WellPoint caps hospital charges, cuts costs 19%

Pilot that limited cost of procedures saved Anthem Blue Cross unit 5.5M

WellPoint's unit in California, Anthem Blue Cross, cut medical costs for the nation's largest pension fund by 19 percent by setting a limit on how much it would cover certain procedures and driving members away from high-priced providers that don't deliver better outcomes.

In a program implemented by the California Public Employees Retirement System (CalPERS), Anthem gave participating members a list of 46 hospitals, including Cedars-Sinai Medical Center, which charged no more than $30,000 for joint replacement surgery. Surgeries at those hospitals would result in no additional charges for members, but if they chose to use another hospital, they would be responsible for all extra costs.

The method resulted in Anthem saving $5.5 million in 2011, with the average reimbursement for a joint replacement dropping from $35,408 to $28,695, the insurer announced Sunday. Costs for total knee and hip replacements ranged from $15,000 to $110,000, regardless of outcome or quality.

Those hospitals agreeing to cap surgery costs dropped their prices by an average of 37 percent from $43,308 in 2010 to $27,149 in 2012. "There were striking reductions in some of the higher-priced facilities,"  James Robinson, a UC Berkeley professor of health economics who studied the Anthem program, told the Los Angeles Times.

Thanks to these cost reductions, other employers are considering implementing similar programs. "There is a lot of momentum building," Ken Goulet, a WellPoint executive vice president, told Bloomberg. "Employers have wanted to see the tools and the proof that it works, and now that they're seeing that, there seems to be pretty heavy interest."

To learn more:
- here's the WellPoint announcement
- read the Los Angeles Times article
- see the Bloomberg article

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