Knee Surgery: $20,000 or $120,000

In 2009, Calpers realized it was paying anywhere from $20,000 to $120,000 within California for knee surgery for its California members. There were no commensurate differences in the surgery’s outcome. Starting in January 2010, Calpers set a $30,000 limit—its employees and retirees would have to pay any extra money. Due to this new rule, 63% of patients covered by Calpers selected low-cost hospitals (41 California hospitals were identified as quality providers who charged < $30,000 for knee surgery). Half of the high-price hospitals cut their rates. Across all hospitals, prices charged to Calpers for joint-replacement surgeries declined by 26% in just the first year—the drop was even greater the second year.