Why You Should Know What RBP & RBR Mean

When it comes to the healthcare industry, there are two things known to be true: 

1) Healthcare providers want to make money, and lots of it.

2) Healthcare sponsors, or employers, don’t want to pay irrational amounts for quality healthcare for their employees. 

So, something’s got to give. Right?

The PPO Era Has Come and Gone

Back in 1976, PPOs (Preferred Provider Organization), were introduced to help control, or regulate, healthcare costs. Providers who chose to participate agreed contractually to accept discounted fees. This was a major step forward as employers happily bought in, gaining access to network discounts and an overall lower cost of healthcare. 

This approach worked well for decades, providing affordable healthcare and reducing the annual cost of healthcare throughout the 1980s and 1990s.

Fast forward to the 2000s as provider contracts began to expire. Healthcare providers took the opportunity to negotiate higher prices, which meant higher healthcare costs for sponsors.

Enter Reference Based Pricing and Reference Based Reimbursement.

What is RBP and RBR?

In 2016, more businesses have implemented a RBP and RBR strategy in an effort to improve price transparency, benchmark the cost of claims, eliminate inappropriate charges, and build some trust between the sponsor and provider. 

Reference Based Pricing (RBP)

RBP specifies the actual amount that is allowed for specific procedures, such as an MRI or knee replacement based on the industry standard. Much like PPOs, participating providers have agreed to accept these payments. If an individual wants to utilize a more expensive provider, it is possible, they will just be responsible for the remaining balance.

Reference Based Reimbursement (RBR)

RBR uses a similar pricing reference module, which is normally associated with a Medicaid allowance and the actual cost for the service. In order to recoup a “fair and reasonable” profit, providers will earn an additional 20%-80% in reimbursement.

While this concept is relatively new, it is catching on and being used in many different ways by health administration departments around the country. As PPOs begin to fade out due to the dwindling benefits, your company may benefit from ending a contract and trying a new RBP and RBR strategy. 

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