More than 45 percent of American adults say it’s difficult to afford health care, according to a survey by the Kaiser Family Foundation. With the current healthcare crisis and the high cost of receiving care, many healthcare consumers have little hope of being offered acceptable low-cost options. When it comes to healthcare expenses, consumers have difficulty understanding the pricing process, so patients rely on the information providers share and don’t second guess their recommendations, even when it costs them. To change this, healthcare payers and their partners need to work together to implement a strategy that will avoid member and provider abrasion, such as market-based pricing.
Market-based pricing is a methodology that encompasses healthcare data from multiple sources and applies historical claims and provider insights to determine fair and reasonable reimbursement rates for out-of-network claims. Market-based pricing achieves reduced provider and member abrasion while still driving savings for the healthcare payer and plan sponsor. Matt Mikulski, Chief Operating Officer of Cost Management, Aaron Billotte, Vice President of Healthcare Economics, and Lisa LaMaster, Vice President of Product, are industry experts from Zelis and met with Future Healthcare Today to further discuss and define market-based pricing.
The experts offered insights into how reimbursement strategies can be adjusted based on plan goals to find the preferred balance between savings and provider abrasion. Health plans can also use market-based pricing as a recruitment tool if they want to maintain strong relationships with providers. Reasonable reimbursements can also motivate providers to become in network to further decrease both provider and member abrasion, providers may be more willing to contract when they perceive they are being reimbursed at a fair rate for out of network claims, said LaMaster.
Legislative and regulatory activity, such as the No Surprises Act (NSA), have accelerated this pricing methodology, so members are now protected in certain circumstances where they had no choice in a provider. This has made market-based pricing a hot topic, as healthcare payers seek new methods to address out-of-network claims and situations where the member chose to use an out-of-network provider (elective).
For determining market-based pricing, data gathering is critical, including geographical information. Nationally, costs can vary drastically; what providers charge in rural areas often differs greatly from pricing by their urban peers. LaMaster comments, “by thoughtfully looking at the entire universe, you should be able to establish what the best market-based price is.” Mikulski adds that while market-based pricing is a broad term with many lenses, setting reimbursement rates from an out of network perspective, especially the elective side not covered by the NSA, is important for managing member abrasion with competitive savings rates.
When “looking at all the different elements of the claim, geography is one of the main drivers, whether it’s by zip code or locality when searching for benchmarks within the data,” commented Mikulski. By understanding the market, pricing can be compared based on geography, which helps normalize the rates. To determine a better rate, it is important to not only “compare pricing to common localities and actual locations, but also nationally.” This will aid in finding the balance between member satisfaction, plan savings, and provider acceptance. While “delivering value and minimizing provider and member abrasion is a challenge, another challenge is having support on the back end,” says LaMaster. “When a provider disagrees with a particular reimbursement, it’s important to have a knowledgeable team who understands the geographic nuances of a particular region when speaking with the providers. This team must be able to have these conversations when negotiations are needed, having the structure in place to support provider communication and negotiations is essential because there will always be outlier claims.” This is where partners can come in that focus, not on just one particular area, but also nationally, to help bring expertise to the health plan, commented Mikulski.
Billotte stated the importance of partners not using just their own historical claims data but also going to market and collecting the most objective data to create a better bird’s eye view. Then it’s critical to analyze the data to discover “behaviors in provider patterns that allow taking the external market data and customizing to the client experience.” Partners that start with “external market data then massage it with internal expertise, knowledge, behaviors, patterns, and analytics are differentiators.”
Mikulski remarked that the right partner’s “market-based pricing can be calibrated and adjusted based on a plan’s unique needs versus stray contracted rates that are used the same across the market.” Customization for the plans satisfies the different needs of being driven either by more financial savings for the plan or by higher member satisfaction. “For plans like this, you can take your reimbursement levels, and you can calibrate them exactly to the needs of the plan instead of taking a more off-the-shelf approach.”
Another advantage to a partner’s knowledge base is that it can determine the best market-based pricing to handle the fluidity of the data and continual changing of rates. It’s important to have a “partner who’s been in the industry and has the knowledge and consultative bandwidth to not only help with nuanced needs but also to determine what is driving the market at a particular moment,” said LaMaster. “The No Surprises Act is a perfect example of where something happened in the market that changed how we look at things and move forward. Partners who have the background can take that in and then incorporate it into their pricing methodology.”
By seeing trends in their own data, partners can use the insight for payers and refine their pricing strategies. This is where history in the industry is essential to provider acceptance. “By working with out of network providers and understanding what levels of reimbursements are historically accepted by providers and which are disputed,” partners can deliver market-based pricing that is acceptable by the provider community. Mikulski commented that partners with a wide breadth of clients of different sizes, a national scope, a long history of collecting provider acceptance data, and benchmark reimbursement data drive more successful out-of-network savings strategies than plans trying to do this on their own.
Partners can meet the balance between expert opinions on outlier investigation and automation for efficiency. “Even though there has been a long-standing tradition of health plans doing pricing themselves, market-based pricing is now becoming accepted,” said Billotte. This methodology has more customization to meet plan goals, which leads to less member abrasion and great provider acceptance by determining the best rate for out of network providers.
To learn more about market-based pricing, click here.