I blog about free markets in medical care and transparent pricing.
A patient that wanted to have their procedure at our facility this week had asked us to file insurance for them. What we discovered when we called the insurance company on her behalf to discover the nature of her “benefits” is what has moved me to write this blog. I think it might be useful to divulge what we were told then provide some history as to how things got this way.
If this patient had her surgery at our facility rather than at an “in network” hospital, her deductible would have been $3000 instead of $1500, her copay would have been 50% of the charge rather than 20% and none of this could happen until she agreed to a 25% penalty for coming to the Surgery Center of Oklahoma rather than one of the hospitals in the “network.” Never mind that the hospital would receive multiples of our fee from the insurance company and the patient’s copay at the hospital was more than our entire charge.
This insurance company (a huge, national insurance company) made it clear when they came on the scene here in Oklahoma many years ago that they were not interested in “contracting” with any facilities that were not hospitals or affiliated with hospitals. Because of this, whenever we have filed an insurance claim with them on behalf of a patient treated at our facility, we have been considered “out of network.” In order to steer patients to “in network” facilities, insurance companies like this one financially punish patients (like I have described above) for wandering out of their “network.”
These “networks” were ostensibly devised as a means to control cost and to guide patients to quality care. They have done the opposite. All you must do to see this is to compare what you were charged for your healthcare or insurance premiums 10 years ago to what you are charged now in order to realize the utter farce that the PPO and HMO concepts represent. Fewer and fewer quality physicians have remained part of these “networks” as these organizations, cutting the physician fees every year, lost more and more of the “good ones,” physicians whose practices were too busy to mess with this type of arrangement.
Cutting the physician fees introduced a soft form of rationing that was central to the profitability of the carrier-PPO concept, as preposterously low payment to a physician for a rendered service resulted in little of that service being rendered. ”But wait a minute,” you say!! ”If profitability is what drove these carrier/PPO’s, why would they want to pay more at a hospital?” ”This doesn’t make any sense.” It doesn’t make sense until you understand that the giant hospital bills gave the PPO’s an opportunity to profit from their repricing shenanigans, charging for the extent to which they are successful discounting these bills, as I have described previously.
The “out of network” penalties didn’t work well at first because our acceptable profit margin was so low that even what the PPO’s and carriers considered giant penalties weren’t sufficient to put us “in the red.” The carriers started to punish patients more and more aggressively, but our prices were so low that we could work with patients individually, making sure that their “out of pocket” working with us, “out of network,” was less than if they stayed in their network at the more expensive hospitals. While these punishments were limited by statute, the carriers found ways around them that no insurance commissioner felt like challenging. (The vast majority of the funding of all state insurance commissions comes from fees paid by the insurance carriers, not the taxpayers…”whose bread I eat, his song I must sing).
The carriers finally hit on a solution to stop the “out of network” leakage. They made the “in” and “out” of network deductibles separate, so these deductibles didn’t cross-apply. That meant that if you had met your $1500 deductible at an “in network” facility and you chose to go “out of network” for other care, you started at zero, your previous $1500 spent not applying toward the new and separate $3000 deductible. The carriers had finally found their solution and it worked. The number of patients we saw at our facility whose carrier/PPO’s adopted this form of punishment plummeted. Their hospital pals rewarded this solution (which brought them a much larger number of patients) by giving better rates for certain hospital services. The insurance carriers could now much more effectively loot the employer groups with their repricing fees. Everyone but the patient or their employer won.
Increasingly aware that something was wrong, managers of employer health plans had become more skeptical when their insurance broker rambled on and on about the spiraling cost of health care and the next year’s 10% premium increase. All the employer groups needed was for someone to post prices online to see the scam clearly.
The tables are turning now. Employer groups (self funded plans) are carving out more and more medical services from the carrier/PPO groups they have paid all these years to administer their health plans. These self-funded plans represent a huge part of the health marketplace and are directly contracting with facilities like mine, securing pricing the likes of which these groups haven’t seen for decades and quality second to none. What the self-funded plans are accomplishing will benefit everyone, as the new and growing free market in healthcare will be sending powerful price and quality signals to every area of this industry. As prices fall and quality soars, all patients will benefit, even those who are not beneficiaries of these employer plans.
I believe that the corporate hospitals and carriers have known for some time that their scam was unsustainable and consequently, Obamacare was more an act of desperation than anything, the last hope of these cronies to continue fleecing the sick in this country. To give total control to those in D.C. who have enabled this scam was a huge gamble, though, as these types of organisms have a way of turning on each other, promises notwithstanding. Maybe behind closed doors, the corporate health cronies were told “if you like your scam you can keep it.”
G. Keith Smith, M.D.
For more information on the growing healthcare free market visit:
For $1900 we fixed a young man’s broken nose yesterday, a procedure for which he was quoted $20,000 at a local “not for profit” hospital. (Keep in mind that our price included the surgeon’s and anesthesiologist’s fees while the hospital quote did not.) ”What can I get away with” is the pricing methodology I have ascribed to hospitals like this. After hearing the $20,000 quote, the young man’s mother did a quick google search and was pleased to find our facility and the price for the procedure her son needed. Without having to ask.
State legislators (in several states), excited about our upfront and transparent pricing, have asked me on many occasions to comment about their efforts to mandate price transparency. Without exception, I have frowned on this, as I have seen this as an opportunity to redefine medical price transparency into an unrecognizable mush, affording no transparency whatsoever. This would allow those who value their price opacity to lay claim to the “transparency” label. I also saw this mandate as an opportunity for the unscrupulous legislator to sell exemptions to hospitals willing to throw down sufficient money to by them.
Representative Arthur Hulbert, a state representative here in Oklahoma, has a new twist on the role of the state in mandating medical price transparency. (Keep in mind that nowhere in his proposed legislation does he dictate what anyone charges, only that they be upfront about it.) Here are the two points he has made which I have found compelling:
1) To the extent that a hospital or medical facility is the recipient of government money, it is a government enterprise and subject to government oversight. The legislation he has proposed here in Oklahoma specifically exempts any facility that does not accept government funds, consistent with his desire to avoid meddling in the purely private market.
2)There are two ways to classify healthcare facilities that do not currently display their pricing in the way that we do. There are those who want no part of this and there is a second group who would like to display their pricing but have been advised by their lawyers that doing so may violate some federal statute or regulation. Mandating transparency lets this second group “off the hook.” After all, if mandated, “we had no choice” would be the excuse used for anyone at the federal level that had a problem with it.
That Rep. Hulbert’s proposed bill could be hijacked to achieve the opposite of its stated intention remains a concern of mine, as sadly this is the fate of countless well-intentioned efforts, as the opportunists morph the new law and power into their own benefit. I remain opposed in principle to legislation mandating the fundamental principles of the free market, but must admit that Rep. Hulbert’s two caveats have compelled me to reconsider my black and white stance on this issue—as have stories from countless patients who have been bankrupted by inappropriately priced procedures like the young man’s broken nose.
G. Keith Smith, M.D.
To learn more about free market healthcare visit:
Jordan Bruneau, writing for the Foundation for Economic Education has written a brilliant article highlighting the practice of Dr. Lee Gross. In my opinion the beauty of Dr. Gross’s model is that it provides for and has anticipated the need for a transition to a cash practice, rather than the flip of a switch, an all or none path. While I admire those in the medical industry who just walk away from third party payment, greater numbers of physicians and facilities are likely to do just that, afforded the bridge of transition provided for by Lee’s model. A link to the article about Dr. Gross is here and a link to Jordan’s article about our surgery center is here, in case you missed it on an earlier blog.
G. Keith Smith, M.D.
For more information about free market health care visit our site:
Peter Suderman of Reason Magazine has written a great piece here, one that summarizes the fact that this “law of the land” is no such thing, as far as the current administration sees things. Not only do large parts of the “law” remain unwritten, those that are written are being selectively implemented for political reasons. An appropriate response to those who continuously say,”Stop Resisting Obamacare,” would be, “What does that mean today?” It looks to me like the resistance the die-hard Obamacare supporters have decried has been effective in at least delaying its implementation. No wonder the supporters of this “law” want people to stop resisting! This is the equivalent of a shrill Berlin Wall guard whining about people always trying to escape.
Suderman’s article is excellent, including the links. Enjoy.
G. Keith Smith, M.D.
To learn more about free market health care visit our site:
Two of my favorite Latin phrases with translations follow. The first, a quote from Virgil, was the life motto of Ludwig von Mises:
Tu ne cede malis, sed contra audentior ito. ”Do not give in to evil but proceed ever more boldly against it.”
The second comes from Ovid:
Principiis obsta et finem respice. ”Resist the beginnings and consider the ends.”
I have thought about these quotes recently as I continue to encounter the argument, “…now that Obamacare is the law of the land, let’s get on with implementing it instead of fighting it,” …or some similar version of this. Interestingly, the same argument (strangely almost verbatim) is used nationally and locally, by the supporters of this federal takeover of the practice of medicine.
I find the continued resistance and defiance, even of those who I suspect to be impostors and demagogues, refreshing. I have no doubt that “..never let a crisis go to waste,” one of the core operational principles of any state (see: “Crisis and Leviathan” by Professor Robert Higgs), continues to drive ideologues of all stripes seeking power. Those who would launch their political careers using anti-state rhetoric promote their own undoing and undoubtedly aware of this, know not to take this too far. I believe the power represented by the public defiance encouraged by all those promoting anti-Obamacare or limited government ideas, dwarfs any political power to be gained by the promoters, political or otherwise. Here’s why I say this.
Public judging of a law (Obamacare is just one example) as a failure invariably leads thoughtful people to dig deeper, wondering, for example if other laws have escaped the public scrutiny they deserved, and introduces an element of doubt about the sincerity of the players in the regime and even the legitimacy of the regime itself. Having lost their health insurance as a result of Obamacare, a hitherto Obamacare supporter might entertain the unthinkable: ”If I was lied to about being able to keep this policy I liked, what else have they lied to me about?” Most people in this spot initially direct their frustration at individuals rather than focus on the system itself, mistakenly believing that a different political course of action is all that is needed.
Much more important is the non-political form of defiance, for this represents the “lack of consent of the governed,” that brand of defiance that even the cruelest of tyrants have found difficult to crush. Ignoring, ridiculing or laughing at the awkward cruelty and corruption of tyrants and their cronies have historically been more effective in deterring political bullies than even the best results of “mid-term” elections, in my opinion.
I remain optimistic about free markets in healthcare and about liberty in general, in part because of the level of public defiance I am seeing everywhere. State legislators and attorneys general all over the country are openly discussing nullification. Not just a few governors are refusing to expand the federal Medicaid program. If these public officials thought their political futures were threatened with such talk, it would not be nearly as widespread. A great number of individuals see these individuals as their champions, their defenders against the leviathan federal government. In short, political defiance is safe and popular because of widespread public defiance.
This is truly remarkable, I think, and shows the extent to which a great number of people see that the federal government has overstepped. Think of the vast numbers of young people refusing to participate in this latest Ponzi scheme, the physicians who are opting out of any involvement with federal medicine, whatsoever, and the great number of well-known medical facilities all over the country publicly announcing their refusal to participate with Obamacare. I, for one, plan to cheer on anyone who proclaims defiance, as once the general public understands, just as Rothbard foretold, that without our consent, the ruling class is neutered.
G. Keith Smith, M.D.
To learn more about the Surgery Center of Oklahoma check out our website and links:
I thought many of you would find interesting my interview with Dr. Elaina George yesterday. This hour long interview covered a wide range of healthcare topics. You can listen to it here. Thanks to Dr. George and her staff for having me on their show.
G. Keith Smith, M.D.
For more information about our facility and pricing visit:
Keep this link handy whenever you hear someone spew “the wonders of socialized medicine in other industrialized nations.” The myth of the Canadian health care utopia has been effectively dealt with in countless articles and patient accounts of care denial and long waiting lists. That Canadians travel to my facility for surgery should be enough proof of the failure of this health “system.” The National Health Service in Great Britain, likewise, has had both eyes blackened with undisputed accounts of involuntary euthanasia (murder) of patients to make room for others needing their hospital beds. Both of these countries are moving toward privatization.
Robbed of their favorite two examples of the success of Stalin-styled health care, the followers of the cult of “universal care,” often times turn to Sweden, perhaps because it seems farther away and the language barrier makes this claim less implausible. It turns out that the Swedes are not only turning toward privatization, but that they have been doing this for some time now, their tryst with “universal care” having been little more than a one night stand, compared to other “industrialized nations’” experiments with socialized medicine for all.
For a better understanding of the predictable failure of “government-run healthcare,” we need only consult the great Ludwig von Mises. He predicted the failure of any industry or government embracing socialism based on what he called the “economic calculation problem.” Basically, without market price signals, producers and consumers have no way of knowing what should be produced or consumed and shortages and surpluses are the result. Long lines and shortages for what buyers need most urgently. Surpluses of goods and services for which there is little demand. These are the results of socialism.
What does a shortage of bread mean? It means that people will turn to potatoes, more than likely. What does a shortage of beef mean? It means that people will turn to fish or chicken or some other source of meat/protein. What does a shortage of hospital beds in Great Britain mean? It means the hospital staff will be commanded to kill a few patients to make room for those who are waiting on a hospital bed in an overcrowded emergency room (or evenly more incredibly in the ambulance outside). What does a diagnosis of cancer mean in Sweden? Unless you have taken advantage of the affordable and private health system, it means you will wait a year or more to be evaluated or treated.
My point is this. For those who believe that the principles of the free market don’t apply to health care, I would say that in no other industry are the principles of the market more important. Ceding our health to government central planners will always result in an economic miscalculation, one that in health care has been shown to be invariably fatal. Socialism doesn’t work. Socialism not working in health care means human beings are made to suffer unnecessary misery and death without alternatives.
While I am certainly no defender of the current cartel-like healthcare economic system in the U.S., I am a believer (and a practicer) of free market health care. Is a health care free market perfect? Of course not. But history has shown with the worldwide failure of the socialized medicine experiments that a better balance of what patients need and what they actually receive is achieved when we turn our backs on the mendacious lies and platitudes of the arrogant and deceitful healthcare central planners.
Like they have in Sweden.
G. Keith Smith, M.D.
For more information about Surgery Center of Oklahoma visit:
I discovered the writing of Eric Peters, like many other of my favorites, on Lewrockwell.com, my favorite libertarian website. Here is an insightful look at Obamacare from Mr. Peter’s viewpoint. Here he uses the devastating analytical tool of reductio ad absurdum, as deftly as Frederic Bastiat, himself. Thank you to Mr. Peters for allowing me to share this on my site. Hope you enjoy this as much as I did.
G. Keith Smith, M.D.
www.surgerycenterok.com for guaranteed surgical pricing
Want to know why big hospital systems are buying physician (particularly primary care physician) practices as fast as they can? Open this link and scroll down to page 6. Now before you get huffy about these “rich doctors” let me clarify what these numbers really mean. These amounts represent revenue generated for the hospital system for which the employed doctor works, not what the physician is paid.
Ordering lab and xrays and MRI’s and physical therapy and nutrition consults…that is the stuff these numbers are made of. Charging for office visits (keep in mind that the great health cartel has decided to pay more for office visits for physicians employed by hospitals than for those same visits to private practitioners) and charging for visits to patients in the hospital make up part of this number, as well. Let’s not forget referrals to specialists and the money that generates as part of the plan.
This is a perfect time to reconsider some of the advantages EMR (electronic medical records) provides to the hospitals:
the ability to automate physician ordering, and
the ability to “cut and paste” complicated physician visits from one day to the next, making it appear the patient is receiving more intensive treatment and attention than the thick and incomprehensible medical record indicates.
Automated ordering means that when a patient is admitted to the hospital, certain billable events are initiated whether the physician believes these to be appropriate or not. Nutrition consultation, laboratory specimens, you name it. An employed physician who complains about “his” patients receiving unnecessary nutrition consultations risks the wrath of those directing these revenue-generating activities: his bosses.
Back to page 6 of the link. Let’s say a family practitioner in private practice in a small town is making about $180,000 per year, working like a madman to generate this sum. A hospital administrator or recruiter from the big city offers this doctor, $375,000, promising to take on the headaches of malpractice insurance, government and insurance regulation compliance and employee management. In return, the doctor sends all of “his” patients to the big city hospital for testing and specialty referrals. This doctor signs on and his “production” for the mother ship is closely tracked.
The small hospital to which this doctor used to send his patients is devastated by this new arrangement, rendering this small facility susceptible to “an offer” from the big city hospital.
This is not the free market. This is a syndicate, the result of which is outrageous pricing and poor quality. The cause is the intrusion of the government into this industry, politicians having accepted countless bribes over the years to provide their hospital and insurance pals with this type of leverage. Obamacare represents this syndicated arrangement on steroids, while its proponents have duplicitously sold it as beneficial to the poor and uninsured.
Those of you reading this, who see a doctor who works for a hospital, now know not only the game, but the numbers. Keep in mind that your doctor must “generate” these numbers by “caring” for you, or, not having earned his/her keep, they are history. When your employed doctor tells you that you need a test or an MRI or some such, consider asking them,” Is that what I need or is that what you need for me to need?”
G. Keith Smith, M.D.
For more information and pricing for surgical services check out our website at www.surgerycenterok.com.
The legendary investor, Victor Niederhoffer (good article about him here), and the benefactor of the remarks I recently delivered in Manhattan, quoted extensively from Albert Jay Nock while addressing the gathered crowd prior to my speech. (Chris Tucker reviewed my speech, here.)
Once back at home, I grabbed my copy of Nock’s “Our Enemy the State,” and reviewed the margin notes I had made when reading it for the first time. I tend to write notes in books that I find jaw-dropping, books that successfully challenge and crush some pre-conceived notion or assumption I have made. “Our Enemy the State” was such a book. From page 24:
"There are two methods, or means, and only two, whereby man’s needs and desires can be satisfied. One is the production and exchange of wealth; this is the economic means. The other is the uncompensated appropriation of wealth produced by others; this is the political means." Later on the same page:
"The State, then,….is the organization of the political means. Now since man tends always to satisfy his needs and desires with the least possible exertion, he will employ the political means whenever he can-exclusively, if possible; otherwise, in association with the economics means."
Acquainting myself once again with this book made me realize that these writings represented the beginning of my current view of the state. While prior to reading Nock, I was intrigued and focused on the enemies within the state apparatus, afterwards, I came to see the enemy, just as Nock did, as the state itself, no different than any other criminal organization, the purpose of which was to loot most of us for the benefit of the few. The enemies within the state change from time to time, but the state apparatus remains, always and irresistibly representing a looting machine for the new players.
Reviewing the book also helped me to recall that this book (and a few others) represented a change in how I greeted information that forced me to challenge my assumptions, even information that led me to believe that I had been dead wrong. Nock excoriates those who would emotionalize such challenges, rather than see these challenges as opportunities to clean up inconsistencies in our thinking.
My point in writing this blog is this: If you are having difficulty seeing the actions of the state (including but not limited to the Unaffordable Care Act) as other than benefitting those who are underwriting these actions; if you still believe that laws are passed to benefit the poor and the sick; if you believe that it is beneath state rulers to increase their power on the back of a crisis, even to provoke crises to strengthen their grip, then Nock might be for you. I say might, because the assumptions he challenges in this work (written in 1935) are basic and hard to accept without some emotional reaction.
I owe a debt to Albert Jay Nock and to Victor Niederhoffer for reminding me of Nock’s important place amongst thinkers and writers who have labored to help us all see the state apparatus for what it truly is.
G. Keith Smith, M.D.