Montana retreats from innovative hospital payment model

Montana is signaling it might step away from an innovative way of setting the prices its public employee health plan pays hospitals for services, an approach that has saved the state millions of dollars and become a model for health plans nationwide.

The plan gained national renown among employers and health care price reform advocates when, in 2016, it established maximum amounts the health plan would pay for all inpatient and outpatient services. Those amounts were pegged to Medicare reimbursement rates. The adoption of that model, known as reference-based pricing, has saved the state tens of millions of dollars. Taxpayers help fund the medical plan, which insures public employees and their families, for a total of about 28,800 people.

Montana didn’t invent reference-based pricing, but the state made waves by having a health care plan of that size set prices for all services, not just certain procedures, such as knee replacements.