By Bill Rusteberg
Reference Based Pricing plans have been around for many years now. Fear of lawsuits by medical caregivers, particularly hospitals, is a concern for middle and late adapters of the model, causing many to pay a premium for protection. The cost to do so can be significant and out of proportion to the risk assumed.
A leading national purveyor of Reference Based Pricing plans recently gave a presentation outlining their performance in this growing health care delivery phenomenon.
Referencing the fear of lawsuits, and potential crippling, credit ruining judgments against plan participants, the marketer announced on power point slide #33 “Between 2008 and 2016 we have had 171 lawsuits filed against our clients, and we have won every one of them!”
We estimate this represents less than one half of one percent of all claims managed by this firm. That’s a very low number.
What the marketer failed to mention is that out of all these lawsuits, only a mere handful went to trial. The rest were non suited early on during the discovery process. (Dollar amounts involved have been surprisingly low. One lawsuit that made it to trial was over a hospital bill of less than $5000).
If the risk is low then shouldn’t that be a factor in rate (fee) making? Unfortunately we find that is not always the case, with costs to the Plan Sponsor running into the hundreds of thousands per year for a group as small as 500 employee lives. That’s essentially stealing from provider reimbursements isn’t it?
It’s all about selling fear (Selling Fear & Cost Plus Insurance) and maximizing revenue.
“Insurance premiums are set through disciplined actuarial science, but fees set by marketers have no bounds”……………...Molly Mulebriar
You may be surprised to find there is no insurance in place at all for lawsuit protection, just a promise to defend and maybe a promise to make good any judgments against the plan participant. Added protection against loss to the marketer may also be carefully crafted into the language of the Plan Document.
For example, language may include a provision that only Referred Appeals are covered only at the discretion of the vendor acting in their capacity as co-fiduciary. This happens almost as often as Hell Freezes Over. The reason the percentage is so low is because smart medical care givers know that to accept the offer of a claim appeal process creates a contract to which they must adhere, which of course will almost always include a provision that the provider agrees to no balance billing once the claim runs though the appeal process.
Another example we have seen limits any damages to only include restitutionary damages. It is our understanding that as a basic rule of law, restitutionary damages are not available in a claim for damages for breach of contract and are only made under one of two conditions; (1) when there is a total failure of considerations and (2) when there is unjust enrichment by wrongdoing. Neither of these two conditions will ever exist in a balance billing case where there has been an assignment of benefits and/or payment at defined Plan levels.
There are many other examples too numerous to list here, all of which benefit the vendor at the expense of the Plan Sponsor and particularly the plan member.
It’s commonly thought legal protection for plan participants can be important and necessary. But at what cost?
Others don’t share this opinion and make no bones about it. “Legal representation? Why, that’s not necessary! At the end of the day we simply throw more money at the screaming mimi’s, take our lumps, and move on. Besides, balance billing represents less than 2% of all claims and negotiated settlements have a minimal impact towards increasing the aggregate overall cost of paid claims.”
Some throw less money than others. Skilled balance bill negotiators often get by with numbers below 180% of Medicare while others don’t do as well. “Will you settle for 1,900% of Medicare. It’s only another $3,200 and represents a 65% discount off billed charges! says the vendor. (You’re Fired!)
Another vendor we are familiar with but unknown by most in our industry (they have done nothing to create market awareness to date) represents to have an astounding record of balance billing claim settlements. “We manage more than 6,000 balance bill settlements per month and settle 100% of all of them in less than 60 days. We have never settled for more than 189% of Medicare. Our average settlement is 142% of Medicare. Despite these high volumes they don’t see the need for legal protection yet offer it as part of their package.
Reference based pricing schemes continue to realize rapid market growth. New RBP entrants pop up almost monthly it seems. There are now so many colors and flavors to pick and choose from these days it’s hard to say whose on first or whose on second.
The fear of lawsuits has had little or no apparent effect towards slowing down this market phenomenon.
