Flume Health’s Chief Operating Officer, Kevin Schlotman, has decades of experience in the insurance industry and was an early adopter of reference-based pricing. In this interview, we talked to him about where RBP came from, and how to make the most of it.
As a concept, it’s been around for decades. The people who created it didn’t buy into the whole negotiated network thing. TPA’s like ELAP and AMS really took it mainstream about 7-8 years ago with a very aggressive mindset and heavy marketing tactics. It didn’t catch on because there was bad patient support and bad customer advocacy. In the last 5 years, it’s moved up-market, gaining interest from larger corporations who could really make use of it. Now it’s coming back downstream and is available, with the right TPA, for companies of pretty much any size.
I was a pretty early adopter. Insurance and benefits was a family business for me, and after years of working in the industry, I just wanted a better way to do things, one that would make real change for my clients. It all came together for me when I found ClaimDOC and 6Degrees, two RBP-focused companies that were really patient-first, with patient advocacy programs like phone calls, apps to take pictures of your bills, and walking people through their bills.
That depends on who you ask.
Advisors will say the most common misconception they run up against is that everyone’s going to get a balance bill. In reality, fully insured plans get balance bills almost four times as often, because of situations like an anesthesiologist being involved in a surgery without the patient ever realizing they’re out-of-network.
Providers’ biggest misconception is that they won’t get paid. But with Flume Pay, we’re able to pay doctors who agree to RBP within 72 hours of an appointment. Flume has a whole team who proactively reach out to providers where our members live to get direct contracts- and this has been working very well for us in terms of expanded patient access.
Hospitals claim that RBP exposes patients to more financial risk, and gives them fewer options. The reality is that most hospitals do take Medicare, and they could also accept RBP prices (which are higher than Medicare rates, often by a significant margin). Many times, they’re just afraid of losing the unfair advantage they get from negotiating secret prices with major carriers. They like being able to overcharge people without any accountability.
On that note, a major misconception patients have is that hospitals have their best interests top of mind. But hospitals are businesses just like anything else, and they’ve been allowed to run unregulated for decades, with sweet deals with major carriers to bring in the cash. Some have even gotten in trouble lately for sending their own employees to collections and bankrupting them. Hospitals aren’t charities.
In the past, advisors have had to go to clients every year and say, “Bad news, your premiums are going up another 12%.” But the system gives them no data or leverage to propose a better alternative, so they’re stuck being the bearer of bad news year after year.
RBP allows them to really deliver better solutions and better results, and to differentiate themselves in the market by doing so. Of course it isn’t easy; they have to be willing to overcome the noise that transitioning to RBP involves - but a good TPA partner will support them in that.
Plans fail without communication. People don’t know how to make appointments with an RBP plan because they’re used to the ‘Easy Button’ they get with big carrier networks. They are not trained to plan, or shop, or ask questions at the doctor’s office. We make a big point of teaching them to show the Flume Health card at the front desk, and put the doctor on the phone with us if they’re receiving pushback.
Secondly, plans fail when HR and the C-suite aren’t committed to changing away from the status quo plan design. Change is always seen as bad - but really there’s much better results on the other side for employees and leadership alike.
I often talk about the “three-legged stool” of people who have to understand and commit to RBP in order for it to work. That’s the broker, the C-suite, and the HR Admin. These are the people who will have to lead the charge during the first 3-6 months of the plan as people get used to all the new parameters. Any time there is a network change there are challenges, not just for RBP. Carrier plans are about getting people to see the carrier’s favorite doctor, for the carrier’s negotiated price, even if that’s not necessarily the best path of care. Reference Based Pricing is about getting people to the right doctor, for the right reasons, at the right price.
RBP is a sledgehammer. It’s a blunt instrument that’s powerful, especially when used by a large number of patients. It would obviously be better if healthcare operated like a free market and pricing was transparent and people could shop for their medicine like they shop for their shoes, but the state of the market right now mandates that we use brute force in order to create meaningful change. We have to break down the opaque barriers that carriers and major hospitals hide behind in order to get them to come to the table with transparent, reasonable prices.
Insurance networks claim to give their members a discount on healthcare, but that term can be misleading. This post explains how both networks and RBP plans end up paying the prices they do.