Reference Based Pricing or As I like to
call it “Sticking it to the man”
Ben Frisch, Regional President CoreSource West
Reference Based Pricing Options
 PPO Replacement – Eliminate PPO in its entirety (no primary network, no
out of network programs), replace standard R&C reimbursement levels
with Reference Based Pricing for all claims
 Hybrid – Maintain PPO for Physician or Professional Claims, apply
Reference Based Pricing to all Facility Claims and out of network Physician
or Professional Claims
 Dual Option – Provide two plan options for employees to chose. Either the
PPO Replacement or the Hybrid option alongside a standard PPO plan.
 Out of Network Replacement – Remove all out of network programs (i.e.
shared savings programs such as MultiPlan) and replace with Reference
Based Pricing.
Features of Each Reference Based Option
 PPO Replacement – CS Recommended Vendor –
ClearHealth or ELAP with ClearHealth doing the
HCFA portion
 Hybrid – CoreSource Recommended Vendor –
ELAP
 Replaces primary network and all
supplemental programs COMPLETELY Member freedom to choose any provider
 Greater member protection as the PPO
remains in place for all professional or
physician claims
 Since no network then no benefit differential
– essentially one tier of benefits for all
providers
 Smaller number of claims will be impacted
however the dollars associated with these
claims will be higher (facility charges)
 Incidence of member balance billing increases
since contracted discounts are no longer
available – highest “noise level” of all options
 Allows for greater “testing of the waters” for
clients as all facility and non-PPO professional
claims will be reimbursed at Medicare or
Reference Based Pricing
 Transplant network should be included to
protect against large dollar claims
 Highest risk and greatest opportunity for
savings
 Payment of MD Network Access fees and the
Reference Based vendor fees
 More complex administration as claims would
need to be split between vendors, plan
language adjustment for distinction of how
claims are priced
Features of Each Reference Based Option
 Dual Option: CS Recommended Vendor:
 Minor change to current plan by adjusting
the R&C reimbursement level to be
Medicare or Reference Based Pricing after
all other discount options have failed
 Majority of claims unaffected as PPO,
supplemental, OON and negotiation
programs stay in place – Status Quo
 Aggressive out of network Medicare or
Reference Based Pricing can be
implemented which may incent members
to stay in-network or search for network
based providers
 Small number of claims to be impacted
 Allows for “testing of the waters” for
clients
 Out of Network Replacement – CS Recommended
Vendor: Clear Health
 Supplemental or OON programs removed
from the claim workflow.
 Allows for stronger discounts than OON
programs using Medicare or other
Reference Based Pricing Models
 Incidence of member balance billing
increases since contracted discount from
supplemental or OON provider is no longer
available
 Negotiation should be embedded in this
option to reduce incidence of balance
billing and retain value of Medicare or
Reference Based Model
 May incent member to stay in-network if
provider does not accept payment or
negotiation unsuccessful
Risks associated with RBP
 Members being balance billed, turned away or asked to pay in advance by certain
providers.
 Provider dissatisfaction as they have no contractual obligation to accept payment.
This can result in: balance billing, potential collection issues, refusal of service
and/or request to collect money upfront.
 Overall noise and disruption if the Clients management team has not been
properly educated and is not on board and supportive of the concept.
 Stop loss reimbursements – potential for negotiated claims to be incurred and
paid in one plan year and then additional amounts paid in subsequent year. Make
sure you’re working with a PSL (or Berkley) that knows and understands these
arrangements.
Why we made the change to Medicare
Reference-Based Reimbursement – a Case Study
(PacMoore an ELAP client)
• Rising Healthcare Cost were Significantly Eroding Profits
• In Two Years (2012-14 )Healthcare Costs More Than Doubled
• % of Revenue – 2.5% to 5.2%
• % of Payroll – 13.2% to 23.8%
• Existing Brokers Offered a 3-5 Year Plan
• Wellness Program Wasn’t Making a Big Impact
• I Needed an Immediate Plan !
• Target – Minimum Annual Reduction of 20% - Without Significant Cost
Shifting to the Employees
• Reference – Based Reimbursement Appeared My Best Option
• It Worked!!! Only 1% of claims has resulted in balance billing.
Financial Results – Year 1
Reduced Costs by $470,038 or 26% !
Total Plan Cost
$2,000,000
$1,771,070
$1,800,000
$1,600,000
$1,301,032
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$470,038
$400,000
$200,000
$0
8/2014 - CIGNA Self Yr 1: 8/2015 - Medicare Cost Reduction in Year
Funded PPO (219 EE's)
Reference-Based
1
Pricing (213 EE's)
Financial Results – YR 1 & 2 PEPY Costs
Cost Reduction has Averaged 22%
Per Employee Per Year Costs (PEPY)
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
$8,099
$6,101
$6,536
$6,319
$1,781
Clear Health Strategies
 Medicare Reference Based Pricing (MRBP) Model
 Selection of Medicare Percentage at the client, plan, geographic location, claim type or provider
 Can be used for all 4 product options
 Appeals are viewed as a provider education process regarding MRBP and if necessary negotiation with
the provider if reimbursement needs adjustment based on claim particulars
 Negotiation threshold can be identified (% of savings off billed, higher % of Medicare, minimum
discount, etc.)
 Progressive and effective dispute resolution and member advocacy services
 Balance billing mitigated through negotiation but not eliminated
 Pricing (Savings = Difference between Billed Amount and Medicare RBP Amount)
 Out of Network Replacement – 15% of Savings
 Hybrid - $8.25 PEPM or 15% of Savings
 PPO Replacement - $9.50 PEPM
ELAP Services
 ELAP considers themselves a cost containment program that goes beyond just the application of a Reference
Based Pricing model and applies a cost plus “build” methodology to determine a fair price for claims
 ELAP offers only a Hybrid Model (MD PPO Network stays in place with PEPM access fee, all other facility based
claims are reviewed)
 ELAP assumes that 90% of all claims (by volume) are physician based, 10% are facility
 Plan Document language is reviewed and revised to allow for the higher of Medicare plus 20% or the providers
actual cost plus 12%.
 Itemized bills for all claims over $25K for audit and review for pricing – post-adjudicated claims to be sent


Claims are adjusted based on the providers cost to charge ratio at the facility’s charge master and
department line level to determine which is the better payment (M+20% or C+12%)
ELAP identified as a co-fiduciary – handles all claim appeals and legal defense of the plan language with
the provider as well as protection for member to engage attorneys to address balance billing or collection
agencies at no additional cost

No claim risk assumed by ELAP (Plan funds for any additional payment to provider)
ELAP Services (con’t)
 Internally ELAP would be resource intense
 Itemized bills would be our responsibility to obtain then fax, mail or email to ELAP
 For each claim repriced ELAP sends to TPA the audit sheet of the claim to be sent to the
provider, notice of adverse benefit determination to provider and member notice
 ELAP projects that 10% of all claims are facility based and would be subject to their
repricing model
 81% of providers will automatically accept their Fair Price payment
 15% of providers will balance bill the member
 4% of providers will immediately appeal the Fair Price payment
 These disputes are handled by ELAP and any litigation is taken from their defense fund which
is included in their fees (12% of billed charges)
 Historically from 2012, incremental plan costs have increased 0.6% for balance billing,
lawsuits and appeals for ELAP clients
Candidates for RBP

Any prospect or client in a low margin business: municipalities,
manufacturing, trucking, grocery stores, etc.

Companies that are geographically diverse are best.

Management must be educated, aware and supportive of the concept.
Client Decision/Implementation - Check List
ClearHealth Medicare Reference Based Pricing Model
 Client selects Medicare Reference Based Pricing Model
- Out of Network (Replace MultiPlan)
Full PPO Replacement
 Complete ClearHealth Client Implementation Questionnaire
- Determine % of Medicare Reimbursement Level(s)
o Will percentiles vary by geographic area?
o Will percentiles vary by claim type?
o Will percentiles vary by plan design?
- Determine client preference for negotiations of balance billing such as minimum discount off billed charges,
increased % of Medicare or stand on Medicare levels (no negotiation)
 Update Plan Document with ClearHealth language
 Include standard Transplant Benefit within Plan Design for Full PPO Replacement
- Provides for network discounts
- 100% benefit payment mitigates balance billing
- OPTUM to be used as the transplant vendor (complete OPTUM paperwork)
 Incorporate ClearHealth Fees/Language within PSA
 Modify ID Card
- Out of Network Model: Remove all MultiPlan logos, etc.
- Full PPO Replacement: No network logos, consider Medicare Pricing language
 Plan Building – Use approved ClearHealth Fee Codes, etc.
 Member Education Process – distributed prior to effective date
- Member Brochure
- Member Letters
Client Decision/Implementation Check List
ELAP Reference Based Pricing Model

Client selects ELAP Hybrid Reference Based Pricing Model
- Facility Claims: no network, cost based pricing by ELAP
- Professional Claims: PHCS MD Only Network

Complete ELAP Client Implementation Questionnaire

Update Plan Document with ELAP language

Include standard Transplant Benefit within Plan Design
- Provides for network discounts
- 100% benefit payment mitigates balance billing
- OPTUM to be used as the transplant vendor (complete OPTUM paperwork)

Incorporate ELAP Fees/Language within PSA

Modify ID Card
- PHCS and MultiPlan logo on ID Card “MD Only”
- ELAP Language?

Plan Building – Use approved ELAP/PHCS Fee Codes, etc.

Member Education Process – distributed prior to effective date