How does reference-based pricing work?
Cost Plus metric-based pricing is a unique method to reimburse hospital facilities for their services. A reference-based pricing plan is designed differently from conventional plans, and is not a PPO plan. With metric-based pricing, employers set a pricing cap on the maximum amount that they will cover for certain medical services that have wide cost variations, such as knee and hip replacement surgery.
Reference-based pricing is a claim review and audit program supported by a claim repricing protocol to determine Allowable Claim Limits. The procedures of this program carefully comply with ERISA rules and fiduciary standards and directly challenge the ambiguity of hospital pricing.
When a claim is initially presented, the service provider begins by employing a forensic approach to auditing the claim which is performed and reviewed by Certified Professional Coders. In fact, the overall repricing review is called an audit. The service provider then determines a reasonable and fair reimbursement rate by establishing an Allowable Claim Limit for hospital facility bills in two ways (facilities include hospitals, imaging centers, and surgery centers).
First, the claim is repriced according to the only national pricing benchmark available in the U.S., namely, Medicare. The Medicare reimbursement rate is increased by 20% to provide reasonable overhead and profit for the facility.
Second, the claim is repriced by determining the average cost for the service from providers in a similar geographic area, and increased by 12% to include overhead and profit for the hospital.
The service provider determines the final facility reimbursement by paying the greater of these two calculations because it views this formula as fair and reasonable.
When a hospital receives a payment less than their billed charge, they do one of three things. Roughly 81% of the time they cash the check with no questions asked. About 15% of the time they question the amount, challenge it, and automatically balance bill the member. About 4% of the time they appeal it. The service provider contacts the hospital, provides further explanation, and most hospitals accept the amount at this time.
When a hospital is unwilling to accept the re-priced bill, the service provider assumes certain defense obligations on behalf of the employer in support of this process. Most importantly, they will represent and defend the individual employee with respect to any balance bills. If the provider attempts to balance bill, the service provider will step in and work with the provider to an acceptable solution. This could include establishing a single patient contract. The service provider’s balance billing customer service provides unique support to plan members never before seen in this industry.
The member is still responsible for the normal copays, deductibles, and out of pocket costs. This is important to keep in perspective because they often confuse their normal liability with additional balance billing.
Members and plans are supported by national law firms with expertise in Healthcare, ERISA, and deceptive trade practices. Appeals are supported by nationally recognized and the Utilization Review Accreditation Commission along with other accredited independent review organizations.
Our reference-based pricing plan is a creative and logical effort to pay health providers a reasonable reimbursement without the use of a PPO contract by establishing limits for the payment of medical claims that correlate to the providers’ cost of services. The Physician Only PPO network applies to physician visits, but there is no PPO network for hospital visits.