The beginning of the COVID-19 pandemic in 2020 reshaped how payors, providers, employers and employees view healthcare. Questions around affordability, equitable access, and sustainable cost models became more urgent than ever. One solution that gained traction during this time was reference-based pricing. This article provides Reference-Based Pricing Explained, offering a clear overview of how the model works, its benefits, and its role in redefining affordability and transparency in healthcare.
For some employers, the solution was this pricing model. This article explores the key points of the model and its impact on redefining affordability in healthcare.
Q: What is reference-based pricing?
A: Healthcare reference-based pricing, or RBP, is a pricing methodology that prices a claim or bill for medical services starting at a benchmark or reference price versus a discount off of billed charges (the way traditional networks price claims). Traditional pricing methodologies include usual and customary pricing. Soultions like Claritev’s Vistara is based on Medicare+ and Cost+ information to determine a fair and reasonable price for medical services.
Q: How does reference-based pricing work?
A: This approach occurs when a claim is priced utilizing Medicare pricing plus other benchmark pricing methodologies to price a claim. The reimbursement for such claims is sometimes negotiated with the provider before the services are rendered. Employers may offer these services to their employees in conjunction with a traditional PPO network for practitioner and ancillary services or use reference-based pricing services to replace a traditional PPO network. As a result, these services frequently promote usage, “with or without a network.”
Q: When does reference-based pricing apply to a claim?
A: Frequently, reference-based pricing is used to determine how much a patient would pay for a facility or a “non-contracted claim.” A non-contracted claim is oftentimes the same as an “out-of-network” claim. This means the provider who treated a patient does not have a contract or agreement with an organization’s health plan or with an insurance company on how much the insurance company/health plan will pay that provider. Sometimes, the patient may end up paying more for their care as a result.
However, when reference-based pricing is utilized, the patient may be charged for the Medicare price plus a percentage or the other benchmarks referred to earlier which will make the price lower than what the patient would have paid if they were with a traditional plan.
Q: What are the benefits of reference-based pricing?
A: Reference-based pricing services often use terms like, “transparency” which means that by using a specific reference price, for example the amount Medicare would pay for a procedure plus a percentage of that Medicare price, the patient may have a good understanding of how much they will pay for care.
Leading solutions such as Claritev’s Vistara, utilize tools like websites and smartphone apps to give members access to information such as an estimated cost how much a member would pay at one facility versus another or how satisfied other patients were with the quality of care they received from a provider. By having access to this information, members may make an informed decision about where and from which providers they would like to receive care.
Q: Why do employers like/utilize reference-based pricing?
A: Employers may utilize reference-based pricing services in addition to their existing PPO network or use them to replace their network. Why? For employers the keyword is “transparency.” By using this model, the employer may save money. The RAND Corporation found that private U.S. health plans, those often sponsored by employers, pay more than 200% of what Medicare would pay. (RAND Corporation, 2021). The reference in RBP services may help organizations understand how much an employer’s health plan will pay towards employee/member care.
Q: I have questions, where can I learn more?
A: To learn more about the impact reference-based pricing can have for employers, brokers and health systems visit claritev.com. Claritev’s Vistara is a leading provider of RBP healthcare services. Vistara is a high-engagement, low-cost healthcare savings solutions that promote employer, employee and provider satisfaction.
RAND Corporation. (2021). Private U.S. Health Plans Pay Hospitals 247 Percent of What Medicare Would Pay. Retrieved from RAND Corporation: https://www.rand.org/pubs/research_briefs/RBA1144-1.html
