The Essential Scan: Top Findings in Health Policy Research | Edition 90

What’s the latest in health policy research? The Essential Scan aims to help keep you informed on the latest research and what it means for policymakers. It is produced by the USC-Brookings Schaeffer Initiative for Health Policy, a collaboration between the Brookings Institution and the USC Schaeffer Center for Health Policy & Economics. To sign up to receive the Essential Scan straight to your inbox, sign up here.

Does Multispecialty Practice Enhance Physician Market Power?

Study by: Laurence C. Baker, M. Kate Bundorf, and Daniel P. Kessler

Vertical integration, which occurs when one company provides services along multiple points of the supply chain, might have both pro- and anticompetitive effects. On one hand, hospitals and care givers yearn for a system in which complementary providers improve communication and coordination, thereby improving quality of care while reducing costs. Yet some studies find that this coordination leads to higher prices and enhances providers’ market power. A new study uses data on 40 million commercially-insured individuals from the Health Care Cost Institute to construct price indices for office visits to general practice and specialist physicians for the years 2008-2012. It found that generalists charge higher prices when integrated with specialists, and the impact of integration is larger in specialist markets that are more concentrated. Reciprocally, specialists charge higher prices when integrated with generalists, suggesting that multispecialty practice enhances physician market power. According to the researchers, these findings suggest that vertical integration in the generalist and specialist markets enhances market power, increases prices in these markets, and importantly these differences cannot be solely explained by quality. Full study here.

“This study is an important contribution to a relatively understudied area
and has important implications for competition policy.”
-Paul Ginsburg, PhD
Director, USC-Brookings Schaeffer Initiative for Health Policy

Association of a National Insurer’s Reference‐Based Pricing Program and Choice of Imaging Facility, Spending, and Utilization

Study by: Anna D. Sinaiko and Ateev Mehrotra

In an effort to reduce healthcare spending growth, health plans and employers have tried a number of health insurance benefit designs. Reference pricing involves the insurer determining a “reference price” for a given medical service (usually non-urgent procedures with many providers available) and covers medical expenses only up to this price point. If a patient receives treatment from a provider whose payment is higher than the reference price, the patient is responsible for covering the additional cost. A new study analyzes the experience of a national insurer, using medical claims from 2014-2016, and finds that switching to a reference-based pricing program was associated with a 22 percentage point increase in likelihood of choosing a lower-priced facility for imaging procedures. The researchers also saw an 8% reduction in the average procedure price. The first year of implementation was accompanied with higher out-of-pocket costs, which curtailed in the 2nd year. The researchers believe that inadequate communications with employees was responsible for little switching by patients, especially in the first year. The study did not find the provider price declines reported in studies of the CalPERS reference pricing program for joint replacements, likely because the employers in this study did not have the impact in any market comparable to CalPERS impact in California. Full study here.

Costs Are Higher For Marketplace Members Who Enroll During Special Enrollment Periods Compared With Open Enrollment

Study by: Laura F. Garabedian, Robert LeCates, Alison Galbraith, Dennis Ross-Degnan, and J. Frank Wharam

Adverse selection occurs when individuals enroll in a health plan only when they have a medical need, something that is facilitated by special enrollment periods (SEP). It is one of the largest stressors to the stability of the Affordable Care Act exchanges because high costs become challenging to anticipate, leading insurers to raise premiums and even exit the Marketplace altogether. Members enrolling during SEPs may contribute to adverse selection if they are markedly different than members who enroll during open enrollment periods. A new study finds that between 2015 and 2016, 21.6% of Marketplace members enrolled during a SEP. Compared with open enrollment members, SEP members were younger, had a shorter average length of enrollment, and had significantly higher average monthly costs. SEP members averaged 34 percent higher total costs across both years analyzed ($185.91 more per member per month in 2015 and $210.70 more in 2016). Furthermore, SEP members were more likely to keep coverage through the calendar year and renew their coverage the following year, which raises concerns of sustainability if costlier SEP members are more likely to stay in the market over time. Full study here.

Trends in Costs of Care for Medicare Beneficiaries Treated in the Emergency Department From 2011 to 2016

Study by: Laura G. Burke, Ryan C. Burke, Stephen K. Epstein, E. John Orav, and Ashish K. Jha

Emergency department (ED) utilization has climbed in recent years, garnering substantial attention from policymakers and clinical leaders. Utilization has risen in part because of the wide variety of tests and treatments now available and the intensity of care provided in the ED which has led to improved outcomes for Medicare beneficiaries who use emergency departments. Unsurprisingly, the increase in utilization has led to greater average charges per ED visit as well as greater total spending within the ED. A new study analyzes national Medicare data to better evaluate the impact of higher up-front costs in the ED, and whether this cost generates more value over time or adds to the unproductive downstream spending in the healthcare system. In analyzing data from 2011-2016, analysts found total 30-day and 90-day spending associated with an ED visit had decreased, citing declining rates of admission among other changes. The authors suggest that greater use of advanced diagnostics in the ED may preclude the need for some hospitalizations. These findings suggest assessments of whether ED care is overused need to focus more broadly on an entire episode of care. Full study here.

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The Essential Scan is produced by the USC-Brookings Schaeffer Initiative for Health Policy, a collaboration between the Brookings Institution and the USC Schaeffer Center for Health Policy & Economics.