Reference Pricing Programs Essay

737 Words 3 Pages
Supporters of reference pricing programs cite reference pricing as the solution to resolving the wide variation in prices charged for similar services across the healthcare sector. For example, CalPERS faced prices ranging from $12,000 to $75,000 for joint replacement surgery, $1,000 to $6,500 for cataract removal, and $1,250 to $15,500 for knee arthroscopy (Boynton and Robinson 2015). However, such wide discrepancies are largely due to market consolidation and regulatory barriers to new provider entry. The consumers’ demand for convenient care at any price only further exacerbated such price variations (Frankford and Rosenbaum 2015). In a consolidated market where providers wield more power over the consumers, a phenomenon that is becoming more common, physicians and hospitals can demand higher prices for their services. With a reference pricing program in place, providers whose price exceeds the reference price point may reduce prices in order to be designated as a high value facility and retain patient volume. Alternatively, providers may maintain their price if the volume will not offset the price reductions or that some patients will continue to use their services and assume the additional costs (The Incidental Economist 2015). In such a situation, establishing a reference pricing program will not be effective unless the employer, or a group of employers, has greater leverage over the providers. Otherwise, providers can simply refuse to contract but will not necessarily…

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