What Is Reference-Based Pricing?


Reference-based pricing TPA (RBP) is a reimbursement method required for healthcare services. It uses Medicare reimbursement rates as a benchmark. This determines the allowable amount that a payer will reimburse a provider for a specific service. RBP is a cost-containment strategy designed to reduce healthcare costs as it sets a maximum price that payers willingly pay for services.


Under RBP, payers, such as self-funded employers and health plans, prepare a reference price for each healthcare service. This reference price typically depends on the multiple of the Medicare reimbursement rate for the service. For example, a payer might have a set reference price for a colonoscopy that is 1.5 times the Medicare reimbursement rate.


When a provider submits a claim for a service covered by RBP, the payer compares the provider's billed charge to the reference price. If the billed charge becomes bigger than the reference price, the payer can only reimburse the provider up to the reference price. The provider has the responsibility to collect the difference from the patient.




RBP is a very useful claims repricing process for both in-network and out-of-network services. However, it is majorly used for out-of-network services, as it is difficult to negotiate lower rates with in-network providers.


There are many benefits of RBP, including:


  • Lower healthcare costs: RBP helps to lower healthcare costs as it sets a maximum price that payers can willingly pay for services.

  • Increased transparency: RBP also helps to increase transparency in the healthcare pricing system as it provides patients with a better understanding of what they need to expect to pay for services.

  • Reduced administrative costs: RBP reduces administrative costs by streamlining the claims reimbursement process.


Overall, RBP is a complex issue that has both potential benefits and drawbacks. Employers and health plans should be careful in considering the pros and cons of RBP before they decide whether or not to implement it.

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