More and more businesses that I speak with are now beginning to hear of Reference Based Pricing (RBP) but really don’t know much about it. RBP simply means that a Reference point (R) is used (typically Medicare and/or Cost) is used to determine the Basis (B) for Payment (B) – RBP. Some employers have either read articles, spoken to other employers, or perhaps heard about in casual business conversations. Some have even heard about it from their local hospitals or their insurance companies as an evil method to pay less than what the insurance companies and their PPO contacts would have paid. They only know enough to be dangerous, sometimes because of the source of the information.
The fact is that the egregious pricing of hospitals is coming to light, as well as the total fallacy of what insurance companies purport to negotiate with hospitals and their bogus PPO contracts.
Employer profit margins are shrinking, and employers are sick and tired of dealing with the annual health insurance renewals that are crippling their business as well as burdening their employees with higher deductibles, copay, and contributions from their paychecks.
Once they actually hear about RBP and how it works for their business as well as their employees, the general consensus is the desire to learn more – and there is more to learn. I have had experts speak at my Workshops/Seminars about the topic and most of the attendees leave with the desire to explore it further – it’s a compelling argument. Of course, if you’re quite happy with your health insurance costs then you may not want to explore this further and just keep paying more.
Not all RBP plans are created equal. In recent years, many RBP companies have started up operations due to their potential revenue opportunities as more businesses deploy this methodology.
But here’s a fundamental problem – most of these RBP companies base their payments to providers as a percentage of the Medicare reimbursement, e.g. 150%, 170% of Medicare. This basis of Medicare Plus reimbursement can actually pay the facility significantly less than their reported cost of the service to the Centers For Medicare and Medicaid (CMS). Believe it or not, in many instances Medicare reimburses hospitals less than their reported costs. It’s no wonder that hospitals push back when paid less than their costs!
The RBP company I work with doesn’t like the moniker of Medicare Plus reimbursements. They actually reimburse the greater of Cost Plus or Medicare Plus. In this way, the hospital is always guaranteed a fair profit margin and their desire to Balance Bill is minimized or eliminated. They call it Metric Based Reimbursement (MBP).
Here’s another benefit – because all facilities are reimbursed under the same methodology and formula, there isn’t a need for a PPO Network any longer. Employees can go to any facility they want to in the U.S.! No Networks!!
Below are the results of a client who recently implemented a MBP plan.
- 175 employees
- Multi state employer
- Expected Claims costs by their Actuary/Underwriter in 12-month period: $1,447,000
- Actual Claims costs in the same 12-month period: $ 808,000
Not only did the company achieve tremendous savings, but so did the employees. Under this plan for example, employees paid a reduced price for a MRI or CT scan rather than some outrageous price charged by the provider, thereby reducing their deductible cost and out-of-pocket expense.
This company recently asked me how they can give back to their employees due to the savings. After all, their employees do have to open their mail….. how would an employee know if they received a Balance Bill in the mail from the facility if they didn’t open their mail?
They are considering giving the employees a 2-3 month moratorium on employee contributions to acknowledge and reward employees for opening their mail. How about that for giving back to employees??
If you want to learn more about how this methodology and the reimbursement that can benefit all concerned, you can reach me at 970-349-7707 or frank.stichter@strategichpcom. I’m happy to schedule a GoToMeeting webinar and I can walk you through everything.
Also, If you want to learn more go to www.strategichpc.com and read some of the articles that I’ve written on this subject.