Mike Dendy on Reference Based Pricing

By Mike Dendy

Reference based reimbursement (RBR or RBP) has evolved over the past 10 years and there are now many more players in the space.

Most of the operational elements that make up a quality RBR program are simple and lead startups to believe that they can provide the service on their own.

The excessive fees charged by some RBR/RBP/Cost Plus providers have drawn a lot of new companies into the business and a lot of companies are gearing up to enter the space in the next 12-18 months.

The “easy” operational elements of RBR/RBP include: Claim Repricing Member and Provider Advocacy Direct Contracting for key providers Hospital Bill Auditing (a bit of complexity).

The more difficult area, which is why most administrators outsource, is legal and possibly member/plan indemnification. However, most RBR/RBP players just use “best efforts” clauses in their contracts now and use the Plan Document language to protect the ERISA Plan and the fact that most members are judgement proof to protect the employee/member. There is no magic therein.

The services that are often overlooked and which pose longer term risk for alternative cost management strategies are legal in nature but can be outsourced effectively. First, there needs to be a step up service in advocacy whereby a trained attorney intercedes on behalf of the plan and the member. If for no other reason, this balances the legal push back from a hospital provider.

If legal were a huge threat to RBR plans, we would have seen thousands of more law suits than we have seen to date over the RBR/RBP payment methodology.

The second area often overlooked is the long term threat to a members credit rating. It should be noted that the BUCA plans often fall short in protecting members from credit reporting items too but we all know that non traditional programs like RBR are held to a different standard than the old-guard BUCA plans.

Most hospitals have multiple layers of collection mechanisms the first layer or two being themselves disguised as an independent collection organization. Most hospital run collection units will not report a member to the credit agencies, however, when they sell the collectable to a truly independent organization those companies are much more vindictive and will often report unpaid balance bills to the collection organizations.

The issue is that it often takes years for that credit ding to affect the member. Like other legal services in RBR, this is a manageable issue and can be outsourced at a reasonable cost.

My speculation per discussions with TPA managers, Stop Loss carriers, and with Private Equity firms is that there will be 2x to 3x the number of players in the RBR/RBP space over the next 12-24 months than there are now which, if nothing else, should drive down the cost of service drastically