Due to healthcare increasing each year, employers are moving away from relying on assurances of the contracts of Preferred Provider Organizations. What PPO’s do is input discounts off arbitrarily set billed charges. Many times they lack accountability and transparency because they are confidential. They are also very inflated and are a cautionary tale of the “buyer beware” market with ever-increasing prices. Below, we will look at how a referenced-based pricing system might be a better option in the healthcare industry, as featured in an article on Benefits Pro.


Reference-based pricing used to be considered a non-traditional option. However, it is now being heavily considered due to the current economic situation and decreasing profits and revenues. It is a market disruptor and a possible alternative to health plans that are carrier-sponsored. It is the first time that total transparency is being offered to consumers; they can see what the cost of medical services will be before they are rendered. It calls for the accountability of service providers. This is a big step in contrast to traditional health services where medical providers are paid on a Medicare Plus basis, and patients are required to pay their presented bill aftercare.


Referenced-based pricing uses a cost-up pricing approach. They focus on optimizing provider payments for medical services, and they regulate their prices based on the available public cost, quality data, and price. This way, a fair price is set for medical services that vary by geography to ensure that provider payments are equitable for the market. This is the complete opposite of the way PPO establishes its pricing. Reference-based pricing helps manage the current inflation of medical services and controls their cost themselves as it is not tied to Medicare pricing. Reference-based pricing prioritizes achieving adequate member and patient satisfaction.


Although employers are becoming more and more aware of different reference-based pricing options, they are still slow to adopt them. Big companies that have adopted the plans include Boeing, Walmart, and Lowes. Group plans have projected at least 20% of savings compared to standard health plans, so we should start to see more companies adopt this method as they start to prioritize more patient satisfaction.