As a referenced-based pricing (RBP) veteran and founder of a full-service RBP company, I’ve witnessed hundreds of plans take the RBP journey, many with great success and others with disappointment. Successful plans share certain characteristics, while others can fall into common traps. The RBP landscape has changed significantly over the past decade, so I am excited to share my experience to help advisors navigate this complex terrain more effectively.
Setting expectations
Expectations of the plan represent the single most important predictive variable in determining an RBP plan’s satisfaction and retention. Sometimes, the plan’s advisors and decision makers are singularly focused on the deep savings of RBP, while ignoring potential challenges.
While the savings are unrivaled, RBP frequently takes more work by the RBP partner, the broker, the TPA and the plan than traditional network solutions. Unrealistic expectations can lead to disappointment and frustration for all involved.
Balancing positives and negatives
Sitting down with an employer and explaining how they can save seven figures in the first year of RBP grabs attention. However, focusing only on the savings without addressing the potential for access issues and balance bills will lead to disappointment. These challenges, though rare (less than 2% of encounters), require proactive education and support. It is critical for the plan and its members to be educated on how the plan works and where members can turn for help. Be on the lookout for red flags if a plan decision-maker has unrealistic expectations about RBP and be ready to have that tough conversation early.
Understanding balance bills
A balance bill is typically the result of the contract (often unknown to the patient) created when the patient receives treatment. When a patient checks in for their service, the terms of service they agree to contain contract provisions whereby the patient purportedly agrees to pay the provider for amounts not reimbursed by their insurance plan (traditional network plans, RBP, etc.). For example, if the provider bills $10k and receives $5k from the plan for that bill, the provider may assert a $5k balance due from the patient, assuming there is no network or direct contract to indicate otherwise.
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While balance bills can be scary to member, they should be educated that a good RBP vendor will support them through the process with proven legal and credit defense strategies. It is important to note that the balance bill from the provider is a contract claim against the patient directly, which is governed by state law. These claims are distinct from the rules that govern ERISA plans, which is federal law. Specific legal details will vary by jurisdiction, but the key point here is that these state law contract claims against the patient should not be confused with the rules that govern the terms of how an ERISA plan pays medical claims.
Why balance bills pose less of a threat today
In the early days, the threat of a balance bill was the primary reason plans and advisors avoided RBP. While balance bills are a reality with RBP (and also network-based plans), the RBP landscape has since evolved, and the risk has greatly diminished.
Many providers have realized the limitations of pursuing patient balance bills, partly because of the inherent problems with hospital gross billed charges. Hospital billed charges are meaningless artifacts of the high-cost network model. These charges are not regulated by the free market, can vary 10x+ from hospital to hospital, and thus can present challenges to a plaintiff prosecuting a contract claim against a patient. In short, patients are unknowingly agreeing to be responsible for amounts derived from hospital billed charges, which do not reflect a commercially reasonable markup over cost and can violate every sense of fairness and equity one should expect from a pillar of the community.
There are different approaches to balance bill resolution, and it is important to understand what options your RBP vendor provides – from fair and reasonable negotiations to maximizing savings via full legal representation of the member. The best vendors provide a range of solutions to meet the objectives of the plan. You should be skeptical of high-cost solutions that claim there is only one way to resolve balance bills. Such vendors are often only willing to work on a percentage of billed charges, which can result in significantly higher fees (e.g., 2-4x) compared to PEPM based models.
Access issues: small pain for big gains
The biggest driver of savings for RBP is the absence of a PPO facility network. Networks are the reason why employers typically pay 2.5x or more than Medicare for the same service. But without a broad, well-known network, members occasionally have challenges in utilizing a particular facility or a specific physician. In RBP, we call these “access issues.” While infrequent, they can create disproportionate member frustration when they go for a provider visit and are told, “we don’t take your plan.”
Let’s be clear that we are not talking about emergency department services. Federal law prohibits patients from being turned away in this setting for financial reasons.
While some hospitals may claim that they don't accept RBP patients, in practice, many RBP patients still receive care at these facilities. If you contact a hospital adverse to RBP and ask if they accept RBP plans, they will likely say no. Hospitals have used various tactics, such as sending letters to plans and brokers explicitly stating that they do not accept RBP. Despite these efforts to prevent RBP patients from receiving elective care, the data points to the opposite. A review of claims data typically shows that the majority of a plan’s patients have received care without a plan or vendor contract for reimbursement.
Addressing access issues
High quality member service is essential in resolving access issues. As you evaluate RBP partners, you would be wise to seek those with a strong reputation for client and member service. Many physician access issues can be resolved with a conversation to explain the plan. In other situations, a single case agreement or a direct contract with the provider may be necessary.
Some of the most challenging access issues occur when faced with an unreasonable hospital who denies access for elective care. While not common these situations require prioritizing the patient’s wellbeing while considering the plan's financial responsibilities. I’ve seen many effective responses to this scenario, but the common denominator is the patient receiving care from a competing provider. Here are a few strategies:
- Negotiating with competing providers: Seeking preferred contract rates with competing providers in the market in exchange for provider desired outcomes, such as provider promotion to patient population, market exclusivity, plan financial incentives to patients, etc.
- Providing patient options: Informing patients of alternate providers of high quality and helping the patient understand associated costs.
- Excluding aggressive providers: Excluding specific providers from plans for elective care.
Conclusion
Traditional health care networks have yielded a system where employers, on average, pay 250% or more of what Medicare pays for the same procedure at the same provider.
RBP is the most effective way to significantly reduce the cost of health care for employers, but advisors and plans need to be prepared to endure some friction to get a big reward – providing a sustainable and affordable health plan for employees. By standing firm against unreasonable hospital demands and exploring alternative providers, employers can create a more competitive market and drive down health care costs. In fact, I believe that employers are the private market’s best hope for regulating the cost of health care. The well-prepared advisor can utilize RBP to provide immense value to their clients while contributing to a more sustainable healthcare system.
Scott Ray is the founder of 6 Degrees Health and an experienced attorney, accountant, and business executive. He collaboratively leads 6 Degrees Health in pursuit of bringing creative and effective cost containment strategies to market.
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