How a CPA saved a state millions in health care costs

Marilyn Bartlett, CPA, changed the conversation about health care policy when her penchant for numbers saved Montana’s state employee health plan millions without increasing member or employer contributions.

A self-described “accounting nerd” who sometimes wears debit and credit earrings has helped shift the conversation and the balance of power in the complex, high-stakes world of state employee health plans. Along the way, she has highlighted the power of accountants to potentially save government employers enormous sums of money.

Marilyn Bartlett, CPA, was 64 and nearly ready to retire in 2014, when she decided to take on one more professional challenge before hanging up her spreadsheets for good. She accepted the job of leading the Montana state employee health plan, which was losing money and projected to be insolvent in three years.

Her efforts to change the way the state of Montana pays for health care not only breathed new life into the state health plan, but it also put her in the national spotlight in health policy circles and prompted other states to follow suit.

“[She] changed the conversation in a really interesting and helpful way,” said Maureen Hensley-Quinn, senior program director at the National Academy for State Health Policy’s coverage, cost, and value team. The NASHP is a nonpartisan organization that supports state agencies and programs with responsibilities for health policy across the country.

Colorado, Nevada, North Carolina, Oregon, and the state of Washington have adopted Medicare-based pricing models in the years since Montana did under Bartlett’s leadership.

But Montana, in September 2021, awarded a contract to a new third-party administrator for its state employee health plan, a move critics say reduces price transparency and could make it possible to roll back the innovations Bartlett brought about.

HOW TO STOP THE BLEEDING OF CASH

In 2014, Montana’s state employee health plan, which covered about 30,000 lives, was headed for insolvency.

Health care costs in the plan were out of control. And not only were they rising — as is typical across the health market — prices for the same procedure also varied widely depending on the hospital they were performed at. By the end of the year, an expected loss of $28.9 million would reduce the plan’s reserves by about one-third. Financial projections further suggested that by the end of 2017 expenses would put reserves at minus $9 million and the plan would be insolvent.

“It was bleeding cash,” said Sheila Hogan, who was director of the Montana Department of Administration at the time.

Enter Bartlett. After stints with an employee benefits company and a health insurer, the then-accountant was not quite ready for retirement.

“I thought, ‘It’s time to take all these little bits and pieces I’ve learned along the way, help others, and work with others. We can get this done. I know we can,’” she said.

Bartlett’s efforts saved Montana’s state health care system up to $47.8 million in hospital inpatient and outpatient costs during just the first three years. Her work in Montana helped her win the AICPA’s 2021 Outstanding CPA in Government Impact Award at the state level.

Bartlett no longer works for the state of Montana. She is skeptical of the state’s change in third-party plan administrators and the change in hospital payment method, saying the decision risks a rollback of the payment transparency she helped usher in.

TRYING TO MAKE HER HERO PROUD

“I love accounting,” Bartlett said.

Her license plate reads “DR CR.” On a vacation to Italy a few years ago, she made it a point to visit the 1,000-year-old Tuscan town of Sansepolcro, where a plaque honors Italian mathematician Luca Pacioli, who in 1494 was the first person to document double-entry bookkeeping.

“Luca’s my hero,” Bartlett said.

Besides prior roles in health care-related companies, Bartlett has also worked for a utility company, in the mining industry, and as a controller for a public accounting firm. As controller of Blue Cross and Blue Shield of Montana she got her first taste of health care finance.

“It was so complicated, I couldn’t believe it,” Bartlett said. “Just following the money back and forth to different parties. I just love that investigative side of it. … I’ve got to follow it to see where it started, where it ended up, where it goes next.”

It’s perhaps not surprising that she also loves jigsaw puzzles.

“She has those great skills that she can audit expenses,” Hogan said, adding that Bartlett’s ability to follow the money and understand health care costs were key to the Montana plan’s reforms.

Bartlett is also equipped with an insatiable work ethic and an ability to communicate complex financial data to others, colleagues say.

“She makes [health care finance] really accessible,” said Hensley-Quinn, who in 2019 hired Bartlett as a senior policy fellow for the NASHP’s Center for Health System Costs. “There are no dumb questions.”

DISCOVERING SECRET PRICES, UNKNOWN COSTS

As the administrator of Montana’s state employee health plan, Bartlett began her quest with a simple question: How much was the state paying hospitals for various services?

She had good reason to ask. Nearly half — 43% — of the plan’s spending went to Montana hospitals. If costs varied, it stood to reason that a health care payer like the Montana plan had a good chance of saving money by negotiating consistently lower prices.

In 2020, the U.S. Department of Health and Human Services established some price transparency requirements for health care services. As of Jan. 1, 2021, hospitals must publicize the prices they negotiate with different insurance companies for certain common procedures.

Analyses done based on these released prices have shown that, depending on the insurance company, prices employers pay for common procedures can vary dramatically between hospitals and even within a single hospital. And many times, the cash price is lower than the insurance negotiated price.

For example, the Kaiser Family Foundation in 2021 found that knee and hip replacement surgery costs across 20 large metro areas varied from $70,610 to $24,831. A 2021 New York Times investigation found that the price of a knee MRI at a given hospital varied more than tenfold depending on which insurance company was paying the bill.

But when Bartlett asked in 2014 how much the Montana state health plan was paying different hospitals for different procedures, the insurance company the state paid to manage the health plan refused to provide the detailed data she wanted. So, she contracted with a Montana-based third-party administrator, Allegiance Benefit Plan Management.

FINDING THE COSTS

Bartlett went after the information she wanted through other channels. She examined Medicare cost reports — public documents that hospitals are required to file with the federal government. The reports detail the actual cost of providing various services. She also dug into the data collected by the actuary who had projected the state health plan’s insolvency.

And then, she and her bosses wanted to move the state health plan from its previous plan, where it paid whatever unknown price had been secretly negotiated by the insurer and hospital, to a reference-based pricing model. Under that system, Bartlett proposed, the state health plan would reimburse hospitals based on a multiple of what hospitals were paid by Medicare.

Bartlett’s goal was to determine what prices the state health plan should pay for hospital services based on the actual cost of those services plus a reasonable markup. She expected the net effect would be significantly lower overall health plan spending on hospital services.

But many of Montana’s hospitals balked. Bartlett found herself at the center of a politically charged negotiation with hospitals that claimed the new lower reimbursement rates would harm them and the communities they operated in.

“I had no idea about political pressure,” Bartlett said. “I was new to state government.”

Hogan, her boss at the time, helped her.

“There was lots of pushback,” Hogan said. While Bartlett handled the math of the negotiations, Hogan navigated the politics. “The hospitals were very unhappy that this really shined a light on their costs. It really helped educate people on the cost of health care.”

Bartlett, other state officials, and Allegiance eventually got them to agree. The health plan and the hospitals settled on reference-based pricing agreements. Under the agreements, the health plan would pay an average of 2.2 to 2.5 times Medicare rates for inpatient and outpatient services.

TACKLING PRESCRIPTION DRUG COSTS

Another big chunk of the plan’s spending — about 18% — went to prescription drugs. Here, too, Bartlett brought her knowledge of health care finance and accounting to bear on the problem. Employers typically hire pharmacy benefit managers (PBMs), companies that specialize in prescription drug coverage, to manage those benefits.

PBMs often negotiate rebates and discounts with drug manufacturers on behalf of insurers and are allowed to keep a share of the rebate money they receive. But in the case of the Montana health plan, Bartlett figured out that the PBM was probably keeping a larger share of the savings than it needed to, instead of passing them along to the health plan. She also discovered the PBM didn’t prefer cheaper drugs — for example, generics over brand names. So, she fired the PBM and hired a new one under a contract that ensured the health plan would get the benefit of any savings the company could negotiate. That saved the state health plan 23% on drug costs.

Those changes, as well as others designed to improve employee access to health care and cut wasteful spending, quickly rejuvenated the health plan. The changes brought the plan reserves to $112 million by 2017, not minus $9 million, as had been projected.

Hensley-Quinn noted that although reference pricing was not a new idea, “It was revolutionary that it actually took hold and was actually in place and was actually working. I’m not suggesting that Montana was the only state doing cost containment, but they were the only one doing this particular policy successfully.”

GOING ON THE ROAD

Bartlett has since left Montana state government and taken her expertise on the road as a senior policy fellow for NASHP. Her ability to find hidden fat in health care spending has put her in the spotlight. She has given speeches to health care policy groups, attended meetings at the White House, and testified before Congress.

On calls with health systems and hospital CFOs, she brings a deep understanding of both the numbers and how they’re calculated. Sometimes, Hensley-Quinn said, those executives will challenge financial assertions made by Bartlett or a particular state health plan.

“Then Marilyn will point out that their numbers are not based on the accounting standards in place for these calculations,” Hensley-Quinn said. “And then the folks that [the hospitals] have that are doing the actual work, they’re like, ‘She’s right.’”

And that has changed conversations.

“We as policy folks don’t know these standards,” Hensley-Quinn said. “So, she’s bringing these two things together by building partnerships but also by using her understanding of accounting standards and numbers in a really practical way.”

Bartlett’s work at NASHP now, plus some other consulting work, is part time. She has created spreadsheet templates and other tools to help people dig into health care cost data. But she says there’s an opportunity for other accountants to step in and continue her work.

“I keep trying to retire,” she said. “What I would love to find is some accountant or accountants who would like to do this work.”

About the author

Mark Tosczak is a freelance writer based in North Carolina. To comment on this article or to suggest an idea for another article, email joaed@aicpa.org.

LEARNING RESOURCE

Health Care Entities — Audit and Accounting Guide

Understand the complexities of the specialized accounting and regulatory requirements of the health care industry.

PUBLICATION

For more information or to make a purchase, go to aicpa-cima.com/cpe-learning or call the Institute at 888-777-7077.

AICPA RESOURCES

Articles

“How to Identify and Report Health Care Fraud,” JofA, March 1, 2020

“CPAs Need to Watch These Health Care Pricing Rules,” JofA, Feb. 18, 2020

“How to Guard Client Finances Against Dementia,” JofA, Jan. 1, 2020

“Government Report Finds Deficiencies in Most US Hospices,” JofA, Dec. 9, 2019