Information and incentives can reduce the cost of laboratory tests for patients and insurers

August 1, 2016

test tubes with U.S. currencyThe implementation of reference pricing for diagnostic laboratory tests, when combined with access to price information, was associated with reductions in prices and payments by both employer and employees, a recent UC Berkeley School of Public Health study finds. Patients opting for lower-cost labs reduced costs by about 31.9% per test in the first year alone. The findings were published in JAMA Internal Medicine on July 25.

Reference pricing, a strategy to incentivize a patient’s selection of lower-cost facilities, is being adopted with increasing frequency in the United States. Under reference pricing, insurers provide payment up to a defined contribution limit and require the patient to pay the difference between this limit and the actual price charged.

The study, led by James C. Robinson, professor of health economics and director of the Berkeley Center for Health and Technology at the UC Berkeley School of Public Health, examined the effects of reference pricing on patient choice of laboratory, price of the lab test, amount paid out-of-pocket by patients, and amount paid by the insurer. Data was collected from insurance claims of the national U.S. chain grocery store chain, Safeway.

Safeway chose to provide reimbursement up to the 60th percentile of the distribution of lab prices in each given geographical region. The actual prices were first negotiated by Anthem Blue Cross with each laboratory, but varied widely based on the efficiency and bargaining power of particular laboratories. Patients were given full access to these prices through a mobile platform on their phone or computer.

Robinson and his team analyzed 2.13 million claims from 30,000 Safeway employees between 2010 to 2013 and compared them to claims from 180,000 people also insured by Anthem over the same period who were not subject to reference pricing. Combined employee and employer savings at Safeway amounted to $2.57 million.

“Patients are not stupid. When given information and incentives, they switch from high-priced to low-priced laboratories unless convinced that especially high prices are accompanied by especially high quality,” Robinson says.

Robinson and his team are continuing to analyze the effects of reference pricing. Currently, they are studying the impact of reference pricing on the use and price of drugs, for another working population.

This study was funded by the Robert Wood Johnson Foundation. Christopher Whaley, a postdoc and Timothy T. Brown, associate professor of health economics, were coauthors.

By Carli Million