The California Public Employees Retirement System began a public reference pricing initiative for total knee and hip replacement surgery in January 2010 and is now expanding the reference pricing to ambulatory surgery, according to a report in the Harvard Business Review.
After paying different prices for the same procedure at various hospitals, CalPERS established a reference price limit of $30,000 and identified hospitals that charge less but also performed well on quality metrics, according to the report. The program incentivizes members to use the "value facilities" and participate in the traditional cost sharing; otherwise patients going to the higher-priced facilities would incur financial liabilities.
The program reported the price for knee and hip replacement surgery dropped 26.3 percent after implementation, with savings exceeding $6 million. Some ambulatory surgery centers are now beginning to offer total joint replacement for select patients and could drive the price even lower, as ASCs are typically reimbursed less than hospitals for the same procedure.
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