“Pssst….Godfather, We’ve Been Exposed!
The following account is based on a true story.
If a Reference Based Pricing plan pays medical caregivers 120% of Medicare, what is the Plan Sponsor paying?
The answer is not 120% of Medicare. It’s much higher than that.
A legacy vendor charges 10% of billed charges as their fee to (1) re-price claims, (2) provide patient advocacy and (3) provide legal representation.
Here’s An Example
Hospital bills $100,000. Plans pays $12,000 which equals 120% of Medicare. RBP vendor bills the plan $10,000 as their fee. Plan pays $22,000 in total which is 220% of Medicare.
So instead of receiving 220% of Medicare the hospital gets much less.
Where does the difference go?
Follow The Money
What most plan sponsors don’t know is their TPA is sharing revenue with the Reference Based Pricing vendor. In this example, the TPA receives 25% of the RBP vendor fees or $2,500.
What about the broker who placed the business? He too is sharing in the revenue. In this example the broker receives a guaranteed $20 per member per month gleaned from the RBP fees. A 400 life case would generate broker commissions of almost $100,000.
It’s not hard to imagine the amount of fees and commissions that can be generated here. This is an example of only one claim.
A 400 life case paid $900,000 in RBP fees over a one year period. Do the math.
Would the plan have been better off just paying the hospital 220% of Medicare? We think so.