Reference-based pricing has long been used in other countries as a means to controlling health care expenditures by creating transparency in pricing. Recent research in the United States has demonstrated that reference pricing can be equally effective at reducing costs for procedures as consumers redirect their business to lower-cost providers, causing providers to lower their prices further to remain competitive.
Under reference-based pricing, a payer offers to pay a fixed price for an item or service. The plan member can then go to any vendor or provider that will provide the item or service for that price. Members may also go to a more expensive vendor or provider, but will have to pay the difference between the plan’s offered price and the price charged by the vendor or provider.
Savings from reference pricing materializes through the combination of 1) patients choosing providers at the reference price, 2) patients paying the difference between the reference price and the allowed charge through cost sharing, and 3) more providers reducing their prices to the reference price.