Implementing RBR “Done Right”…Begin with Diligence


“It is my belief that any TPA or Advisor using this list of questions as a tool to evaluate options will be able to easily differentiate the pretenders, professional marketers and conscientious vendors offering a well-designed, well-supported offering.  Such differentiation is critical to the continued development of the RBR approach and disruption of traditional PPO use.” Glenn McLellan

By Glenn McLellan

May 11, 2017

I have written a couple of Blogs about Reference-Based Reimbursement, Cost Plus or whatever the various vendors offering the services want to call it.  I do feel that PPOs, with most contracts blindly applied to a provider’s billed charges, are one of the major drivers of increasing health benefit costs.  I also feel that the health benefit industry has gotten “top heavy”, with carrier-based networks driving self-funded Plan Sponsors to ASO arrangements with the carriers or TPAs using carrier networks.  That certainly is not a good thing, as many of the products and services bundled with network access as a prerequisite miss the mark as it relates to service and cost control.

Assuming the market continues toward the RBR model, Advisors to Plan Sponsors (brokers and consultants) and TPAs looking for RBR partners must complete the due diligence required to implement RBR “Done Right”.  My focus in this Blog is to provide a series of areas of investigation and specific questions designed to differentiate between vendors.  Ultimately, this diligence will point to the vendor best suited to deliver the RBR approach to clients.

Keep in mind that implementation of any approach to health benefits is about risk tolerance.  As an Advisor or TPA, understanding the client’s risk tolerance is paramount…and must be “across the board”.  One of the most interesting “wrestling matches” these days in benefits is the risk adverse Human Resource function versus the “all in” Finance function.  I have seen way too many Plan Sponsor efforts to implement RBR fall apart because there was not a compromise between those functions.  Reaching compromise is easier than you might think.  I think you will see the framework for compromise as I run through the questions.

I think it is important to organize the diligence into 6 areas:  Background and Implementation; Process; Advocacy and Support; Indemnification; Financial Relationship and Contract; and Indicators of Program Results.  This is the first step in the process of compromise.  The Human Resource function is rightfully compelled to address employee perception of value, mitigation of disruption, potential issues in the community, and in the omnipresent focus on the worst case, employees being sued or having their credit impacted.  The Finance function knows that health benefit expense is their second or third largest cost, and knows that changes must be made.  They also want to protect the Plan and the company from legal liability.  The 6 areas on the menu address both “tastes”.

Background and Implementation

The goals for this set of questions include gaining an understanding of the vendor’s experience, stability and culture, as well as the support that is provided during the implementation process.

How long has your company been in business?  When did you start offering services related to RBR?  Does your company offer any additional services?  If so, what are those services?

Do you believe that an RBR approach can be applied across all provider types?  If not, which types of providers do you feel it will not work well and how do you assist the Plan Sponsor with accessing those providers cost effectively?

What do you feel are the 3-5 factors which are most important for a Plan Sponsor’s success in implementing an RBR approach to the delivery of benefits and why?

How much time is needed to successfully implement an RBR program, and what are the implications if that amount of time is not available?

Please outline your standard communication plan for the implementation of RBR, identifying the tools provided, proposed timing and your ability to customize, with and without additional cost.  How much does the approach vary if the RBR Plan is offered as an option at enrollment?

As part of your implementation services, do you develop the Plan Document for the RBR Plan?  If not, do you provide all required language so that the Plan Sponsor can include it in the Plan Document?

With respect to the role of Plan Fiduciary as described in the Plan Document and Administrative Service Agreement between the payer and Plan Sponsor, please describe how your program transfers responsibility for that role, if applicable.

What has your experience been with providers refusing to provide other than emergency care to patients covered by RBR Plans?  How have you overcome those issues?

What is your organization’s position related to providing “safe harbor” providers which can be used by covered participants with no risk of balance billing?  Do you depend on the Plan Sponsor, TPA or client to establish those relationships or do you provide negotiation and contracting services?

With respect to the “safe harbors”, should they be put in place prior to an RBR Plan becoming effective or after?  Does your answer vary by provider type?

Please address one of the concerns we have heard during our investigation of RBR that the lack of network information on the participant’s ID card has caused issues with acceptance of the patient for elective services.  Has that been your experience and if so, how do you overcome that issue?

Other than expansion to much broader use, where do you see the RBR approach going in the future in terms of variations in the delivery, services, packaging or marketing?  How is your organization positioning itself for those changes?

Has your organization undergone a SSAE 16, SOC 1 or SOC 2 review in the most recent 12 months?  If so, please provide a copy of the report issues by the CPA firm.  If not, is one in progress or planned?


The goals for this set of questions include gaining an understanding of the vendor’s controls related to the handling of claims, methodology for determination of the reimbursement, and level of overall integration with the payer:

How many payers have you integrated with?  What have your learned from those integrations and do some payers support RBR better than others?  What are the biggest challenges to integration?

Please describe the points of integration with a payer, being as specific as possible as it relates to communication materials/ID cards, eligibility data, claims workflows, customer service, checks/EOBs/EOPs and reporting.

Would you describe the determination of the RBR reimbursement amount in your approach to be prospective (i.e., determined in advance of a service being provided via negotiation), retrospective (i.e., determined based on benchmarks applied to submitted claims) or a combination?

For either a prospective or retrospective approach to determining the RBR reimbursement, is the reimbursement developed internally or through a subcontractor?  If internally, please outline the “tools” developed or purchased to support the process.  If a subcontractor, please identify the subcontractor.

If the RBR reimbursement is ideally a “fair” amount for a service which has been provided, how do you go about determining that fair amount?  What benchmark or series of benchmarks are used?  How are those benchmarks utilized and when is one benchmark used versus another?

Do you integrate any clinical review into your process as it relates to upcoding of DRGs or clinically inappropriate services?

In the Plan Sponsor allowed to change your process of determining the reimbursement?  Can they request the reimbursement level to be more or less aggressive?  What type of consulting support do you provide with respect to the reimbursement amount?

What amount of tracking/analysis do you utilize in determining what is the appropriate benchmark or mark-up on a benchmark that should be used for an RBR Plan?  How much does your prior experience with a provider or in a market play into your recommendation?

Assuming you have not had experience in a market previously, how do you determine the appropriate benchmark or mark-up on a benchmark?  How much might your recommendation vary based on geographic area, urban vs. rural or not-for-profit versus for-profit facility?

What do you feel are appropriate percentage mark-ups on a benchmark like the Medicare allowable for clients with 3 different goals in RBR Plan implementation…Aggressive (maximize Plan savings knowingly accepting some level of employee disruption)?  Cautious (achieving a good balance between savings and minimal disruption)? Paternalistic (willing to compromise some savings for limited disruption)?

How do you establish reimbursement amounts where there is not an acceptable benchmark available (e.g., pediatric services)?

Advocacy and Support

The goals for this set of questions include gaining an understanding of the vendor’s strategies and approaches to managing appeals, balance billing and other challenges to the integrity of the RBR Plan.  These are closely linked to the indemnification or legal protection ultimately offered to the Participant, Plan, TPA and Stop Loss market.  In reviewing the cost of RBR services, the extent of advocacy and strength of indemnification are significant variables.  Just as greater advocacy and indemnification can justify additional cost as “sleep” insurance, higher cost with illusionary support and protection should be a “deal breaker”.

Do you provide any telephonic or web-based prospective support to a patient relating to an elective procedure and or admission?  Will you provide financial “predetermination” services?  How if at all will you integrate with pre-certification and/or prior authorization services?

Do you integrate any medical cost and quality tools into your offering?  If so, is it an internally-developed tool or one obtained from a vendor?  Which vendor?

Do you offer any telephonic “care navigation” services designed to educate covered participants and re-direct to “safe harbor” providers or less costly settings for care?

Are the Navigators employees of your company?  If so, how many are there?  If not, what controls are in place to manage the quality of the outsourced services?

In addition to use of Check/EOB/EOP language, do you provide any additional proactive communication with the patient or the provider?  Does this occur on all claims or only those meeting certain criteria?

Please provide a complete description of your Advocacy support, from the point where you have been advised of a balance bill, all the way to the point a Participant is subject to a lawsuit or has learned of adverse credit reporting.

Do you provide advocacy support for all claims you have handled?  If not, what are the parameters for the claims you will provide such support?

Is all advocacy facilitated by representatives or do you utilize a self-service web portal for any aspects?  What aspects are available via the portal?  Is portal use completely voluntary or required for certain claim sizes or situations?

Are the Advocates your employees or is the service contracted?  If they are your employees, how many Advocates do you have?  Do they have any other responsibilities other than advocacy?  If you use a subcontractor, what controls are in place to manage the quality of the advocacy support provided?

How do you define an “appeal” presented by a provider?  Are there different levels of “appeal” in you contract and process?  Please be specific in how they are defined and handled.

What level of discretion does your contract allow with respect to resolving an appeal by a provider on the amount of the reimbursement?  Is any additional payment “capped” at a predetermined dollar amount or percentage?

Please describe the scope of legal support made available to the covered participant, including internal resources and retained or available outside counsel.  Will you defend the covered participant, Plan and/or Plan Sponsor in the case of legal action taken by a provider?  Is that all at your cost?

Please describe the support provided to covered participants in the case of derogatory credit reporting related to a claim you have handled.


The goal of this series of questions is to gain a firm understanding of the protection provided to the participant, Plan, Plan Sponsor and Stop Loss carrier via the RBR vendor.  The review of responses should focus on indemnification protection for all parties as well as the continencies and limitations impacting coverage.  The TPA and advisors should view the contingencies and limitations in the same context as a 12/12 stop loss contract with exclusions and lasers.  At some point the gamble might not be worth the sale.

Please describe in detail the standard indemnification provisions of your contract related to the covered Participant and all entities related to the Plan (Plan Sponsor/Fiduciary/ Administrator)?

What protection is provided with respect to additional payments outside the stop loss contract period where a case-level agreement with the stop loss carrier has not been put in place?  Is the additional payment not reimbursed by the stop loss contract subject to coverage under the indemnification policy?

Do the indemnification provisions cover defense costs for both participant and Plan?  Are there any limits?

Do the indemnification provisions cover amounts between the original gross billed charges and the RBR reimbursement which is in contention?

Are amounts above the original gross billed charges such as additional damages covered?

Is there an overall dollar limit to the indemnification provision per incident or in aggregate?

How is the indemnification provision impacted by “customization” requested by the Plan Sponsor, such as failure to utilize recommended participant communication/education materials, Plan-specific EOB/EOP messaging, or variation from your standard approach to determining the RBR reimbursement?

Do you offer variations in your indemnification provisions subject to additional charges or a reduction in charges?

Cost and Contract

The goal of this series of questions is to gain a complete understanding for the financial and contractual arrangements available from the RBR vendor.  The overall value of the vendor’s offering will be defined by their costs, the comprehensiveness of their services and protections, and ultimately their results.

Is there an implementation fee related to the RBR service?  Does this vary whether you have integrated with the payer previously?

Please identify whether you charge for your services based on the cost of claims (percentage of gross billed charges or allowed charges), a PEPM/PMPM fee or a combination?

On the basis of #2, what are your standard arrangements?  Does this vary based on the size of the group measured by headcount or claims volume?  Does it vary if the RBR Plan is the only Plan offered or part of a multiple plain offering (2 or more Plans)?

If the fee is charged related to billed or allowed charges, does it only apply to those claims where you determine the reimbursement via RBR methodology?  Does it apply to claims where a “safe harbor” contract is utilized and your role is essentially contract management and re-pricing?

If a claim is appealed and some additional payment up to the gross billed charges is made, do you adjust your fees or issue a credit?

Do you have a required minimum number of covered employees to offer your RBR services?

With respect to the fees identified in #3, what services are excluded from that fee and will be billed separately?  Please be specific in identifying the services excluded, the applicable fees, and how they will be applied.

Does your contract allow for the Plan Sponsor or an agent of the Plan Sponsor to complete an audit of the services provided?  Are there any limitations to the right to audit?

Please provide a sample contract for review.

Does your organization offer any Service Level Agreements (SLAs) or Performance Guarantees related to the services you provide such as claims turnaround, pricing accuracy related to benchmarks, additional amounts paid based on appeals on clinical review or pricing errors, Advocate availability and responsiveness and participant satisfaction with Advocacy?

Indicators of Program Results

This set of questions has as obvious goals determining whether everything else learned about the vendor, its RBR service and its support and protection mechanisms have generated positive results for clients.  They also will identify whether the vendor is using business metrics consistent with a well-run organization and positioned to use the metrics to achieve a balance between savings and mitigated employee impact.

Because the RBR business is evolving (and growing) so quickly, each of the following questions is designed to measure trends as well as results:

What are the five most important business metrics used by your organization internally to measure the quality of the product/service delivered?

How many Plan Sponsors are you currently providing RBR services?  How many offer the RBR Plan as the sole option versus one of two or more options?  What has been your growth in RBR client base over the most recent 12 months?

Do you measure PEPM or PEPY cost on a longitudinal basis across your client base?  Does this include cost prior to RBR Plan implementation?  What has been the impact on trend during the transition to the RBR Plan?

How many covered employees are you providing RBR services to? What has been your growth in RBR covered employees over the last 12 months?

How many total claims and total gross billed charges did you handle in your RBR product during the periods 1/1/16-12/31/16 and YTD 2017?  How many of these were inpatient facility?  outpatient surgery?  all other outpatient services from a facility? all other claim types?

For the claims identified in #5, what was the total initial RBR reimbursement allowed in dollars (i.e., before any appeal or audit-related adjustment)?  In aggregate across all bills managed, how did that value equate to a percentage of the Medicare allowable?

Do you track balance bills received by participants?  If so, what were the total number of balance bills reported to you?  How many of these were duplicate balance bills (provider sent multiple notices)?

For the same periods identified in #5, what was the total number of claims appealed by providers?  What percentage of those resulted in the appeal being at least partially upheld and an additional amount paid?

What was the total additional amount paid for the upheld appeals?  When the additional amount paid is added to the initial payment, what was the aggregate relationship of the payments to the Medicare allowable (across all claims)?

Do you track the number of participants reporting they have been contacted by a collection entity?  If so, how many reports did you receive?

Do you track the number of situations where it was confirmed that a derogatory report had been placed on a participant’s credit report?  If so, how many such reports have your received?  How many of those reports did you or a subcontractor facilitate removal of the report?

Since inception of your company, how many lawsuits have you either been a party to or provided legal defense services related to your RBR work?  How many of these have been settled or received judgement at an amount at or below the original gross billed charges for the claim?  How many have been settled or received judgement at an amount above the original gross billed charges?  How many are ongoing?

Does your organization complete satisfaction surveys with respect to your services?  If so, can you provide a copy of your most recent survey and the results?


After 67 multiple part questions, I am sure the average reader is on a bit of information overload.  Imagine if I were to provide the answers I would like to see in the optimal solution!

It is my belief that any TPA or Advisor using this list of questions as a tool to evaluate options will be able to easily differentiate the pretenders, professional marketers and conscientious vendors offering a well-designed, well-supported offering.  Such differentiation is critical to the continued development of the RBR approach and disruption of traditional PPO use.