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Lindsay Lowe, Associate, Wolfe Pincavage, Miami Lindsay Lowe, Associate, Wolfe Pincavage, Miami

The financial pressures surrounding COVID-19 have led employers to look for new ways to contain health care costs. Payors are using reference-based pricing (RBP), saying goodbye to traditional participating provider (PPO) networks.

Reference-based pricing is a health care cost containment model that limits what a payor will pay a provider for health care goods and services. Most insurers these days use RBP for certain out-of-network benefits. However, this becomes problematic when a plan foregoes a PPO network for hospital services altogether and pays all services, including emergency services, using an unsupportable benchmark rate, typically based on a percentage of Medicare fee-for-service or the provider’s cost plus a minimal mark-up. The plans usually keep a PPO network for physician or other professional services to ensure their members can continue to see their preferred physicians. This occurs most frequently with mid-sized self-insured employer plans.

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