A payment model gaining traction in California could drive more surgical cases to ASCs.

Called reference pricing, or reference payments, the strategy provides full coverage for a medical service or procedure up to a defined contribution limit. Patients have to pay the difference between the limit and the actual price charged.1

Research shows that reference payment for a surgery, such as colonoscopy, can result in a health plan’s members using low-priced facilities, such as ASCs.1

For example, the California Public Employees’ Retirement System (CalPERS) implemented reference payment in 2012. Investigators collected data on more than 21,000 enrollees that underwent colonoscopies in the three years before reference payment was implemented and more than 13,000 enrollees who underwent colonoscopies in the two years after implementation.

Investigators found that those subject to reference payment increased their use of low-priced facilities from 68.6% to 90.5% in 2013.1

CalPERS offers HMO and PPO options for its 1.5 million covered lives, says James C. Robinson, PhD, Leonard D. Schaeffer professor of health economics, director of Berkeley Center for Health Technology, and division head of health policy and management at the University of California, Berkeley. Robinson has conducted research on reference payments and also speaks at national conferences on how payment models affect ASCs.

Half a million CalPERS members are in the PPO product and implemented reference pricing for ambulatory surgical and diagnostic procedures, Robinson says. When employers are self-insured, they pay much higher prices for ambulatory procedures that are performed in hospital outpatient departments (HOPDs) rather than in ASCs or physician offices, he notes.

“Reference pricing is a benefit design with cost-sharing for patients,” Robinson adds, describing the structure this way: “If it’s managed by Anthem Blue Cross in California, Anthem is the contracted network of ASCs.”

If a patient chooses to undergo surgery in an ASC instead of a HOPD, then the patient pays the usual copayment and deductible under the usual plan. But if the patient chooses to undergo a procedure in an outpatient hospital surgery facility, then the patient has to pay the cost share plus the difference between the charge at the facility and reference price. It’s cheaper for them to undergo surgery at the ASC, Robinson says.

“When faced with this benefit design, there is a significant shift in market share from hospitals to free-standing centers,” he adds.

Researchers studied complication rates before and after the shift to reference pricing. They found no differences between the hospital-based and freestanding procedures, Robinson says.

“Employers and insurers see very strong site-of-care price differences, depending on where procedures are performed,” he notes. “If a doctor thinks a patient needs to go to another site, then they can file for an exception.”

But the idea of reference pricing is to move as many people as possible to non-hospital settings because of the significantly lower prices, he adds.

“Another strategy is the payer could say they won’t cover the procedure at all in a hospital-based center unless you have a clinical exception,” Robinson says. “But reference pricing is a more lenient approach; you still can go to the hospital surgery center, but you have to pay more yourself.”


  1. Robinson JC, Brown TT, Whaley C, Finlayson E. Association of reference payment for colonoscopy with consumer choices, insurer spending, and procedural complications. JAMA Intern Med 2015;175:1783-1789.