Does the Implementation of Reference Pricing Result in Reduced Utilization? Evidence From Inpatient and Outpatient Procedures

Abstract

Reference pricing (RP) is an insurance design that can be used to incentivize patients to use low-price settings. While RP is not intended to affect overall utilization, it could unintentionally reduce utilization. We examined whether utilization was reduced when a large employer adopted RP for selected elective surgeries, including inpatient joint replacement surgery and outpatient cataract surgery, colonoscopy, and arthroscopic surgery. Data included a treatment group subject to RP implementation and a comparison group that was not. We applied autoregressive integrated moving average analysis as comparison-population interrupted time-series analysis to determine whether there were procedure reductions following RP implementation. We find no evidence of short-term decreases (within 3 months of RP implementation). However, we find very modest declines of approximately 14 (20%) fewer arthroscopic knee surgeries 6 months after RP implementation and 129 (17.2%) fewer colonoscopies 8 months after RP implementation. There were no declines in the other procedures examined.

Keywords

reference pricing service utilization interrupted time series ARIMA

Get full access to this article

View all access options for this article.

References

Balasubramanian

Prinja

Aggarwal

A. K.

(2015). Effect of user charges on secondary level surgical care utilization and out-of-pocket expenditures in Haryana State, India. PLOS ONE, 10(5), Article e0125202. https://doi.org/10.1371/journal.pone.0125202

Box

G. E.

Jenkins

G. M.

Reinsel

G. C.

Ljung

G. M.

(2015). Time series analysis: Forecasting and control. John Wiley.

Brodke

D. J.

Guo

Aouad

Brown

T. T.

Bozic

K. J.

(2019). Impact of reference pricing on cost and quality in total joint arthroplasty. Journal of Bone & Joint Surgery, 101(24), 2212-2218. https://doi.org/10.2106/JBJS.19.00475

Brown

T. T.

Atal

J. P.

(2019). How robust are reference pricing studies on outpatient medical procedures? Three different preprocessing techniques applied to difference-in differences. Health Economics, 28(2), 280-298. https://doi.org/10.1002/hec.3841

Brown

T. T.

Guo

Whaley

(2018). Reference-based benefits for colonoscopy and arthroscopy: Large differences in patient payments across procedures but similar behavioral responses. Medical Care Research and Review, 77(3), 261-273. https://doi.org/10.1177/1077558718793325

Cassidy

(2014, July 24). Site-neutral payments. Health Affairs. http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=121

Catalano

Serxner

(1987). Time-series designs of potential interest to epidemiologists. American Journal of Epidemiology, 126(4), 724-731. https://doi.org/10.1093/oxfordjournals.aje.a114712

Chang

Tiao

G. C.

Chen

(1988). Estimation of time series parameters in the presence of outliers. Technometrics, 30(2), 193-204. https://doi.org/10.1080/00401706.1988.10488367

Chi

W. C.

DeVries

(2014). Value-based purchasing’s effect on quality and costs. Health Affairs, 33(4), Article 723. https://doi.org/10.1377/hlthaff.2014.0145

10.

De Gooijer

J. G.

Hyndman

R. J.

(2006). 25 Years of time series forecasting. International Journal of Forecasting, 22(3), 443-473. https://doi.org/10.1016/j.ijforecast.2006.01.001

11.

Gabel

J. R.

Fahlman

Kang

Wozniak

Kletke

Hay

J. W.

(2008). Where do I send thee? Does physician-ownership affect referral patterns to ambulatory surgery centers? Health Affairs, 27(Suppl. 1), w165-w174. https://doi.org/10.1377/hlthaff.27.3.w165

12.

Haddad

Fournier

(1995). Quality, cost and utilization of health services in developing countries: A longitudinal study in Zaïre. Social Science & Medicine, 40(6), 743-753. https://doi.org/10.1016/0277-9536(94)00134-F

13.

Holder

H. D.

Blose

J. O.

(1992). The reduction of health care costs associated with alcoholism treatment: A 14-year longitudinal study. Journal of Studies on Alcohol, 53(4), 293-302. https://doi.org/10.15288/jsa.1992.53.293

14.

Hollingsworth

J. M.

Strope

S. A.

Krein

S. L.

Hollenbeck

A. T.

Hollenbeck

B. K.

(2010). Physician-ownership of ambulatory surgery centers linked to higher volume of surgeries. Health Affairs, 29(4), 683-689. https://doi.org/10.1377/hlthaff.2008.0567

15.

Lee

I.-H.

Bloor

Hewitt

Maynard

(2012). The effects of new pricing and copayment schemes for pharmaceuticals in South Korea. Health Policy, 104(1), 40-49. https://doi.org/10.1016/j.healthpol.2011.09.003

16.

Lee

Y.-C.

Yang

M.-C.

Huang

Y.-T.

Liu

C.-H.

Chen

S.-B.

(2006). Impacts of cost containment strategies on pharmaceutical expenditures of the National Health Insurance in Taiwan, 1996-2003. PharmacoEconomics, 24(9), 891-902. https://doi.org/10.2165/00019053-200624090-00006

17.

Moreno-Torres

Puig-Junoy

Raya

J. M.

(2011). The impact of repeated cost containment policies on pharmaceutical expenditure: Experience in Spain. European Journal of Health Economics, 12(6), 563-573. https://doi.org/10.1007/s10198-010-0271-1

18.

Nelson

A. A.

Reeder

C. E.

Dickson

W. M.

(1984). The effect of a Medicaid drug copayment program on the utilization and cost of prescription services. Medical Care, 22(8), 724-736. https://doi.org/10.1097/00005650-198408000-00004

19.

Petrou

(2015). An interrupted time-series analysis to assess impact of introduction of co-payment on emergency room visits in Cyprus. Applied Health Economics and Health Policy, 13(5), 515-523. https://doi.org/10.1007/s40258-015-0169-2

20.

Petrou

Ingleby

(2019). Co-payments for emergency department visits: A quasiexperimental study. Public Health, 169(1), 50-58. https://doi.org/10.1016/j.puhe.2018.12.014

21.

Puig-Junoy

Rodríguez-Feijoó

Lopez-Valcarcel

B. G.

(2014). Paying for formerly free medicines in Spain after 1 year of co-payment: Changes in the number of dispensed prescriptions. Applied Health Economics and Health Policy, 12(3), 279-287. https://doi.org/10.1007/s40258-014-0097-6

22.

Robinson

J. C.

Brown

T. T.

(2013). Increases in consumer cost sharing redirect patient volumes and reduce hospital prices for orthopedic surgery. Health Affairs, 32(8), 1392-1397. https://doi.org/10.1377/hlthaff.2013.0188

23.

Robinson

J. C.

Brown

T. T.

Whaley

(2015). Reference-based benefit design changes consumers’ choices and employers’ payments for ambulatory surgery. Health Affairs, 34(3), 415-422. https://doi.org/10.1377/hlthaff.2014.1198

24.

Robinson

J. C.

Brown

T. T.

Whaley

(2017). Reference pricing changes the “choice architecture” of health care for consumers. Health Affairs, 36(3), 524-530. https://doi.org/10.1377/hlthaff.2016.1256

25.

Robinson

J. C.

Brown

T. T.

Whaley

Bozic

K. J.

(2015). Consumer choice between hospital-based and freestanding facilities for arthroscopy. Journal of Bone & Joint Surgery, 97(18), 1473-1481. https://doi.org/10.2106/JBJS.O.00240

26.

Robinson

J. C.

Brown

T. T.

Whaley

Finlayson

(2015). Association of reference payment for colonoscopy with consumer choices, insurer spending, and procedural complications. JAMA Internal Medicine, 175(11), 1783-1789. https://doi.org/10.1001/jamainternmed.2015.4588

27.

Robinson

J. C.

Pozen

Tseng

Bozic

K. J.

(2012). Variability in costs associated with total hip and knee replacement implants. Journal of Bone & Joint Surgery, 94(18), 1693-1698. https://doi.org/10.2106/JBJS.K.00355

28.

Whaley

C. M.

Guo

Brown

T. T.

(2017). The moral hazard effects of consumer responses to targeted cost-sharing. Journal of Health Economics, 56(December), 201-221. https://doi.org/10.1016/j.jhealeco.2017.09.012

29.

White

Reschovsky

J. D.

Bond

A. M.

(2014). Understanding differences between high- and low-price hospitals: Implications for efforts to rein in costs. Health Affairs, 33(2), 324-331. https://doi.org/10.1377/hlthaff.2013.0747

30.

Wolfson

Kapadia

A. S.

Decker

Sear

A. M.

Roht

L. H.

(1982). Effects of cost-sharing on users of a state’s health service program. Medical Care, 20(12), 1178-1187. https://doi.org/10.1097/00005650-198212000-00004

31.

Zechnich

A. D.

Greenlick

Haxby

Mullooly

(1998). Elimination of over-the-counter medication coverage in the Oregon Medicaid population: The Impact on program costs and drug use. Medical Care, 36(8), 1283-1294. https://doi.org/10.1097/00005650-199808000-00015

32.

Zhang

Cowling

D. W.

Facer

(2017). Comparing the effects of reference pricing and centers-of-excellence approaches to value-based benefit design. Health Affairs, 36(12), 2094-2101. https://doi.org/10.1377/hlthaff.2017.0563