In reference based healthcare payment model known as reference-based pricing, the employer sets aside the traditional insurance carrier contract and makes payment to the hospitals directly. The amount which is paid is usually multiple reimbursement rate than just being based on the discount. Those who have supported this strategy have termed it as rational and a cost-effective way of paying for healthcare.
Working on this pricing
For instance, an employee goes for an echocardiogram. It is an ultrasound of the heart that produces the movie of the heart. Heart specialists use them to diagnose any potential issues with the heart and try to find out whether the heart is pumping the health properly. The procedure takes almost 20 minutes for the technician and the heart expert interprets the image is not more than 5 minutes.
If the test is done in any hospital, he might charge almost USD 2000. If the insurance network has negotiated a 50% discount, the final rate would be USD 1000 which might be paid in the following ways.
It is paid by the patient if he has reached his deductible. Then a part may be paid by the patient and other parts are paid by the health plan, if the patient is covered in a co-insurance plan. Or the health plan may pay the entire bill.
If the same test is done at the doctor’s clinic he might bill the same test at USD 1000. And the same test might cost USD 750 if the insurance network has negotiated half the discount.
With reference-based pricing, the Medicare pays about USD 150 for an echocardiogram. And if the reference based price is set at 150 percent of Medicare then health plan would pay USD 225 whether the procedure was done at the hospital or in the office of the doctor.
Now the question arises will the hospital or the doctor accepts this paltry sum as the payment when they get paid higher in other forms. The answer is sometimes yes and sometimes no. When the hospital sees that the patient has no network, they may charge the patient in full with no discounts. If the health plan reimburses USD 225, then the hospital will balance the bill and it is up to the patient to negotiate the balance bill.
In The End
There may be many reference-based pricing vendors but the best is one who brings the best result.