The numbers may not seem striking in otolaryngology, but in 2011, when CalPERS set its maximum payout for a knee or hip replacement at $30,000, the amounts quickly added up. Patients “flocked to lower-priced hospitals and outpatient surgical centers,” wrote health economist Austin Frakt, PhD, in the New York Times (August 8, 2016.) Prices and total spending for the procedures plummeted.
Through the program, CalPERS saved $2.8 million, or approximately $7,000 per patient, on hip and knee replacements in 2011 over 2010 rates, according to the Center for Studying Health System Change, a Washington, D.C., think tank founded by the Robert Wood Johnson Foundation (Health Affairs. 2013;32:1392-1397). Patient cost sharing decreased by roughly $300,000, or $700 per patient.
Will Otolaryngology Be Impacted?
James Denneny III, MD, executive vice president and chief executive officer for the American Academy of Otolaryngology–Head and Neck Surgery, said his organization has been tracking reference pricing closely for years. While no otolaryngology procedures are currently included in the CalPERS program, Dr. Denneny said he must prepare should other states or private insurers eventually decide to include such procedures as tonsillectomies or tympanostomy tube insertion in their reference pricing programs.
He thinks that the yield in otolaryngology is so low, percentage-wise, and the cost to institute this pricing model by the payers so great, that otolaryngology won’t see much of it. “My suspicion is that the people who are most interested in doing it are the private insurers, and the overall bill for otolaryngology services is still low enough where I don’t think we’re looking at it in the next three to five years,” he said. “There may be trial models by certain larger hospital systems, but it’s an issue that, from a federal dollar point of view, is not a big spend.”
Still, Dr. Denneny noted that, in an era of value-based care, alternative payment models, and an overall move away from fee-for-service spending, otolaryngologists need to determine the best care to provide their patients and then determine the appropriate costs for that care.
Dr. Brown added, “Otolaryngologists can determine procedures that are likely targets for reference pricing by simply ranking ENT procedures that meet the reference-pricing criteria by national aggregate reimbursement.”
Dr. Sun said that good candidates for this pricing model would be high-volume, elective procedures for which there might be a wide variation in cost but not necessarily a big difference in quality. For example, tonsillectomies and tympanostomy tubes might be good candidates, he added. These are single procedures for which follow-up may not necessarily be as complex.