The Truven Health Blog

The latest healthcare topics from a trusted, proven, and unbiased source.

 
By Truven Staff

Reference Pricing: Carrot or Stick?

Matt Collins imageAs a recent Associated Press article pointed out that the Obama administration is supporting the continued practice of reference-based pricing, but that decision is being met with mixed reactions. Some say it’s an innovative healthcare cost-control strategy; others worry about the burden on patients.

Either way, it’s really only a matter of time before more employers and health plans begin to strategically implement the concept to reduce costs — because it works. Recent research studies show the use of reference pricing, where plans place a cap on what they will pay for a specific procedure, saves money for both organizations and patients alike.

The key for employers and health plans going forward, though, will be to decide whether to use reference pricing as an incentive or punishment — the proverbial carrot or stick.

Using it as a motivational tool, businesses can leverage the opportunity to inform consumers of reference prices — and then reward them for staying below that price. Rewards could take the form of gift cards for accruing X amount of dollars below the reference price, or even straightforward cash-back rewards equaling the difference between the reference price and the lower dollar amount charged by the provider.

And we already know that encouraging consumers with rewards is a great way to take overall engagement to a whole new level.

Of course, cost penalties that hit their personal pocketbooks can get the attention of consumers, too. Organizations could simply choose to present consumers with reference prices, thus making them accountable for the difference between the actual amount of the procedure over the reference price.

No matter which path an employer or health plan chooses, finding ways to boost cost transparency, like offering treatment cost calculators and other personalized tools, will be important as reference-based pricing gains ground.

Matt Collins
Director, Product Management
3548
Categories: Employer, Health Plan

Name:
Email:
Subject:
Message:
x