Referenced-based pricing, or RBP, is a concept that’s beginning to tackle the rising costs in the healthcare industry. While it’s been around for approximately 3 years, it’s gaining in popularity as employers are looking for ways to cut costs. There are benefits to switching to this type of plan, but it’s not for everyone.
Here Are Some Facts To Consider About Referenced-based Pricing Healthcare
Healthcare is one of the few things we purchase where we do not know the cost until after we have received medical services. Imagine going out to eat and not having the prices listed on the menu and waiting to get your check to pay or shopping for food, clothing, vacations, etc. and not knowing the cost until checkout.
Why Should Healthcare Be Any Different?
With traditional health plans, the fees charged for medical services are not provided to the plan or its members. Referenced-based pricing is all about transparency and it’s intent is to provide transparency in provider rates by indexing fees to a published schedule.
For procedures or tests that are not time sensitive, members are encouraged to “shop” for their healthcare. Suppose you need surgery to repair a torn knee. You would be able to research what the cost would be at different hospitals. Hospital A charges $35,000 for the surgery and hospital B charges $80,000. That’s a huge difference! It gives you power when you know what the hospital is charging to make an informed choice in your care. And a higher cost for the same surgery doesn’t mean better quality of service either. Being able to review pricing information in advance can eliminate surprises and save money.
Traditional health plans have contracts with providers for what will be paid for services and members pay a premium but receive services not knowing the cost. And the cost can vary tremendously from provider to provider. Over payment for services is a huge reason why health insurance costs so much.
The referenced based pricing model is based on a percentage of Medicare rates to reimburse health care providers for their services. Medicare is the largest health care payer in the country. Medicare provides a standard reimbursement measurement that is transparent and adjusts for provider differences. Depending on the negotiated price, hospitals would get paid somewhere around 150 percent to 250 percent above Medicare. Way less than traditional plans - but still a healthy profit for hospitals.
This strategy all but eliminates the traditional network and because providers are paid a certain percentage above Medicare for services you can see how it has the potential to keep healthcare costs under control.
Because RBP plans help control what members pay for medical procedures, the potential health insurance premium savings to employers can be 20 percent to 30 percent over their current plan.
Will employees to this type of plan need to be educated? Yes. But didn’t employees have to be educated when the HMO plan was first introduced? They had to understand that they couldn’t just go to any doctor or hospital for services. They couldn’t go to see a specialist without a referral from their primary care doctor. They had to learn about in network and out of network, etc. RBP healthcare will be no different.
A Possible Solution To The Rising Cost Of Healthcare
The current healthcare system is broken - too many hospitals profit from the traditional plans and the profit is not in thousands of dollars, but in millions upon millions of dollars, which makes the problem hard to fix. The goal of a referenced-based pricing plan is to put the reins in the hands of the consumer. As health care costs continue to rise, RBP healthcare is a way to keep those costs under control while promoting quality care, transparency and affordability.
If you are interested in finding out if a referenced-based pricing health plan is right for your company, contact me to discuss this in more detail.