Reference-Based Payments Program Reduced Colonoscopy Payments by $7 Million in 2 Years

The implementation of a reference-based payments program by the California Public Employee's Retirement System reduced payments for colonoscopies by $7 million over 2 years.

The implementation of a reference-based payments (RBP) program reduced payments for colonoscopies by $7 million over 2 years.

In 2012, the California Public Employee’s Retirement System (CalPERS) implemented a RBP program in order to reduce spending. After examining the medical claims of 50 million individuals from the Health Care Cost Institute (HCCI), supplemented by data from Aetna, Humana, and UnitedHealthcare, researchers estimated that total medical spending would decrease by approximately $95 million per year if an equivalent program were applied to all 3 payers in the HCCI database.

The data included external data on demographics, market characteristics, provider concentration, and insurance marketplaces. The sample population consisted of those who had a colonoscopy within the 2009-2013 period, were between the ages of 19 and 65, and excluded those who were in inpatient and emergency department settings. CalPERS excluded some individuals so that at-risk patients did not have their access to care hampered. Colonoscopies were selected because they were the service where RBP programs were most often applied.

The researchers believe that meaningful savings could occur in all geographic markets, excepting those that already have low prices or those that have only high-priced providers. There is no indication that RBP programs would decrease quality of care.

Although high-deductible health plans (HDHPs) were intended to alleviate the problem of price variation—and they have been effective in reducing consumer healthcare spending—there has been evidence that consumers also may forego necessary services, in addition to unnecessary services, in order to reduce cost-sharing. RBP programs may be an alternative solution to high spending in which consumers become aware of cost differences rather than avoiding costly services altogether.

RBP programs use financial incentives to direct consumers away from high-price providers to low-price providers, without detracting from the quality of the clinical care. In this instance, CalPERS set a maximum reimbursable amount, or reference price, for a given service such as a colonoscopy. If a patient receives a colonoscopy from a provider whose cost exceeds the reference price, the patient is responsible for the difference plus standard cost-sharing; if the patient receives a colonoscopy below or equivalent to the reference price then that individual would be responsible only for the cost-sharing.