Reform Update: Organizations release paper touting reference pricing use with bundled payments

Two organizations focused on value-oriented healthcare delivery reform have released a joint paper (PDF) on the advantages of coupling reference pricing with bundled payments as a strategy to control costs, bolster quality and promote transparency.

The paper came from Catalyst for Payment Reform and the Health Care Incentives Improvement Institute.

The term “reference pricing” refers to when employers require their employees to choose healthcare providers whose price for procedures and other services is at or below a set point or pay the difference if they go to a higher-priced provider. The strategy has been in use for prescription drugs for years, and employers increasingly are looking at it as a tool to keep costs down for procedures such as colonoscopies and advanced imaging services.

But for more complex procedures, such as hip replacements, using reference pricing could lead to “significant out-of-pocket costs for consumers,” the authors warned. Some employers have already begun using reference pricing for such procedures. For instance, the California Public Employees' Retirement System, or CalPERS, which manages benefits for current and retired state employees, reported in June that it had successfully lowered costs of hip- and knee-replacement surgeries by limiting members to a designated list of facilities that had all agreed to charge less than $30,000.

A coalition of large U.S. employers, including Walmart and Lowe's, recently announced a deal with four centers around the country to send their employees there for hip and knee implant procedures starting Jan. 1. Employees who have their procedures done at those centers will receive full coverage with no deductibles or co-insurance, as well as receiving travel costs.

One way to keep out-of-pocket costs down, the authors say, would be to combine reference pricing with bundled payments, or single payments for all services provided for a particular condition. Such an approach would extend financial risk to providers as well as patients, while also encouraging cautious use of services, according to the report.

“For providers, pairing reference pricing with bundled payment creates accountability for defined outcomes (e.g., quality of care metrics) and financial liability for costs above the predetermined price for the bundle,” the authors wrote. “This promotes a focus on delivering only the most appropriate healthcare services within the episode, optimizing patient outcomes and avoiding preventable adverse events that can lead to a need to deliver more care, including readmissions.”

In January, the CMS announced tapped more 450 providers to participate in its Bundled Payments for Care Improvement initiative, developed by the Center for Medicare and Medicaid Innovation, which aims to test the use of episode-based payments as a method of aligning incentives across care settings and improving quality.

A group of 74 national and state-based medical societies are urging HHS to reconsider its decision to include clinical textbooks and journal articles under the Physician Payments Sunshine Act. That's a provision of the Patient Protection and Affordable Care Act requiring drug and device companies and other firms to disclose payments and items of value given to physicians. In an Oct. 28 letter to HHS Secretary Kathleen Sebelius, the groups—including the American Medical Association, the American College of Cardiology and the Medical Group Management Association—said textbooks and reprints of scholarly journal articles should fall under the exclusion category of “educational materials that directly benefit patients or are for patient use.” The letter said, “we are concerned that the final regulations could inadvertently prevent the timely distribution of rigorous scientifically reviewed medical information to clinicians and patients and thereby undermine efforts to improve the quality of care provided to patients.”

The American College of Physicians has released an updated version of its Web-based “Internist's Practical Guide to Understanding Health System Reform.” The guide is divided into sections based on the year that selected ACA policies go into effect. It includes brief explanations and answers to frequently asked questions. For instance, under the section “2014 reforms,” the guide lists 11 provisions, including the rollout of the health insurance exchanges, employer-based wellness programs and new requirements for insurers.

The Patient-Centered Outcomes Research Institute, the Washington-based organization established by the healthcare reform law to fund and disseminate comparative effectiveness research, has issued a call for nominees for a physician representative to serve on its 21-member board of governors. Letters of nomination are due by Nov. 15, according to a posting in the Federal Register.

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