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Background: Prices for total joint arthroplasty vary widely. Insurers have experimented with reference-based benefit designs (reference pricing) to control costs by setting a contribution limit that covers lower-priced facilities but necessitates higher out-of-pocket payments at higher-priced facilities. The purpose of this study was to evaluate the impact of reference pricing on the cost and quality of care for total joint arthroplasty.Methods: The California Public Employees' Retirement System (CalPERS) implemented reference pricing for total joint arthroplasty in January 2011. We obtained data on 2,023 CalPERS patients who underwent total joint arthroplasty from January 2009 to December 2013 and comparison group data on 8,024 non-CalPERS patients from the same time period. Trends in 9 cost and quality-related metrics were compared between the CalPERS group and the comparison group: patient choice of a lower-priced hospital, insurer payment, consumer payment, 90-day complication rate, 90-day readmission rate, annual surgical volume of the chosen hospital, length of stay, travel distance, and rate of discharge to home. The impact of reference pricing was estimated with difference-in-differences multivariable regressions, adjusting for covariates.Results: An increase of 19 percentage points (95% confidence interval [CI], 13.0 to 25.6 percentage points; p < 0.01) in the selection of lower-priced hospitals was attributable to reference pricing, with a concurrent mean savings for the insurer of $5,067 (95% CI, $2,315 to $7,819; p < 0.01) and an increase in the mean patient out-of-pocket payment of $1,991 (95% CI, $1,053 to $2,929; p < 0.01). No significant change in any quality indicator was attributable to reference pricing, with the exception of an 8% reduction (95% CI, 3.3% to 12.7% reduction; p < 0.01) in the length of stay for hip replacement.Conclusions: Reference pricing motivates patients to choose lower-priced hospitals for total joint arthroplasty, with no measurable adverse impact on quality. Reference pricing represents a viable strategy in the shift toward value-based care. [ABSTRACT FROM AUTHOR]

Background: Hospital-based outpatient departments traditionally charge higher prices for ambulatory procedures, compared with freestanding surgery centers. Under emerging reference-based benefit designs, insurers establish a contribution limit that they will pay, requiring the patient to pay the difference between that contribution limit and the actual price charged by the facility. The purpose of this study was to evaluate the impact of reference-based benefits on consumer choices, facility prices, employer spending, and surgical outcomes for orthopaedic procedures performed at ambulatory surgery centers.Methods: We obtained data on 3962 patients covered by the California Public Employees' Retirement System (CalPERS) who underwent arthroscopy of the knee or shoulder in the three years prior to the implementation of reference-based benefits in January 2012 and on 2505 patients covered by CalPERS who underwent arthroscopy in the two years after implementation. Control group data were obtained on 57,791 patients who underwent arthroscopy and were not subject to reference-based benefits. The impact of reference-based benefits on consumer choices between hospital-based and freestanding facilities, facility prices, employer spending, and surgical complications was assessed with use of difference-in-differences multivariable regressions to adjust for patient demographic characteristics, comorbidities, and geographic location.Results: By the second year of the program, the shift to reference-based benefits was associated with an increase in the utilization of freestanding ambulatory surgery centers by 14.3 percentage points (95% confidence interval, 8.1 to 20.5 percentage points) for knee arthroscopy and by 9.9 percentage points (95% confidence interval, 3.2 to 16.7 percentage points) for shoulder arthroscopy and a corresponding decrease in the use of hospital-based facilities. The mean price paid by CalPERS fell by 17.6% (95% confidence interval, -24.9% to -9.6%) for knee procedures and by 17.0% (95% confidence interval, -29.3% to -2.5%) for shoulder procedures. The shift to reference-based benefits was not associated with a change in the rate of surgical complications. In the first two years after the implementation of reference-based benefits, CalPERS saved $2.3 million (13%) on these two orthopaedic procedures.Conclusions: Reference-based benefits increase consumer sensitivity to price differences between freestanding and hospital-based surgical facilities.Clinical Relevance: This study shows that the implementation of reference-based benefits does not result in a significant increase in measured complication rates for those subject to reference-based benefits. [ABSTRACT FROM AUTHOR]