Montana Negotiates Price Transparency in Hopes of Controlling Rising Medical Costs

Jul 8, 2016

Governor Steve Bullock, Dr. Heidi Duncan, Department of Administration Director Sheila Hogan, and Community Hospital of Anaconda Steve McNeece announce a new reimbursement model for the state employee health insurance plan. It's projected to save taxpayers $25 million by the end of 2018.
Credit Jackie Yamanaka

 Governor Steve Bullock projects Montana taxpayers could save about $25 million dollars because of the way it manages medical costs for its state employees.

Under the old system, providers could charge the state of Montana’s health plan different amounts for the same service. Under a new transparent pricing model Allegiance, the state’s third party administrator, is contracting with facilities. Allegiance is using Medicare as a national point of reference for costs. It then pays hospitals a multiple above that.

“What the new reimbursement model does is make medical costs more predictable, consistent, and comparable among facilities,” says Governor Steve Bullock.

The state of Montana as negotiated price transparency with 9 of the 10 largest hospitals and most of the smaller local hospitals. Bullock says the state continues to negotiate with Benefis Health System in Great Falls.

Family Practice Doctor Heidi Duncan says discussions about cost are a regular part of her conversations with patients.

“As physicians, clinics and hospitals we are not going to be able to solve the problems of high costs of health care on our own,” she says. “There are multiple complex factors, a lot of which are beyond our control.”

This includes the cost of keeping up with technology, as well as to recruit and retain doctors, nurses and other providers in a rural setting.

Calls for price transparency have been increasing, particularly when it comes to elective surgery, like knee replacement.   

Doctor Nick Wolter is the CEO of Billings Clinic. He says Billings Clinic has in place a plan to control overall health care costs, which continue to rise at the same time reimbursement for medical services continues to drop.

“We’re taking, $12-15 million of cost out of our operation every year. That has translated into us keeping our charges flat over 5 years,” Dr. Wolter says. “That’s really pretty amazing. The problem is charges don’t always reflect the cost to an individual.”

That’s because insurance companies or large groups negotiate with providers the different reimbursements allowed for medical visits and procedures.

Wolter says there are no quick fixes to the rising cost of health care.

For now, the change in reimbursement based on price transparency only affects state employees and their dependents and state retirees or about 33,000 people.