Ignores one of the largest drivers of growth in health care spending: prescription drugs − by excluding them from reference-based pricing programs.Increases consumer demand for price and quality transparency, and reliable tools are not yet widely available.Undermines broader health care planning, as providers have less ability to predict their patient mix and volume and their health care needs.Increases bad debt for providers, making it more difficult for hospitals to meet their mission of caring for communities.Creates “pain points” for consumers by leaving them stuck with unexpected bills and greater costs.Does not consider quality in the equation, as the reference price does not help direct patients to higher-quality providers.Often leaves patients unaware that they may be subject to additional costs, making them financially vulnerable.Is a cost-containment strategy that simply pushes more of the cost of care away from the payer and onto patients and providers.Reference-based pricing is bad for patients and the hospitals and health systems that serve them because it: Recent changes to federal rules that expand access to association health plans could increase the number of individuals enrolled in plans that use this reimbursement strategy.However, some larger employers are using reference-based pricing for discreet services, such as knee and hip replacements. Large employers that use benefits to compete for workforce talent have shown less interest in this payment model, as it creates pain-points for their employees (balance billing and subsequent adjudication).There is a growing industry of third-party administrators targeting small businesses for reference-based pricing solutions.
Although reference-based pricing software programs vary, the methodology includes collecting data on prevailing costs for medical services from CMS’s HCRIS (Healthcare Provider Cost Reporting Information System), benchmarking it against relevant types of hospitals and settings, further calibrating by severity level, and applying a margin factor.