Kroger picked services that had a significant variation in price but did not vary in quality from provider to provider, according to Theresa Monti, a benefits executive at Kroger. The company also chose to set the price the plan would pay at a point where employees would still have a wide range of choices, she said.
Historically, information about how much a doctor or hospital will charge before a patient gets a test and treatment has been difficult — if not impossible — to obtain, and the federal government's recent decision to publish Medicare data on hospital charges has focused attention on the wide variation that exists throughout the country.
Employers that offer health plans have been pushing hard to get information on pricing and quality so their workers can make more informed choices about providers. WellPoint, for example, is also working closely with an outside company, Cast-light Health, which offers companies Web-based tools that help employees compare hospitals and doctors.
One of the goals is to determine when the price of a medical service bears no resemblance to the quality care. Paying more money without getting better care in return has been a longstanding source of frustration for employers.
Under the federal health care law, many employers are looking for ways to reduce their own costs without shifting them onto their workers, said Darren Rodgers, a senior executive at the Health Care Service Corporation, which operates nonprofit Blue Cross plans in four states.
"We're having a dialogue about it right now," Mr. Rodgers said. Two employers it works with have programs that cap payments for tests, like colonoscopies or CT scans, and a handful of other companies will introduce a similar program next year.
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Benefits experts say these programs are only appropriate for medical services with little urgency and where the quality of care does not vary significantly. But it is not always clear that even a seemingly mundane procedure like an M.R.I. may not vary in quality from facility to facility, depending on the skill of the physician to interpret the images, said Dr. Robert Berenson, a health policy expert at the Urban Institute. "Is an M.R.I. just an M.R.I. and just a commodity?" he asked.
While Dr. Berenson described these programs as promising in forcing a more explicit discussion about the value of their care from hospitals and doctors, he said the current ways of determining quality were inadequate. "There are huge domains in quality that we don't measure at all," he said.
In the California program, the hospitals were not selected simply on price but on other measures, like how many surgeries they performed and their outcomes, Ms. Boynton said. "It's not just about reducing cost at the expense of health and clinical outcomes of members," she said.
About 350,000 people are covered by the California program. While more members chose to get operations from facilities participating in the program, members who went outside were able to get the procedures done for less. On average, members had about the same out-of-pocket costs as they did before the program.
At the least, the California experiment may suggest that the irrationality of pricing may be coming to an end. "Price is the leading driver of health care cost growth," said Suzanne Delbanco, the executive director for Catalyst for Payment Reform, a group that aims to encourage employers and health plans to change the way they pay for care.
The California plan has made it clear to the hospitals that it was both aware of the unexplained variation in prices and that it would no longer simply pay whatever a hospital charged the insurer, she said. "That's a very powerful signal," she said.
—By Reed Abelson of The New York Times