Reference Pricing Could Reduce Health Spending by Changing Provider Pricing - New Research Insights

Prior research has demonstrated that patients respond to the incentives of reference pricing by shifting their demand to lower-priced providers. Do providers then respond to this shift in demand by lowering their own prices in a bid to retain their patient base? This Research Insights highlights findings from a paper co-authored by Dr. Christopher Whaley, with support from a NIHCM Foundation research grant, showing that such provider-side price responses exist but appear to be modest. However, because providers negotiate prices with an insurer for its full enrollee population, any price reductions for enrollees whose benefit design incorporates reference pricing are also enjoyed by all others covered by the insurer.