Transforming Health Care Through Evidence and Collaboration
Transforming Health Care Through Evidence and Collaboration
The NIHCM Foundation is a nonprofit, nonpartisan organization dedicated to improving the effectiveness, efficiency and quality of America's health care system.
  • Awards

    This week NIHCM Foundation hosted the 25th Annual NIHCM Awards at the Organization of American States in Washington, D.C. to recognize outstanding health care research and journalism.

    Press Release Winners Finalists
  • News

    NIHCM welcomed Secretary Azar to a meeting in March to discuss efforts by the Department of Health and Human Services to transform health care by lowering costs and improving value for patients.

  • Webinars

    As recognition of our country's mental and behavioral health challenges grows, Americans are looking for answers that will increase their happiness and well-being and prevent deaths of despair related to mental health, opioids and suicide. Our four-part webinar series delves into the research and explores innovative strategies and evidence-based solutions to lift our society from crisis.

    Learn More
  • Grants

    NIHCM Foundation has awarded ten grants for health care journalism including investigative reporting, public engagement campaigns for documentaries and educational opportunities for reporters.

    Press Release All Journalism Grantees Apply for Funding
  • Grants

    NIHCM has awarded over $400,000 in grants to support seven investigator-initiated research studies on topics including value-based drug pricing and Medicaid expansion.

    Press Release All Research Grantees Apply for Funding
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Events

May 16, 2019
Alliance-Rx-Patent-Webinar-052019

Manufacturer practices under the current patent system have come under scrutiny for blocking or delaying the entry of generic or biosimilar drugs into the market. During this webinar, panelists will explore the relationship between patents, prices and patient access.

May 08, 2019
Suicide-webinar-graphic-1

The third part in our Defying Despair series delved deeper into the data on suicides and explored a range of initiatives designed to prevent suicide in different communities.

In the News

May 2019
Population Health Spotlight
mental-health infographic-May2019

How Do Providers Respond to Reference Pricing?

Why This Study Is Important

Prior research has demonstrated that patients respond to the incentives of reference pricing by shifting their demand to providers with lower prices. This study of reference pricing for three types of common surgical procedures explores whether providers respond to this shift in consumer demand by lowering their own prices in a bid to remain competitive.

What This Study Found

  • Despite initially pricing below the reference price thresholds in most cases, ambulatory surgical centers (ASCs) showed modest reductions in their prices for colonoscopy, cataract surgery and some types of joint arthroscopy after reference pricing began. ASCs may have been especially responsive to the reference pricing pressures because the targeted procedures constitute a large share of their total patient volume.
  • As a group, hospital outpatient departments (HOPDs) did not reduce their mean prices in response to demand shifts arising from reference pricing. However, HOPDs whose colonoscopy prices began above the reference price threshold did reduce their price for that procedure after reference pricing was implemented.
  • There was no evidence that providers responded to the changing incentives by lowering prices only for patients facing reference pricing. Rather, over 75 percent of the provider price reductions accrued to the insurer’s non-CalPERS population.
  • There also was no evidence that providers attempted to compensate for lower facility prices by raising other fees, by charging higher prices to other insurers for these services or by letting quality decline.

What These Findings Mean

Reference pricing for common, non-emergent procedures whose quality is comparable across providers can be an effective strategy for steering patients to lower-priced providers. This study shows that there may also be supply-side impacts as some providers lower their prices in response to shifting demand. Together, these findings suggest that reference pricing could help to moderate health care spending through two avenues. At the same time, the provider price responses documented here were modest, and few payers have the purchasing power of CalPERS. Significant changes in provider pricing behavior in response to reference pricing are unlikely unless these programs are coordinated across many large employers and purchasers.

More About This Study

This study uses 2009-2013 claims data from a large insurer that began administering a reference pricing program for colonoscopy, cataract surgery, and joint arthroscopy in 2012 for people receiving health benefits through the California Public Employees’ Retirement System (CalPERS). The claims data were used to determine the negotiated prices paid to each provider, and market areas were characterized by the extent to which the local commercially insured population was exposed to the CalPERS reference pricing program. Providers in markets with higher exposure are expected to be more responsive to the program’s incentives. Difference-in-difference modeling was used to estimate the post-reference pricing change in providers’ negotiated prices as a function of market exposure, with non-CalPERS patients insured by this carrier serving as the control group. A similar triple difference model was estimated to differentiate pricing responses based on whether the provider’s baseline price was above or below the reference price threshold. Results are robust across a number of alternative specifications.

Full Citation

Whaley CM and Brown TT. “Firm Responses to Targeted Consumer Incentives: Evidence from Reference Pricing for Surgical Services.” Journal of Health Economics, 61:111-33. July 2018.

For more information about this study, contact Dr. Christopher Whaley at This email address is being protected from spambots. You need JavaScript enabled to view it..
For more information about the NIHCM Foundation Investigator-Initiated Research Grant Program, contact Dr. Julie Schoenman at 202-296-4426.

Read More

This Research Insights summarizes a study showing that provider-side price responses exist but appear to be modest.

Events

May 16, 2019
Alliance-Rx-Patent-Webinar-052019

Manufacturer practices under the current patent system have come under scrutiny for blocking or delaying the entry of generic or biosimilar drugs into the market. During this webinar, panelists will explore the relationship between patents, prices and patient access.

May 08, 2019
Suicide-webinar-graphic-1

The third part in our Defying Despair series delved deeper into the data on suicides and explored a range of initiatives designed to prevent suicide in different communities.

In the News

May 2019
Population Health Spotlight
mental-health infographic-May2019

Grants

Journalism GrantsJournalism Grant Program

We are now accepting letters of inquiry for the 2019-2020 round of grantmaking. The deadline for submissions is July 15, 2019.

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Investigator-Initiated Research Grant Program

We are now accepting letters of inquiry for the 2019-2020 round of grantmaking. The deadline for submissions is July 9, 2019.

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Awards

Winners Named in the 25th Annual Research and Journalism Awards

Winners Announcment 2018 1

Congratulations to all of the winners of the 25th Annual NIHCM Foundation Research and Journalism Awards! The winners and finalists will be honored at a banquet in Washington, DC, in May.

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