The California Public Employees' Retirement System, the nation's third-largest purchaser of healthcare, moved closer to adopting both a restricted provider network and a regional pricing model that would charge its 1.2 million members different rates for coverage depending on where they live. CalPERS officials said 26-hospital Sutter Health agreed in principle either to offer discounted rates or participate in a narrow network that would exclude 15 of Sutter's highest-cost hospitals, as well as 30 others. Sutter initially resisted when CalPERS unveiled the proposal last month. A study by Blue Shield of California, CalPERS' largest HMO carrier, found that Sutter hospitals were 80% more expensive than the statewide average and that CalPERS could save $53 million a year by cutting ties with 15 of the hospitals.
CalPERS' board also accepted a recommendation to divide its membership into five regions to establish fairer pricing for the some 1,100 cities, counties, schools and special districts that account for 38% of the pension fund's enrollment. About 37,000 members in Southern California pulled out of CalPERS' health program early this year because their public agencies were able to find cheaper rates locally. While the action does not lock the board into approving regional pricing, it allows the directors to find out what premiums could be charged in different regions. A report on those premiums is expected next month, and a final decision on the entire $3.9 billion health package will be made in June. -- by Laura B. Benko