Reference-based pricing: 10 keys for successful implementation

Health care affordability remains a monumental issue, presenting a daunting fiscal challenge for individual consumers, employers, and public budgets alike. Skyrocketing health care costs have introduced roadblocks to essential health services and prompted a vigorous search for new and robust strategies to mitigate this escalating crisis. 

More than any other development in my 21 years in this industry, reference-based pricing (RBP) has emerged as one of the most compelling and progressive approaches to this challenge. This innovative model, championed by disrupting self-insured employers, defines a maximum limit or “reference price” they’re willing to pay for health care services. Different repricing entities use varying metrics, but this often ties the claim payment to a derivative of Medicare that results in the employer paying from 140% to 150% of Medicare, on average.  

Opaque pricing shrouds the legacy health care sector. The actual costs of services have historically remained elusive for both patients and payers, often only disclosed post-provision. This murkiness precipitates pricing inconsistencies, engenders inefficiencies, and cultivates an environment ripe for bloated costs and rampant fraud.