Reference-based pricing reimbursements: When to negotiate

When it comes to balance billing, one aspect to consider is when the health plan negotiates with the provider. There are pros and cons of negotiating prior to an employee’s surgery or service, versus after the surgery or service.

Here are a couple of things to consider.

Prior to service

Negotiating with providers before the surgery or service reduces the risk of balance bills. Hospitals and the plan typically have already determined an agreed upon reimbursement, and it is less likely that an employee will wind up with a surprise bill.

Further, brokers can structure this process similarly to pre-authorization requirements that employers are already familiar with, reducing the pain of transitioning to reference-based pricing.

However, a drawback of negotiating beforehand is that hospitals can simply refuse. In a larger market, the plan can then either counter the offer or direct the employee to a lower-cost site of care. But in smaller markets where a single hospital has a lot of leverage, this may not work as well.

Post-service

Some reference-based pricing plans negotiate on behalf of employees after services have already been provided. One benefit of this strategy is that the service has already occurred, which automatically puts the employer in a stronger negotiating position.

After the fact, some hospitals will be more willing to accept a payment in excess of Medicare rather than fight for an even higher reimbursement. The “something is better than nothing” mindset can benefit employers in this position.

On the other hand, this situation is more likely to result in a chargemaster balance bill to employees, which can be stressful. Though many vendors have high success rates in negotiating balance bills on behalf of employees, many employers may be unwilling to consider a plan where this is even a possibility.

Even so, the cost-savings associated with reference-based pricing — under either negotiation strategy — are so significant that brokers should be able to effectively communicate how these plans work. Even if a client is unlikely to move in this direction, brokers will benefit from being able to explain the variety of options employers have, and the pros and cons of each.