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Study: CalPERS Members Had Similar to Better Outcomes at Facilities Charging Less for Hip & Knee Replacements

June 24, 2013

A pilot program for the California Public Employees’ Retirement System lowered the price of members’ hip and knee replacement surgeries by 19 percent in one year.


The analysis, conducted by HealthCore, an outcomes research company, was presented at the AcademyHealth Annual Research Meeting Sunday in Baltimore. The study is based on findings for the referenced-based purchasing design program developed for CalPERS members by CalPERS and Anthem Blue Cross (Anthem).


In May, the Centers for Medicaid and Medicare Services released a database of 2011 hospital charges for Medicare services showing a wide disparity in charges for some services by hospitals in the same areas.


California hospital charges for total knee replacement and total hip replacement surgeries ranged from $15,000 to $110,000 without evidence of difference in outcome or quality, according to an Anthem analysis conducted in 2009.


“We were pleased to see that the program led to better quality for some measures and increased use of facilities that charge less,” said Ann Boynton, deputy executive officer for Benefit Programs Policy and Planning for the California Public Employees’ Retirement System, which has approximately 350,000 PPO members in California served by Anthem. “The outcomes of this program further support what we know to be true, that higher cost does not mean better quality.  Current spending levels are not sustainable and we must continue to find ways to provide quality services at lower costs now and into the future.”


As part of the intervention program, members of the California Public Employees’ Retirement System were given a list of designated facilities that charged less than $30,000 for in-patient costs associated with each knee and hip replacement surgery.


To qualify for the list, hospitals had to have already contracted in the Anthem PPO network, which manages a robust credentialing process. Participation includes requiring all participating hospitals maintain accreditation by at least one of several nationally renowned accreditation organizations. In addition, hospitals had to perform enough procedures to ensure results could represent credible measurement that positively demonstrated the hospital’s skill in the surgeries.


Members were able to either choose from 46 facilities on the list that would result in them paying little to no out-of-pocket costs beyond deductible or co-insurance or pay the difference if they used another facility that charged more than $30,000.


The result was that that CalPERS health plan costs dropped significantly – by 19 percent from $35,408 to $28,695, per surgical-related admission.


“We were also glad to see that overall member out-of-pocket expenses did not increase from year to year even though not all facilities originally charged the threshold payment and not all members decided to go to designated facilities,” said Dr. Michael Belman, medical director for Anthem. “Not only were we able to save 19 percent while maintaining or improving quality, but the data also confirm that this program helped reduce costs for these procedures at hospitals that didn’t participate in the program.”

The analysis also found:


  • Use of designated facilities increased by 21 percent by CalPERS members
  • Out-of-pocket costs remained relatively flat from 2011 to 2012 
  • Outcomes were either equivalent or better in the group using the designated facilities
    • CalPERS members had significantly lower 30-day general infection rates than non-CalPERS members
    • CalPERS members had significantly lower general complication rates in 30 days than non-CalPERS members


The study compared CalPERS Anthem PPO members to other Anthem members in California. The analysis used administrative medical claims for patients who had elective, non-emergency total knee replacement or total hip replacement surgeries from Jan. 1, 2010 and Dec. 31, 2011.

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Michael Bowman
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