Transparent Open Networks
A Transparent Open Network (TON) offers purchasers such as employers and unions fair and fully transparent pricing for medical services/procedures ranging from specific treatments (e.g., knee replacement or colonoscopies) to specific conditions (e.g., diabetes or kidney disease). TONs are the successor to value-extracting PPO networks (For details on how PPO networks have lost their value, see PPO Networks Deliver Value chapter here). Services and procedures are typically bundled, meaning there is just one bill for all the services received for a specific treatment or condition that includes multiple providers and sometimes multiple settings. Another dimension of transparency is that the market is open to participation by any provider with sufficiently high-quality indicators and charges fair prices. It should be like “Fair Trade” for health care.
We view Reference-based Pricing (RBP) as a step in the direction of TONs. When RBP and direct contracting are implemented and managed correctly, we’ve found that the rate of balance bills on traditional PPO plans is almost twice the rate of balance bills on a well-managed RBP program. With TONs, balance bills are zero. One of our Health Rosetta advisors provides a great example of this. For his RBP plans balance bills are < 0.5%, and with his PPO plans, it’s 1.4%.
Another example of RBP as a stepping stone toward TONs is, in the Pacific Steel & Recycling case study (Pacific Steel webinar here), RBP led to over 4,000 direct contracts in roughly two years. Unlike cloaked PPO agreements that are miles long, TON agreements are simple (often 2 pages or less) and fair to both parties. RBP serves as a conversation starter and a quasi out-of-network solution where there aren’t pre-existing TON agreements.
