Reference-Based Pricing: The Best Solution to Restrict Healthcare Spending of an Organization
Reference-based pricing has emerged as a tool self-insured organizations are utilizing to combat the growing financial burden of rising healthcare costs across the U.S.
By 2022, healthcare costs are expected to rise by another 6%, largely because of rising prices. A recent study found this trend has been consistent since 2009. As a result of hospitals and outpatient facilities charging different prices for similar procedures and services, employers are also facing cost uncertainty.
Reference-based pricing is a method that provides employers with greater cost clarity and alleviates the uncertainty of the many factors involved in pricing healthcare services.
As an example, an employee requiring knee replacement surgery can choose between two hospitals. One hospital may charge around $75,000 for the procedure, but another may charge $50,000. A knee replacement typically costs $45,000 from Medicare and 125% from an employer. An employer will pay up to $50,000 for the procedure if Medicare pays $45,000. There are two options for the employee: have the surgery done at a hospital and let their employer foot the entire bill or visit the hospital on their own and pay the remainder of the bill. Regardless of which choice an employee makes, reference-based pricing caps the employer’s cost at $50,000.
This form of pricing offers dual benefits for both employers and employees. For employers, it offers significant cost savings, maintains the consistent quality of care for their employees, and eliminates the need for network negotiations. For employees, these systems provide cost transparency and certainty. The company also invites employees to visit any facility they wish, eliminating provider networks.
Reference-based pricing is on the rise, but not everyone may be right about it. While the financial benefits are tempting, the system may be hard for employees to adjust to. Businesses that use this pricing method have to give it a lot of thought because a switch can be a costly investment.
The following four questions should be asked before diving headfirst into a reference-based pricing system:
#1: Is It Your Desire to Champion Change?
Companies sometimes struggle to get their employees to switch over to a reference-based pricing model, which is a change that can take some time for them to get used to. For the first time, they’ll be asked to consider the costs of the healthcare they receive. They’ll have to do some due diligence on pricing before making a decision about where to receive care. With all of the different health care providers out there, it’s a decision best made with an eye for detail. To know what kind of care will work best for you, and your budget, it’s best to do some due diligence before you make a decision.
Companies that adopt reference-based pricing are often looking for something innovative, like those who shake up the status quo. With increasing healthcare costs, they may be unable to sustain coverage as they have in the past. Though this change can be initially disruptive, it may prove to be a long-term solution. A successful implementation will require the adopting company to be patient and to live through some growing pains in the early goings.
#2: How Does Your Employee Data Look?
Self-insured organizations have access to vast amounts of health care claims data. This data can provide you with a better understanding of your employee’s health care needs and how they make their healthcare decisions. As such, if your employees are typically using low-cost providers, they will not be burdened much by a switch to reference-based pricing. On the other hand, if your employees are heavily relying on high-cost providers, this switch could turn out to be too disruptive. Seeing as the ultimate goal of all employee benefits plans is to add utility to your employee’s lives, the last thing your organization wants to do is to inflict so much pain on your employees by significantly reducing their ability to receive high-quality healthcare.
#3: Would You be Interested in Using a Third-party Administrator?
There are some companies that are hesitant to change their current insurance plan provider, but that is not an option if your business wants to switch to reference-based pricing. There are also some companies that have switched providers because their current provider does not have the expertise to implement reference-based pricing. Companies considering reference-based pricing should have a team of experts ready to ensure that the many different types of transactions for which their company is a reference have the appropriate pricing tier and TPAs available to process and account for them, which could be handled by the right brokers who have partnerships with highly experienced TPAs that will provide the company with the best possible service.
#4: Can you Effectively Communicate this Change to your Employees?
Considering the implications of this decision, employers must provide workers with clear information on why and how this will affect their coverage. Open communication lines between a manager and an employee are the keys to an employer going the extra mile. To ensure a smooth transition, companies that are less adept at internal communication should take extra precautions.
In Conclusion:
Reference-based pricing can help to protect an employer’s budget in tough times by keeping healthcare costs down. The rates in hospitals can differ greatly, so employers often use this pricing model to charge less. But that doesn’t mean that it’s for everyone. It can be tricky to get the rates right. Before committing, it’s important to explore the pros and cons to see if it could be a good fit for your organization. Talk to TPAs who can price all PPS types of institutional and professional claims including claim editing for referenced-based pricing by using SaaS-based medicare pricing tools like CMSPricer.
CMSPricer comes with three volume-based tiered plans. All plans are volume discounted to offer the best pricing with the highest volume. You can consider your volume when selecting and add multiple plans to your cart to optimize your cost. The CMSPricer system will automatically update and display your balance so you know exactly how many claims you have remaining in your account upon return. Pricing is the same for either auto batch or manual entry. New users of this SaaS-based medicare pricing tool get the first 5 claims FREE!
To get more information, visit https://cmspricer.com/