In the first year after implementation the amount paid by Safeway decreased by $6.82 (30%) and the patient’s average out-of-pocket payment per test decreased by $3.58 (34.2%).
  • Safeway's savings on laboratory tests persisted into the second year with a $6.32 (28.3%) reduction, and into the third year with a $7.11 (31.1%) reduction.
  • The reduction in employee out-of-pocket payments for laboratory tests grew to $4.37 in the second year and to $4.58 in the third year.

For more details on the Laboratory Test study, read:

Article: Association of Reference Pricing for Diagnostic Laboratory Testing With Changes in Patient Choices, Prices, and Total Spending for Diagnostic Tests

Issue Brief: Reference Pricing, Consumer Cost-Sharing, and Insurer Spending for Laboratory Tests 

   

Learn More About Reference Pricing!

Reference Pricing, Consumer Cost Sharing, and Insurer Spending for Advanced Imaging Tests. Robinson JC, Whaley C, Brown TT. Medical Care 2016; 54(12):1050-55.

Impact of Reference Pricing on Consumer Choices, Laboratory Prices, and Total Spending for Diagnostic Tests. Robinson JC, Whaley C, Brown TT. JAMA Internal Medicine 2016;176(9):1353-1359. doi:10.1001/jamainternmed.2016.2492. Published online July 25, 2016.

Association of Reference Payment for Colonoscopy with Consumer Choices, Insurer Spending, and Procedural Complications. Robinson JC, Brown TT, Whaley C, Finlayson E. JAMA Internal Medicine 2015; 175(11):1783-91. Published online 080815, doi:10.1001/jamainternmed.2015.4588.