The Truven Health Blog

The latest healthcare topics from a trusted, proven, and unbiased source.


Reference Pricing Can Incent Price Moderation

By Truven Staff
Tom Weatherup imageA recent article in Modern Healthcare discussed the idea of meaningful competition. “Ensuring meaningful competition” through increased transparency is a key component to re-engineering the U.S. healthcare system and resolving the issues of high costs and high utilization.

When large employee group health plans, like CalPERS, are able to access and analyze claims data, they can see (often for the first time) the wide variation in pricing that currently exists. Many of our large employer customers are shocked at the extremely wide range of all-in prices for the same service, such as colonoscopy or knee replacement, within a confined geographic area.  

Of course, in the current environment consumers tend to be price insensitive, due to the design of health benefits, and they can’t access marketplace pricing even if they were interested. Given the lack of price information, the CalPERS initiative of setting a reference price (for the allowed amount covered by the plan) for a subset of specific procedures is a reasonable approach to communicate what is considered “average” for a given service within the marketplace. An interesting, and perhaps unexpected, result of the CalPERS reference pricing initiative is that many high-priced providers have lowered their price to the reference price or near it. In retrospect, this is a reasonable response by providers when discovering that their price was inconsistent with the marketplace – especially in an environment where consumers now care about provider prices.

Tom Weatherup
Vice President, Client Service

Provider Cost Competition Affected by Generational Characteristics

By Truven Staff
Linda MacCracken imagePricing transparency is more crucial to consumer provider selection, given more healthcare spending. Price and affordability are one of the top two factors defining quality for Generation Xers and Baby Boomers, and the third highest factor among the younger Millennials and older Generation Xers. The recent article, Disruptive Innovators: Cost Competition Puts Pressure on Providers underscores the future impact to providers. This is more apparent in outpatient care, where there are many more competitors for the same provider services. Providers wanting to keep the educated, informed and patients willing to act will need to engage around direct price competition – via payments, rates and payer channels. The Truven Health Treatment Cost Calculator integrates payer coverage benefits applied to any planned procedure, and gives the consumer more provider switching options than seen in the past. For the Millennial deciding between seeing the doctor or spending money on food, entertainment and cell phone fees, healthcare may be postponed. The Baby Boomers and Greatest Generation have higher loyalty to primary care providers, and may have a comparatively slower rate of defection for pricing purposes for planned procedures, such as the colonoscopies.

Complete a short form to download the Truven Health research brief, Matching the Market: Using Generational Segments to Attract and Retain Consumers, that explains the motivations behind four current generations:
  • Greatest/Silent Generation (adults born before 1942): Physician Directs Me
  • Baby Boomers (1943–1960): Engage Me
  • Generation X (1961–1981): Educate Me
  • Millennials (Adults Born Since 1982): Connect With Me
These generational attitudes affect how consumers view a variety of healthcare decisions.

Linda MacCracken
VP, Advisory Services