and you can get away from your votes. you can't get away from your statements. there's this thing called, the press that kind of document all that and hold us accountable, as you should. and so i think they are in real trouble. what i saw when senator merkley said he was going to go on the lander bill, that told me panic had arrived. >> we're going to go next to francine. >> if you look at the latest developments in obamacare, strictly from a policy point of view, whether it's the presence executive order one whether it's the up and bill or whether it's what mary landrieu is working on, wouldn't allowing people who have these individual plants to keep their plans, wouldn't that mess up the overall concept of obamacare? ..

>> sometimes a thousand dollars a month. i mean, you know, it's a wide range. some people will get subsidies and support and pay less. but there's this group in the middle who make just enough, they get no subsidy, and the price of their premiums for their plans is going up dramatically. but moreover, and this is just what -- after 36 meetings in my own district -- their deductibles, their deductibles, they fear, are at a level where

unless you have a catastrophic health event in your family, you really don't have health insurance because you're paying upwards of 12, $15,000 where it was 2 or 3,000. and so they may go without, because you have a guarantee issue. so you can always go to the emergency room, right? the penalties are not more than the premiums. i think this is the chaos i'm talking about out there on the ground in communities all across america. >> a quick follow up? >> sure, of course. >> has there been time to actually figure out as this legislation has been going on which is the worst case? these folks whose premiums are going up because -- or what happens to the whole system as a result of this group being out? >> well, i would, i would argue on the side of the individual whose plans are being

terminated, and they either don't have access to to the web site to figure out what a their alternative is or what their subsidies will be or what their costs are. that's the world we're in right now which is a more important world total individual than the sort of global effect on obamacare for the long haul. this, you know, you've got a situation in my home state, we had a high risk pool for people who had pre-existing conditions, and i was, i was in the legislature back in the late '80s and early '90s. we worked on all these things so people had a place to go to get covered. that high risk pool ends at the end of this year. they closed it down to replace it with cover oregon. which has signed up zero people. the governor's now hired 400 individuals or in the process of hiring that will manually go out and sign seem up by paper -- and sign people up by paper, but still they're going to have to

figure out how to run them through a computer system that they've now admitted won't work. in the terms of real people's lives, this is happening in fast time. that's why i equate it to like the only thing i can come up with is like a hurricane, cat 5 hurricane. all over the country, i did this town hall in the town of probably 80 people, there were 51 at the meeting on tuesday night a week ago. and, you know, you had a couple saying it's all working great, you republicans are this, that and the other thing. and, oh, these cancellations, that's not true literally. and a fellow there said here's my letter. i got canceled. and the replacement policy is x more premium. i mean, this is -- people are sitting around the kitchen table saying now what do we do? that's who i think we have to worry about first. >> scott. >> you mentioned a few minutes ago your conversation with governors, obviously a big part of your job. despite being in the minority, democrats have done an unusually

good job with their fund raising over the last few years, a lot of which has been fueled by large numbers of small donations. what, what are you and the rnc doing on that front? are you too overreliant on large donors, and is it even possible for, you know, a kind of republican party apparatus to kind of activate donors at this point given the deep levels of distrust? >> -- no. i won't buy into that last piece of that at all. we stood up the biggest data digital team in republican politics at the beginning of in this year, and these young people are creative and brilliant and have done amazing things and grown our presence online dramatically. they can give you all the metrics, but our facebook likes

are off the charts, grown our e-mail dramatically. we've tripled our monthly fundraising online. all that's good. we have a long way to go. if i were back in my small business, small town radio station owner mold, i'd say we have a target of opportunity to grow our revenues. but we've figured out how to do that now. we've been very thoughtful, creative at building out our presence online, becoming more of a content provideer and in our comparisons with our competitors in terms of how people share the information we put out, it's doing all the right things. so thousand we can begin to invest -- now we can begin to invest more deeply this that and build that presence. we have a long way to catch up, true. >> warren? i'm sorry. >> our small donor base is coming, is fired up. and finally, remember, the

president for all the things i may disagree with him on and say he's not good at, he's darn good with at raising money. -- darn good at raising money. and he committed to my counterpart, steve israel, to do six events for the dccc. and he is keeping that -- that's one commitment he's keeping. he's been to boston, he's been to new york, he's been to san francisco and chicago. that's hard to compete with. they've got the president, mrs. obama, the vice president, you know? the whole infrastructure is administration. because there's one thing he wants more than anything else, and that is to govern in his last two years like he was able to in his first two years without us being a check and balance. and if we're out of the way, he'll never have another oversight hearing on the irs or benghazi or all these issues that people are rightfully concerned about. and it'll be katie bar the doors.

and they'll all get along. legislation will pass and flow, it's just will you have time to read it. and i'd say you won't. >> a life without darrell issa would be ard to imagine, wouldn't it? [laughter] lauren. >> what would you all do? >> what would e do? that's right. >> i wanted to ask you specifically about the race between mia love and jim masterson because he is certainly the most vulnerable democrat in the country. what about mia love's campaign has been retooled and what about it needed to be retooled? you mentioned that word, so -- >> well, i'm not going to get into all the specifics in a race, but i would say this, that she is a very dynamic, impressive individual. a wonderful mother who served her community as mayor. and i think the country saw her in that brief moment during the convention, and they loved her. and she has been a very successful fundraiser. she's outraised him, i think in the last quarter, two to one

basically. and so she is on a solid track on the fundraising side. she is much more engaged locally than perhaps she had time to be last time, and i think with that and her team being assisted by some of the top pros in utah from senator hatch's campaign side, i think, you know, you learn. we sat down with every one of these candidates who wanted to run again. we created a special project just to say what do you think worked and what do you think didn't work and then how do we fix that. and here's what we think worked and didn't work, and then we compared notes. because nobody wants to go through one of these races to come up short. it's just not that much fun. and is second isn't -- second isn't a good thing. so with each of these we've tried to identify strengths, weaknesses and done the whole squad analysis to say, okay, how would you do it differently and

actually have that path to victory? so i think she clearlies now has a path to victory. >> we've got time for a couple more, stephanie kay and david wasserman. stephanie? >> we've seen in the presidential election that the opposition to -- [inaudible] is not -- >> could you speak up a little? >> the opposition to obamacare didn't work in the presidential election. what are your members going to do to actually give a response or offer the kind of help or what can you do? because the flip side of the president's broken promise is perhaps there are a lot of republicans talking about repeal and replace when everyone knew that wasn't going to happen -- [inaudible] so is it just enough to be the alternative in and what about people who actually are seeing their premiums go down -- >> and there will be some of those. i think you have to factor that in. and then, you know, i was in a meeting in the northeast part of my district on saturday late

afternoon with a bunch of veterans, and this woman talked about being put on, off her individual plan and into i think it was medicaid. and remember, the other piece of that where the funding comes from is out of medicare. and so you still have this element of seniors, especially in some of the rural districts where medicare advantage actually played a major role in being able to keep your provider because of the reimbursement rate issues that are cognizant that that may be a problem. so you've got this they took money out of medicare to put into medicaid, that's an issue. our members are very capable and competent at talking about alternatives that we would offer for a patient-centered health care delivery system. but it doesn't do us much good to put, you know, that up on the floor in a comprehensive way when you know that, i mean, let's be honest, the senate's not going to take it up, the president's not going to go along with that. so when one party passes something exclusively, denies

the other party the ability to even offer a single amendment on the house floor which occurred, then they own it and embrace it. and they've owned it and embraced it and overpromised and underdelivered, and it is, it's the, you know, the tsunami that's washed up x there's a lot of debris on the ground. and i think it's, it will be the twining issue in -- defining issue in 204. and they've got to explain it. you know, when these other major programs in america were created, they almost always were created with bipartisan votes. major reforms in entitlement programs, go back to when reagan did some of the reforms. he did it with tip o'neill in a bipartisan way. this one they made a conscious choice to lock us out. i remember sitting down with henry waxman in a conference and saying, henry, i spent four and a half years on a hospital board be, i chaired the committee that implemented the oregon health plan ultimately, i think there's

all kinds of reforms that need to be done. i i was part of the process on the high risk pool. i mean, we did a lot of experimentation in oregon on health care, and i was an employer who paid 100% -- with my wife -- the premiums for my workers. i've been on every side of this, public policy, private sector, nonprofit, small community rural hospital. i told that, and that's kind of how we were treated. you go, okay. here we are. now you own it. now you keep overpromising, how are you going to fix it? and if oregon can't get their side up and running, they even admitted in august that it wouldn't be ready and it was over budget, now they're admitting it won't work before the end of the year, you got, you know, typical funky ads promoting it, you can't use it. and now they're hiring these 400 people at $3 million between now

and the end of the year, and tear only going to the urban -- they're only going to the you un areas of the state, it's just a mess. >> last question, mr. wasserman. >> oh, no t him. [laughter] again? >> roger asked about california 36, and i'm curious. you know, on paper it ought to be a toss-up, but your candidate doesn't seem to have caught fire. is it time to go back to the recruiting drawing board there? >> we are fully engage and intend to win california 36. >> what's going on? >> well, stay tuned. [laughter] >> do you know what california 36 -- >> stay tuned. >> can i ask you one sort of longer-term thing -- >> i thought you said that was the last question. >> yeah, i know. you know reporters lie. [laughter] karl rove also this week was talking about sort of the overarching trends confronting republicans, and i take your point that your job is to elect

republicans to the house. one of the things he said was that the country's becoming less white as there's a rise in the latino and african-american population. he says until those populations economically rise, they're going to, you're going to have a more democratic electorate. do you worry not in your specific alley, but just more generally about the fate of your party? >> sure. >> we go live now to a discussion with health care professionals on health care costs and price caps on some plans currently being offered by employers. they're speaking at an event hosted by the alliance for health reform. this is live coverage on c-span2. >> using a strategy called reference pricing to restrain health care costs while maintaining quality. here's the 45-second nonexpert

version. under this practice the payer -- an employer or health plan -- sets the reference price for a particular drug or device or procedure. the individual's then responsible for charges above that price. there are important nuances to this concept that i am ignoring for the moment, and you'll be hearing a lot about them in just a few minutes. the idea is to address the sometimes wild differences in price for the same service or product. i apologize to those of you who were here on friday, because i recounted this same anecdote. several years ago one of our board members noted that the cost of a specific surgery in one of the 50 best hospitals in the u.s. news list was double what it was for another of the 50 best hospitals a few miles away. and he asked how can the best

health care in the world cost twice as much as the best health care in the world? same question has occurred to a lot of smart people involved in paying for health care in the private sector, and they came up with reference pricing as a partial response. and we've assembled several of those smart folks today on our panel to explain how this mechanism works, what the challenges are in putting it in place and whether plans like medicare and medicaid could draw lessons from this experience. now, we're pleased to have today as our partner wellpoint incorporated operator of the blue cross blue shield plan in more than a dozen states which collectively cover about one in nine americans. and you're going to be hearing there michael bell monday from wellpoint's anthem health plan in a few minutes. let me take a couple moments to cover song logistics -- some

logistics. there is a lot of biographical information about our speakers in your packets. you'll also find in hard copy the powerpoint presentations of our speakers. those slides and all of the background material those of you in the room have in your kit are available on the alliance web site, www.allhealth.org. also on our web site you can i view a webcast of the briefing in a couple of days and a few days after that, a transcript of today's discussion. now, of course, if you're watching on c-span, you have the video. you also have access to all of the materials i mentioned if you have a computer as well and go on to our web site, allhealth.org, and you can follow along with the slides, among other things. i would ask you at the appropriate time to fill out a blue evaluation form to help us

improve these programs as we go along, make suggestions about speakers and topics that you'd like to hear from and about, and this is also a green question card. when we get to the q&a, there are both microphones you can go to to ask your question or to write it on the green card and pass it forward. if you're part of the twitter verse, you can make use of the hash tag @reference pricing as you see up on the slide that's in view now. and that's enough of the preliminaries. we have, i believe, just a marvelous assemblage of folks with knowledge and insight into today's topic. you'll hear their presentations, and then we'll get into the discussion and the q&a. and we're going to start with andrea who's the program

director at catalyst for payment reform. and if you're not familiar with cpr, as it's appropriately abbreviated, it's a nonprofit working with large employers and other purchasers to improve how we pay for health services and to promote high value care. andrea's had a decade and a half's experience inning with a focus on benefits and payment policy, and we've asked her to provide an overview of reference pricing today; how it works and what some of the challenges are. andrea, thank you for being with us. >> thank you, ed. thanks to the alliance and for wellpoint for convening this really important meeting. i think you'll hear some really great case studies from the folks on the panel, and i'll be giving a background and, actually, ed gave of actually a pretty good definition for -- on it. and i think cpr is catalyst for

payment reform, as ed mentioned, is a nonprofit national organization that works on behalf of national large purchasers. we have about 31 purchase efforts that -- purchasers that work with our group, and they include eight state agencies. and of those state agencies, we do have four medicaid plans. so to the previous point about can state agencies and medicaid programs learn there some of this, i would say that in the work we're already doing, there's a lot of shared learning that's occurring. one thing that the cpr members agree to do when they join is to work on a shared agenda, and i'm not going to get into all of the details of our shared agenda, but the middle section there on the right-hand side will talk about our innovation, so i'm going to touch on three of those today. the first, obviously, is reference pricing and value pricing. the second is price transparency, and the third is market power. and all three of those items are really closely related. and you can't really talk about reference pricing without also

talking about market power and the need for price and quality transparency. at its core, cpr has -- our strategies fall into two categories. and it sounds simple, but it actually can be kind of complicated. but basically, we're trying to create a critical mass of purchasers to send the same messages into the marketplace at the same time. and that's how we think we'll really change the market. we've got a lot of noise, a lot of people asking for different benefits, different payment, different ways of doing things, and that can really exacerbate confusion. so the cpr purchasers are trying to use common tools, common language, common priorities to send messages into the marketplace about what's important. and, of course, the second is to shine the light on the urgency for payment reform as our name is catalyst for payment reform, after all. so this might be a little difficult for you to see in the orange text, but if you look at

your printed version, it might be a little easier. as ed mentioned, reference pricing really is just setting a standard price for a drug, a procedure, a service. and then once you've set that price, that's the amount, the allowed amount that the health plan or self-insured employer pay. and above that amount the consumer is likely to have additional out-of-pocket financial liability. if you look at the graph there, on the y axis you see price variation. this is really just for illustration purposes. you'll see different variation in prices ranging from a thousand dollars up to $20,000. and then along the bottom you see the frequency of these services. and the blue line kind of shows how often are these procedures taking place and at what price and then where do they go up. and this is the kind of analysis that has to take place. so you can set a reference price, but it's actually quite complicated in doing that.

a lot of analysis has to go into doing that. i'll give you an example other than calpers or kroger, but safeway did analysis of how much they were paying for colonoscopies in the san francisco bay area, and the prices ranged from $900 to $7,200 with no correlation to quality. so that's an extreme variation in price. and once they did the analysis on the price and they saw the frequency of how many visits were at a certain price or below, they pegged their reference price at $1,250. so then their benefit design, as they implemented it, if you are a consumer, safeway employee and you seek care can from a provider that is at or below the reference price, $1,250, then you either have no cost sharing or no -- or your regular cost sharing. if you seek a provider at that $7,500, at the top of the list,

then you are going to be responsible for the difference between the $1,250 and the $7,200. so that's the mechanism of how reference pricing works. and some actually will consider it to be a pretty blunt instrument in the marketplace, and i think you'll hear how it's a blunt instrument, that it really is intended to shake up the marketplace and really shine the light on not only how things are being paid for, but what are the prices for things and how there's just extreme variation without any correlation to quality. i'm sure you'll hear from my colleagues that there are really four key elements of reference pricing. they'll probably go into more detail about these different elements, but basically there's benefit design. you really only want to implement reference pricing when it's elective and when you have a wide availability of providers. obviously to, this isn't going to work if you have one or two

providers providing a service in an area. that is not going to create the level of competition that you need. so, one, the procedures have to be elective, and there's time to shop and, two, they're available for multiple providers. the next two are really interrelated and, i think, are very on topic for conversations in this room which is price and quality transparency. you can't implement a reference price without giving consumers adequate information about the price of the procedure or the quality that they're receiving. most consumers still equate higher price with higher quality, and we know that not to be true. so you really need to arm consumers with plenty of price information so they know which providers are at or below the reference price, and you also need to arm them with the quality information, how often are these providers performing these procedures? what is their volume? what is their outcome? and if you have that information, then you can --

consumers are better armed. but it would be with really unfair to implement a reference price if you aren't going to arm them with that kind of information. that goes into the next one which is consumer education, and i think there will be case study examples of how informing your employee population and educating consumers about the price and the quality and that the -- and the correlation between the two will be really very important. because you don't want consumers to get into a gotcha situation where they didn't know someone was above the reference price, and now they have a pretty extreme financial out-of-pocket liability. and the last one is add yacht networks, and network might not be an appropriate term here because usually these are providers within an already established network, so i use the term "network" loosely. but you want to be able to make sure that you have plenty of providers who can offer these services, these procedures at

the reference price so consumers have the ability to choose, and they don't feel overly limited. they have plenty of options including the option to go to seek the care from the provider over their reference price, but that's their choice. i won't go through all the detail, but this is a schematic of reference pricing. you have very basic all the way to really more mature and sophisticated. and cpr also likes to talk about value pricing. reference pricing really refers to commodity-type services like lab, imaging. and value pricing -- or, excuse me, commodities services, that's really where for services where quality is thought not to vary. when you move into value pricing, you're actually adding a quality component and quality can vary. so as you get to the higher end of that spectrum, that's when quality gets inserted.

and again, when you look at the safeway -- when they applied reference pricing to their colonoscopies and they've now applies it to other procedures, they were able to hold their per capita health care spending flat. and i think you'll hear from calpers about the savings that they were able to achieve. and i think as we go into, you know, what's next for reference pricing, you'll find that reference pricing is going to gain in popularity. only about 5% deployed this strategy in 2013, but we expect closer to 15% in 2014. that's from our recent towers watson/nbgh study. i want to go back to this issue of price variation because one of the things reference price does, why implement reference pricing, one of the main reasons you do it is to really bring a huge spotlight on the price variation and how it is unwarranted. and market power will drive the

price, and price is the leading cause of health care growth today s. so reference pricing is a way for employers, purchasers, those that we work with to really say that that price variation is no longer tolerable. what's next for reference pricing, um, a couple of things. price transparency and quality transparency. ..

>> and it's actually a natural fit, bundled pricing -- excuse me, bundled payment is a packaged price for lost procedures within a particular service, let's take a hit or a knee replacement. easy multiple providers in multiple settings. a bundled payment is for all of that. then if you set a reference price, you really are making it very clear what's included in the reference price. the providers are clear about what's in the bundled payment and we see that road as the next generation, once we get a little more experience with pure reference pricing and the providers get more experienced taking bundled payment i think we will see a hearing of bundled payment and reference pricing. so with that i guess i will turn it back to you, ed. >> thanks very much, andrea. we are indeed next going to from david cowling who's the chief of the center for innovation at

calpers, california public employees' retirement system. you may know that calpers is a lot more, you might imagine from the title of its organization it administers health and retirement benefits for more than 3000 public schools and agencies and state employers, and covering more than -- 1.3 million health plans to david is here to tell us about calpers reference pricing program and its impact on health care and costs, as andrea said that he might, and promised that he might. thank you for coming. >> thanks, ed. i'm going to talk about calpers -- hold on. i'm going to talk about calpers state pricing program for hip and knee replacement. as ed alluded to, calpers provides health benefits for about 1.4 million members

statewide. that includes active and retired state employees, and about 1200 local agencies including school districts. about a third of those end up in the preferred provider organizations with anthem blue cross of california and we spend about 7.5 billion annually and health benefits and i don't know about in washington but in sacramento that's a little bit of money. so the impetus for state pricing with a variety of studies and they all have different purposes, but they ended up kind of helping guide reference-based pricing. for hips and knee replacement to the first one looked at cost drivers for calpers, and it turned out osteoarthritis is one of the drivers and about a third of those osteoarthritis costs comes from hip or knee replacement. in addition a deeper dive showed from 2005-2008 there was about a 40 been increased in that -- 40%

increase in the hip on the replacement. one of the other studies we looked at included look at kind of regional variation in cost but when we looked at that we also saw not only those regional college relations but also a lot of variations within region and a have some charts to show you that kind of variation towards the end. in addition, you know, as andrea alluded to, a lot of the literature in our in house study suggested that the hospital cost that little to do with equality of the clinical quality of a barney replacement. and so as you go through kind of the four requirements -- a hip or knee replacement. potential that volume might increase quality and then the last one is that the procedures could be scheduled.

so in january 1, 2011, calpers along with anthem blue cross california and limited the pricing program for hip and knee replacement. 46 facilities that the quality cause in the geographic variations. there was a volume gate in addition to those qualities gates. the quality date, they conducted 10 hip and 10 need replacement in the previous 18 months. the valley of $30,000 was chosen as a threshold and i think michael belman will talk about this further later today. but about two-thirds of the facilities charge less than that and include a large number of facilities that were well known and have a good geographic

reference. when you look at the implementation, and from the a lot of working with providers and orthopedists on average. a lot of times they act as this scourge of the patients. in addition a lot of outreach was done with the members themselves. not only what was provided in the brochures and coverage, evidence coverage and materials but also whenever there was a recertification or pre-notification to the patient, that included the price facilities and description of the program, as well as if it was time between the precertification and after surgery, and, would call up the patient and invite them to the program as well. in parts of northern california there's lots of travel needed, and so is the actual facilities there. so included in this is a travel benefit for the member and their companion.

and then the last one is that the one important part of this is this is for, reference pricing is only for routine procedure to any non-routine procedures would have a medical exemption. i'm going to talk about the evaluation program and these results are mainly from a study that we did with uc berkeley, jayme robinson and tim brown which was published in august of this year. that i think is in your packet. so this is looking at the utilization. this is the volume of hip or knee replacement and the first three lines and his chart have to do with calpers, anthem invoice but what's unique was they were able to get from anthem the non-calpers enrollees it as well so we can look at where our members were going before and after the application of the program. so the first line is the volume, the number of procedures.

the second line is looking at what percentage of our members went to the reference-based icing facilities and we can see it was about 50% or so before the limitation of the program and then it wasn't increase up to about 63, 64% afterwards. you look at the non-calpers members, about 55% before the program, and it's slightly dipped and then came back. i have a visual representation of the next. the dark blue line being the calpers pricing usage. you can see it went up dramatically after the implementation of the program. and we can see for the non-calpers it was fairly the same overtime. so this is a chart or a table of the average prices charged or hip or knee replacement surgery. again, for calpers members and non-calpers members. so the first line here is for average of all facilities and we

can see that basically for all of, across all the groups there was an increase from 2008-2010. and the average was about 35,000 in 2010 for the calpers members and then after a limitation of this program, it dropped to about 25,000, 26,000 come in that range. was really interesting is that the reference-based price is still the cost stay the same from 2010, 2011, 2012 virtually the same. what was surprising was this impact in the non-reference pricing this of which went around 43,000 dropped dramatically down to 28, 27,000 after implementation of the program. so by having comparison with the non-calpers anthem group we can see that for most, those charges to the same outside of calpers. and again i have a little chart showing the. so the solid blue blood is

alpers-based which is pretty stable over time. and we see the limitation of the program which is the dotted blue line you can see the dramatic drop in prices. i have one more chart, kind of getting at what andrea was talking about with the variation in cost. i don't know if they show the pink dots or orange, but they were pink originally, or orange originally. i think they are pink now that the pricing facility, the blue dots are for the programs participaparticipa ting in the pink dots are for the charges or the non-reference-based charges. so easy is in 2008, 2009, 2010 a lot of variation with the pink dots clustering around 45,000 in 2008 going up in 2009 and about 50,000 a little cluster their in 2010. and then after the implementation of the program, the pink dots now start clustering around $30,000.

so we reduce variation on the high-end, bottom and other cost state pretty much the same. so jumping to the results conclusion, jayme robinson a uc berkeley concluded that there was a $5.59 savings over the first two years. this resulted in an average cost, about $9000, or 26% drop in cost for us, calpers. also important to note is the clinical quality, and doctor bellman will talk about this in a little while, about the study they did. but the clinical qualities got better or stay the same and calpers, for the rest of the people who went to the reference state pricing facility. so this turned out to be hospital market story as much as the consumer and roly store. reference-based pricing induced enrollees, yeah, to go to the

facility to change the market as well. jayme robinson concludes about 14% savings in market share and about 86% were due to a reduction in prices. so another important thing is that it's working the market as well. with expand the program from 46 hospitals beginning in 2011 to 61 now. and so we've expanded reference pricing, and andrea alluded earlier that we have these low-volume, high costs for hip or knee replacement and we've moved in 2012 we moved to this kind of more high-volume low-cost or teachers looking at cataracts, colonoscopy xcopy -- arthroscopic. that would reiterate that those three procedures meet our kind of checklist with cost variation within region, a focus on volume

increase may increase quality. they can be scheduled, substantial costs to us. and the last thing is with a variety of initiatives around kind of educating consumers, under the price transparency, trying to get that information across. thank you for hearing us today. >> thank you very much, david. >> we're going hear next from theresa monti. she's the vice president, and this is very impressive, total corporate awards at kroger company, which most of you know a cincinnati-based corporation that's the country's largest grocery store chain. it's ashley the fourth largest retailer of any kind in the world. and theresa is in charge of kroger's health, welfare retirement and pay plans. pretty broad portfolio, and kroger had some expense with

reference pricing as well. theresa. >> thank you for coming today. i just want this been all the time to about what we're doing around reference-based pricing to we happen to the target price and because with might relate to that a little better so i might refer to it as target pricing throughout my discussion today. but i wanted to start just by getting a little bit of information about the kroger company so you can get a flavor for what we're all about and will refocus our efforts. we put about 343,000 associates, all u.s. states. we offer about 35 states across the country. in the company health care plan we have about 85,000 eligible associates. the rest of our associates are represented under collective bargaining agreements and their benefit plans are provided through other funds. so where we innovate and where we try new things really within the company plan, and that's where the target pricing initiative is today.

so that's where i'll focus our discussion for this afternoon. mainly, we operated grocery retail centers throughout the country, but we also have distribution centers, fuel centers, manufacturing centers, fine jewelry stores. usually get a few eyebrows that raise a message or restores but we are one of the larger jewelry chains in the country as well. to talk a little bit about what our objectives are with on health care plan, we really focus on trying to keep it simple for 350,000 people to try to understand what we are trying to accomplish with the health care benefits that we provide to them. we really focus on objective. the first one is to improve the health of our associates and family members. we truly believe that if we can improve the health of our associates and their family members, not only will be able to hold down the cost for the

company and costs for our associates, we also think that's a better place to be as an organization, more productive associates, happier worklife balance so we're focused on health improvement. secondly, we're very focused on reducing costs. the grocery business is not one of high margin so we are very focused on where we invest our dollar. we spend about $1.5 billion on health care for all of our associates in all of the benefit plans. so we are very focused on health and reducing costs. as we are looking at to reduce cost, we are constantly looking at not just what health care costs, but how people access the health care system and where they're choosing to get care. so where are they making or where are they able to make decisions about quality and cost as their accessing health care when they need it. so a couple of initiatives, i'm going to focus most of my discussion today on our target pricing initiative but when implemented that in 2012, we took to initiative at the same

time and focused on target pricing, which is our discussion today about putting a price in place for certain services. and we focus our services on high-tech imaging. so cat scans and mris and the like. we also at the same time put in a very specific centers of excellence program to focus on hip or knee replacement and find fusion surgery. so that typical initiative is really focus on quality of care and cost of care. target pricing as my other panelists today have talked about is not so much about quality because we are assuming that the majority of the quality in a high-tech imaging service is relatively the same. the difference is in the variation and cost. so our two different initiatives are addressing those costs, and then on the centers of excellence peace around the quality of care.

our target pricing program we partnered with anthem, they are our claims administrator self-insured plan so they are very instrumental in helping us design our target pricing and are centers for excellence program. so the target pricing program only has three levels were associates and providers get involved in making a choice about where to access a high-tech imaging service. so the first thing that we put in place is that any high-tech imaging service has to get prior authorization or precertification. so the provider or the associate would call into blue cross blue shield before a service is received. and that is where it really starts. it's on the slide, you can see the aim or high-tech imaging. that is usually where a physician or provider would get some education about our target pricing program. to help them understand that the plan has a certain threshold of how much we will pay for

high-tech imaging services, and help the provider then understand where in the market can they go our way they can send the patient to stay at or below the target price. so that is the first level and use in some of the results that's usually where most of the services will get redirected them. the second public office shopper program and that's usually where a nurse from anthem will outrage to our associates or family member who is due to get an mri or ct scan, and help them in more educated on our target pricing program to let them know that the plan will pay up to a certain level and that there are a lot of choices in the market to help them understand what providers they can go to, if they want to be at or below the target price. or if they choose to pay more and go someplace else, they can do that as well. so completely voluntary program

that we do help educate both the provide and our associate as they're making the choices on where to go to get their care. then the third piece is implementing that target price. so in 2012 we started with five high-tech imaging services, and we started only in 10 anthem states. so is technically a little pilot for us, and in terms of how we implemented it. so you see you on the slide five tests in 2012. we added a sixth high-tech imaging service in 2013, and also in 2013 we expanded it to all of the u.s. states across the country. so we were able to capture a lot more of our associates in that initiative. a little bit about the results that we are seeing. you can see here from the three levels of the program the clinical review operational activities, so that's the first level where most of the services are getting redirected to a provider who is at or below the

target price. you will see the 2012 total year savings, and remember that's just 10 states for us, and in the third quarter 2012, or 2013 year to date slightly bigger but again a cross the u.s. the middle, the shopper program, not as much savings but we wouldn't expect as much there. we hope most of the services would get redirected, and they have, prior to getting the outreach call from a nurse to an associate. actually implement the threshold of the target pricing program we have about 30% of our population that still chooses to go over the target price, and we think that comes down to education. so if you think about a lot of people when they go to the doctor still aren't comfortable questioning costs or questioning quality, questioning whether doctor sends them for service. so celebrity and about 30% of the population chooses to still go to a facility that is at or above the private market price.

to give you an example of the variation in cost, in ohio, where a ct scan of the abdomen, the cost ranges from about $260, to about $2600 depending on where you go. so that education alone both to the provider entity associate our associate is critical. right now it's all telephonic-based comments are getting them to really have that conversation with her provider is difficult but we are making progress, as you can see in her numbers and getting people educated. early and 14 we will be implement in an online tool so that people can access, cost, and quality transparency, cost information online so they can start to make even better decisions. so what we actually saw with the unit cost, when the blue rose here, the 2012 results for the 10 states where we have had target pricing in 2012, and as you can see were actually able

to reduce the unit cost through target pricing by redirecting people to a cost efficient provider. and by about 12% on both ct scans and mris. compared to all other states in 2012 where we didn't have target pricing implemented, costs actually increased for both ct scans and mris in 2012. when you break that down by the five services, high-tech imaging services that we had in 2012, you can see each of the individual services and into 10 states would target pricing in 2012. all of those went down. summit in significant. if you look at the abdomen ct right in the middle, went down by 32%. in unit price in the states where we had target pricing. compared to some of the increases in the other states for the same services. so i the same time we

implemented target pricing for medical services, the high-tech imaging, we also implemented on several prescription drug categories. so i wanted to give you a little bit of the results from the prescription drug side as well. kroger has her own tv him, so we just kroger prescription plans to help us design a very similar target pricing initiative that we had in the medical world in the pharmacy world as well. so we took three categories of drugs in 2012 and that's the ppi's and the blood glucose test strip. and 2013 we added another category. that really focuses on education at the point-of-sale. when someone is in our store, the added from us and talking to a pharmacy tech or pharmacist, really being able to get that education about the choices that they have, because if you think that some the drug categories, that an act example, huge variation in cost or we are just starting to see that drug

category kind of settle out with it going generic latch up with that huge variation in cost, and not a high variation ineffectiveness in that drug category. so we've seen some really great results on the pharmacy site as well. and here is just some statistics on what we saw in unit cost in the prescription drug side. see you can see some pretty significant cost reductions on all three of the drug categories in 2012. utilization was not significantly impacted. i think initially what some people might think of is individuals might forgo a medication because of target pricing because some of that cost may end up with them if they choose a higher cost of drug. we saw a little bit of that in that in category but other than that the utilization -- in the ppi, the utilization was down on the bit but not significantly. we are watching that closely because what we don't want to happen is we don't want people to stop medications when you need but we want them to be

better educated about the cost and the quality of the services that they are receiving. >> so just a brief moment on standard of excellence, and this is the service what we did is we looked at me replacement, hip replacement and spinal fusion surgeries, muscular skeletal decision for us has always been one of our highest categories in our medical plan. so we looked at how could we look at a cost and look at quality of care that people were receiving, and could we take a network and parents will be to be a little more and include travel expenses if someone was willing to go to a high quality cost efficient provider, or a particular joint replacement or spinal fusion surgery. and so we are able to do that. we have four tiers within the network, and we leveraged at blue cross blue shield centers for excellence or blue distinction network, and we went

for the. we started with quality and added a cost component. so this is some of the results from 2012 and 2013 when we implemented that. so we had about 264 joint replacements are back using surgeries -- fusion surgeries in last 18 months or so. in the middle to embark you can see the impacts of the cost. someone who chose to go to the highest quality, most cost efficient providers around the country, we saw about a 28-30% reduction in cost. when you include travel, so we paid for travel and very similar to what calpers is doing. again, about a 30% decrease in cost. and from a quality perspective, no adverse side effects. so potentially avoidable complications, there were none in the first year by someone going to a facility that may not be in their hometown where they had to travel for that hip replacement in the first year in 2012 we had about 20 facilities

in the network so we people traveling around the country for this surgeries and had really great feedback and great experiences. and as you can see, great quality and low cost for our members, or for our associates. over all, i was in our associates are very pleased with the program. one of the things we thought we'd hear a special on target pricing and implemented it was a lot of pushback. you are just shifting the cost to me. instead what we're hearing is thank you. thank you for letting me know that there's such a big difference in cost in my community but and if i know i can go someplace else and do the same quality at a less cost, that's good for them and it's good for the company. and so we have seen a lot of positive results and a lot of positive feedback from our associates by doing things like target pricing and centers of excellence. so thank you for your time today. >> well, thank you, theresa. very interesting. finally, we are going to from dr. michael belman.

is the regional vice president and medical director for programs and innovations for anthem blue cross in california. anthem and shivered as a part of wellpoint. he's been trained as an internist, specialized in pulmonary medicine. he's been with anthem since 96, and he's in a great position to discuss with us the role of insurers in reference pricing and their various partnerships with employers. and by the way, dr. belman made a couple of changes in this life back from the version you have in your kids. -- kits. you can get the latest version on the alliance website after you get out of here. >> thank you, ed. ..

>> i live in west los angeles where it's not only important to look healthy, you have to look good as well. [laughter] so one of the striking features was that a free-standing surgical center in 90210, just around the corner from the gucci store, in fact, was a total price of $3500 for the cataract whereas the two largest west los angeles facilities -- one an academic institution and the

other a very large community hospital -- the academic institution was about 6,000, the large community hospital was 11,000. for me as a individual who paid a 20% coinsurance, the benefit was direct to me in the sense that the coinsurance on the 3500 saved me 2-$3,000 out of pocket and it also saved them money in the sense that they paid the 3500 and not the expanded fee. so i'm telling you this because my experience, although it was relevant for me, doesn't make much of a dent in these two high-priced institutions, and it didn't save that much money for anthem. but now what we're seeing unfolding and what you've heard today from kroger and from calpers is the realization or the actualization of these differences that make a big impact in terms of the price that everybody pays because, in fact, once these expenditures

from these employers starts trending down -- and in some cases it is trending down -- that makes a difference to the premiums that they charge the following year. and that's the premiums that you pay. so this is a direct impact for all of us. so i just wanted to emphasize that because it, obviously, has relevance. i'm also using my ipad because as good as the cataract surgery was, there is no way that i can read that screen over there. [laughter] so the point that i wanted to make at the beginning is that the costs outside of premiums, co-pays and deductibles are typically unknown to the average consumer and i might say, also, to the average physician. and that's why this is an education for physicians, and i commend kroger, in fact, on making sure that the physicians know about that. because physicians are totally oblivious to what the charges are. they know what they receive, but they do not know what facilities receive, what drugs cost, etc. and, in fact, a recent article in the new england journal of

medicine highlighted this dilemma and actually called the coinsurance and deductibles an avoidable side effect of treatment or harmful effect. in other words, people undergo treatments and/or receive medications and then have the unpleasantness of finding that the charges that result or the out-of-pocket expenses are so extreme as to make it extremely difficult to actually pay for these. so this becomes very relevant in this setting. so we also know that in california the hip and knee replacements vary between 20,000 to 110,000 across the network. so you saw a similar diagram to this where we talked i think when we had the talk for the, from from cpr. and, essentially, this shows the range of pricing in california of the 110 or so institutions that provide hip and knee surgery. so it was noted that when you choose a value of $30,000, that

you encompass a significant number of institutions within the network. it also included a wide geographic distribution, so if there was travel involved, it was a reasonable amount of travel and p didn't require long distances. and this was really, i think, the basis for the number. the other point that i think was important is that we did look at at -- am i going the right way? i'm going to wrong way. there we go. we did hook at the quality, and i'm going to come to that in a moment, but essentially, the value-based purchasing design establishes the payment for elective procedures. it limits the obligation of the payer and guarantees members the ability to choose a facility that will provide services within an appropriate cost range. one interesting term that has been used is it acts as a reverse dedoesn't bl. instead of the enrollee paying a

defined limit and then taking over which is the standard deductible that many of you are familiar with, in this case it turns that on its head, and the plan pays up to to the limit after which if the enrollee chooses an institution above the threshold, the enrollee is liable for the increment. the participating hospitals were based on the procedure volume, as you heard. they met the standard regulatory standards, so they were all accredited at high levels by the appropriate external agencies. and we also have an anthem quality program for hospitals. and a number of metrics are measured across a broad range of procedures and tests and treatments that the hospital provides and outcomes that they report publicly, and it's combined into a score. all of these hospitals were participants in the anthem program. so the overall impact was the shift of members to designated hospitals and shift away from

nondesignated hospitals. and i think you would, it would be appropriate to reemphasize that point, that although there was a shift to the designated hospitals, the big, the big change was the shift away. and the decrease in total costs -- and this, i think, was a critical point how the market reacted to this -- was the decrease in cost in the nondesignated hospitals, some of which prior, immediately prior to the advent of the program lowered their price in order to be part of the network. the other point that is made in the article by jamie robinson in health affairs is that the upward cost trend from 2008 to 2010 which ran from 28,600 to 34,700 was reversed in 2011 with the advent of this program. so the really was a very striking example of bending the

cost curve down which i believe is the washington phrase for, or the goal that has been set for the affordable care act. on the quality side, we use the hospital claims to look for general complications and jenin nexts, things that -- general infections, things that are not necessarily related to the surgery itself, but if there were results from, say, heart problems, kidney problems, lung problems as a result of the surgery or there were infections like pneumonia or kidney infections, so on after the surgery and, in fact, in the designated hospitals these rates actually dropped slightly. significantly, but they dropped. there was no difference in complications related to the surgical sight itself in terms of the process three cease, the hips or the knees, there's no difference, and no other site complications like local infections or bleeding and the like. we also followed the claims for

180 days after the surgery, and it's important to note that there was no difference in the readmissions either for joint issues or for other complications in the two populations that went to the two different institutions. and also bearing in mind again, and i should have maybe emphasized this, we're also comparing it to noncalpers ppo anthem members whose claims we also had. so as you saw in some of the slides that were shown earlier, there was this comparison group of anthem ppo members in the same geography as was the, as were the calpers pens. members. we have a number of other clients that have as a result of the successful experience we had with calpers and with kroger have also joined the reference-based benefit movement, and so i've listed some of these. it's not as important as much as the fact that there is now, i would say, a shift, and a number

of large employers are embracing this program as a way to disrupt the continued increase in health care costs very largely driven, in fact, by institutional pricing. so this has been a very encouraging development. in addition, we also have expanded it to include what kroger has included and what others have used in the past to include for outpatient procedures which are for cataracts, arthroscopy and endoscopy. so this is definitely something which has really blown the lid off, i think, the veil of secrecy over pricing together with a number of other events that have happened in the past and some recent publications including the very notorious one in "time" magazine earlier in the year which i think was also a major, major impact. as was cms', actually, release of charge masters which occurred

recently as well. should also just mention, because i noted in the "wall street journal" which was left outside my hotel room this morning, an article from intermountain, the intermountain health system run by a very, very prominent health researcher, brent james, on the current initiatives within the salt lake city region which i would imagine is most of utah to develop not what they call a charge master, but, in fact, a cost master. where they're actually developing costs of procedures based on real data and not wishful thinking and numbers plucked from thin air which has been the basis of most charge masters up til now. and i think this is the start of a new movement where cost accounting will, i think, enter the health care arena and make it much more long call and much more sane -- logical and much more sane. so that, i thought, was an

encouraging development. so in summary then, our with reference-based pricing expands the barrier of medical prices, it raises the question of why variation in procedure is justified. there are a large number of organizations that are out there collecting quality, but there is still much work to be done in this regard. it provides a useful mean of helping purchasers, members make choices that help reduce costs both for the company, for the individual. and it's definitely a valuable tool in the overall approach to bend the cost curve down. thank you. >> terrific. thanks very much, michael. we are at the point where you can have input here. there are green cards that you can fill out a question to ask one or more of the panelists, and there are microphones that you can use to vocalize your questions, and i would invite our panelists as well, if you have comments about anything you've heard or if you wanted to ask one of your panelists

another question to jump right in, and let's mix it up. in the meantime, the first mixer-upper, would you please identify yourself and keep the question as brief as you can. >> i will do both. i'm bill rogers. confident in the statement that there's no such thing as a stupid question, my first question is do all of these reference prices include the professional or physician's payment, and then my second question is how do you all decide what to do in subsequent years with your reference price? >> two good questions. >> well, the answer to the first one is, yes. it was the total claims, institutional and professional, that were included in the calculation. >> and andrea, you talked about bundled payment being a part of this calculation. >> right. so i think, um, i think in the calpers example that that's one not all reference pricing programs include both. so that's something you need to distinguish. but if you, as this evolves and

as reference pricing gets paired with a bundle payment, then, yes, you'll see them be bundled together and paired together. >> so if i could just make one additional comment which, when you look at physician reimbursement across the state -- and i'm referring now to anthem's reimbursement -- there is variation geographically minor, and in some cases if there is special expertise. but the degree of variation or the standard deviation of the reimbursement is a fraction of what it is for facilities. >> and and how about adjustments? those of you who are involved in this business, how do you go from year to year? can you ratchet down further, or do you have to take advantage -- take into account what's going on in the market? >> well, from kroger's perspective, we looked at it of the five services that we target priced in '12, we did look at the cost data for 2013.

we decided to leave the target price where it is, and it's roughly around $800 for one of those high-tech imaging services. but we found we didn't really need to adjust it at in this point. but our plan is to look at it every year because what we don't want to happen is our target price stays the same, but the cost of services continues to go up. so we need to adjust that, and we will as we need to as we move forward. but our hope is that it brings down the cost and that we have more and more people staying at or below that target price wherever we can. >> okay. yes, ma'am. >> hi. sandra -- [inaudible] from senator heinrich's office. i believe it was mentioned that education was the variab that was distinguishing between those who were opting for reference or target-based procedure or facility and those that weren't. and i'm wondering if there's any evidence of that or evidence of any other variables that would distinguish between folks who do and don't and also providers who opt for that and don't. thank you.

>> well, i'll talk about it from kroger's perspective. we have anthem after every individual that does have an mri or that's going through our target price program. they're actually surveying them and asking them a series of questions, did you know about the program before you had the service, do you understand how it works. and what we're finding is that there's a vast majority of people that didn't understand it. so i think there is a big education component, getting people to understand, one, what their benefits are because it's complicated, you know? they understand deductible and coinsurance, and anything past that they don't. it's complicated. so having that initial education up front, we do a lot to the communicate to our associates on their benefit plans and give them access to a lot of resources. but it's going to take some time, i think, to really get people to understand that they do have choices to make and that there is a lot of variation for certain services in the health care system.

so we're going to continue to educate and continue to give them access to resources. i also mentioned i think that right now we don't have an online tool where people can go to get information about cost and quality of providers in their community, and we will be implementing something like that in the first quarter of 2014 so that a they can access information before they go to their providers and before they have to get a particular service. so we're hoping that will help further educate people. >> okay. david? >> pretty similar to calpers' situation as well in terms of we -- anthem does a patient experience follow-up study in looking at members' knowledge of the program and all of the follow-up questions and their awareness. so similar to kroger, we're rolling out in mid 2014 a much more web-based and mobile tool to provide cost and quality information as well.

>> okay. well, you've unleashed a tremendous volume of questions on green cards, and we're going to plow right in. a lot of them are very basic and i think will help fill in some of the blanks in the people's knowledge. how do insurers handle complications in procedures that extend the costs above the reference price? and are consumers forced to accept that burden? >> right. so the reference price is for routine procedure, so if the procedure becomes non-routine, it would not fall under the reference-based pricing program. and i think you see that when i was showing some of the variation in the chart. some of those dots are outside of the 0,000 or above -- 30,000 or above that, and those are falling into the non-routine procedures which are not excluded from the way the claims data is set up. >> before -- don't forget what you were going to say, but i did

want to follow up because there's another question in the be pile that asks about how you work that medical exception. does it happen before or after? how big is the acquisition between the two -- the division between the two categories, that sort of thing? >> my understanding is that it works through, it's before, and it would also occur after, say the colonoscopy gets in, and they need to do some other procedure. >> right. it's a question of communication between our case manager and the calpers staff so that the aberrations or the exceptions are picked up and then can be dealt with. >> okay. andrea? >> i was just going to say that so when it falls into the exception and outside of the reference price, the normal cost sharing would apply. so just to round out the story that if you're outside of the reference price, meaning you're an exception to the rule that would qualify you, then your normal cost sharing and your benefit applies.

>> and could i -- actually, one of the questions that came in before ties into that, that line of observation, and that is, um, you're talking about major procedures with potentially thousands of dollars even in the co-pays. how do these potentially large out-of-pocket expenses square with the out-of-pocket limits that are supposed to go into effect in the affordable care act next year? which i think are something like $6400 a person per year? or has no one -- >> my impression is that at present this particular program where there are options to go to a reference-based -- a facility that is designated within the reference price range is not the same as the standard open-ended out of pocket when you go to any

number of institutions. so there is the choice that the member has here to make, to stay within the range of the expenses. that's my understanding of the current perception. >> and i rephrase that, that means if the patient chooses a nonparticipating program that doesn't meet the price point, whatever that excess is does not count toward the whatever hundred dollar out-of-pocket limit in the aca? is that a fair reading of what you just said? >> that's my understanding. >> okay. >> that's my understanding as well. i think we have some, i think there's some resolved interpretations because one of the things as representing purchasers, purchasers work with many health plans around the country, and not all health plans are equipped or able to -- or want to implement these kinds

of programs. so i think there are different interpretations around that particular issue. which, you know, is maybe health plan dependent. it could be other variables about why someone won't implement it unlike wellpoint that has decided that it's viable. >> question, another question about prices. how do you monitor whether the prices rise for the nonreference price procedures? that is to say, is there some sort of cost shift going on? >> well, i'm sorry. >> go right ahead. >> i will jump right in. when cpr's been advocating for reference pricing or at least encouraging our purchasers to use it a as a strategy, the criticism is, well, that's -- as i said before, it's a really blunt instrument to use in the marketplace, and you just whack at it, and now you've disrupted the market.

but the, the reality is that, you know, employers do have to kind of stand up and say, you know, we're not going to tolerate the variation anymore. and, you know, i think when you, when you send that message into the marketplace, they're going to respond with a shift this volume. and when there's a shift in volume, then you see a change this behave. in behavior. >> and sort of a variation of that same question has to do with the impact on physician incomes. has there been pushback from physicians on this aspect because the total amount is higher -- is lower than it would have been otherwise or volume isn't flowing to the hospitals where they have privileges? have you heard anything like that? >> i can't -- from no? >> i think anecdotally, the orthopedic surgeons have all been pretty positive in terms of coming fort in terms of

participation -- forth in terms of participation programs. as was mentioned earlier, the variation in costs have little to do with the professional fees that we see. so there's a little less, you know, pushback from that. >> okay. >> just the one point i would make, i think it's logical to assume there's going to be disruptions, and that's clearly part of the goal of these innovations is to reduce the cost trend. and a number of stakeholders will get impacted through various interventions. this one happens to possibly impact physicians to some extent and facilities, but there are others that impact individuals' plans and so on. so i think we're all in this together that we're searching for ways to come to, you know, reasonable adjustments to the fact that the trend has to come down. but it does raise the issue both with bundle pricing and with reference-based men b fits that -- benefits that in this

case we assume that the physicianing's decision to operate is correct -- physician's decisioning to operate is correct and the procedure gets done. so, well, maybe you didn't even have to do it. it's all very well to have reference-based prices, but you can make it up on the volume. and so everybody, and so the physicians would certainly come out equal in that setting. so it's encouraging to see that some of the quality metrics that are being developed -- and there are registries now being developed around the country, there's one in california, the california joint replacement registry -- which will, which is collecting data on preoperative and postoperative enrollee function, pain, etc. so that these indices can be incorporated into the decision-making process. so when the surgery is decided upon b, it's based on some rational information. and there's tracking of provider performance in each of these metrics. >> and, of course, kroger program has a reauthorization --

>> we do. and i think the disruption is exactly why we're doing what we're doing. we want people to understand that there is a variation in cost that isn't necessary. and so the more that we have providers calling anthem questioning why the slower the volume going a different direction is great. that's exactly what we want to happen. >> andrea? >> yeah. i was just going to follow up on a point that dr. belman made cans, you know, will -- there is a risk of the payments being made up for on other services. but i think if you speak with a hospital cfo, they will say, well, i know what my margins have to be, i know that if i'm going to take a hit over here, a haircut over here, i'm going to have to increase something somewhere else whether it's on rice or utilization or volume. and i think there is the risk of

that happening. i don't know that we have any evidence of it, of that sort of shell game actually happening. i think the insurers once they have a little more experience with reference pricing and as they see how charges if they have their payment tied to charges and those change, then they will, you know, we'll have a little more evidence of whether there is that kind of cost shifting within a facility's procedures. but i think the, it's -- while it can happen, it should not limit the first step which is to implement the reference pricing on front end. >> yes. david? >> yeah. we get the same question as well for the hips and knees, kind of looping back around. as you saw in our muchs, we didn't actually see an increase in volume over the time, and then on the other three procedures that we're looking at, i think we've seen a little bit of increase in colonoscopy, but that necessarily isn't a bad thing. that's, for screening like that,

it's probably a good thing. >> be okay. yes, ma'am. >> my name is lisa summers, i'm with -- [inaudible] health care institute, and my question is for andrea or anyone else on the panel, but particularly given cpr's work on pa a alternativety care payment reform, certainly ob care is not entirely elective. once you're pregnant, you have to deliver, but women certainly have months to shop for prenatal care and delivery services, and we know there's huge variation in cost and quality. and it's a very high frequency occurrence with four million births a year. so i'm interested in whether or not any of you are looking at reference pricing for maternity care, and if you have thoughts about whether or not the lessons we've learned from the global payment in ma a alternativety care -- which is somewhat like bundled care -- informs this discussion at all. >> so i'll start by saying that so far i think while we work

with some very progressive employers, they sort of self-select to be that way by being part of catalyst for payment reform, i don't know that maternity care will be, maternity care services will be at -- that's probably farther down the road in terms of reference pricing. i think maternity care is much better suited for bundled payment or a blended payment methodology because you have so many parts of, you know, you do have time to look around and shop, but you also have many providers within that system. and then once you're in the facility delivering, there are other variables that can come into play. so i'm not sure that we'll see reference -- maternity care be a reference price bl, if that's a word, benefit. it may be, but i haven't seen it yet. i think it's more appropriate for different kinds of payment reform like bundled or blended

payment. >> the one comment i would make is that, you're right, that there is wide variation. we haven't looked at bundled or reference-based pricing, but because of the wide variation in, for example be, c-section rates amongst hospitals which in california range from 22 to 50% and the appearance or the fact that there is now a decreasing but up until now a fair number of women who were induced, where labor was induced prior to the 37th week or just shortly after the 37th week, between 37 and 39 weeks which is now recognized as a non-- actually, a counterindication. if there were no other complications, a term should be 39 plus. and the rate of these non-medically indicated, premature deliveries has gone down dramatically, but that particular target plus the c-section rate, be the those are

reduced, can reduce costs enormously because a large number of those infants end up in the intensive care unit where costs are astronomical. so one of the early successes we've had is, in fact, with reducing c-sections and with reducing premature induction of labor where it's not indicated. so that can have a big impact on total costs and out-of-pocket costs. >> and this is -- i'm sorry. this is actually an area where the private sector can learn from medicaid, because we have several state medicaids, and we just did a, we just released a case study on south carolina's birth outcome initiatives where it's not a reference pricing ram, but it is a non-payment policy for early elective inductions. and so the, you know, the commercial private sector could learn a lot to reduce those c-section rates and the early elective inductions which are a major cost driver.

>> yes, go right ahead. >> hi. my name is -- [inaudible] from the national academy of social insurance. and i have two short questions. so in addition to consumer education, are there a new set of challenges for implementing reference pricing for orthopedic and other health care services versus implementing it for trucks and pharmaceuticals? and then -- drugs and pharmaceuticals. and be then really quickly, my second question, are there examples either at home or abroad where reference pricing has not worked in bringing down the cost of care or in bringing down the quality? >> i think reference-based pricing, target pricing is still so new that it's hard to say, um, you know, where it hasn't worked right. we're all kind of in that version one type of initiative where we're just trying certain things. we're trying different things between calpers and what kroger's doing and what other employers are doing. so i think it's early to tell where it's not working. i think in kroger's results we've seen positive results both

on the quality cost side and from feedback from our associates. so we haven't seen any one of the things either on the pharmacy side or the medical side where it's not working yet, but we're certainly watching things like it here on the pharmacy side because, like i said before, we don't want people to forgo medication when they need it because of cost. so we need to look at that very closely and make sure that's not happening. but right now we haven't seen anything negative or something that's not working yet. >> in our research, we haven't found either at home or abroad. i think at home it is too new. abroad where reference pricing on druggings has been, um, quite common, i haven't read anything that would indicate that there was a decrease or that it didn't decrease costs and it also decreased quality which we want to improve quality. on the consumer education piece, i don't know if anyone on the

panel can answer that question. i don't know that there is -- there are different challenges for implementing different types of reference pricing programs, so it's obviously, when you're implementing a reference pricing program for hip and knee replacement which is far more complex than just a lab test or imaging, you know, there are lots of variables in there. the consumer education piece has to be tailored to the type of service, or if you're doing multiple services, it has to be tailored to it. i don't know, you know, i think a lot of it would -- it's around medical literacy and being able to articulate something in an easy-to-understand way whether it is a lab or a knee or hip replacement, but it's highly dependent on the type of service. >> i think the other thing is it's easier to know or ask about the cost of a prescription drug than it is to know about the cost of a medical service.

so when you're going to the counter at a pharmacy, you can ask about different costs for different levels or categories of drugs, the generic versus a brand name, etc. and it's not so easy on the medical side. you have to do a lot of digging and a lot of research to even know where to go to get cost information on the medical side. so it's a little easier on the pharmacy side today, but we're hoping on medical side it gets to be just as easy so that people can make better choices. >> a couple of times in the last few minutes we've talked about elect i versus non-- elective versus nonelective health expenditures, and we have a specific question asking if we have some sense of what share of health care spending is elective as opposed to trying to negotiate while you're in the ambulance on the way to the emergency room. >> i don't know the proportions of spending. >> i have no idea.

>> could find out. >> could find it, but -- >> and since chronic care counts for such a large percentage of spending particularly in medicare, does that count as elective or not? one would think that if you're taking a preventive drug or going through some sort of service to keep you from worsening in your diabetes, that that would not necessarily be elective. >> well -- >> could you apply that, apply reference pricing to those kinds of things as well? >> so in the kroger program on the pharmacy side, it's any script in those four categories of drugs. on the medical side with the high-tech imaging, we don't do target pricing for children. although we're finding that what's happening with our associates and their family

members who are over the age of 18, they're starting to ask questions when their children need an imaging service. so that's good. and we're also not doing it on emergent services. so don't really call it elective, right in you're getting an mri or a ct scan and it's not a an emergency, target pricing's going to apply. >> david, do you have something to add on that? several people are interested in the application of your travel reimbursement policy. you might call it domestic -- >> domestic tour itch. >> -- tourism, medical tourism, yes. so let me just read them off because there are a bunch of aspects of it. if somebody had to travel to a distant hospital, are travel expenses paid before travel in the event the patient can't afford it? what kinds of expenses are covered such as lost wages for extra time off, child care, postprocedure follow-up visits,

expenses for a traveling companion, i think we may have heard a little bit about that. that's all on one question card. do you pay for follow-up care for patient and family after a procedure at a preferred provider who's located far away from the patient's home? and finally, are reimbursement for travel expenses is good, but what about for conditions where travel is difficult and painful or people who don't have a companion to travel with them? what is, what are the conditions under which you're requiring people to pay for travel impacting their mobility and ability to get to the high quality care? lots of interest. would you like to expand on your descriptions of the travel policy? >> sure. so in the kroger program in our centers of excellence program,

if someone chooses to travel to use one of our we call them tier one facilities and they don't have one this their community -- in their community, we have a group of professionals at anthem that that's what they do. they help to coordinate the flights, the hotels, the meals, the companion traveling with them. all of that is taken care of so that it's not coming out of the pocket of the associate. so it's billed as a claim through our billing process that we have with anthem. so all of that is taken care of for them. if someone can't travel, then we have accommodations for that as well. so they're not penalized for having a comorbid condition that prevents them from traveling or some other type of barrier. so it isn't intend bed to be such a stiff penalty just because they can't travel. so we try that first, and if

they're willing to do that and if they can physically do that, if not, then we also accommodate them to try and get them to another centers of excellence be, a tier ii provider to take care of that for them. so we really try and coordinate all of that. i would say one of the challenges that we experienced early on went we implemented the centers of excellence program was the postoperative care. so moving someone back from a centers of excellence facility that might not have been in their community and getting them back into their local provider for that care. and so it's taken a lot of coordinationing between an hem finish coordination between anthem and the nurses that help us do this at anthem, the surgeon and the local provider community. i think we finally got it all figured out, but that was really where the challenge was. it's not getting them to the high quality facility, getting the great services there. the challenge for us is really getting them back into the local provider community. but it's working, and it seems

to be something, i think, that barrier has been worked out for us. >> david? >> follow up with the same, anthem has a concierge service which provides all the travel arrangements. the -- also, again, the same. if they're not allowed, if they have a chronic condition that doesn't allow them, they would get a medical exception which wouldn't force them to use the facility. so they could use something in the community if it was too far. and in california, luckily, we have enough facilities, that only happens at a very small number of facilities in northern california where we have this kind of issue. >> and, actually, this question goes in the other direction. if examples provided today -- in the examples provided today, we see large insurers pushing for competition in procedures for which there are a lot of providers in an area.

do you have any thoughts on how this model might work in an area with just one or two providers and a small insurer network? we're at -- is that what you find yourself addressing when you have somebody in eureka? >> right. so, i mean, that's the challenge, right, of having enough regionally-located, geographically-dispersed reference-based pricing facilities and then having to have that travel and the canyon package -- companion package. and so in terms of the impact of that in terms of on the market, well, if there's only one facility and they're either meeting or not meeting, so it's, you know, it's a little difficult to look at the variation in a region like that. >> yeah. i was just going to comment that if you have only one or two providers who can perform a procedure in a geographic area, you -- if there is variation, which most of the time if

it's -- it's really only one or two providers or very few that are clustering around each other, so you don't see the same variation. therefore, you, you know, this type of pricing doesn't necessarily have the same impact for those providers, and it won't have the same kind of -- and if you think about it, then you could end up if some kind of antitrust issues where if you have two providers and they're agreeing to either set or be close to one another on price, i mean, we get into a whole other area of complicated issues when you're really only talking about where you don't have competition and you only have one or two providers so you can perform a service. so it's not likely that these will occur there. >> okay. we have only a few minutes left, and i'm going to ask you to spend those minutes not only listening to the qs and as but also filling out the blue evaluation form if you would. and we have another

california-centric question here. how about you've got a market in california that is heavily penetrated by hmos, and the questioner wonders how the reference-based prices for anthem's ppo compare to the prices in california hmos. the prices that they pay. >> well, the hmo in california in general is significant, although it's actually decreasing gradually over the past few years, and the ppo is increasing overall. but there's still a very large number of hmo members. in most cases as far as anthem goes, the hospital pricing is a contract between anthem and the hospital. so the professional component is

where the capitation occurs on the hmo side with the exception of about 15% of our network which is in a full risk or more of a global capitation setting. so the answer, in short, is that the hmo is not currently part of this initiative. and the prices paid at those institutions are the prices that the standard anthem price. >> and, actually, this is a related question, at least poor country lawyer thinks it's related. it might not be. why can't reference pricing be part of the carrier networking contracting negotiations, that discounting up to the reference price versus usual and customary? is that a reasonable question if this context? in this context? >> well, first of all, i'm a

physician ad hoc, so -- [laughter] i don't want to venture into that. but be i think you're asking is it, should it be part of the normal contractual negotiation or rather than the negotiated price it is a agreed upon between both parties s that the essence? >> i guess that's right. that as you establish -- >> right. >> -- a network that's willing to meet that price, can you leverage that into going to those who are outside that range and negotiate that as art of your new contract? as part of your new contract? >> >> well, i'm probably not going to venture too far into that other than just to reemphasize the fact that there was that pressure on the nonconforming institutions with the calpers initiative to actually bring the prices down. which actually happened without it being a direct goal. so it may well be that it could be effective. >> i was -- >> [inaudible] >> from a payer's perspective, it's where we want it to go,

right? so we want to be able to bring the cost down of all of those services in a particular category, so hopefully, target pricing or reference-based pricing is eventually going to lead us there. it's just one of the initiatives trying to get costs more aligned in a community. >> i think it's really important to understand that, i mean, reference pricing is ultimately a benefit strategy. it's not a payment strategy. so while you are capping the payment, you could still pay for it on bundled payment or fee for service or another method. so reference pricing is a benefit design. so while, you know, calpers -- i don't want to speak for david here, but calpers implemented reference pricing without having to renegotiate contracts, and anthem didn't renegotiate contracts during that period. they looked at the data, and they set the benefit design price of $30,000, and then hospitals moved cordingly.

and then surely, i would imagine, in subsequent contracting cycles with those facilities that were either outside or at or below, that becomes part of the conversation. but you don't have to implement reference pricing through a contract negotiation although once it's occurred, it probably does become a part of it. or i think there's a question. >> [inaudible] >> you want to get to a microphone? right behind grow. right behind you. >> right now -- i'm a taft-hartley fund, but anybody who has a relationship with a good carrier like an anthem, they say we'll give you a guaranteed discount of 60%. but it's based on the usual and customary. and what i'm suggesting is we would have a lot more manpower if our carriers weren't just

negotiating on my behalf or kroger's behalf, but on their of business and telling some of these facilities we will take a 60% discount but be up to a reference price as opposed to the usual and customary which is more supply driven. and so it's a really kind of out of the box way to think, but it's something i think everybody in the room could benefit from if they have, you know, stronger negotiations while we still have a chance before network negotiations go away because everyone in the country's going to have insurance, and a hospital won't take a discount anymore. >> that's a very improved formulation of your question from if -- from mine. and does it elicit some further response from any of our panelists? >> well, again, the point i would make is that i, that in this whole area of pricing has been changed as a result of the,

let's say the shroud has been lifted. and so the previous discussions that occurred on discounts or the desired target price were discussions around the argument about percentages off. now discussion is different, and those high-priced institutions from my own personal experience in california are aware of the pact that their prices are now out this and can be seen by the public. and so it is a different discussion. to the extent that you're -- the end point you've described, i can't speak to that. i'm not expert at that. but i believe the nature of the discussion has changed because of the fact that when the target prices are put out by these institutions, they are -- they could be recognized as way out of range of averages and reasonableness. so i think it's a positive. i'm not sure exactly where you want to get to yet. >> okay. all right. and by the way, one of the best

illustrations of the impact on the upon the participating hospitals is this the -- on the nonparticipating hospitals is in the chart. jamie robinson, and we have our friends to thank for these very readable one-pagers summarizing jamie robinson's article. there's a lovely chart on that second page that shows you the impact on the pricing of these services in the hospitals that were not participating in the calpers experiment. yes, bob. >> bob grist with the association of community health. with all the discretion that the payers have in setting reference pricing that you've disclosed in this panel and with the tendency of employers to cost shift onto

employees usually in the form of greater deductibles or co-payments, what are the protections for consumers from reference pricing which sets a standard price and expects the consumer to pay anything over that reference price? it seems like a very dangerous precedent even if it's in the interests of the payer in the short run. you haven't given any indication that this is a way of actually reducing total health care costs. we don't know whether the hospital is going to follow this procedure with regard to other payers or whether they're going to shift those costs onto other procedures. and i'm not sure how comfortable we should feel about this

particular short-term strategy to help payers reduce certain costs. the panel itself is telling one story, and we don't have on the panel providers or consumers who have been discriminated against because their unique needs did not fill the, you know, you sort of assume that quality remains the same. but, in fact, that may not be the case if most health care situations -- in most health care situations. >> well, for us, i think, it's about being an informed patient. and it's completely sol p tear -- voluntary for our associates and their family members to choose where they get care. we don't tell them they have to go anywhere. the choice theirs. and they have an opportunity to be informed before they obtain a ct scan or an mri or get a

particular prescription and to make a coys as to whether or not -- a choice as to whether or not they want to stay under the target price or if they prefer not to. so the choice completely theirs. it's about, for us, it's about information and about helping them be informed consumers of health care and to make a choice from that perspective. so they know whether or not they're going to be paying more if they choose to do so. >> go ahead. michael. >> yeah. no, that's a very good question, and i would say to the issues of patient protection, there is the protection that if the enrollee or the member stays within the defined reference-based network, then their share is fixed as to whatever benefit structure they have with their employer. the only time they would be subject to additional cost is if they went outside the network. so i don't think it's necessarily bad in that sense.

the quality issue is relevant, and i agree that when you're talking about quality in general, there are a large number of metrics out this, and there are a few hundred that have been developed by very prestigious organizations. but be when it comes to -- but when it comes to specific quality issues within these very detailed procedures such as hip and joint replacement and so on, a lot of quality metrics that need to -- or a lot of quality information that hopefully will come out of registries. what we have at the moment is not completely adequate. so in terms of the overall success, i would just say that there are a number of initiatives that have been put out there, and there are various organizations that describe various initiatives for bending the cost curve down. very many of them have failed. and this is one of the few that at the moment has had some success. and it's had success as well documented not just by calpers and not just by anthem, but by

an impartial third party here with the health economists at uc berkeley. so i think there is some validity to this study the. i'm pretty sure. these are very good researchers. and i think it is a success story. now, whether or not it can be replicated a across the country, that remains to be seen. but in this has been a successful initiative, and i think it's -- i mean, i'm biased, of course, but i think it has done something to push the knowledge and the practice of health care delivery along. >> go ahead, david. >> okay. calpers is exreamly sensitive to this -- extremely sensitive to this question given who we represent and, in fact, the jamie robinson article includes an analysis of the out of pocket to the payers. i didn't include it because it gets a little complicated talking about coinsurance, co-payments, deductibles, but we did see the out of pocket went down to our members over time with the implementation of the

program. and in general, if you think about so something like -- so in that case with the hips and knees the deductible plays a big role in terms of how the out of pocket hits you. something with the more, the colonoscopies, the cataracts, you know, the coinsurance still plays a role there, and, you know, the lower costs are going to benefit you. so that is going to be included as well as when we do our follow-up economic analysis of those three other procedures we're doing on reference pricing. in terms of total costs, that was also included looking at the out of pocket plus the net pay, so that went down dramatically as well. as i said, for the hips and knees. and that may have been due to the deductible being reached in a number of cases. and then i think your last part was a little bit about, talking about the bubble. if you push down on the balloon here, it comes up over here. i think that's just for calpers something we'll have to look at in the future and be aware of and be concerned about. >> and i just wanted to comment

that i think there is awareness on behalf of the payers and the purchasers that this is somewhat of a short-term fix. but it is one of the few short-term fixes that actually is seeing positive results. and so in the absence of being able to look at the total and being able to bend the total cost curve down, i think the strategies are having to be, they have to be a little bit more piecemeal. so it's not that we're not conscious of the impact that it could have, it's just that sometimes things have to occur incrementally. and as dr. belman said, some of the incremental things haven't worked so far, and this is actually starting to work. and then we'll have to see what lessons can we learn from this to look at the more total population costs and the total costs and not having that cost shifting occur in the balloon

impact. but part of this is disruption and inthough sative disruption -- innovative disruption that could help with short-term costs which we are all struggling with and then learn from that to see what are the long-term lessons and strategies we can put in place. >> all right. my, that is a fittingly big picture end to this discussion, final comment anyway, if not the end. this has been quite edifying for your moderator anyway. i've learned an awful lot about the way this mechanism works and might work for others in a similar situation. and i'd ask you to while you're filling out the evaluation forms that you've not had a chance to do yet note that we are indebted to our friends at wellpoint for helping us think through this session and put it together and

for your great questions which covered a number of aspects of this that weren't all that clear. and finally, ask if you would join me in thanking our panel to help us understand this concept. [applause] [inaudible conversations] >> and taking you live now to the senate, gaveling back in for general speeches. they'll be debating the nomination of robert wilkens to serve on the u.s. court of appeals for the d.c. circuit, a vote to move forward on that nomination is scheduled for 5:30

eastern time. also today possible work on bills that would expand fda oversight of pharmacies and 2014 defense program as. also today the senate homeland security committee will be examining the impact of digital currencies. we'll have that hearing live at 3 p.m. eastern over on our companion network, c-span3. live coverage now from the floor of the u.s. senate. the president pro tempore: the senate will come to order and the chaplain, retired admiral barry black, will lead the senate in prayer. the chaplain: let us pray. our father, be with us not only in great moments of