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What is Reference-Based Pricing?
Reference-Based Pricing (RBP) is a highly effective, widely used cost containment strategy for establishing optimal reimbursement rates for medical services. The current medical services reimbursement system uses a discount off of some negotiated dollar amount agreed to by the provider of medical services and a PPO or other organized network of providers, typically administered by a fully-insured carrier.
Reference-Based Pricing is a way for consumers to combat this highly flawed pricing model and to reduce the increasing cost of healthcare. Reference-Based Pricing establishes a maximum amount that an employer plan sponsor will pay providers for certain, specified medical or prescription services. It is not uncommon for medical services to have drastic cost variations between providers with no discernible differentiation in quality.
How it Works
Reference-Based Pricing reimbursement rates are established as a multiple of what Medicare pays based on the Medicare Fee Schedule. A traditional PPO network marks up healthcare services just so they can be marked down! Reference-Based Pricing is a more transparent and fair pricing system. An employer can see significant savings over a PPO plan while the provider still receives more than they would normally receive from Medicare.