By: Jon Jablon, Esq.
Reference-based pricing (or RBP) tends to be one of those things that there’s little ambivalence about; in general, if you are acquainted with reference-based pricing, you either love it or hate it. And, like so many hot topics, some of the intricacies are not quite clear. That’s partially due to the sheer complexity of the industry and reference-based pricing in general, but also partially due to the competing sales efforts floating around. Since the RBP stew has so many ingredients, like any stew recipe, there are tons of different ideas of what makes a good stew – but that also means it’s fairly easy to cook a bland one.
Some have historically advocated sticking to your guns and never settling at more than what the SPD provides. This is a mentality that has largely dissipated from the industry, but some still hold it dear, and many plan sponsors and their brokers adopt reference-based pricing programs with the expectation that all payments can be limited to a set percentage of Medicare with no provider pushback. That can best be described as the desire to have one’s stew and eat it too; in practice, it’s not possible for the Plan to pay significantly less than billed charges while simultaneously ensuring that members have access to quality health care with no balance-billing. The law just doesn’t provide any way to do that.
Plans adopting reference-based pricing programs should be urged to realize that although it can add a great deal of value, reference-based pricing also necessarily entails either a certain amount of member disruption, or increased payments to providers or vendors that indemnify patients or otherwise guarantee a lack of disruption. It is not wise, though, to expect that members will never be balance-billed, and that the Plan will be able to decide its own payment but not have to settle claims. Provider pushback can be managed by the right program, but unless someone is paying to settle claims, there is no way to avoid noise altogether and keep patients from collections and court.
Based on all this, it has been our experience that reference-based pricing works best when there are contracts in place with certain facilities. Steering members to contracted facilities provides the best value and avoids balance-billing; when a provider is willing to accept reasonable rates, giving that provider steerage can be enormously beneficial to the Plan. Creating a narrow network of providers gives the Plan options to incentivize members, and gives members a proactive way to avoid balance-billing.
There are of course other ingredients that need to go into the RBP stew – but having the right attitude is incredibly important, and knowing what to expect is vital. Expectations are the base of the stew; you can add all the carrots (member education?) and potatoes (ID card and EOB language?) you want – but if the base is wrong, then the stew can’t be perfect.
By: Jon Jablon, Esq.
Reference-based pricing is a huge hot topic in the industry today, and different entities have very different ideas of how to accomplish a given health plan’s RBP goals. Doing it right isn’t difficult, especially when you have the right partners on your side – but doing it wrong is even easier. Here are a few of the most common RBP “bloopers and blunders.”
Lack of preparation: poor (or no) supporting SPD language
A health plan’s rights are only as good as its language. This is true regarding subrogation, assignments, and many other facets of plan benefits and administration – but it is especially true, and immediately noticeable, in the context of the plan’s payment parameters. Since RBP necessarily entails changing the way the health plan pays claims, the plan language must reflect how the Plan Administrator will adjudicate allowable amounts for claims submitted to the plan. If the language is vague, ambiguous, or unsupportive, the plan is giving medical providers the ammunition they need to invalidate the plan’s RBP-based payment determinations.
Looking at claims in a vacuum: applying RBP payments to contracted claims
Simply put, if a health plan has agreed to a contract, it must follow that contract, or prepare for the consequences. If a plan wants to use a reference-based pricing methodology, it should ensure that it doesn’t have contracts that require claims to be paid at a higher amount. One of the biggest issues we see is when a health plan pays a claim based on Medicare rates because it is payment the plan has deemed reasonable – only to later encounter pushback from a provider that asks, “what about our contract?” The world of insurance is a world full of contracts – especially self-funded insurance, where plans have to arrange their service agreements themselves rather than relying on an insurer to handle everything for them. Ignoring contracts is one of the most problematic things there is for a self-funded health plan.
Not knowing your audience: refusing to settle claims with providers (or choosing too-low standards)
Calling someone’s bluff when negotiating can be a useful tactic at times, but be aware that medical providers have the right to send patients to collections or even sue them. Calling a hospital’s bluff would be a more enticing prospect if not for the fact that the patient’s credit is held hostage – and unlike in Bruce Willis or Denzel Washington movies, hostages do sometimes get hurt… Just because the health plan may have the right to walk away from the bargaining table doesn’t mean it’s a good idea.
Not knowing all the options: thinking RBP is all or nothing
When looking into a reference-based pricing option, many TPAs, brokers, and health plans have the impression that they either use RBP, or they don’t. The reality is that there are other options out there! For some plans, physician-only networks and narrow networks will help the plan achieve its goals without the burden of “full” RBP; for many plans, though, the out-of-network option is the best way to go. If the plan accesses a provider network that adds significant value for the plan, and one that members are well-accustomed to, then perhaps losing that network access would not be the best route to take.
The bottom line is that the self-funded industry contains various vendors and consultants that can offer reference-based pricing guidance and options to suit every health plan’s needs. Feel free to contact The Phia Group to learn more.
…Is what a Hospital VP of Accounts Receivable said to me when I called to discuss a reference-based pricing (RBP) claim that was referred to The Phia Group for handling. Upon review, the health plan had issued a reasonable percentage above Medicare on a large claim, and this was perfectly in line with the Plan Document’s language. In fact, payment for this episode of care was subject to a percentage above a particularly high Diagnosis-Related Group (DRG) pricing, so the payment greatly exceeded the average commercial insurance reimbursement at this facility.
You see, hospitals report their complete financial information to the Centers for Medicare and Medicaid Services (CMS). This publicly-available information is submitted in accordance with generally accepted accounting principles, and verified by the hospital to be accurate. At The Phia Group, we use Medicare payment rates along with this data to assess the fair market value of services (what payors actually pay).
Back to my story. I would have understood had the Hospital VP said “I am sorry, Jason, but I have a policy that requires me to balance-bill the member,” or “We can’t write off the balance but let’s explore ways to close this account together,” or anything like that. I get it – there are always policies to follow. But to say “It will be my pleasure to balance bill the patient 1.3 million…” Come on.
There is a lot of rhetoric out there about no one being happy with “the way things are” and how everyone wants to “do the right thing” as the market changes, but I don’t believe that. I routinely see the ugliness of corporations gorging themselves on unreasonable reimbursements at the threat of destroying patients’ credit scores. Patient credit is the ransom in exchange for payment of ridiculously high charges. Thankfully, this generally proves to be the exception, as I deal with reasonable and helpful providers all the time; to those valued and reasonable healthcare providers: I salute you.
This particular interaction really shook me, and it stands as a stark reminder of the issues we need to address in achieving transparency and affordability in healthcare.
Monday, May 2nd, 2016
3:30 PM (EST) to 4:30 PM