"Pssst... I can get it for you cheaper!"
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"An example of reference pricing is the initiative by the California Public Employees' Retirement System, or Calpers, for orthopedic knee and hip replacement...Calpers was upset after noticing it paid between $20,000 and $120,000 for the same procedure across the state, without commensurate differences in outcomes. In January 2010, the retirement organization established a $30,000 reference-price limit on what it would pay..The percentage of Calpers patients selecting low-price hospitals increased to 63% in the year after reference pricing was introduced, from 48% in the year before, and the trend continued into the second year after the introduction. Across all hospitals, prices charged to Calpers for joint-replacement surgery declined by 26% in the first year and by even more in the second." James C. Robinson in The Wall Street Journal
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