Reference-based pricing (RBP) is a cost containment strategy that offers healthcare members freedom to choose preferred providers and establishes more predictable healthcare costs. It sets a maximum limit on what the payer will pay for a particular medical service based on a reference price, which can be derived from various sources such as Medicare rates or other benchmarks.
And while it may seem straight-forward, there are still quite a few misconceptions about this fair cost provider reimbursement model.
Below we address the top five misconceptions about RBP. Get the facts and understand why transitioning to this increasingly popular cost containment solution is beneficial.
1. Balance billing only occurs with RBP
Balance bills are not 100% avoidable with any type of health plan, including traditional PPO (Preferred Provider Organization) network plans.
The best vendors have proven processes to defend plan members against unfair billing practices and can effectively eliminate or reduce balance bills through dedicated member advocates.
Pro tip: Look for experienced RBP vendors with a balance billing rate of less than 2%.
2. RBP plans unfairly underpay doctors and hospitals
RBP plans provide a fair profit margin for physicians and hospitals, which promotes payment acceptance. Providers are paid using the fair and transparent RBP reimbursement model, which is based on Medicare.
By using Medicare as the baseline, with an added percentage determined by the health plan, a more fair and transparent reimbursement price is achieved that allows physicians and hospitals to get paid for services above the standard.
According to a 2020 survey by the Healthcare Financial Management Association (HFMA), hospitals and health systems that implemented RBP strategies achieved an average revenue increase of 5% to 8%, with an average decrease in reimbursement rates of 10% to 15%. This indicates that providers can still maintain a profitable margin under an RBP plan.
Another study by the Employee Benefit Research Institute found that while RBP often resulted in lower reimbursements for providers, hospitals and physicians were still able to maintain a reasonable profit margin due to the elimination of administrative costs and the ability to negotiate higher rates with some payers.
3. RBP plans result in more legal battles and fees trying to sue providers over balance bills
RBP plans come in different shapes and sizes like any other commodity, and most healthcare claim payments result in positive experiences for both sides.
On the off chance that a claim results in a balance bill dispute, vendors with a robust member and legal support program help all parties arrive at a fair negotiated rate to avoid confrontation and negative fallout.
4. RBP plan members must switch to new doctors and sacrifice quality
RBP eliminates network limitations and pays providers and facilities a fair price for care. A great vendor will guide plan members to high-quality providers who have negotiated fair prices so they can stop playing the in- or out-of-network guessing game. Unrestricted access to provider pricing and zero network limitations free members to make informed provider decisions that align with their personal preferences.
5. Employees won’t understand how to use an RBP plan
Self-funded employers who move to an RBP plan from a traditional network witness compelling results, but member education is key to a successful launch. A supportive vendor can help facilitate member adoption with member on-boarding, education, and engagement tools.
One of the benefits to employees is that they can select their own providers and pay less out of pocket, leading to increased utilization and improved overall population health.
The wrap up
A well-managed healthcare pricing solution can increase transparency, put a cap on costs, and create a win-win for payers, providers, and plan members. Look for a vendor that offers flexibility in plan design, a fixed PEPM model to manage plan costs, member advocacy, and other essential features.
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