Reference-based pricing can control lab costs

Reference-based pricing (RBP) can help subscribers make cost-conscious decisions when they are supported with education and an online shopping tool, a new study by Cigna and Safeway Inc. shows.

While previous studies focused on pharmaceuticals, this is the first published reference-based study to focus on lab services, according to Cigna and Safeway.

Reference-based pricing is a benefit design that sets a maximum contribution (reference price) from the health plan to pay for a particular service. In the case of the Cigna/ Safeway study, lab services such as a lipid or comprehensive metabolic panel were analyzed.

“The goal of reference-based pricing is to help individuals become smarter health care consumers by giving them the opportunity to choose health care services at the best price, without compromising quality,” said Jackie Aube, Cigna's vice president for Product. “Ultimately, it’s up to individuals to make choices that are right for them, but the education and online tools that health plans and employers offer can help individuals make more informed decisions. Individuals make these types of choices every day when they purchase other consumer goods and services, evaluating the information they have about quality and cost.”

“We already had strong evidence through our RxTE™ program that reference-based pricing in the pharmaceutical space could dramatically increase selection of therapeutically equivalent lower cost options. Now we see that reference-based pricing has promise in doing the same for certain medical services,” said Dr. Kent L. Bradley, senior vice president and chief medical officer of Safeway Inc.

Revenue, spending and the number of lab tests in the U.S. have risen steadily in the past 10 years, notes the study, and controlling those costs without impacting quality is a goal of managed care.

The study looked at 492 procedural codes for lab tests from January 2010 through December 2011. Study and reference groups were subscribers and dependents of Cigna’s employer-based health plans.

The study group had a set RBP, received information from their employer about the RBP, and was provided with access to a free online shopping tool that allowed them to enter lab-related text such as “lab,” “cost of lab,” and “blood panel.” The reference group had no access to the RBP benefit, did not receive information about RBP from their employer, and did not have access to online lab shopping tools.

A total of 20,144 claims from 4,363 subscribers were analyzed in the study group, while 405,784 claims from 83,059 members were analyzed in the reference group. Results, which were published in the December issue of the American Journal of Managed Care, showed significantly greater lab compliance among the RFP group than the reference group.

“This study is an important first step, but we can’t conclude from it that the benefit alone drives the greatest behavior change,” Cigna's Aube said. “Though not specifically demonstrated through this study, we do know that communication and education are essential to all of Cigna's consumer-directed efforts. Our hypothesis is that it is a combination of benefit structure, with effective education and messaging, that presents the greatest opportunity to change behavior.”

“We looked at very early data for this analysis,” said Safeway’s Dr. Bradley. “The understanding of reference pricing along with adoption of online tools to inform the consumer has increased significantly since the early days of 2011. Thoughtful application of reference pricing warrants consideration as a mechanism to improve value in health care and help individuals reduce their costs for certain services.”

While authors note that only 7% of members in the study group took advantage of the online tool, they recommend future research that examines factors that influence consumers’ selection of lab providers.

Authors of the study from Cigna include Doug Melton, Ph.D., MPH; Raegan Armata, MBA; and James B. Parr. Authors of the study from Safeway include Kent Bradley, M.D., MPH, MBA; and Patricia Lin Fu, MPH. Carole Alison Chrvala, Ph.D., of Health Matters, Inc., prepared the manuscript.