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Why Reference-Based Pricing is Unsustainable and What Will Replace It

When reference-based pricing (RBP) was first implemented in 2011, it was seen as an exciting alternative to discounts from billed charges that traditional networks used to price medical claims. The hope was that the cost of employer-provided health benefits would be more affordable and predictable.

But over time, as we point out in a new white paper on this hot topic, “Why Reference-Based Pricing has been Leapfrogged," self-insured health plans lost sight of this well-intentioned model’s initial mission. Rather than serve as an enhancement for commercial plans to eliminate costly out-of-network care, it became a full-blown substitute.

RBP, which establishes a reference price for medical procedures that usually involves a multiplier of Medicare reimbursement in the 140% to 180% range, has failed to provide a methodology that is transparent and understandable. This approach is arbitrary and does not meet the definition of usual, customary, and reasonable pricing.

There are a multitude of other problems with RBP that our industry has glossed over. One huge concern is that it applies pressure on providers to claw back whatever reimbursement they can to make up for below-market rates. That pits patients against providers, which results in balanced billing and dissatisfaction among both parties. And despite attempts to reduce or eliminate employee friction, litigation, and balance billing, those efforts have fallen short.

Mindful of these pitfalls, WellRithms developed a far superior method called Sustainable Claims Pricing (SCP). SCP uses a proprietary medical pricing database to reprice medical bills line-by-line based on hospital cost-to-charge ratios reported quarterly to the Centers for Medicare & Medicaid Services, as well as geographical cost variations and quarterly inflationary adjustments from the U.S. Department of Labor.

We also leverage the expertise of physicians and surgeons, rather than coders or administrative personnel, to manage a technically advanced bill review process. This guarantees precision in claims payment accuracy, prevents overbilling, and eliminates fraud, waste, and abuse. The only way to ensure that a medical bill is properly reviewed is to fully understand the medicine behind it. When medical professionals are the ones who scrub bills, they are easily able to spot redundancies and items such as durable equipment that should never require separate billing.

Leveling the Paying Field™

We’re helping plan sponsors significantly reduce their healthcare claims costs while delivering unmatched member protection and guaranteed savings. It’s a commitment that drives our team of physician experts to uncover, review and reprice medical bills – averting medical overbilling costs on behalf of self-funded employers, unions, brokers, and administrators.

Today, there’s no reason why claims errors and deliberate overbilling should cost billions of dollars every year. With WellRithms as an ally, payors prevent those losses and reap the savings.

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