Value-Based Pricing for Hospital Outpatient Services: A Demonstration That Merges Cost-Effectiveness Analysis with Real-World Cost Data

Employers have been trying to manage the cost of providing health coverage for decades. Attempted cost control measures include a combination of plan design and cost-sharing changes that affect how much enrollees pay out-of-pocket for health care services and other structural changes to the delivery of health care more generally. Yet, in most years since 1988, the cost of providing health benefits to employees and their dependents has increased more than overall inflation.

One tool that can be used to inform the value of money for health care is “value assessment,” which is a form of economic evaluation that compares estimates of an intervention’s costs with its projected health benefits. However, value assessments tend to be focused on prescription drugs rather than other outpatient health care services. This is true even though prescription drug spending accounted for between 9 percent and 15 percent of U.S. health spending in 2022, while inpatient and outpatient services accounted for between 50 percent and 70 percent of health spending. More generation of evidence on the clinical effects of inpatient and outpatient services — particularly those representing a large share of employer spending — could be of value to employers.

The purpose of this Issue Brief is to offer a demonstration of how employers can use value assessments to compare prices paid for value of hospital outpatient department (HOPD)-provided services relative to the cost paid by comparing published cost-effectiveness analysis (CEA) estimates with real-world cost data. We use the quality-adjusted life year (QALY) and the incremental cost-effectiveness ratio (ICER) in our analysis. The QALY is a measure that integrates the quantity of life in years with the quality of that time in terms of health status. The ICER measures the QALYs gained from the additional costs incurred using the treatment compared with “treatment as usual” (or an alternative intervention). Finally, in CEA, the ICER is routinely assessed according to society’s willingness to pay for a QALY. Value-based prices can be derived using these metrics.

Key Findings:

If spending on a health care service is below a value-based price, then one might consider that price to be worthwhile (or “a good deal”) given society’s willingness to pay for a QALY. If spending is above the value-based price, then one would conclude that the payer is overpaying for the service. It can be argued that a single number cannot adequately capture a society’s willingness to pay for a QALY due to variations in values, assumptions, inferences, and contexts. Despite this challenge, we present our results with respect to a value-based price at the $100,000-per-QALY threshold, since researchers have been gravitating toward this level. We also compare the value-based price with median spending. Our findings are mixed as to whether the value-based price is above or below median spending. Readers interested in the distribution of health care spending and other value-based prices are encouraged to examine the appendix.
In all three carotid artery stenosis screenings, the service was worthwhile at the median allowed amount, as the value-based price was above it.
For both arthroscopic partial meniscectomy services, the value-based price was below the median allowed amount. As a result, payers may have overpaid for these procedures.
For low-back-pain imaging, we combined CT scans and MRIs. Median spending was determined to be below the value-based price, suggesting that payers may not have overpaid for these services.
Median spending for septoplasty for a deviated septum was considerably higher than the value-based price.
Regarding sleep studies, we examined full-night and split-night studies. We found that median spending was below the value-based price, suggesting that payers may not have overpaid for these diagnostic tests.

Findings from this study, and from the field of value assessments more broadly, should be of importance to both sponsors of health benefits and policymakers. While plan sponsors prefer to offer generous health insurance to recruit and retain workers, they have limited resources and must manage costs accordingly. Greater generation of evidence on the clinical and cost effectiveness of health services that represent the largest share of spending can improve plan coverage decision making. Today, evidence on value assessments of most services representing significant costs to employers is lacking. The current evidence that is available suggests that many employers may be overpaying for services relative to the “cost effective” price.

This study was conducted through the EBRI Center for Research on Health Benefits Innovation (EBRI CRHBI), with the funding support of the following organizations: Aon, Blue Cross Blue Shield Association, JP Morgan Chase, and PhRMA.

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M. Value-Based Pricing for Hospital Outpatient Services: A R w p e slff a e he e p e ee fe c p tt r he iv ,st rw e rudy for e ne Jour the vhe nc ass lue r e ve na a a t-s he lue na b l o us a ly sed e f V -cb si om a as a s sed p sp (a c rC a i ul c E c r e p a om a As a r tr)o ic , Su rp e r ta w og ew rr g a a set loc a e e s not ts a or trhe y) , b r27 b ov a k rae now ll sed (e c y 2) e , itiv .r . n a e on ing giona s “ atllow he vll a y lue he e , dor a a a l tm s na h ca sess ount tion rm es. a e serv ll nt y W .. e ”ic C d eiv om , tid he p ed a se r a th t tiv w e e o r ec d a lia ini l-g w cnost or al ld eff ic , e d tc a ettst iv a-s edne w ere ss iv re e in dc v o colv m osp tea s (ri.e ed. , w the ith Christopher Roebuck is President and CEO of RxEconomics, LLC. This Issue Brief was written with assistance from The rising costs of health care continue to challenge employers, compelling them to seek innovative strategies for Demonstration That Merges Cost-Effectiveness Analysis with Selection of HOPD Services inc a we hom r ighing eme e-n b ta tahe sed l c os b e sl tn ) e e e b fit p y s a st the udy g a ein xpe . s W t e c tt he e found d ha num rm tha b s efo tr m rof one e d QA ia n sp L trY es g atem nding ain en etd op tw o ta ion y sie bld e vs. low the a not tc he ost he v a rp lue e (Irns -QA bta itL s ut Y ee d ( i.e for pric ., C etlin , he su ic Ig a Cg l a EeR) st nd ing ob Ec ser tono ha vte m d pic ain 202 y ers 2 mantahe ging Ins spe titunding te’s r ew sea hilr ec h a prov nd iding edit e or ffia ec l st tiva eff c s. ovAeny ra gve ie . w Ts e his xIp srsu ess e e Bd rie in t f unde his rresc po orrte a s t rehe tho prse actof ica the lity aof utus hor ing and value should Anderson, Gerard F., Uwe E. Reinhardt, Peter S. Hussey, and Varduhi Petrosyan. 2003. 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A es nga a r geesu he lt, alt ph p ayela rs n e ma nr yolle hav ee s . ov Com erpm aid uni for ca ttion hese w it ph roc pla ed n ur m ee s. m bers is key to an effective specific outcome such as reduced inpatient hospitalization. A special form of CEA, cost-utility analysis, uses the quality- empa loy nd erRe spe sea nding rch Fund . More (E g Be RI ne -E ra RF) tion o , orf tc he om ir pst aa ra ffts. N ive c elin ithe ica r l- Ee Bff RI ec nor tive ne EBss RI a -E nd RF lob costb -e ie ffs or ectiv te ane kes p ss a osit naions lyses on can g speuid cifie c “ By cost P-a eff ul Fro ectivene nsss tin, P analy h.D. sis” a , nd Emp “CEloye A” coe m Ben binede w fit it R h na esm ee as of rch I serv ns icte itut s rou e, tine and ly pM. erfor Cm hris ed in t top he he Hr OP Ro D e sett buck, ing. To implementation of value-based pricing. Individuals will need comparable information on prices and quality to make Deutsch, Peter A., Michael S. Simmons, and Jeanne M. Wallace. 2006. "Cost-Effectiveness of Split-Night adjusted life year (QALY) as the outcome of interest (Drummond, Sculpher, Claxton, Stoddart, and Torrance, 2015). policy proposals. EBRI invites comment on this research. e gm uide ploy our ers in o searc ph, tim wizi e ng looked their for spe itnding ems inc on lude headlt h se on the rvic C ee s. nt Our ers fo finrd Me ings ind dicare ic a and te tMe hatd w ica hil id e Se cerrv tiacin se es’ (C rvMS’ ices m ) lisa t y of b30 e 0 Ph.D., RxEconomics, LLC • For low-back-pain imaging, we combined CT scans and MRIs. Median spending was determined to be below Endnotes informed decisions regarding provider selection. Lists of doctors and ???????? hospit a ?????????? ls, either ???????? in preferred networks or with Value Poly -Ba somnog se r 4ad phy P ar nd ici Hom n eg St f udie or s in t Ho he s Evp alua ita tion o l Ou f Obstt rp uca tivt e ien Sleep t A Ser pnea Syv ndrom ice e.s " : Jour A nal of 5 The QALY is a measure that integrates life expectancy with the quality of life in terms of health status. A year lived in priced closely to the estimated value, others reveal significant overpayments that warrant reconsideration of current “shoppable services” as well as those designated as “low Figu vare lue2 ” by the U.S. Preventive Services Task Force (USPSTF). ???????? ?????? ???????? (?? . ?? . , ???????? ) = the value-based price, suggesting that payers may not have overpaid for these services. prices at or below the value-based price, can be more easily disseminated today than in the past through the use of Clinical Sleep Medicine, 2(2), 145-153. 6 perfect health equals 1 QALY, whereas a year lived with any mor ???????????????? bidity is adj us ?????????? ted to e ????????????qual some proportion of 1 QALY p De W re ic ing sea mo r st cr he un cdt us PrubM et s.r H a eow dt ,Med ion G ev oog erian , le our T Sc A h a hola llo na aw ly rt , si ed a s a Me nd A lso hig Tuf mr ount tg Uni hli es g v s ht erCo s siCo t ty he m ’s C pa lim s Ered A t it e- Re dEf a g W v isf a ith tila re y.b c V ili alu t tyiv of ee -cBased on st-e effs e cs Prices tiv A enen ssa dl ay ta s foris mawi ny th Suggested Citation: Fronstin, Paul, and M. Christopher Roebuck, “Value-Based Pricing for Hospital Outpatient 1 m S ob eeile Fi g aur ppes a s 6. nd 4 a w nd eb 6. si5 tein s. https:// 2www.kff.org/report-section/ehbs-2024-section-6-worker-and-employer-contributions-for- ( Ient .g.r , o QA duc LY=t0 r ion ep resents death). medical services, emphasizing a need for more comprehensive economic evaluations to better inform employers’ • Median spending for septoplasty for a deviated septum was considerably higher than the value-based price. $100,000 per QALY Median Allowed Amount Real-World Cost Data Services: A Demonstration That Merges Cost-Effectiveness Analysis with Real-World Cost Data,” EBRI Issue Brief, Drummond, Michael F., Mark J. Sculpher, Karl Claxton, Greg L. Stoddart, and George W. Torrance. 2015. Methods for premiums/. For our analysis, we had several inclusion criteria. First, one or more (preferably recent) CEA studies specific to the I cn th overea g semi e and nal p spe ap nding er “It d ’s T ecis he ions Pric . es, Stupid: Why The United States Is So Different From Other Countries,” Uwe E. Howno. ever62 , t5 his (E c m onc ploeypete m Ba eyne bfit e dRe iffsea icult r cth I o im nsp tit leut me e, nt N ov in p em rabce tic r e 21 . , En 20 rolle 24)e . s who value high-priced providers may choose the Economic Evaluation of Health Care Programmes, 4th Edition. Oxford University Press. The incremental cost-effectiveness ratio (ICER) is used in CEA to compare one treatment with another or “treatment as 2 H By OP Pa D serv ul Fro ice w ns erte in, P requir h.D. ed. , Se Emp condloye , those e Ben studie efi s tha R de ts o einc arch I $1,200 lude su ns fftic itut ient e , dea ta nd il reM. ga C rding hris the top IC he ER r cRo alcul ebuck, ations. • Regarding sleep studies, we examined full-night and split-night studies. We found that median spending was Re Th inh e a QAL rdtY ame nd tric his ha coCo s a u b mp tehor e un ted s c c riti Tom onc co iz graph e lude d fo icd A r ,ng d “is The iog crimi raph Unit na y ofting Nec ed kSt agaatin es st sc pe ert nt a in consi popd ula ertions ably m and or eis on bann hee ad lt h c from are b e th ing an a usny ed ot in he ma r ny The observed cost per QALY can be examined with various willingness-to-pay thresholds in mind to assess value, $779 to pay the higher cost sharing. And communicating a value-based price for select health care services while other usual.” The ICER equals the difference in costs between the treatment and its comparator divided by the difference in Our findings underscore the necessity for employers and policymakers to adopt a more nuanced understanding of value Thi Ph.D. rd, w , eRx b e op low Eco te dt he nomics for v C aE lue A -s, b tudie aLsed LC s w pric he er , esu in gtg he est cing omp tha ara t tp or as ye w rs erm e a “y tr e not atm ha en vte aov s u esu rpa aid l” tfor o a tllow hese for dia the gnost geine c tre ast l a slign . ment government programs but has been commonly used in health outcomes literature. country, whether measured per capita or as a percentage of GDP. At the same time, most measures of aggregate partiC cul op ar yly rig wh he t In n com form paa ring tion m : eTdhis ica l re ap nd ortp ha is c rm opaycry ight treead t m be y nt the ser Ev m icpeloy s te ha e tB a erne e c fit o m Re psea eting rch I forns sc tit au rc te e ( he EB aRI lth ). ca Yrou e may Fronstin, Paul, and M. Christopher Roebuck. 2014. "Reference Pricing for Health Care Services: A New Twist on the services are not subject to a value-based price may be challenging and confusing to plan participants. QALYs resulting from the treatment and its comparator. It is measured over a selected time horizon (often lifetime). Put a wss ith esrsm eale -w ntor s b ld ec yo ond st d p arte asc in o riptur ion d subrseq ugs. ue Ant s d ce am lcu onst lations rate. dF , our the $1,200 trh, e a w re e p va re ry fe ing rred im st pudie licatio s t nha s for t a d dop iffe te rd ent a lif he ea tim lth se e ervv aic lueast, ion utilization such as physi Mc aiga nn vi etic Re sit ss p onan ecre A ca np giiotg a r aa ph nd y of hospit Neck al days per capita were below the OECD median…U.S. resour cop ce y , dp olla rint rs. , or W d eow alsnloa o md u lt this iplie rd e p to he rt e solely for xpected QA perLsona Y gal a insn d fo nonc r eacom h se mre vr ic ce ia l use times $ , p50 rov ,000 ided, t$1 ha0t0,00 all ha 0,r d and cop $1 ie50 s r,e 00 ta0 in 3 Defined Contribution Concept in Employment-Based $1,062 Health Benefits." EBRI Issue Brief, no. 398 (Employee See https://www.cms.gov/files/document/nations-health-dollar-where-it-came-where-it-went.pdf and si Fim nding ply, s fr theo I m C E this R me sta udy, surea s t nd he fr om expe the cte field d QA of LYs g value aine ad ss fr es om sm e the nts am dd or ite ion ba roa l cd os lyt, s in should curre b de us of ing imtphe or ttarnc eae tm to ent bot . h and a one-size-fits-all approach may not suffice. CEA provides a useful benchmark rather than a prescriptive solution horizon. Finally, we also sought to present some diversification in the type of service examined, such as imaging, policymakers need to reflect on what Americans are getting for their greater health spending. They could conclude: It’s t Eo md pe a loy rny ive e ra s ha tnd he a v vll c a elue cop onsi -y braight d sed ere a d pnd rs ic im eot ila the ha r rtis a w sp ue ould plic s a a p s t brle ehe vnot ayil a ha icte vs c e ea c w ont hr eof a stin le the edd se w the itth r hr ree e in, sh ferold aend nc s.e y ou pric m ing ay st cit ra et e or g ie quot s, aend sm the all p reo m rta ions y b eof Appendix Benefit Research Institute). https://www.ispor.org/docs/default-source/intl2023/bvi-empirical-research-poster-final-pdf. Note that the Centers for Medicare sponsors of health benefits and policymakers. Wh A T ile pla An sponsor G L s AprN efer C to Eoffe r generous health insurance to recruit for benefit design, and employers’ use of it may be limited unt $1,200 il more evidence is generated. Employers may want to surgical, and diagnostic. Based on these parameters, we selected the following nine treatment services for analysis: Duplex Scan of Extracranial Arteries le the ss ons t p the ric ero s, st ep bor eupid tle p arrov .” ne ide (d A nde fr dom tha rso itt n, y (ou Fr Re on d inh o stin so ve ard at nd , rH bRoe us atim sey, b uc and k a, nd 20 wit P 1h p e4t)r.os r o Re y pa e fe n, r rc e2 it nc 00 ateion. 3) p.r icA ing ny m usa ey bno eytond nec tehe ss asc rily op h ea of ve td he esi for rab ele going & Medicaid Services (CMS) counts only retail pharmacy spending $642 in its prescription drug estimate. Specialty medications not and retain workers, they have limited resources and must manage costs accordingly. Greater generation of evidence on consider innovative strategies, such as tiered cost sharing and enhanced transparency, to facilitate consumer E Fr m ons ploy tin, P ers ha aulv , e a nd beeM. n tr Cy hr ing istop to he ma r n Roe ageb uc the k . c20 ost 21 of . 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Today, evidence on value assessments of most services representing significant costs to a fa c cum e im ula ple tiv mee n 18 ta.7 p tion ch erceant lle a ng meong s re la the te d p op to ula prov tion ide w r it ph e ricing mp loy and me enr ntolle -bae sed be he haa vlt ior h . cUlt ove im raagte e ly (H , e aa dlop th C ting arev a Clue ost- b In ast sed itut e, Report Availability: This report is available on the internet at www.ebri.org ???????? = pocket for no. he 52 alt 5h c (Ea m re p lo serv yeeic B ee s a ne nd fit ot Re he sea r st rcrh uc Ins turta itl uc tha e).n ges to the delivery of health care more generally. Yet, in most pricing ground. Providers may move to increase prices of non-reference-priced services. And providers below the number relative to other sources of health spending. ?????????? ???????? ?????????????????? - ?????????? ???????? ?????????????????? ?????????? emp2. loy erMa s is g ne lactk icing. 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Tomography and Magnetic Res ................................ onance Imaging of Spine .......................................................................................... 4 Percentile Percentile QALYs Gained Percentile Percentile per QALY per QALY per QALY $932 This study was conducted through the EBRI Center for Research on Health Benefits Innovation (EBRI CRHBI), A Em rthr ploy osc eop rs h ica P va er tb ia el M en tr enis ying cectto om my a n of agte he t he Kne cos e t of providing health care coverage for decades. Attempted cost-control There are generally accepted thresholds that are often referred to when classifying health services. Historically, $50,000 One im 5 ple tm ool ent B tr ha ing iet f , cv no. a an b lue 51 e -b 6 us a sed (e Ed m tp p o lo ric inf ying eor e m B we e tne r he efit ev a a Re sy lue sea t o of r dco, m h I one m nor st yie tfut or ee m ) he p . loy alte h rs w care ould is “ v aa lrlue ead a yss be es d sm oing ent ,so ” .w hich is a form of E pr m icp eloy to eb rs m e wa or yt hw wan hil t e to (or us e “a v g alue ood - bdaesed al”) pgriv ice ing n soc but ie m tya ’s y w ne ille ingne d to ss ta kte o a p a nua y an t cte hd a ta tp hr pe roa shc old h. . Im How aging everfor , if spe low-nding back pis a in See https://www.uspreventiveservicestaskforce.org/uspstf/topic_search_results?topic_status=P. Data and Methods ................................................................................................................................................. 6 with the funding support of the following organizations: Aon, Blue Cross Blue Shield Association, JP Morgan measures include a combination of plan design/cost-sharing changes that affect how much enrollees pay out of pocket Computed4. To mA or gtrhr apos hic cop Anic gi oP ga ra rtpia hy l M ofe niscectomy, Medial and/or Lateral (without osteoarthritis) per QALY has been the preferred level above which interventions are often considered “not worth it.” However, ranges $4,400 e ab conomi ove the c evvaa lue lua -tbion ased tha ptr ic co em , tp he arn o es e ne st im would ates of conc an int lude etrha vetnt the ion’ ps c ayo est r is s w ov ite h it rpa s yp ing roje fo cr t etd he he serv alth b icee . ne Nefit um s. aH nn, owe Cv oh ere , n, is a case in point. Our findings suggest that median spending on imaging for low-back pain is below the value-based Septoplasty or Submucous Resection 14,591 $1,111 $382 $779 $1,480 0.012 $92,542 $31,825 $64,928 $123,338 $600 $1,200 $1,800 6 $6,742 Neck ( w Sie th e co http ntrs a:st //)cear.tuftsmedicalcenter.org/. Chase, and PhRMA. G for ilbe he 5. rta , ltFi h se Aona rthr r v os J., icc eop A s a dic rnd ia Pn M aot rthe i. aG l M r rst aen rnis u t, cMa tcu erca u tl c om ree hy n G a, nge Me . C s t d. ia o G l ill t ahe nd/or an, dL euk liv La e etr e D yr . a of Va l (he w leit a , h lMa tho st c rion K aeroa e. rY . th e Cr ta , itm is in m p ) be ost ll, N ye eil W. Sc ars sincot e t19 , D 8a 8, th vid J. e cost Selection of HOPD Services ................................................................................................................................ 6 of $20,000 to $150,000 have been proposed, and in recent years, researchers have been gravitating toward $100,000. value assessments tend to be focused on prescription drugs rather than other outpatient health care services. This is p and riceW , su eins ggte est in ing (20t14 ha)t a pragyue ers t ha are t a not single ove rtphary eing shold for c tould hese ne serv veric re es. pr e The sent N or sotch A iety m ’s w eric ill aingne n Spine ss tSoc o pie ayt yfo rr e c ao QA mm Le Ynds due to of providing Knight he, alt ah b nd e Dne oug fitla s s Wa to em rd pla loy we . e 20 s a 04 nd . "tLhe ow ir B da ec pk e n Pd ae in: I nts ha nflue s in nc ce re of ased Ea rm ly or MR e tIhm an agov ing eror all infl CT o atn Tr ion ( eFi atg m ur ee nt 1) and . 7 It is worth noting that some scholars (Neumann, Cohen, and Weinstein, 2014) argue that a single threshold could $10,000 v t r a S ue reia e e t http ions ven th s in v ://oug wa w lue w h .p s, a me rerc sc ss e ru r. ipti m co p o m tn d ions /en rug -, us inf /spe ins ere ig nding nc hte ss /us , aa- cnd he coun ac lth ont te -ne d e x w for ts; ins s/ s bo eme tw tee -a g e d o n 9 , otdhe -ne py e w ra cs re-gnt aue b o a , ut nd m -rul e 15 fe tip re p le e nc rtchr ee-nt e bsh a s of e old dU. -p s sh S. ricing he ould a / lt fo h sp br ethe ut ending ili m ze os dt . against the use of imaging of the spine within the first six weeks of an acute episode of low-back pain in the absence of Use of Real-World Cost Data ................................ Full-Night Polysomnography .............................................................................................. 6 Magnetic Resonance Angiography of Neck $2,149 Tod Imaa gy ing , pOut rfor em c L iu o ow m ms fo e B — aMult crk e P m a ic p ie n loy nt e er e -R only ando c 2m ov ,6ize 4 e1 ra dg Tr e ia a $nd l. 1,"3 fa R 80 am dily iolog $499 cov y, e23 rag 1e $ (1 2) a ,0 v , 6 e 34 2 ra3 g– e $ 3 1 $ 51 ,8, 99 .951 5 and 0 $.2 05 1,2572, c$ o1 m 1p 4,a 9r6 e7 d w $it 4h $ 1,55 48,704 $ 88,484 $166,217 $600 $1,200 $1,800 8 never represent society’s willingness to pay for a QALY due to variations in values, assumptions, inferences, and in 202 recent 2, w datahil tha e t inpa we tcie on uld t a fin nd d out on p re afe tie re nt nc ser e pvric ice ing s a . ccounted for between 50 percent and 70 percent of health spending. r Sim ed ila flarg lys. , t he Adrv ea a nc re e d seve ima rg aing l rea in t sons his t h sia tua t the tion h ICE aR isn’t s not b a ed ee n qfound uately tro ep im rep sent rove ing out the com int ee s.r vN ea nt viga iontsing ’ clin su icca h l b ca erne e fits. In (with or without contrast) Results ................................................................ 1 ................................................................................................. 7 and $12,680 (respectively) in 2008. Despite the efforts to manage spending, employers continue to face challenges 6. Computed Tomography and Magnetic Resonance Imaging of Spine (with or without contrast) contexts; instead, they argue, multiple thresholds should be utilized. $8,000 Mor the e figur gene es b rateion o low, f e wev ide prenc sent e on the the va clue linic -baal e sed ffe p crtic s of e ainpa t thet ie $1 nt00 a,000 nd out thpra etsh ieold nt serv . Deispit ces e— the pa N rte icum ulaa rnn, C ly those ohen, and recommendations can be quite challenging for employers. 8 Split-Night Polysomnography See https://www.aafp.org/pubs/afp/collections/choosing-wisely/127.html. Health Care Cost Institute. 2024. "2022 Health Care Cost and Utiliz $2,184 ation Report." Available at c ontrolling their spending on health coverage and health care services. Discussion ............................................................................................................................................................. 8 Duplex Scan (i.e., Ultrasound) of representing a large share of employer spending — could be of value to employers. Weinstein (2014) argument, researchers have been gravitating toward $100,000. As you will see below in our findings, 8,757 $686 $321 $642 $959 0.012 $57,184 $26,723 $53,488 $79,948 $600 $1,200 $1,800 healthcostinstitute.org/images/pdfs/HCCI_2022_Health_Care_Cost_and_Utilization_Report.pdf. Extracr Va alue nial a As rtsess eriesments are predominantly focused on prescription drugs rather than other outpatient health care services $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 E Se ve pn th topla oug styh for the D re ev is ia tm ed uc Se h mor ptum e research on value-based pricing related to prescription drugs than on outpatient for some services, median spending is below all the value-based prices, while for other services, it is above all value- Figure 1 Limitations ............................................................................................................................................................ 9 (Neumann, Li, Phillips, and Cohen, 2024). This is true despite the fact that prescription drug spending accounted for The 7. pur pSe ose pt op of la this sty Ior ssu Submu e Briefc is ous R to offe esect r aion de monstration of how employers can use value assessments to compare services, for the most part, employers have not moved toward value-based purchasing in any meaningful way. This Note: QALY = quality-adjusted life year. based prices. Premium Increases Among Employers With 10 or More Employees, Institute for Clinical and Economic Review. 2023. "Value Assessment Framework." Available at https://icer.org/wp- Arthroscopic Partial Meniscectomy, 3 Source: Employee Benefit Research Institute estimates based on administrative enrollment and claims data; Gilbert et al. (2004); NIHR (2004); Deutsch et Conclusion ........................................................................................................................................................... 10 between 9 percent and 15 percent of national health spending in 2022. In contrast, inpatient and outpatient services prices paid for value of hospital outpatient department (HOPD)-provided services relative to the cost paid by comparing may in part be due to the dearth of usable CEA studies for medical services. Ultimately, like reference pricing, if al. (2006); Schwartz et al. (2014); and Williams et al. (2022). Worker Earnings, and Inflation, 1988–2023 Medial and/or Lateral (without 10,114 $10,677 $5,224 $8,278 $12,913 0.065 $164,257 $80,372 $127,358 $198,661 $3,250 $6,500 $9,750 content/uploads/2023/10/ICER_2023_VAF_For-Publication_101723.pdf. th th accounted for between 50 percent and 70 percent of health spending in the United States. As argued by Neumann, Li, Sle p The ublish ep a p St p eudie e dndix cost s inc -efflude ectiv s t ene hess follow analing ysis d(e CtE aA ile ) d e s rt eim sua ltts: r es w ea itlh r -wor eald l-w cost orld s c aos t tthe d am tae.a W n, e25 use pte he rc e qnt uaile lit, y- m ae dd jus ian, teda nd life 75 yea r im Rep fe le re m nc ent esing ................................ value-based pricing ................................ were easy to do, mor................................ e employers would lik................................ ely already be doing so. ........................... 12 osteoarthritis) 20% th th Phillips, and Cohen (2024), “the lack of attention to services and procedures [in value assessment] neglects (QALY) and the incremental cost-e Pff ree mi ct um iv e Inc ne res as s r esatio (IC WE or R) ke rin our Earnings a Inc narly eas sies s. The QA Overal LY l In is fla atim oneasure that integrates the perce 8. nt ile Full ; e-xpe Night cte P doly QA som LYs g nog aine rapdh;y c ( ost att e pnde er QA d b Ly Y a a tt e the chnolog mean, ist25 ) in Hos perc pe itnt al O ile, ut m pe ad tie iant n, D and epa75 rtm e pnt er centile; and value- National Institute for Health and Care Research. 2024. "Effectiveness of Septoplasty Compared to Medical Management 18% Arthro Thi sco s st pic udy show Partial Mes t nisce hact t o vm alue y, assessments can be useful for employers and plan sponsors to benchmark the prices they opportunities to achieve broader systemwide efficiency and affordability, and may distract focus from the largest b qua ased nt 9.i tp yr Sp ic of elit s lif -a eN t in ight the ye $5 P aoly rs w 0,00 som it0 h -nog t , he $1 r 00 q ap ua h ,000 lit y y (a -of t , ta etnd nde hat$1 dt im 50 bye ,000 ain t te-e cp hnolog re m rs of -QAL is he Y t) a t hr W lth st e its h C hold aton us st..inu The ous P ICEosit R me ivea su Airrw es t ayhe Pr e QA ssu LY re s g Thera ained p y in 5,843 $9,063 $4,924 $7,513 $11,118 0.065 $139,429 $75,760 $115,577 $171,048 $3,250 $6,500 $9,750 in Adults With Obstruction Associated With a Deviated Nasal Septum: The NAIROS RCT." Health Technology Medial and/or Lateral (with osteoarthritis) Figures pay. But it also highlights the dearth of evidence on the value of services that would enable this benchmarking. More categor 16ie %s driving health costs.” And a key reason for this lack of focus is the lack of readily available data on the fr Dis omcu thes a sd ion ditiona l costs incurred using the treatment compared with “treatment as usual” (or an alternative Hospital Outpatient Department Assessment, 28(10). g Fie gne urr ea t 2ion o show f e s vour ide nc fined on ings th . e W celin eic xa am l e ine ffed c tts of hreeinp tya pteie s nof t acnd arot out id p aa rt te iernt y st ser eno vic sies s s — cr epeanin rticgula s. r Aly c t om hose putreed p rte om sent ogirng aphic a effectiveness of the services on health outcomes. But this is a barrier that is easily overcome if we can prioritize and intervention). Finally, in CEA, the ICER is routinely assessed according to society’s willingness to pay for a QALY. Value- Figure 1, Premium Increases Among Employers With 10 or More Employees, Worker Earnings, and Inflation, This demonstration shows how value assessment for the common and costly shoppable services can be easily used by Computed T14 om %ography and Magnetic angiography of the neck is a type of CT scan, while a magnetic resonance angiography of the neck is like an MRI. A large share of employer spending — is needed. incentivize health outcomes research that targets procedures and services. N ba esed uma p nn, P ric1988 es c ete a –n b r2 J., 02 e3 Joshu d ................................ erive ad T us . C ing ohetn, hese and m Milt e ................................ tric on s. C. Weinstein. 201 ................................ 4. "Updating Cost-Ef................................ fectiveness — The Cur .............. ious 4 Reson For ance ea Ic m h ag serv ing o icfe S , pw ine e a (w ttie thm op r ted to ide 29 nt ,6 ify 72 and $ ut 1,ili 2ze 53 the $527 best liter$932 ature-ba$ sed 1,6 8e2stimate 0 of .04 the 1 expe $c3t0 e,d 5 5num 9 $ b1 e2 r ,8 of 53 $22,741 $41,013 $2,050 $4,100 $6,150 employers and plan sponsors to learn how the prices they are paying align with “value-based prices” to determine 12% withou dtuple contx sc rast)an of extracranial arteries is an ultrasound. In all three variants, the service was worthwhile at the median QALYs ga Re ine sid lie fr nc oe m of ret che eiv ing $50,00 the0 serv -peric -QA e cL oY m Thr pare es dhold with ." “N tre ew at E mng enla t nd as us Jour uan l,a ”l o wf M hich edw icaine s n , o 37 t r 1ec (9) eiv . ing the service in whether they are overpaying for select services. Figure 2, Median Allowed Amounts Compared With Value-Based Prices ..................................................................... 8 The purpose of this Issue Brief is to offer a demonstration of how value assessments can be used for hospital K allow ey Fi ending d amount s: , as the value-based price was above it. 10% seven of the nine. For the two sleep studies, the comparator was a home sleep study. Citations for the CEA studies SeptoLi plam sty ita or S tu ions bmuco us Resection 6,796 $8,736 $2,679 $6,742 $12,110 0.044 $198,554 $60,892 $153,236 $275,226 $2,200 $4,400 $6,600 out Apppeandix tientF d igur epa er t1 m , e Fu ntll Re (HOP suD lts )- ................................ provided health servic................................ es by combining publish ................................ ed CEA estimates w............................. ith real-world cost 11 Neumann, Peter J., Meng Li, Marie Phillips, and Joshua T. Cohen. 2024. "Prioritizing Services And Procedures For Value The results presented above focus on median costs for select services with existing CEA data, compared with value- used are provided in the results figures below. 8% • If spending on a health care service is below a value-based price, then one might consider that price to be Next, we examined two types of arthroscopic partial meniscectomy (APM). An APM is a surgical procedure that removes data. Our studA y ss ise int ssm ende entd ." tH o eill aus lth A traff te a ihow rs For Ce Efr Aon mtight . doi:10.1 be ap37 plie 7/ dfo to reH frOP ont D .202 serv 4ic 06 e28 s t.o 81 d52 eriv 87 e value-based prices. Several based prices that were derived with the assumption of society’s willingness to pay $100,000 per QALY. Whether a Full-Night Polysomnography (attended by a damagw ed or p thw ortion o hile (f th or “e a kgnood ee jd oint eal”) to g riv elie en soc ve syie m ty p’ts om will s ingne of a m ss t enis o c pa al te y for ar . aW QA e L eY xa . m If spe inedndin the g serv is a ic beov sep e ta he ra tvealy lue fo -r 6% limitations are worth noting. First, while we implemented important selection criteria, our nine HOPD services are health care service is considered “a good deal” or overpriced will depend on the specific price from a specific health Use of Real-World Cost Data a technologist) in Hospital Outpatient 24,149 $2,216 $1,140 $2,149 $3,060 0.10 $15,302 $8,867 $4,535 $14,627 $5,000 $10,000 $15,000 Findings from this study should be of interest to both sponsors of health benefits and policymakers. Plan sponsors Schwartz, baA sed aron prL ic ., e, Btrhe uce n o E. ne L aw ndo ould n, c Aonc dam lude G. tEhls ah t atug, he pMic aye ha r is el E. oveC rhe par yne ing wfor , and the J. serv Micha icee . l M It c ca W nill b ia em as rg . ue 201 d 4. that a enrollees with and without osteoarthritis. In both cases, the value-based price was below the median allowed amount. th th largely a convenience sample and are not representative of all HOPD services. Second, the CEA publications we Deparcta m re en p t r4% ovider. Indeed, for some services, the 25 and 75 cost percentiles straddle the value-based price (see the ® We made use of 2022 MarketScan outpatient medical claims data as follows. Using procedure (and in some cases also prefer to offer generous health insurance to recruit and retain workers, but they have limited resources and must "Measuring Low-Value Care in Medicare." JAMA Internal Medicine, 174(7), 1067-1076. doi:1067-1076. As a result single , one num would ber cconc annot lude a d tha eqtu a ptaeyly e rc s am pta uyr eh a av so e ov ciee ty rp ’s aid will for ingne thess se tsu o p rg ae yr ie fos. r a QALY due to variations in values, referenced vary in terms of quality, methodology, discount rate, time horizon, and economic perspective. Consequently, appendix). Moreover, the relative appropriateness of the real-world costs is highly sensitive to the chosen willingness- diagnosi 2% s) codes, we extracted all claims for each service delivered in the HOPD setting (using place of service codes) manage costs accordingly. While value assessments can help employers understand how the prices they pay relate to a dss oi:10.1 umpt00 ion 1/ s, infe jamarint enc ere nsm , e ad nd .201 cont 4.15 ext41 s. Despite this challenge, we present our results with respect to a value- Split-Night Polysomnography (attended by a lack of comparability among the incremental QALY estimates may lead to misalignment when marrying them with our to-pay threshold (see the appendix). and paid on a non-capitated basis for all plan enrollees ages 18–64. We also extracted claims for contrast agents for In our findings for imaging for low-back pain, we analyzed claims data for CT scans and MRIs. Median spending was a tech w nhe olotghe istr ) w serv ith C ico en s a tinu re o ue s st Pim osia titve ed to be low or high value, the current evidence base is limited. Broader-based value based price at the $100,000-per-QALY threshold, since researchers have been gravitating toward this level. We 0% real-world cost data, potentially impa2c0 ting ,028the a $c 2c,u 29 ra 1cy o $f o 1,0ur 74 value $2,-1b 8a 4sed$ p 3r ,ic 20 ing 7 assess 0m .0e 8nts. Thir $2d 0, ,0 g6iv 0en th $12 a,t4 3 the 2 $4,850 $18,719 $4,000 $8,000 $12,000 Airway Pressure Therapy in Hospital Williams, Emma E., Jeffrey N. Katz, Valia P. Leifer, Jamie E. Collins, Tuhina Neogi, Lisa G. Suter, Bruce Levy, Alexander b ca erlow otid the art e vraylue st- eb no ased sis s pcrric ee e, nin sugg g ae nd sting imatgha ing t p for ay e low rs m -ba ay c knot pa in. A havend, ov e w rp he aid re for we tc he ould se serv reliaib ce lys . aThese ssocia tfin e td he ings w m witill h b the e assessments can also help policymakers at the federal and state levels as they wrestle with budget constraints in the also compare the value-based price with median spending. Our findings are mixed as to whether the value- Employers should consider several issues as they weigh the utility of value assessments for services. First, how do cited CEAs were conducted some time ago, potential changes in clinical practice or technology may limit the relevance Outpatient D-e 2% partment serv ice, w Fa er id, als o Cla inc relude E. Sa d fa fra cin lit -N y or fete on c, laA im . s. Fin David aP lla y, ltie for l, a ar nd thrE os lecnop a ic Losin para ti. a20 l me 22nis . "C ce os ctto -E m ffe y c of tiv the ene kss ne of e a And rthr sep osc top opla ic sty discussed in more detail below. context of setting spending priorities for programs, such as Medicare and Medicaid. But to realize the savings, more based price is above or below median spending. Readers interested in the distribution of health care spending employers use value-based pricing to negotiate with providers of health care services? Employers may be able to use and applicability of our findings. The expected QALY gains drawn from these earlier studies may no longer align with Partial Meniscectomy and Physical Therapy for Degenerative Meniscal Tear." ACR Open Rheumatology, 4(10), for deviated septum, we included all claims occurring on the same day in the HOPD setting, assuming that they were -4% generation of evidence on clinical effectiveness of services and procedures is needed. Note: QALY = q au nd alitot y-a he djr u st va elue d lif- eb ye ased ar. prices are encouraged to examine the appendix. value-based pricing to negotiate lower reimbursement rates among high-priced providers. However, low-priced the current effectiveness of the HOPD services analyzed or the comparators due to advances in medical procedures, 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 With respect to septoplasty for a deviated septum, one would conclude that payers overpaid for this service because Source lin : k Eem dp tlo o ye 853 the e B - 862. su enr eg fie t rR ye . search Institute estimates based on administrative enrollment and claims data; Gilbert et al. (2004); NIHR (2004); Deutsch et al. (2006); Schwartz et al. (2014); and providers may be able to use value-based pricing to negotiate higher reimbursement rates. Employers’ use of value- treatment delivery, updated clinical guidelines, or shifts in standard care practices. Finally, we have not attempted to William the s e v t a alue l. (2 -b 02 a2 sed ). price was below median cost. 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