We began working with a financial services firm in Q4 of 2019. The company had fired their PPO the year prior and transitioned to a Reference-Based Pricing (RBP) approach paying providers a percentage above Medicare allowable rates. Using RBP leverages transparency, defensibility in pricing medical services, and cuts out a lot of the waste inherent in opaque PPO pricing. As an example, the graph below shows a local hospital’s billed cost for a hospital stay due to pneumonia versus what medicare pays the same hospital for the same service. PPO discounts are in the ballpark of 50% of the billed charge. You can see how much fat remains between what Medicare pays and what the assumed PPO discount is. Simply paying less for healthcare is a great start in bending the overall cost curve.
Not all RBP is the same. The company that engaged us was using a RBP contract where the company handling the repricing of claims was charging a 12% fee assessed on the billed charge for every single claim. The larger the claim, the higher the fee. Nearly $100,000 in fees were paid out for this small company to merely reprice claims as a percentage above Medicare. This is largely a commodity service.
Now our approach with RBP is a bit different. We blend a multi-pronged strategy to achieve not only optimal unit cost of healthcare but also drive quality care and outcomes. This involves strong case management, upfront advocacy, second opinions, plan design and cash incentives to steer site of care, direct provider contracts, and bundled rates for surgeries. Here is the before and after we implemented our strategies for this company. The result is nearly zero out of pocket for employees and significant cost savings to employers. The below graph highlights the impact on claims costs before and after we implemented these strategies.
Both plans (Gray and Yellow) are RBP plans. Not all RBP is the same.
