Major BUCA Throws In The Towel

Blue Cross of Montana throws in the towel and joins the Reference Based Pricing movement at the expense of their provider partners…………………

By Bill Rusteberg

Back in 2007 when we started Reference Based Pricing in San Antonio, Blue Cross sales reps. in the San Antonio and Austin offices went berserk. With their hospital friends they spread fear and doubt intended to stop employers from leaving managed care plans. They attended events at which I was to speak about Reference Based Pricing, trying their best to influence the discussion.

“It won’t work! Employee’s credit ratings will be ruined! Employers and plan members will be sued! We have Favored Nations status with hospitals so you won’t ever get better pricing!” was their message.

A lot has changed in the last 15 years. But perhaps the biggest change just happened in, of all places, the great state of Montana.

After a careful review of the Blue Cross Administration Agreement with the State of Montana one can only conclude this is a game changer in American health care. To our knowledge, this is the first instance a BUCA has agreed to fundamentally change their business model.

The BUCA business model core value is their proprietary provider networks. That’s really all they have to sell. That’s the value they say they bring to the table. It’s also where they make a majority of their income. I won’t go into the how here, it’s been described in detail in some of the over 6,000 articles on this blog.

What’s happening in Montana is a game changer. The first state in the country to adopt Reference Based Pricing for their state employee health plan several years ago, Montana has now passed administration to Blue Cross with the mandate to continue administering their Reference Based Pricing Medicare based reimbursement plan.

The Blue Cross Administration Agreement can be read here: medical-tpa-services_010122-thru-123125_signed-3.pdf (

Here are some of the key provisions:

FEE DISCLOSURE (Page 2, 4.1)

Contractor agrees that Contractor’s compensation related to this agreement and the Services is limited to the administrative fees in Exhibit C. Contractor shall acknowledge in writing that Contractor receives no other direct or indirect compensation related to this agreement, including but not limited to bonuses, finder’s fees, prepaid commissions, payments by third parties, or incentive programs. Contractor shall provide the written fee disclosure acknowledgement on or before March 31st, 2024, and each March 31st thereafter.


(Page 13, #2)

a. Contractor will provide a reimbursement strategy that targets a total aggregate reimbursement level for all in-state and out-of-state facility claims (inpatient and outpatient) not to exceed 195-200% of Medicare in year one.

b. Contractor will provide a reimbursement strategy that targets a total aggregate reimbursement level for all in-state and out-of-state professional/ancillary provider claims not to exceed 139% of Medicare in year one.

c. Contractor will target an aggregate reimbursement level for the combined inpatient facility, outpatient facility, and professional/ancillary provider claims of 180% of Medicare by year three of the agreement.

d. During the initial three-year term, Contractor will employ provider reimbursement strategies that include networks with reference-based pricing methodologies, such as a predetermined fixed unit[1]cost amount that uses a static base schedule and is adjusted through a negotiated multiplier rate by provider type (e.g., percentage of the CMS Medicare rate). With State’s approval, Contractor will employ and/or implement alternative provider payment models to lower provider reimbursements, including but not limited to targeted provider contracting, negotiating single-case agreements for high dollar claims, creating steerage to Blue Distinction Centers through special contracted rates, value-based care programs and focused contracting to reduce reimbursement for outlier facilities.

e. Total aggregate reimbursement for all inpatient facility, outpatient facility, and professional/ancillary provider claims will be measured annually for a 12-month incurred period with a minimum of 15 paid months for adequate runout each calendar year and made available by Contractor beginning May 1, 2024, and each May 1st thereafter.

f. Subject to State’s approval, Contractor will administer custom alternative payment arrangements with providers

PROVIDER NETWORKS (Page 13, 14 #3)

Contractor shall provide broad access to provider networks for Montana-based and out-of-state facilities and providers subject to the following:

a. Participation by at least 95% of Montana-based inpatient facilities, including but not limited to acute care hospitals., critical access hospitals, nursing homes, rehabilitation hospitals, inpatient psychiatric facilities, and drug and alcohol addiction treatment facilities. DocuSign Envelope ID: 80087CD3-3A8B-4655-9147-9D76B3E0EA30 Third Party Administration for Medical Claims Contract # HCBD22-0161NH Page 14 of 40

b. Participation by at least 95% of Montana-based outpatient facilities, including but not limited to ambulatory surgery centers, reference laboratories, dialysis treatment centers, and imaging centers.

c. Participation by at least 90% of Montana-based professional and ancillary healthcare providers., including but not limited to physicians, dentists, mid-level providers, physical and occupational therapists, speech language pathologists, and mental health providers.

d. Participation by at least 85% of ground and air ambulance providers operating within Montana. e. Access to the Blue Card National PPO network for out-of-state care and treatment wit