Consumer-Oriented Approaches to Cost Containment

The study by Robinson and colleagues1 of Safeway’s experience with reference pricing for laboratory services adds to a valuable, and promising, body of work examining approaches to contain health care costs. By the third year of the program, they found that the average amount spent per laboratory test by Safeway and its employees was 31.9% less than the amount spent by controls, such that the 3-year initiativewas associatedwith $2.57million less spent on laboratory testing, including $1.05 million less in patient out-ofpocket spending.1 The opportunity for such a large cost reduction derives from the striking variation in negotiated prices for laboratory services. The price for the most commonly prescribed laboratory test, the basicmetabolic panel, ranges from$6.15 at the 25th percentile to $44.00 at the 75th percentile. But for reference pricing programs to succeed, somework is required on the part of patients, whomay have little awareness of price differences across laboratories, especially differences between those in some physicians’ offices and in large commercial laboratories. To take advantage of the savings, patients will have to choose the lower-priced laboratories, often insteadof the laboratoryat thephysicianpractice. Safewayaddressedthis throughannouncementof the initiativeandbyproviding employees a smartphone app to compare the price of a test at each laboratory in the networkwith the reference price. Where does reference pricing fit in the context of consumer-focused approaches that private insurers or large employers can use to achieve lower spending not only for laboratory services, but also for the larger market of covered medical services? Broadly, there are 3 such approaches being pursued in the United States today—high-deductible benefit designs,narrownetworks,andtierednetworks.Referencepricing is a relatively aggressive version of the third. The approaches differ on dimensions such as the information challenges for consumers and the degree to which they support integration of delivery as opposed to fragmentation. Themost commonefforts focusedon loweringhealth care spendingarecombinationsofhighdeductiblesandtools forpatients that provide information on prices for different providers.Deductibleshavebeen increasingover time, as reflected in growingpopularityofplanseligible forHealthSavingsAccounts (HSA), aswell as increases in planswith deductibles below the threshold for HSAs.2 The availability of tools for enrollees that show prices by provider specific to their plan has also grown a great deal. A 2013 survey conducted for Catalyst for Payment Reformshowedthat98%of respondinghealthplansoffer such tools for their enrollees, but only 2% of enrollees use them.3 The problem with this approach to cost containment is the complexity for consumers. Finding out the exact services needed and comparing prices among unfamiliar providers may be a challenge for many consumers. Another issue is that the approach does not work well for services that cannot be scheduled in advance and for most inpatient services, where even high deductibles are exceeded for almost all hospitalizations. Indeed, since Safeway’s health plan already had a high deductible, the savings shown in this study are in addition to what was achieved by the highdeductible approach. This approach also encourages patients to search broadly across the health care system for services “a la carte” rather than commit to an integrated system to take responsibility for their care—also an issue with reference pricing. Networkstrategieshave thepotential to containcostswith less information burden on consumers than high deductibles Related article page 1353 Reference Pricing and Changes in Laboratory Prices, Patient Choices, and Diagnostic Spending Original Investigation Research