As the cost of healthcare continues to rise, employers search for new ways to reduce those costs while maintaining the quality of care they want for their employees.
One approach that’s not so new to the scene but gaining in popularity as a cost containment strategy is Reference-Based Pricing (RBP).
RBP seeks to provide the true cost of care administered by a healthcare provider or facility by replacing the antiquated percent off billed charges that are based on an ambiguous chargemaster or fee schedules that beg the question of the source(s) for the procedural prices.
Reference-Based Pricing, also commonly referred to as Medicare Reference Based Pricing, Reference Based Reimbursement and Metric Based Reimbursement, is a strategic alternative to a traditional PPO network, replacing High Deductible Health Plans (HDHP).
RBP comes in many forms, basing the reimbursement amount on some type of Medicare-based rate, cost of charges or percent of savings, and it can be structured with or without a contract with a hospital and/or individual provider.
When an employer-sponsored, self-funded health plan transitions from its current PPO plan to an RBP plan, they will realize the benefits of lower provider reimbursements, increased plan savings, increased satisfaction, and possibly healthier employee populations with care being more affordable.
Before a self-funded group makes the move to this model, it’s important to understand how an RBP program works.
There are several options for adopting an RBP plan, and depending on the partner you choose, such as Payer Compass, you will encounter different approaches to navigating this reimbursement strategy.
Through the support and guidance of a Third-Party Administrator or Benefit Advisor, a self-insured group can select their optimal RBP plan. Factors such as plan locale, RBP climate, and risk, among others, should be considered in determining the best RBP model:
- Full PPO Replacement Model – RBP for all claims
- OON Model – RBP for Out-of-Network claims only + PPO network for all other medical care
- Hybrid Model – Narrow network or Direct Contracting + RBP
- Carve-Out Model – RBP for specialty, carve-out services only
Approaches to RBP differ based on the parties involved – TPA,
Payer Compass’s turnkey RBP program, INNOVATE360, focuses on three pillars:
- Accurate Claim Pricing: Claim pricing encompasses not only pricing/repricing a healthcare claim, but also editing, gap-filling for claims that seem unlikely to price, and contract management.
- Proactive Patient Advocacy: Patient Advocacy includes education of the plan member and provider, gaining acceptance of the plan rate by the provider, balance billing communications and correspondence, and care coordination when needed.
- Effective Balance Billing Strategy: The balance billing strategy consists of upfront review and alignment of all plan docs, escalated balance billing support and the oversight of appeals determination and fiduciary responsibility.
Now that we’ve established what a comprehensive RBP program is, let’s see what it looks like from the eyes of the Plan Administrator and Plan Member.
Let’s say Widgets, Inc. implements an RBP plan, replacing its HDHP. Widgets educates its plan members upfront to familiarize them with this new concept (your RBP partner should have education materials for use).
Jane Doe, who works at Widgets, needs a knee replacement. Jane asks her friends and family about reputable providers in the area and decides to contact Dr. Smith. Once Jane sets an appointment with Dr. Smith, she contacts her Patient Advocate to notify them of her scheduled visit.
If Dr. Smith’s office has questions about Jane’s RBP plan, the office can reach out to her Patient Advocate who can provide education and answers to Dr. Smith’s office to ensure they understand and accept the plan rate.
Jane successfully undergoes knee replacement surgery, and the claim is processed in line with her RBP plan, without any additional out-of-pocket expenses from Jane to Dr. Smith – this is the case for 99% of all scenarios experienced by Payer Compass clients.
Alternate Scenario Outcome:
If the situation were different, and Dr. Smith sent Jane a bill for an amount over the agreed upon plan reimbursement rate, known as a balance bill, Jane would first notify her Plan Administrator.
The Plan Administrator would help Jane verify that the difference was a legitimate balance bill, and not an owed copay or deductible. If they found it to indeed be a balance bill, the Plan Admin would contact Jane’s Patient Advocate who would then go to work for her to address the outstanding balance with Dr. Smith.
In this case, additional balance billing strategy may be activated including appeals support and fiduciary responsibilities to resolve the scenario.
Reimbursement solutions like Reference-Based Pricing provide a valuable, sustainable method for employers to provide the benefits they want to give their employees, without crippling their budgets.
Some self-insured groups are hesitant to migrate to this type of model, mentioning fears of risk, upsetting plan members with a new concept, and lacking knowledge of industry partners. However, with education and building trusted partnerships, the outcome is bright.