CEO SUMMARY: Transparency tools, such as those from Castlight Health, help consumers see the significant variation in clinical laboratory test prices. In this analysis, THE DARK REPORT argues that lab executives and pathologists should recognize how two factors are poised to change the status quo in how labs price their tests. One is the credibility of the Safeway reference pricing study, with a 32% price reduction. The other is that Anthem may be poised to implement reference pricing for its 40 million members.
PUBLICATION OF THE STUDY that demonstrates how use of reference pricing can encourage patients to choose lower-priced labs over high-cost labs is getting national news coverage. But one important part of that study has gone unreported—until now.
As reported in JAMA Internal Medicine, Safeway, Inc., introduced reference pricing into its health insurance design for 15,000 employees. Three years later, the company and its employees were spending 32% less for clinical laboratory tests and saved $2.57 million during the years 2011 to 2013.
What has escaped notice is the essential tool Safeway used to provide its employees with speedy access to the different lab test prices of the in-network laboratories. Patients could use either a mobile app on their smart phone or access a website that offered that information.
This service was provided by a company that should be on the radar screen of every clinical laboratory manager and pathologist. It is Castlight Health, Inc., of San Francisco. Castlight’s specialty is collecting and reporting the price data of healthcare services for employers and their workers. Castlight is an early entrant into the market for healthcare big data. It offers an extensive database on the prices healthcare providers charge for care.
This was the database used by Safeway, when, in 2011, it gave its employees access to the Castlight tool. That allowed Safeway employees to see the price charged by all of Safeway’s in-network clinical laboratories for 285 lab tests that its employees ordered most frequently. Armed with this information, employees chose lower-priced lab tests, as confirmed by researchers.
Patients Find Lowest Price
This development is significant in the healthcare marketplace. Castlight Healthcare has created a way for patients to quickly compare the clinical lab test prices any in-network laboratory charges. Patients with high-deductible health insurance plans have an easy way to check lab test prices and choose the clinical laboratory with the best combination of quality and price.
Does the Castlight app help patients find lower-priced providers? Certainly it did for the 15,000 Safeway employees who were studied from 2010 to 2013 by researchers from the University of California, Berkeley. (See Why Lab Test Prices Declined 32% During 3-Year Study and Lead Researcher Outlines New Details Of Laboratory Test Price Study)
Anthem had the Data
Another element in this story that has gone unreported is the role of Anthem in providing two essential elements in the study. First, Anthem had the contracts with the labs that were in-network for Safeway (a self-insured company.) So it had accurate data on the wide variation in the prices different in-network laboratories charged for the same test.
Second, Anthem provided the control group for the study. During 2010 to 2013, data from 90,000 patients was collected. This data showed which labs did the test and the price paid for those tests.
Anthem must have been impressed with the 32% decline in the price of tests that benefited Safeway and its employees. That’s because, last November, Anthem entered into an agreement with Castlight. Among other elements, it calls for Castlight’s transparency tool to be made available on Anthem’s consumer website.
Reference Pricing at Anthem
It would be reasonable to assume that Anthem entered this agreement because it has confidence that it can introduce reference pricing to its 40 million members for clinical laboratory tests. If it duplicates Safeway’s success, it could potentially experience a similar 32% decline in what it pays for lab tests, in as little as 36 months!
All of this evidence argues that lab administrators should get serious about developing a strategy to serve patients who can price-shop for lab tests with a mobile app—and who are motivated to buy their lab tests at the best price.
Castlight Clients Use ‘Core Transparency Tool’
FOUNDED IN 2008 IN SAN FRANCISCO, Castlight Health is one of the early players in healthcare big data. One of its goals is to improve the access of patients to information about the prices and quality of healthcare providers.
Castlight considers both employers and health insurers as important customers for its services. The content of its data base and its capability to perform sophisticated analysis with big sets of information— including laboratory test data—has already brought it a growing roster of important client companies.
In fact, one important Castlight customer has substantial power to influence clinical laboratory test prices. That is Anthem, among the nation’s largest health insurers with almost 40 million people enrolled in its health plans.
Last November, Castlight and Anthem entered an agreement that calls for Castlight’s core transparency tool to be “available to Anthem’s affiliated health plan members on its consumer websites.” This will make it easier for Anthem to implement reference pricing with its members for clinical lab tests and other healthcare services.
In February, The Wall Street Journal reported on how employers are teaming up with Castlight and a handful of similar companies to conduct studies that would identify employees at risk for chronic diseases, such as Type 2 diabetes. Doing so would make it possible to provide them personalized services that would improve their health, such as helping them lose weight.
One secret to Castlight’s success is that the company has developed web and mobile solutions that are consumer-friendly and make it easy for patients to compare the prices of healthcare services. Safeway used these solutions to allow its employees to compare the prices of lab tests across all the labs that were in-network.