Medical Pricing Transparency Saves CalPERS $2.8M, Report Finds

An initiative to educate patients about the cost of certain health care services saved CalPERS nearly $3 million and decreased patients' cost sharing by $300,000 over the past two years, according to research released Thursday by the Center for Studying Health System Change, Kaiser Health News' "Capsules" reports (Rao, "Capsules," Kaiser Health News, 12/6).

Background

In 2011, CalPERS began "reference pricing," which establishes a standard price for a medication, procedure or service and requires members to pay any charges beyond that price.

For the program, CalPERS asked its PPO, Anthem Blue Cross, to research the average costs for hip and knee replacements among hospitals and develop a program that ensures sufficient coverage by those hospitals that meet a certain cost threshold. The program set a maximum of $30,000.

Forty-six medical institutions -- including Stanford and UC-San Francisco -- initially were included in the plan (Edlin, California Healthline, 1/9/12).

Research Findings

The Center for Studying Health System Change report found that CalPERS saved $2.8 million and patients' cost sharing decreased by $300,000 since the initiative began.

Researchers also found that patients who were given "intensive communication" from CalPERS:

• Supported the transparency efforts; and
• Recognized the wide lack of pricing clarity.

In addition, the report found that patients overall were satisfied with the quality of care they received when they chose the facilities designated by the reference pricing system.

Reaction

According to "Capsules," many California residents are unaware that a lack of pricing transparency could decrease their health care costs.

Alwyn Cassil, director of public relations for the Center for Studying Health System Change, said, "There is a tremendous need to increase public awareness of this problem," adding, "It should matter to you as someone who is paying for health care, not just or you, but for everybody."

Cassil also said CalPERS' model could lead other insurance plans and medical systems to follow suit with similar reference pricing programs.  However, she noted that the program was limited by its focus on just two procedures ("Capsules," Kaiser Health News, 12/6).