More on the Market for Joint Replacements in California

See our previous post. This is Jamie Robinson and Tim Brown in Health Affairs:

We evaluated the impact of reference pricing on the use of and prices paid for knee and hip replacement surgery by members of the California Public Employees’ Retirement System (CalPERS) from 2008 to 2012, using enrollees in Anthem Blue Cross as a comparison group. In the first year after implementation, surgical volumes for CalPERS members increased by 21.2 percent at low-price facilities and decreased by 34.3 percent at high-price facilities. Prices charged to CalPERS members declined by 5.6 percent at low-price facilities and by 34.3 percent at high-price facilities. Our analysis indicates that in 2011 reference pricing accounted for $2.8 million in savings for CalPERS and $0.3 million in lower cost sharing for CalPERS members.

Comments (12)

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  1. Dewaine says:

    Reference pricing is a step in the right direction.

    • JD says:

      This analysis certainly seems to indicate that. In the previous post he says that “if a significant number of patients were involved, the hospital market would begin to resemble a competitive market.” The closer we get to the open market the better.

      • Dewaine says:

        True, but, we need to be careful about merely “simulating” a free market, we may be missing out on benefits.

  2. Saul says:

    Let the markets work!

  3. Dewaine says:

    We need more places like the Surgery Center of Oklahoma City

  4. Buster says:

    Seeing results like these makes you wonder why health plans didn’t try this years ago.

  5. Sandip says:

    Can someone better explain the concept of reference pricing? To me, it sounds a bit vague.

    • August says:

      “Some employers are implementing reference-pricing benefit designs, which establish limits on the amount they will pay for some procedures covered by employer-sponsored insurance. Employees are required to pay the difference between the employer’s contribution limit and the actual price received by the hospital. These initiatives encourage patients to select low-price facilities and indirectly encourage facilities to reduce prices to increase patient volume.”

      • Sandip says:

        Understand the concept but it’s still vague and convoluted. I don’t know if this really assuages our pricing problem.

  6. Erik says:

    0.3 million in savings? trying to spoof up the numbers to make going to a clinic look good?