What’s Your RBP Sweet Spot?

The State of North Carolina’s Reference Based Pricing sweet spot is 177% of Medicare. “The new rates for various categories of services will average out to 177% of Medicare’s fees, down from a current (PPO) average of 213%, North Carolina Treasurer Dale Folwell (R) told The Wall Street Journal. …………………………”

By Bill Rusteberg

The state of Montana settled on 234 percent of Medicare, a relatively generous mark-up from standard Medicare payments.

Back in the early 1980’s J. Patrick Rooney (J Patrick Rooney (1927 – 2008) contended that authoritative research showed that Medicare plus 25 percent is the reasonable amount for hospitals to charge. Many believe that still holds true today.

One RBP vendor contends 120% of Medicare is their sweet spot, regardless of geographic area. Yet another says 150% of Medicare is where it’s at, pointing to evidence balance billing represents only 2.5% of claims nationwide on their book of business.

In Texas we find RBP vendors are using reference points from 120% to 170% of Medicare.  Of interest, we’ve found medical caregivers accepting much less for point-of-service claim payment and direct contracts. For example we have direct hospital contracts pegged at 100% of Medicare with no outliers and we are getting bundled cash pay point-of-service rates below Medicare.

All RBP vendors are sensitive to balance billing and set their benchmarks at a point they believe best mitigates the noise without sacrificing too much “money left on the table.” Some set their benchmark on the low end to offset high fees usually tied to a percentage of billed charges or a percentage of savings, something we never recommend.

This is important to note since a low benchmark of Medicare can end up equaling +200% of Medicare by the time fees are added to the claim reimbursement. This egregious practice of enriching the vendor at the expense of the provider of care is not in the best interests of plan sponsors.

So if the government’s sweet spot is 100% of Medicare while others are 177%, 234%, 120%, 150%, 170%, what’s yours?

RiskManagers.us is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods.