staten category. other than that, ppi and test strips, utilization went down a little bit and we're really watching that closely. we don't want people to stop taking medications when they need it, but we just want them to be better educated about the quality of the services they're receiving. just a brief moment. what we did is look at knee replacements, mus skeletal has been one of the highest in the plan, so we look at cost and quality of care that people were receiving and could we take a network and tier it so that we could pay just a little bit home run and inclumore and include t

expenses if somebody was willing to go to a provider. we have four tiers within the network. and we leveraged the blue cross and blue shield centers of excellence and tiered it even further. we started with quality and added a cost component, so this is some of the results from 2012 and 2013 when we implemented that. about 264 joint replacements or back fusion surgeries in the last 18 months or so. in the middle blue bar, you can see the impact to the cost of someone who chose to go to the highest quality, most cost efficient providers around the country. we saw about a 20 to 30% reduction in costs. when you include travel, so we plaid for travel and a companion to travel. similar to what health purse is doing. again, about a 30 perts decrease

in cost and from a quality perspective, no adverse side effects. potentially avoidable complications, there were none, by someone maybe not going to a facility in their hometown. where they had to travel for that knee replacement. we had people traveling around the country for those surgeries and had great feedback and experiences and as you can see, great quality and low cost for our members or associates and overall, i would say our associates are very pleased with the programs. one of the things we thought we would hear is a lot of pushback. you're just shifting the cost to me. instead, we're hearing thank you. thank you for letting me know there's such a big difference in cost in my community and if i know i can go some place else and get the same eququality at s cost, that's good for them and the company. so, we're actually seeing a lot of positive feedback.

so thank you for your time today. >> thank you. very interesting stuff and finally, we're going to hear from dr. michael bellman. he's the regional director for anthem blue cross of california. anthem, as you have heard, sa part of well point. 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 his role of insurers in reference pricing and their various partnerships. only made a couple of changes -- so, you'll be able to get the latest version. >> thank you.

it's a pleasure to be here and thank you for coming. i want to start with a story relatively recently has become a big topic. it was much hidden. i'm giving some o o personal health information. i had cataract surgery four years ago and two years ago in los angeles and used for the first surgery our anthem, which provided the total cost of various procedures that was the total cost that would include the facility, the position, the anesthesiologist, whatever you need. for a cataract. and what i learned is that there was a wide variation in the cost. i live in west los angeles, where it's not only important to be healthy, you have to look good as well.

one of the striking things is that a free standing surgical structure in 90210, just around the corner for the gucci store, 3200. two largest facilities, 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 to $3,000 out of the pocket as a result of that and it also saved anthem money in the sense they're paying the 3500 and not the expanded fee. so, i'm telling you this because my experience, relevant for me, doesn't make much of a dent in these two high priced institutions and didn't save that much money for anthem, but now what we're seeing unfolding

and what you've heard today -- the actualization to make a big impact in terms of the price that everybody pays frchlt because in fact, once these expenditures from the employers starts trending down and in some cases, it is trending down, that makes a difference to the premiums they charge the following year and that's the premiums that you pay. so this is a direct impact for us. just wanted to emphasize that because because it has relevance. as good as the cataract surgery was, there's no way that i can read that screen over there. so, the point i wanted to make at the beginning is that the cost outside of premiums, copays and deductibles are typically unknown for the average consumer and physician. that's why this is an education for physicians and i commend

kroger on making sure that the fi is sigss know about that because they are totally oblivious to the charges. they know what they receive, but don't know what facilities receive and what drugs cost. a recent article high leichted this dlim ma and called it an unavoidable side effect. 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. 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 when the we had the talk

for the from cpr. essentially, it shows the institutions that provide hip and knee surgery. so, it was noted that when you choose a value of $30,000, that you encountered 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 and didn't require long distances. we did look at the quality and i'm going to come to that in a

moment. the design establishes a payment threshold -- the ability to choose a facility that will provide services with an prominent cost range. one interesting term that's being used is it acts as a reverse deductible. instead of paying up to a defined limit and then the plan taking over, which is the standard deductible you're familiar with, in this case, it turns that on its head and the plan pays up to the limit where if they choose an institution, they're liable for the increment. the participating hospitals were based on the procedure volume as you've heard. they met the standard regulatory standards, so they were they met the levels. and we also have an anthem quality program for hospitals. and treatment that the hospital

provides and outcomes that provide publicly. all of these hospitals were participants in the program. so, the impact was the shift of members to hospitals and i think i would -- the big change was the shift away and the decrease of total costs and this was a critical point. how the market reacted to this. was the decrease in costs in the nondesignated hospital. some of which immediately prior to the advent of the program, lowered their pricinging the network.

the other poinlt is that the upward cross trend from 2008 to 20 2010, was reversed in 2011 with the advent of the program, so this was a very striking example of bending the cost code down, which i believe is the washington phrase or the goal that has been set for the affordable care act. on the quality side, we use the hospital planes to look for general infections, if there were results from heart problems, lung problems, kidney problems, as a result of the surgery or that there were infections like pneumonia or kidney infections and so on after the surgery and in fact, in the designated hospitals, these rates dropped slightly. it was no difference in complications related to the

surgical site itself in terms of the prosthesis that were replaced, the hips or the knees. there's no difference between the two sets and no other site complications like local infection and the bleeding and the like. we also followed the claims for 180 days after the surgery and it's important to note there was no difference in the readmissions, either for joint issues or 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 non help eers p claims. as you saw in some of the slides that were shown earlier, there was this comparison groups in the same geography as the members.

we have a number of other clients also joined the reference based benefit movement and so i've listed some of these. it's not as important as the fact there is now i would say a shift and number of large employees are embraced in this program as a way to obstruct. very largely driven by institutional pricing. we have expanded it to include outpatient procedures which are for cataract, ar tlos ko pi and endoscopy. this has really blown the lid

off the veil of secrecy. include iing the very notoriouse in "time" magazine, a major impact as was cms' release of charge masses, which occurred recently as well. the intermountain health system run by a very, very prominent health researcher, brent james, on their current initiatives within the salt lake city region and i would imagine most of utah to develop a not what they call a charge monster, but in fact, a cost master.

which has been the bases up until now and i think this is really the start of a new movement where cost accounting, which has been a part of most other industries will enter the health care arena and make it more logical. that's an encouraging developments. spans the transparency of medical prices. raises the question of why varuation in price for the same procedure is justified. it is important to -- number of organizations that are out there collecting quality, but there's still much work to be done in this regard. it helps members make choices that reduce cost for the company, the individual and it's a valuable tool in the approach of bending the cost down. thank you. >> thanks very much. we are at the point where we have input here.

there are green cards that -- 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 wanted to ask one of your panelists another question to jump right in and let's mix it up and in the meantime, the first micker upper, would you please identify yourself and keep the questions brief as you can. >> i will do both. i'm bill rogers. my first question do all of these reference prices include the professional or physicians payment and how do you decide what to do in subsequent years. >> the answer to the first one is yes.

you talked about bundles payment being part of this. >> i think in the example, that's one not all reference prices. that's something you need to distinguish, but if you as this evolves and as reference pricing gets paired with a bundled payment then yes, you'll see them be bundles today and paired together. >> you look at physician reimbursement across the state, down to anthem's, there is variation minor and in some cases, if there is special expertise but the degree of variation is a fraction of what it is for facility. how do you go from year to year.

can you ratchet it down further? >> from kroger's perspective, 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 around $800 for one of those high-tech imaging services, but we found we really didn't need to adjust it at 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 service needs to stay 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 that level. >> yes, ma'am. >> hi. i believe it was mentioned that education was the variable that was distinguishing between those

opting for reference of target based procedure, facility and those that weren't and i'm wondering if there's any evidence of that or of any other variables that would distinguish between folks that do and don't and providers that opt for that and don't. thank you. >> from kroger's perspective, we have anthem after every individual that has an mri or going through our target price program. they're actually serving 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 just 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. anything past that, they don't. it's complicated. so, having that initial e

education up front, we do a lot to communicate and give them access to a lot of resources. it's going to take some time to get people to understand they have choices to make and that there is a lot of variation so we're going to continue to give them accesses to resources. right now, we don't have an online tool people can go to to get information about cost of quality providers and we will be implementing something like that so they can access information before they go to the providers and before they have to get a particular service, so we're hoping that would help further education people. >> david. >> pretty similar to cal pers situation. anthem does a patient experience follow up study in looking at --

similar to kroger, we're rolling out a more web based and mobile tool to provide cost and quality information as well. >> you've unleashed a tremendous volume of questions and we're going to plow right in. a lot of them are basic and will help fill in some of the blanks. how do insurers handle complications in procedures that extend the cost above the reference price and are consumers forced to accept that burden? >> if the routine becomes nonroutine, it would not fall under the program.

you'll see some of those dots are outside of the 30,000 or above that and those are falling into the nonroutine proceediers, which are not excluding. >> don't forget what you were going to say, but i did want to follow up because there's another question in the pile that asks about how you work that medical exception. does it happen before or after. how big is the division between the two categories. >> my understanding is that it works through it's before and it would also occur after if say a colonoscopy and some other procedure. >> the information between our procedure and the staff so that the aberrations or exceptions are picked up. >> okay.

>> when it falls outside of if reference price, normal cost sharing would apply. so just to round out the story, 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. >> could i actually one of the questions that came in before ties in to that line of observation and that is you're talking about thousands of dollars, even within the copays. how do these square with the limits that are supposed to go into effect next year? which are like $6400 a person per year.

>> this particular program where there are options to go to a reference based facility that is designated within the price range is not the same as the standard open ended pocket when you go to any number of institutions, so there is a choice that the member has to make to stay within the range of the expensions. that's my understanding that's the current perception. >> and can i rephrase that? that means that if the patient chooses a nonparticipating program that doesn't meet the price point, whatever that excess is does not count toward the 60 whatever hundred dollar could have pocket limit in the aca? is that a fair reading of what you just said? >> it's my understanding.

>> that's my understanding as well. one of the things, purchases work with many other health plans and not all are equipped or able to or want to implement these kinds of programs, so i think there are different interpretations around that issue, which is maybe health plan dependent, it could be other variables about why someone won't implement it, unlike well point that has decided it's viable. >> how do you reference -- is there some sort of cost shift going on? >> well, i'm sorry. >> go ahead. >> i will jump right in and say one of the things when cpr had been advocates for reference

pricing or at least encouraging purchases to use it as a strategy, the criticism is a really blunt instrument to use in the marketplace and you just whack at it and now, you've disrupted the market. but the reality is that employers do have to kind of stand up and say we're not going to tolerate the variation anymore and when you send that message to the marketplace, they're going to respond with a shift in volume, then you see a change in behavior. >> sort of a variation of that question has to do with the impact on physician incomes. has there been pushback from physicians on this aspect because the total amount is high, 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 think the orthopedic surgeons have been pretty positive in terms of coming forth. as was mentioned earlier, the variation in costs has little to do with professional fees that we've seen, so there's little less pushback from that. >> okay. >> i just want to point out, i think it's logical to assume there's going to be disruptions and it's part of the goal of these innovations is to reduce the cost train and a number of stakeholders will get impacted through various interventions. this one has to possibly impact others and others that impact individuals and so on. i think we're all in this together.

reasonable adjustments, the trend has to come down. but it does raise the issue both with pricing and with referenced based benefits that in this case, we assumed that the physician's decision to operate is correct and the procedure gets done. so, there is no second guessing here to say well, maybe you didn't even have to do it, so it's well to have referenced based benefits and prices. but you can make it up with volume and so, everybody would certainly come out equal in that setting. it's interesting to see some of the quality metrics developed, there's one in california. the california joint replacement registry, which is collecting data on pre and post operative function, pain, et cetera, so

these can be incorporated. >> and the program has a preauthorization. >> we want people to understand there is a variation in cost that isn't necessary. the more we have providers calling anthem questioning why the flow or the volume is going to different direction, great. that's what we want to happen. >> i was just going to follow up on the point der belman. there is a risk of the payments being made up for on other services.

if you sit across from a hospital ceo, i know what mien margins have to be -- i think there are is the risk of that happening. i don't know that we have any evident of it actually happening and how the insurers, once they have a little more experience with reference pricing and see how charnls, if they have their payment tied to charges, we'll have more evidence of whether there is that kind of cost shifting within a facilities procedures. i think it's while it can "happy-go-luck "happy-go-lucky "happy-go-luckhappe limit, it should not on the front end. >> yes, david. >> we get the same question. well, for the hips and knees, kind of looping back