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Marilyn Bartlett saved the state of Montana more than $30 million in three years by pegging hospital prices to a multiple of what Medicare pays. But she's finding the model she used in the state difficult to replicate elsewhere.
Marilyn Bartlett might be the closest thing health policy has to a folk hero. A certified public accountant who barely tops 5 feet, Bartlett bears zero resemblance to Paul Bunyan. But she did take an ax to Montana’s hospital prices in 2016, stopping the state’s employee health plan from bleeding money.
“Marilyn is not a physically imposing person,” said Montana Board of Investments Executive Director Dan Villa, who worked closely with Bartlett in state government. “She is a blend of your favorite aunt, an accounting savant and a little bit of July Fourth fireworks.”
Bartlett, whose faith in data borders on fervent, hauls binders full of numbers everywhere she goes. “My focus has always been following the dollars,” she said. “You’ve got to roll up your sleeves and get down to the nitty-gritty detail, especially in health care.”
Bartlett’s success in Montana saved the state more than $30 million in three years by pegging hospital prices to a multiple of what Medicare pays. Now, she is an in-demand adviser to states, counties and businesses all trying to control health care costs. But as she’s hit the road, binders in tow, she’s found it difficult to replicate the Montana solution.
A Montana Miracle
Bartlett earned her reputation as administrator of the Montana state employee health plan, a role she assumed in 2014 as the plan hurtled toward insolvency. As Bartlett dug into the data, she discovered hospitals were charging the state as much as five times what they charge Medicare, the federal insurance program — for exactly the same services.
Historically, the state had accepted the seemingly arbitrary prices set by hospitals. Bartlett, staring down a $9 million shortfall, knew that had to change. She wanted the state to start dictating the rates they were willing to pay, but she needed a benchmark first.
She turned to Medicare. Unlike most payers, who bury prices in secret contracts, Medicare makes its payments public. Bartlett borrowed those rates and then more than doubled them — to 234% — knowing that hospitals often complain Medicare pays too little. This new kind of contract, known as reference-based pricing, was among the first attempted at this scale.
Bartlett expected the hospitals to chafe at the offer, but with Montana’s plan insuring 30,000 people, more than any other employer in the state, she had the upper hand. Despite what Bartlett described as “very, very tense” negotiations, all the state’s hospitals signed on.
Five years later, the state health plan regularly runs in the black. Villa, who was former Gov. Steve Bullock’s budget director, said governors dip into the plan’s reserves to fill budget gaps. “I now refer to the state health plan as the ATM,” he said.
The Player Becomes the Coach
Montana’s success became a small sensation, at least in health policy circles. Now, one big question remains — the same one that has deflated the highest hopes of so many health care leaders. Can it be replicated?
Many of the country’s employers are desperate to find out. Their costs have risen 50% in just the past decade. Employee spending on health care is also on the rise, growing two times faster than wages. Leading economics researchers point to high hospital prices as a key culprit.
Since retiring from Montana state government in December 2019, Bartlett said she has spoken at numerous conferences, given hours of free advice, and answered a seemingly endless stream of calls.
One of the first calls came from Trish Riley, executive director of the National Academy for State Health Policy (NASHP). Riley hired Bartlett in 2019 to serve as “a coach, cheerleader and mentor” for officials from dozens of states trying to cut costs, including New Jersey, which passed a bill in 2020 overhauling the state’s health coverage for teachers and estimated to save the state $30 million annually.
Bartlett is also advising regional business coalitions stretching from Houston to Maine and seeing early signs of progress.
In Colorado, Bartlett is coaching a group of public employers, including city, county and state health plans, that have come together to negotiate with hospitals. The group recently notched its first win, signing one hospital to a Medicare-benchmarked contract.
‘A Hard, Hard Thing to Tackle’
Bartlett has learned over the past five years just how difficult her model is to export. “It’s a hard, hard thing to tackle,” she said.
Opposition from hospitals is often fierce. In Montana, the deal Bartlett negotiated has actually boosted some hospitals’ bottom lines, but the Montana Hospital Association still criticizes it. MHA President Rich Rasmussen faults the contract for focusing on prices and largely neglecting issues of quality and access. “It doesn’t connect all the dots,” he said. Rasmussen also argued Medicare rates are an “inadequate” starting point for negotiations because they fall short of covering the full cost of care.
That opposition pales in comparison to what Bartlett has seen crisscrossing the country. “What I faced in Montana was nothing like North Carolina faced,” she said, her eyes widening as she described the sheer power of the “mega systems” she encountered while advising North Carolina officials.
North Carolina’s plan to pay hospitals roughly twice Medicare rates fell short in 2019 after just five hospitals agreed to the deal and several giant health systems refused to budge.
Bartlett understands that, as a result of decades of mergers, more states face hospital landscapes like North Carolina’s, with its immense consolidation, than Montana’s, with its more than 40 rural hospitals. And the insurance industry nationwide also is highly concentrated, leaving employers with fewer alternatives.
Saying No to Employees
For employers to have any chance at the negotiating table, Bartlett said, they must be willing to make tough calls. In practice, that might mean dropping a hospital that delivered an employee’s twins or a surgeon who cured a CEO’s cancer. “That’s pretty damn hard,” she acknowledged.
“Employers don’t want to disrupt their employees’ care,” said Elizabeth Mitchell, CEO of Purchaser Business Group on Health, which represents Fortune 500 companies like Walmart and Microsoft. “It takes a lot of fortitude to carve a marquee-brand hospital out of a network.”
A 2020 KFF survey found only 4% of employers had dropped a hospital from a network in order to cut costs. (KHN is an editorially independent program of KFF.)
Bartlett is quick to remind cold-footed employers that continuing to contract with expensive hospitals and doctors has a price, too. “You’re going to disrupt members when they get less and less benefits and pay more and more,” she said. High health care costs also eat up wage increases in the private sector and school funding in the public sector.
Will Covid-19 Be a Catalyst?
Bartlett’s work has hit a crossroads during the pandemic. It is harder to criticize hospitals and their business practices as they play such a vital role. Meanwhile, employers and workers are hurting financially.
“Many large employers are facing economic pressures they frankly haven’t had for a while. They’re laying off tens of thousands of employees,” said Mitchell. “There’s a new sensitivity to costs.”
Bartlett sees an opportunity and is hustling to help employers meet it. She has teamed up with researchers at Rice University on a NASHP project called the Hospital Cost Tool.
“It breaks open this black box and lets you ask where these dollars are going and why,” said Riley of NASHP. The tool aims to automate the kind of forensic accounting of hospitals’ finances that Bartlett had been doing on a one-off basis.
‘You’re Not Going to Be Liked’
There’s one final test Bartlett has tried to prepare employers for — one for which numbers won’t help. It’s the personal toll that comes with challenging the status quo.
While working for the state health plan and before her work delivered results, Bartlett lost close friends, was cut out of meetings and even discovered her co-workers had created a Facebook group to criticize her. “You’re not going to be liked. You’re going to be ridiculed.”
She reminds employers they have a moral and fiscal duty.
“The reality is this is hard work, and it became harder than I ever anticipated,” said Bartlett. “But employers have been given this money, by the taxpayer, by the member, for these benefits. They are responsible for every penny spent. You can’t turn your back on that.”
In Montana, the premiums and copays state workers pay have not increased a single cent since Bartlett and colleagues renegotiated with the hospitals. Over that same time, the average premium paid by American families with employer-based insurance rose 13%.
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Dan Gorenstein is the creator and host of the Tradeoffs podcast and Leslie Walker is a senior producer on the show. Their Feb. 18 episode profiles employers’ efforts to purchase health care in new ways.