Most network agreements establish discounts and billed charges in an arbitrary manner. There is not much relationship between them and the actual cost of the procedure, and they can vary widely by location, provider, and many other factors.
Reference-Based Pricing (RBP)
In order to control rapidly rising healthcare costs, self-insured companies use reference-based pricing (RBP). Reference-based pricing involves an employer setting a maximum amount they’ll reimburse for medical services. Employees are responsible for any amount above that cap.
Employers can Control Costs
Reference-based pricing can help employers contain costs. Reference-based pricing typically pays providers 120% to 150% of Medicare reimbursement levels instead of discounts off billed charges. Emergency procedures are usually not included in this pricing.
As a result of RBP, overall medical spending can be reduced by up to 40%, as can fraud, waste, abuse, and stop-loss claims.
Pricing based on reference creates transparency, which is why it works. Employers can identify lower-cost facilities and project their healthcare spending trends more accurately by understanding healthcare costs and profits. In spite of the fact that reference-based pricing can reduce employer and employee costs, it can also place an unacceptable burden on employees.
Referral-Based Pricing: How does it Work?
Successful implementation of RBP can have dramatic effects. CMSPricer found that RBP reduced claims costs by 46% for 14 clients across the country.
As a result of reference-based pricing, employees pay the difference between the allowed amount and the actual price when they choose procedures at the reference price, providers reduce their prices to the approved amount, and employees pay the difference.
Employers can encourage employees to choose lower-cost options by guiding them to lower-cost options. Outpatient facilities are almost always more cost-effective than hospitals.
Cost-shifting in the Right Direction
Reference-based pricing falters when employees don’t get enough support.
In most cases, a health plan provides a list of services, pricing structure, and providers willing to accept the reference price for each service. Research must be done by employees, but they must be willing to do it.
In cases where employees aren’t well-informed about their specific plan or guided to appropriate providers, the employee must pay the difference between the reimbursement maximum and the provider’s fee. Known as balance-billing, it’s sure to drive your employees crazy.
Even successful RBP plans can leave employees with more cost-sharing obligations. A substantial increase in average pay you may observe after RBP was implemented. The increase may primarily be driven by employees who continue to use hospital outpatient facilities.
Quality is of course important to companies on RBP, but they don’t want to sacrifice it for cost. Employees must be able to find high-quality providers for any health plan to work. Fortunately, cost and quality are not correlated. Unfortunately, finding a provider who balances both can be challenging.
What can CMSPricer do for you?
Using a SaaS-based Medicare claims repricing system, payers can benefit from automated adjudication of rates, reduce the risk of incorrectly paying claims, and batch process claims with ease and precision. In addition, the system provides an easy-to-use interface for importing and exporting claim files for repricing. Be sure to check out these features before implementing a SaaS-based Medicare claims repricing system.
Are you interested in learning more about how a SaaS-based Medicare claims repricing system can streamline your business? Let’s schedule a consultation TODAY!