Featuring: Stacie Sutter | Senior Director of Payor Performance
Reference-Based Pricing (RBP) plans: RBP plans pay providers, labs, clinics and hospitals based on an established benchmark set by a third-party administrator, rather than rates based on services rendered or value derived, like traditional private health plans. RBP plans do not offer in- or out-of-network tiers. Providers may choose not to accept these plans for scheduled non-emergency services or elective services.
What is the difference between Reference-Based Pricing plans and other commercial health plans?
Reference-Based Pricing removes the economic predictability that a contracted fee schedule provides. The model also upsets the existing economic structure of health plans, which relies on:
- Network involvement: The discount provided to the payer or third-party administrator through a managed care agreement is provided in exchange for network participation.
- Benefits from participation: The network then channels patient volume to the provider. In other words, the provider is discounting their rates and agreeing to payment and Utilization Management protocols in exchange for patient volume.
Under the RBP process, however, the provider’s reimbursement is unilaterally discounted by the RBP administrator, and the provider receives no volume increase in exchange.
Who is driving the adoption of these plans?
Adoption of RBP plans has been driven by employers. According to 2019 data, less than 2% of employers were using an RBP plan but 10% were actively considering it for future use. As employer-sponsored health plan costs continue to rise, more employers will be looking at alternatives like RBP plans.
Why might employers choose this type of plan?
Employers want financial savings and less expensive options while also meeting their obligations to provide health coverage under the Affordable Care Act (ACA). RBP plans meet that need, and often reduce an employer’s healthcare claims spending by 20% to 30%.
These savings, however, are accomplished by shifting the cost of care away from the employer to the employee and the employee’s providers. Employers adopting RBP plans arguably prioritize financial savings over service or employee experience.
How should providers go about accepting RBP plans?
If you choose to accept RBP plans for scheduled non-emergency services or elective services, then consider the following:
- Providers: Be sure to think through your out-of-network billing policies for scheduled non-emergency services. RBP plans often increase bad debt for providers. You may consider seeking a Single Case Agreement from the RBP plan in advance of rendering the service.
- Patients: Providers have a responsibility to educate patients on these types of plans so patients may understand how RBP will impact their own financial responsibility for the non-emergency services sought.
FAQ
When can providers choose not to accept a Reference-Based Pricing plan?
Providers have the option not to accept these plans for scheduled non-emergency services or elective services. For emergency services, patients with private or commercial health coverage, including employment-based group health plan coverage, are protected from balance billing under the No Surprises Act (NSA) and sometimes state law. Any decision not to accept RBP plans should include review by your legal and compliance advisors.
Who sets the rates? How is the benchmark defined?
Employers engage third-party administrators (TPA) who develop pricing according to a reference or benchmark, like Medicare, and often use provider cost reports to do so. The TPA will develop rates in reference to that benchmark and which they think is fair, but without the provider’s agreement or consent.
What sort of agency do providers have for recouping payment for non-emergency services or elective services?
There are two possibilities when it comes to provider involvement:
- Dispute the rates: This is specifically relevant to elective procedures, educating patients regarding what their plan does not cover. Alternatively, providers can still bill patients, but must notify them that they’ll be billed. The patient then contacts the plan, so that the plan negotiates with the provider. Essentially, the Reference-Based Pricing model uses the patient as the AR follow up person rather than staff. Without the plan’s intervention, the patient may be “balance billed” for the remainder of the provider’s fee.
- Work out additional payment: Providers don’t know what the rate will be — the standard notice under NSA simply states that this provider doesn’t participate with the insurance plan. This then gives the provider an opportunity to work out additional payment, since the patient has to go to their health plan, and then the plan goes back to the provider to address any remaining differences.
Get in touch with one of our experts to learn more about Reference-Based Pricing plans and how they may impact your revenue cycle.
Stacie Sutter brings nearly 20 years of healthcare experience in managed care and revenue cycle operations to Ensemble Health Partners as the Senior Director of Payor Performance.
