Perhaps over the last several years or even months, you’ve heard the term Reference Based Pricing (RBP). It’s gaining popularity in many regions of the United States, and is the next up-and-coming strategy for employers to control healthcare costs. As the name implies RBP utilizes as a basis for pricing some reference – usually Medicare as the reference base with which to re-price a claim  and pay it based upon a Medicare-Plus or Cost-Plus basis, or a combination of the two.

My experience over the last several years has been terrific working with one of the originators, the Gold Standard, and leader in the field. Since then, over the last few years other companies have sprouted up to do the same thing. In my opinion, it’s a highly effective method for any employer.  However there are numerous questions to ask any of these companies, as their services can differ a great deal. A few questions to ask:

  • What is the basis to methodology of your re-pricing?
  • Do you re-price for facilities, professional services, or both?
  • What advocacy programs do you provide and how do they work?
  • What happens if a member receives a balance bill?
  • Do you provide legal representation on behalf of a member, if necessary?
  • Since you’re re-pricing claims on behalf of my group plan – making those determinations – will you agree to be a co-fiduciary of my plan?

There’s a great deal more detail to uncover in order to differentiate one RBP company from another – services will definitely be different.  As an employer, it’s extremely important to know those differences and how your company, and your employees will be treated and serviced.  You certainly don’t want dissatisfaction amongst any employees – if there becomes a disagreement with a provider, it can be David vs. Goliath situation if it’s not handled properly.

Here a simple look at some financial experiences to better understand the significance of the program.  These are real numbers that illustrate charges and allowances over different periods of time on different claims.

Company                                       Billed Charges                          Allowed Payment

  • A                                          $2,749,896                                       $857,968
  • B                                          $4,285,815                                    $1,315,745
  • C                                          $1,090,992                                       $345,523
  • D                                          $1,793,964                                       $733,731
  • E                                          $3,425,779                                       $914,683
  • F                                          $3,633,840                                    $1,122,856

PPO Networks cannot generate this kind of savings, regardless of what you might think.  PPO discounts are generated off of billed charges, which are controlled by providers and can be increased at any time. It’s a “discount off of what” situation.  When you use RBP, everything is re-priced using a predetermined basis – Medicare or Cost – and it doesn’t matter what a provider chooses to bill.  You cannot obtain a big enough discount fro any PPO or insurance company to obtain these types of numbers and savings.

One exercise that proves to be helpful for employers is to re-price historic claims in order to quantify what the financial opportunity really is.  We obtain actual claims from the current administrator and re-price them under RBP methodologies which will produce actual savings that could have been achieved.  There’s no cost and this way, there aren’t any guesstimates about what the savings might be.

if you’d like to learn more about RBP and what it can do for your company, please reach out to me for a brief conversation.  You can reach me at 970.349.7707 or at [email protected]

Or, you are welcome to come to one of the Seminars in May to learn more.

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