Hospitals Lowered Surgery Costs After CalPERS Capped Payments
About 40 hospitals across California lowered the cost of knee and hip replacements after CalPERS capped its payments for the procedures, the Los Angeles Times' "Money & Co." reports.
CalPERS decided to cap payments for knee and hip replacement surgeries at $30,000 for its Anthem Blue Cross members because the pension fund was paying anywhere between $15,000Â and $110,000 for such procedures.
As part of the change, CalPERS and Anthem provided beneficiaries with a list of 46 hospitals considered to offer high-quality care at lower costs.
Details of Price Reductions
Following the change, the average price for the knee and hip replacements at higher-priced hospitals in the state decreased by 37%, from $43,308 in 2010 to $27,149 in 2012. Such reductions at state hospitals accounted for about 85% of $5.5 million in savings for CalPERS, according to UC-Berkeley researchers.
The remaining savings came from beneficiaries selecting lower-cost hospitals, where costs for the two procedures decreased by about 3% from 2010 to 2012, the researchers said.
In addition, the use of preferred hospitals among CalPERS members increased by 21% between 2010 and 2012.
Meanwhile, HealthCore -- WellPoint's research division -- found that CalPERS beneficiaries enrolled in Anthem plans had similar or better health outcomes than Anthem members who were not enrolled in the pension fund during that time period.
CalPERS said that it likely will consider expanding the strategy for other medical procedures (Terhune, "Money & Co.," Los Angeles Times, 6/23).
Medicare recently has put pressure on organizations to justify high costs that do not correlate with quality of care.
Last month, the program released data for the 100 most common inpatient procedures at U.S. hospitals as part of an effort by the federal government to increase transparency in the health care system
The data show wide variations in list prices among hospitals in the same area or city (California Healthline, 5/8).The CalPERS findings could motivate other employers to cap prices to encourage competition and reduce health costs, according to "Money & Co." ("Money & Co.," Los Angeles Times, 6/23). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.