I blog about free markets in medical care and transparent pricing.
If I didn’t have my hands full I would like to open a surgery center across the street from the not for profit hospital in Tulsa that has bestowed such large amounts of “community benefit” on local residents. I would display prices called “community benefit pricing” on a large neon sign out front. I might even run weekly specials.
We would include in our medical staff only those who have refused to succumb to the large hospital system, those independent practitioners whose understanding of the doctor patient relationship precludes employment by a hospital.
So here’s the question: what would be the effect on the quality and cost of medical care provided in the Tulsa market? Let’s forget for the moment that the likelihood of success in getting this venture going is practically “zero” as those threatened by this move would more than likely keep it from happening. Back to the question.
What happens to the service you receive from the hardware store down the street if their only competitor goes out of business? Conversely, what happens to the service you receive from your favorite restaurant when another restaurant opens right next door to them? What happens to the price of a hammer or hamburger with this competition? Why do you think that health care is any different?
You say,”the more surgeons that practice in a town, the more surgery that is done!” You would be correct. I’m talking about facility competition, however. You see, physician fees are an almost insignificant component of the overall cost of health care. It’s the facility fees that make up the lion’s share of the cost. Even a 10% cut in facility fees would represent a savings that would dwarf eliminating physician fees altogether! The website fees at our facility are 1/5 to 1/10 of the charges at our local “not for profit” hospitals for the very same procedures. This represents an 80-90% savings of the facility fee. And our facility is profitable.
I think this Tulsa hospital would do the same thing that our prices have forced some of our local hospitals to do: lower their prices. I have blogged before about the patient that told me he was quoted the exact same price for his surgery by a local hospital not known for providing low-cost care, as that listed on our website. Our price, however, included the physician charges and so represented a better deal for him. This price difference can’t be sustained for very long. The competition for patients will force the prices down and increasingly, the embarrassment of “not for profit” price gouging will have its effect on prices, as well.
At the bottom of the neon sign would be a running total, a number that represented the “community benefit” our new little surgery center venture bestowed on Tulsans. This number would be the difference between our fees and the fees across the street. Bastiat’s “what is not seen.” Money people didn’t have to pay. Money that stayed in their pockets. Money that stayed in their self-funded plans.
Watch for a physician-owned facility in the Tulsa area to embrace price transparency. That will be for the price of medical care in Tulsa, what the Surgery Center of Oklahoma’s deflationary effect on prices has been for Oklahoma City. And that will be a true benefit to the community.
G. Keith Smith, M.D.