Today’s Managing Health Care Costs Number is 28%
JAMA Internal Medicine published research showing that CalPERS caused dramatic shifts in site of service and overall cost when it implemented a “reference pricing” approach for its California beneficiaries having diagnostic colonoscopies. (no paywall)
The program was implemented in 2012, and applied only to diagnostic colonoscopies. Screening colonoscopies were covered in full regardless of location, but colonoscopies for non-screening purposes were paid in full if the site of service was an ambulatory center or if the hospital provider’s cost was $1500 or less. Some hospitals charged as much as over $8000; if a patient went to a hospital charging more than the reference price, she was responsible for paying the difference.
The results:
· Price of colonoscopies overall declined by $79
· Portion of members having colonoscopies at ambulatory centers went up from 69% to 91%
· Total price declined by 21%
· CalPERS saved $7 million (28%) over two years.
· Complication rate went down slightly (not statistically significant)
The small portion of beneficiaries who had diagnostic colonoscopies in hospitals charging over $1500 were responsible, on average, for around $700 in total costs. Most of the savings from this program were not cost shifting. The cost savings would have been substantially larger if screening colonoscopies were included.
This is big news. CalPERS beneficiaries were given a financial stake in getting a “shoppable” procedure at lower cost facilities – and they did it. Complaints were not widespread, and quality might have improved, and in any event did not decrease.
There are serious challenges to scaling this success. $7 million in savings is less than it might seem; it’s only 0.05% of the estimated $7.5 billion CalPERS spends on health care each year. That's right - this saved only 1/20 of a percent - and this doesn't even consider the administrative costs of the program. Even when reference pricing is expanded to other shoppable services, it takes a huge amount of coordination, contracting, and communication to get large cost savings without cost shifting.
Savings from reference pricing can be substantial, but these shoppable procedures continue to represent a small portion of total medical costs.
Savings from reference pricing can be substantial, but these shoppable procedures continue to represent a small portion of total medical costs.
