G. Keith Smith, M.D.

I have come to the conclusion that the main reason my medical free market and transparent pricing message has been so widely and warmly embraced is very simply that it is good news.  I have been viewed as a good news guy in a bad news industry.  That “here is what we do and here is how much it will cost,” has been received as such good news is an indication of how truly cartelized the medical industry has become. 

To be fair, the bad news of Obamacare, has made our message even more appealing.  Nothing about this Unaffordable Care Act is good news.  Insurance premiums and the costs of healthcare are skyrocketting due to this legislation, access to care is problematic due to physician retirements and employers are laying people off or moving them to part time positions in order to keep their doors open.  Recently, The Associated Press’s Ricardo Alonso-Zaldivar reports that some of the sickest and most vulnerable patients will be unable to afford the increasingly high out-of-pocket costs for the drugs they depend on for their very survival. 

All of this is quite predicable, actually, as Obamacare was, I believe, meant to fail.  The purpose of this legislation, seen in this rare slip by Rep. Barney Frank, was to introduce such price increases that the American people would beg the government for relief:  single payer.

This failure currently and long term, however, is beneficial to this administration’s corporate healthcare buddies on Wall Street.  Seriously, how would you like to provide a product or service(health insurance) the purchase of which the federal government made mandatory?  How would you like to know that your business (giant hospital) will collect from the distant taxpayers, rather than the patients you are supposedly meant to serve?  The giants of corporate healthcare are making record profits, profits that will pale when compared to their future ones as the great consolidation of this industry takes place. 

But I said I was a good news guy.  Here then is the reason for hope.  As the costs of healthcare and insurance spiral out of control patients and businesses will increase their out of pocket deductible exposure and do something that has long been absent in the medical industry:  shop.  Patients will shop for price and quality just like they do for everything else.  This, of course, is the unanticipated nightmare of the Obamacare bureaucrats, as real competition will appear (it already has, check out my pricing listed on our website) and actual price deflation will result.  The crisis this adminstration has attempted to create will paradoxically create the cure to the mess that the government and their cronies have made of the medical industry. 

Patients travel to our surgery center from all over the country to take advantage of our upfront and fair pricing.  Indeed, the first patients to show up after we put our prices online were Canadians!  In addition to the patients who travel to our center, many patients are using our pricing to leverage better pricing in their local medical markets.  As I stated on the John Stossel Show last month, a Georgia hospital recently agreed to charge a patient $4000 for a prostate surgery (rather than the $40,000 initially quoted) after the patient showed them our online price of $3600 and a plane ticket. 

Medical facilities and physicians all over the country are jumping on this free market medicine model.  The AMA continues, and deservedly so, to lose members, while membership in the free market Association of American Physicians and Surgeons (AAPS) soars.  The AAPS growth is largely due to its advocacy of third-party-free physician practices, a model that removes the bureaucrat from the exam room.  Big hospitals on physician hiring binges are finding that once they become employees, doctors go on vacation, working less and less, making this patient-disenfranchising model very unstable.  More employers are punching out of traditional insurance and seceding from this cartelized system by self-funding, taking the control of their employee health plans away from those insurance carriers whose interests differ from their own. 

I could go on.  The good news in health care is not Obamacare, but rather is in spite of Obamacare.  The free market competition that this legislation has unintentionally spawned will improve quality and lower prices just as competition has done (without exception) in every other industry.

G. Keith Smith, M.D.

The release by CMS (Medicare) of hospital charges and Medicare payments this week deserves a response, partly because the figures are wrong.  While most of the newspaper reports focused on the gigantic differences between what hospitals charged and what they were paid, the real story is the irrational and nonsensical pricing of the CMS central planners.  Also notable is that while this story appears to bash the hospitals to some degree, the true amounts they receive from Medicare are hidden, as the prices released don’t include the uncompensated care kickbacks or the provider tax rebates.  

The witholding of these amounts from the final numbers makes the payments to certain hospitals (physician-owned facilities like the McBride Clinic Orthopedic Hospital who don’t accept this money looted from the taxpayer) look high compared to the corporate and not-for-profit hospital payments, as their actual payments for the procedures and diagnoses are much higher than shown.  It’s bad enough that the hospitals lie about their income, but to have the federal government join in on the act while posing as the great champions of price transparency is disgusting, although not surprising.

This New York Times article about the CMS “revelation”asks the question, the answer to which followers of this blog now know by heart:  ”Why are the hospitals charging so much more than they know they will receive?”  If you are drinking the hospital Kool-Aide, you believe that this overcharging is justified to combat the discounts demanded by the insurance carriers.  You also believe that hospitals with large amounts of “indigent” care are charging more to offset these “losses.”  

But if you think that these giant hospital bills:

1) Provide the “losses” and red ink necessary to maintain the fiction of the not for profit status of these creators-of-personal-bankruptcy

                                                      &

2) Provide larger DSH (disproportionate share hospital), uncompensated care payments to the extent that the hospitals claim they don’t collect on their giant bills

…if you believe these two points, you know the true answer to the question posed by the NYT reporter. 

If you understand that the extent to which a hospital claims losses is the extent to which they collect DSH or uncompensated care payments, you also understand whythe patient with no insurance or no money at all, is likely to receive the highest bill of all, in order to maximize the take from the taxpayer!

There is a simple reason that the CMS pricing makes no sense.  True prices emerge from a market economy.  They are not imposed.  I have said many times that I won’t know if my online pricing is “right” or not until someone starts competing with me.  Prices send signals to the marketplace, signals indicating relative shortages and surpluses.  That the prices for various hospitals in the same community are not even close shows the truly fatal conceit of the CMS central planners.

Here’s the bigger question, though.  Why did CMS release this and why now?  I think that it is no mistake that the cost of health care was never discussed during the Obamacare debates.  Getting everyone “coverage” was the focus.  Now that “coverage” is mandated, cost is center stage.  Why?  

Imagine that you own an insurance company that has a good relationship with Uncle Sam.  Imagine that you have been successful in getting your government pals to mandate the purchase of your product (health insurance).  This is now a great revenue stream.  How do you maximize your profits, now?  How do you maximize your net?

You ratchet down the price paid for “care,” ideally to a price where few physicians or facilities will see patients or participate.  Presto!  You have fewer claims to pay and they are cheap! You are seriously in the money, now.  Lots of premiums rolling in, very few claims paid out. Simple math.  

This is, of course, how HMO’s and Medicaid work.  HMO’s collect premiums, pay so poorly that few physicians will participate and then actually pay some doctors a bonus to the extent that care is denied.  This creates huge profits for the home office. 

Medicaid vendors are typically paid a price per head.  In Arizona, for instance, this number is about $8000/ head.  If the physicians are paid a pathetic amount, few will participate and this will result in subtle price rationing where few claims roll in and long lines form.  This creates gigantic profits.

This is the whole idea behind Obamacare.  Make everyone buy insurance, then use the IPAB (independent payment advisory board) to step in to make sure that prices paid are below the market clearing price, using this low price as a rationing tool.  ”Best practices” will also eliminate many of the health care services that people need and want and the “health researchers,” if they want to keep their government grants will find whatever they are paid to find, that mammography or prostate screenings are not necessary for instance.  This has already begun.  My personal favorite rationing tool is “pay for performance,” where the sickest of patients, those needing the care can’t get near a physician, as doctors increasingly shy away from complicated patients who might damage their “profile.”

You would think that a bankrupt program like Medicare would be looking for the best deals they can find.  This revelation by CMS shows the effects of years of lobbying by the hospitals and other connected players: prices all over the place.  Hospitals are paid 40% more for physician services than private practice physicians are paid.  Wouldn’t you think that in order to save 40% on physician services, Medicare would seek out the private practitioners and shun the hospital employed doctors?  Chemotherapy administered by a hospital is paid at a 40% greater rate than at a private physician clinic.  Seems like Medicare would save a bundle by keeping patients away from the hospital chemo units.  Our online prices are half what the big hospitals are paid by Medicare for the same surgeries.  I could go on and on.  

These federal programs are not about getting care for the poor and elderly, as much as they are about funneling money to connected cronies in the medical industry.   This revelation from CMS reveals just as much about the government as it does about the hospitals.  I don’t think that was their intention, though.

G. Keith Smith, M.D.

The poor and the sick folks who currently make too much money to qualify for Medicaid in Oklahoma have pooled their meager resources to lobby hard for Medicaid expansion, buying expensive media ads under the name, “Oklahomans for a Healthy Economy.” O.K. Enough sarcasm.  These ads are funded by those who would benefit from more taxpayer Medicaid loot—the big hospitals.  If the poor had organized this push, for instance, they would not have minded mentioning the word “Medicaid,” which, of course, the ads never do.

I wish these hospitals would make up their mind.  On the one hand, they claim that Medicaid payments (more than what we have listed online) are killing their profits, set way below their costs forcing them to shift the losses to other patients/payers.  On the other hand they want to expand this program.  This is kind of like, “..our emergency room is a loss leader, but we are going to build on to it.”  None of this adds up.

The hospital lobby is pushing hard in Oklahoma because the governor of the state has taken a stand, a hard stand, to reject the Obamacare exchanges and its expansion of Medicaid.  Even our local media, heavily funded by corporate medicine, has turned on the hospitals, one media outlet recently characterizing the Obamacare vehicle these hospitals want so badly, as a Ford Pinto.  The editorial in the Sunday Oklahoman asks essentially if Oklahomans want to ride as a passenger in such a vehicle.

Sometimes I think that these hospital folks have forgotten some of the lessons of childhood, where, for instance, the more a child begs at the grocery store for a candy bar at the check out counter, the less likely they are to get one as the parent’s frustration with them grows.  I hope that our governor’s disgust with the hospital whining helps her to grow even more resolute in her stance.  This is politics, though, and while the governor has remained strong, the Republican version of crony politics continues to raise its head, attempting in new devious and renamed ways to funnel money to their hospital pals.   

The hospitals aren’t the only ones who can’t make up their minds, though.  Remember the government promise that the uncompensated care scam would end with Obamacare?  Remember the hospitals begging for Medicaid expansion because of the end of this revenue stream?  Well, it turns out that the hospitals are going to get to keep their uncompensated care scam, after all!  You would think that this would dampen their media and political push for Medicaid expansion.  Nope. And that’s not all.

Remember the Medicare payment cuts that were going to hit the hospitals as part of Obamacare?  Remember the hospitals using this, as well, to bolster their arguments for the need for an expansion of Medicaid?  Well, it turns out that they are now getting a raise from Medicare!

Why can’t any of these hospital or government folks make up their minds?  I’m thinking that the question most commonly asked at the Obamacare drawing board was perhaps,”..how much do you think we can get away with?” All of this wishy-washiness then makes sense.

G. Keith Smith, M.D.

P.S.  Here’s a great article on this issue by Michael Carnuccio, President of the Oklahoma Council of Public Affairs.

Here is a link to my portion of the interview with John Stossel for those of you that are interested.  This interview led to my interview tonight with CNBC Asia-Pacific with host Bernard Lo.  I’ll post that link as soon as I have access to it.  These two shows have reached huge audiences and the response has been impressive, particularly the number of people that are requesting price quotes.  Our website actually melted down due to the traffic Sunday night during the Fox News Channel broadcast of Mr. Stossel’s show.  

The price war has begun.  The competition in health care on quality and price has begun.  The beneficiaries will be patients and their pocketbooks.  Nothing will create better quality at lower prices than the free market.  Nothing will create unaffordable care and poor quality like state involvement in health care.  Thanks to all of you who are helping to spread this message, essentially good news in an otherwise bad news industry.

G. Keith Smith, M.D.

Let’s say that i have advertised the price of an anterior cruciate ligament reconstruction (all-inclusive) at $6990.  Let’s say that the implants (screws, fixation devices, etc) are included in that price (I don’t mark up implant costs).  Let’s say that 1 of the 10 surgeons at my facility that does this operation insists on using an extremely expensive implant, one coming from a manufacturer with which he has a “relationship”….no such partner exists here…this is just for illustration.  I can either send him  patients (business) which means we lose money at the surgery center, or I can charge a whole lot more if he does the surgery, which prices him out of range, or at least begs the question of why is he so much more?

This is the market at work.  While central planners would work to institute price controls in the market place, the unfettered market would place the outlier physician’s price under the microscope.  Transparent pricing would quickly reveal that something didn’t smell right.  While legislators would outlaw physician owned distributorships, transparent pricing would empty the waiting rooms of physicians who play these games.  

Who benefits from non-transparent pricing?  All of the folks who would suffer if their shenanigans were discovered, that’s who.  The only way that unethical physicians, pharmacies, hospitals, physical therapy clinics, etc. can thrive is for pricing to be veiled to some degree.  Otherwise, comparison shopping would create value questions, none of which would have satisfactory answers in the case of the gougers.

The answer to “implant” profits is not a tax on implant makers any more than the answer to fraud in medicine is government goons.  The answer is price honesty and a movement away from third party payment, government payment for healthcare, in particular.  What is Obamacare?  If you guessed “just the opposite,” you go to the head of the class.  

G. Keith Smith, M.D.

As Murray Rothbard asked, “cui bono,” or “who benefits.”  Here is the answer to his question when it comes to Obamacare, plain and simple.  Just as the corporate hospital stocks soared after Justice Robert’s ruling, they soared with the announcement that pay cuts became pay raises and the elimination of the uncompensated care payments became a maintenance of this scam at a 25% reduced level.  

It should be increasingly clear who the real beneficiaries of this legislation are, and increasingly clear who they are not (the patients).  It would have been more honest to call this “Cronycare,” as the corporate medical players and their stockholders are making a bundle off of the increasingly poor taxpayers.

G. Keith Smith, M.D.

One of my partners, an ear nose and throat surgeon resigned years ago from a particularly abusive HMO.  He said, “never again,” as did all of the reputable ear nose and throat surgeons in the area, physicians whose practices were already solid and busy without having to deal with this outfit.  Even though many of the HMO’s are long dead and gone from Oklahoma, this particular HMO has lingered on, only to crawl back to this partner of mine, telling him to make them an offer.  They had, very simply, lost every single ear nose and throat surgeon from their “panel,”even the not-so-good ones.

He made them an offer he knew they would refuse, a ridiculous amount, one that would make this pathetic organization his best source of payment.  They accepted.  

His presence on their “panel” allowed the HMO to advertise….well…to advertise his presence on their “panel.”  Having quality ear nose and throat coverage made their product easier to sell to reluctant employer groups, most of which know the HMO hunger games by now.  Things seemed to be going well for about three months when he noticed a sudden change.  The HMO had made it impossible to schedule a patient for surgery.  Phone call after phone call.  Extended phone consultations with remote nurse manager-gatekeepers to review the indications and justify the need for surgery.  Lost, needing-to-be-refiled paperwork.  Waiting on hold for 30 minutes while attempting to obtain pre-authorization for CT scans for patients needing sinus surgery.  And more.

It dawned on my partner that what the “beneficiaries” of this HMO had as a benefit, was not unlike what the beneficiaries of the Canadian system have and what people in this country under “Obamacare” will have:  a right to hope for care, or a right to a place in line.  A health care card in your wallet may mean nothing.  As Dr. Jane Orient has now famously said, “coverage doesn’t mean care.”  

The poor child with gigantic tonsils and adenoids with sleep apnea and chronic ear infections who could be spared all of this misery with a 20 minute operation is left holding the bag.  The parents, frustrated with this waiting game of insurance approval, are now very troubled to find out that my partner has resigned once again from this HMO.  What will they do now?

If they follow the example of many patients that have been down this road, they will wind up at our facility, paying a fair price for their child’s surgery, a price that is within their budget and having their child’s surgery done immediately, and done by the surgeon they have rightly come to trust and respect.  They will wonder afterwards why they have “insurance” at all.  They will wonder if some “insurances” are really a black mark, that actually prevent them from receiving care.  Finally and angrily they may conclude that this whole HMO idea must be good for someone, just not the patients covered by “the plan.”  

I think this illustrates that while the central planners of HMO’s or ACO’s or government health care may boast that the reimbursement levels they have arbitrarily concocted are sound and fair, they will always retain the powerful tool of rationing-access-by-bureaucracy, an incredibly cruel way to balance a budget or book a profit.

G. Keith Smith, M.D.

You can see our prices here.

5 months ago I posted this blog about Dr.’s John and Alieta Eck.  Toward the end of the post, there is a link to a video of Alieta’s congressional testimony at the end of which Dr. Rand Paul delivers a scathing rebuke to those on the panel who had spoken of a “right” to health care and what that really means.

The Dr.’s Eck are featured now in another video blockbuster by none other than our good friend from Reason Magazine, Jim Epstein, producer of the video about our facility. With his uncanny ability to pack these brief videos with such large amounts of factual material all the while maintaining perfect clarity, he devastates the Medicaid expansion movement like nothing I have seen up to this point.

Congratulations to Jim Epstein on this new project and also to John and Alieta, whose work may now begin to receive the attention that it so richly deserves.

G. Keith Smith, M.D.

In Frederic Bastiat’s “Economic Sophisms,” he begins by quoting the English philosopher, Jeremy Bentham:

“In political economy there is much to learn and little to do.”

Bastiat thought this so important that he begins his powerful book with this quote, one which at once acknowledges the natural power and tendency of free markets to benefit everyone, while simultaneously discounting the ability of the legislator to achieve little but mischief.

Almost all legislative efforts, all protests to what I am about to write notwithstanding, are geared toward the benefit of the producers in a respective industry, not the consumers of any individual product or service.  Bastiat, with piercing and brutal logic, demonstrates  that the interests of  the producer and those of the consumer to be completely and absolutely opposed.  The producer benefits from scarcity of his product, as this brings him a higher price, while the consumer benefits from an abundance of the same product, this absence of scarcity manifesting as a lower price.  

Any consideration of law or policy, must therefore, consider the effect it will have on both the consumers and the producers,  or the economic analysis is at best absurd, at worst duplicitous.  Expanding Bastiat’s analysis, then, any law or policy the result of which brings higher prices to an industry, whether intended or not, demonstrates without further proof or theorem needed, that the producer was the beneficiary.

If you think that this applies to Obamacare, you get a gold star.  No further proof is required that the producer (hospitals, insurance companies, etc) is the beneficiary of this law, other than the fact that the price of healthcare and health insurance has gone up.  Furthermore, as mentioned above, that the interests of the producer and consumer are diametrically opposed, to the extent that the producer is benefitted, the consumer is impoverished. When the market is allowed to function, these opposed interests arrive at a mutually beneficial space.  When the “state” makes its entrance, usually due to the bidding of the producers, the consumer is robbed of some of his marketplace influence and power.

Ever wonder why as an individual you can contribute to a 401K with pre-tax dollars but can not buy health insurance with pre-tax dollars?  If you guessed that:

1)this is a way to make you buy more of what Wall Street has to offer than you normally would and you also guessed

2)that the insurance companies benefit from selling one policy covering 1000 group lives, rather than 1000 individual policies, grab another gold star.

In both instances above, the tax law is twisted in favor of the producer, not the consumer.  In addition, having priced their insurance product beyond what freely acting consumers consider reasonable with record numbers of “uninsured,” the government has responded with Obamacare, a law which makes everyone buy an insurance product they wouldn’t buy on their own.  

Corporate hospitals didn’t support Obamacare because it would help the poor and uninsured.  They supported it because they would have guaranteed payment for every person who came through their doors, direct payment from the taxpayers in many cases, with no need to deal with reluctant paying or unsatisfied patients.  How’s that for a business plan, where you get paid whether the customer wants your product or not (insurance) and whether the patient is satisfied with their service or not (hospitals)?

Any legislation that rewards producers does so at the direct expense of consumers.  This is a game that has gone on as long as politics and the “state” have existed, a game that must be accompanied by a propaganda campaign meant to convince its victims are its beneficiaries.  As I have said before, nothing oozes out of Washington that doesn’t benefit those who wrote or promoted it.  The last thing on the mind of these central planners, was greater accessibility, lower prices and higher quality.  Re-reading Bastiat’s  brilliant and timeless analysis helps make this even more clear to me.  

G. Keith Smith, M.D.

Thanks to Brandon Dutcher for passing this along, an article that contains an admission by the “president” that his own health care bill is a failure.  That’s right.  He has rescinded the cuts in the “uncompensated care” payments to the hospitals because….ready?….because the Unaffordable Care Act will do nothing to lessen the amount of uncompensated care!  

This is embarrassing.  This is also devastating for the hospitals attempting to continue to spew propaganda about how the states need to expand Medicaid in order to make up for their loss of uncompensated care payments.  I wrote in August of 2012 that the hospitals would perhaps support the Unaffordable Care Act and in return agree to let their uncompensated care payments go, only to get these payments anyway. 

It will be interesting to see if this mess continues to unravel or if Uncle Sam starts to play rough.  Kudos to the governors (ours, Mary Fallin, included) who have said no thanks to the exchanges and the expansion of Medicaid.  The political pressure by the hospital lobby here in Oklahoma has been intense, just as I am sure it has been in other “rebel” states.

G. Keith Smith, M.D.