“Your margin is my opportunity” – Jeff Bezos
Reference Based Pricing vendors make millions off hospital Charge-Masters while at the same time throwing stones at the high cost of health care.
Charge master rates are rectum-extractum-based-rates having zero correlation to costs. PPO discounts average 50-75% leaving a profitable 50-25% margin representing 225-500% markup above costs.
Its like a sticker price on a new car. Accepting a trade-in offer is akin to gifting your old car for free while still paying a margin above costs. Car dealers understand American health care finance better than anyone else.
Discount providers, including Reference Based Pricing vendors, make money off the spread. Lots of money. Here’s how:
- % of billed charges
- % of savings
- Fixed dollar pepm
- Combination of all three
Aetna, Blue Cross, Cigna, United HealthCare and Reference Based Pricing vendors are discount brokers. They earn fees extracted from the pockets of medical providers.
Reference Based re-pricing costs are low. Adding balance billing and legal representation turbocharges plan costs. More plan sponsors are wondering if the additional fees are worth it since their plan pays exactly what’s stipulated in their plan document, nothing more and nothing less.
Instead more plan sponsors are treating employees as adults, advising them they are on their own when facing a balance bill. “Check prices before you buy just like you do everything else” is their message.
One plan sponsor we know has done exactly that, saving over $250,000 in RBP fees (That frees up enough BENEFIT BUCKS to cover almost 3,000 primary care visits). Employees have been empowered to shop for health care using indemnity “BENEFIT BUCKS” stored in their pre-loaded company issued debit card. Plan members have learned balance billing never occurs when asking the price but often does when they don’t.
Such is the dynamic and evolving world of American health care finance.
