Reference based pricing (RBP) is emerging as a reasonable alternative to the low reimbursement rates offered by Medicare, but it’s only useful when providers are transparent with their pricing. Without that transparency, the plan’s members may be frustrated with balance billing, and their plan, by extension. According to a survey published by MedData, 92 percent of patients want to know exactly what their payment responsibility is prior to receiving treatment, and balance billing makes that impossible.
Everyone benefits from a plan that incentivizes consumer choices, and RBP can do that if price and quality transparency is available to the patient. This is what Medibid brings to RBP, and how Medibid can help employers contain costs with an RBP-focused plan.
What Is Reference Based Pricing?
RBP is a feature of self-insured (or self-funded) plans, and is designed to attract providers with higher reimbursement rates than what Medicare would offer. A reference based pricing plan establishes a maximum for what the employer will pay for a particular, nonemergency procedure. This could be a hip replacement, bariatric surgery or a round of medical imaging. RBP isn’t practical for emergency procedures, as it’s only effective if the patient has time to assess providers like a consumer.
Typically, the maximum is set relative to Medicare’s rates, as a multiplier or a percentage. For example, an RBP plan may pay out 150 percent of what Medicare would pay out, so the provider always profits a bit more while the employer reduces costs by cutting out the payer. Group members also benefit from the added flexibility that comes with an RBP plan. Reference based pricing plans do not have traditional provider networks – as long as the provider accepts RBP, they are considered in-network for the plan’s purposes. Effectively, plan members are able, and empowered, to shop for providers they are comfortable with and make a smart consumer choice, without being limited by a network. This reduces medical expenses for the group member and their employer, making it a powerful cost containment mechanism.
RBP, though, does not reflect what the procedure will cost to perform, and it’s common for significant balances to remain even after the plan pays its portion. The group member and the employer may both be liable for this balance, and balance billing is a primary concern of RBP plans, especially from the patient’s point of view. It’s essential that measures be put in place to minimize this risk, as it can damage the relationship between employer and employee, and result in unexpected costs.
Another challenge with reference based pricing is that it’s a considerable departure from traditional, fully-insured plans. It may be difficult for patients to fully leverage their RBP plan benefits, especially if they do not know how to research pricing among providers. Of course, there may be price confusion on the provider’s end as well, leading to a lot of guesswork from the patient regarding their payment obligations.
Medibid eliminates these challenges for everyone involved.
How Medibid Solves the Reference Based Pricing Dilemma
Employers, and larger employers in particular, recognize the cost containment potential of an RBP plan, but they may have reservations with how much work is involved in getting accurate pricing information. Medibid has solved this problem. Medibid also ensures your RBP plan is easy for group members to understand, and also removes any pricing confusion on the provider’s end. In short, Medibid removes all of the obstacles in the way of a smoothly functioning RBP plan. How so?
Medibid’s bidding platform can be written into an RBP plan, and because Medibid’s bidding platform encourages providers to compete on price and quality, employers know their group members are getting all of the information they need to make a cost-effective decision. Here’s a closer look at how bidding changes the reference based pricing game:
- Guarantees price and quality transparency – Group members request treatment in the form of an “ask” on Medibid, and this could be a request for a joint replacement or bypass surgery. Providers review this request and submit a bid that includes the total cost (physician, facility and anesthesiologist) as well as the provider’s quality metrics. The bid’s price can be compared directly with the RBP plan’s benefits to determine if the price is fair. In some instances, it may make sense for a patient to choose a higher bid, but the patient will know they are making that choice beforehand.
- Resolves pricing confusion on the provider’s end – If a patient calls a hospital and requests the price for a certain treatment, they may be given more than one price, or a range of prices that the provider can’t commit to entirely. This can leave the patient guessing at their payment obligations and result in them being hit with balance billing. Because Medibid requires the provider to commit to one price upfront, there is no room for cost confusion. Both the patient and provider know exactly what will be paid out before treatment is provided.
- Reduces confusion with, and resistance to, an RBP plan – People want to be consumers of their healthcare, but they often don’t know how. Medibid does the hard work in getting critical information in front of group members, so group members can start making consumer-focused healthcare decisions instantly. People are used to shopping for everything online, and Medibid now makes it possible for your employees to do that with their medical care. It’s not just cost-effective, it’s extremely convenient for group members, which provides additional value as an employee benefit.
Reference based pricing plans can contain medical benefit spending and give group members freedom in their provider choices, but challenges remain. Medibid mitigates those challenges with the power of a competitive healthcare market, allowing RBP plans to function like the cost-saving systems they should be.