I blog about free markets in medical care and transparent pricing.
The Oklahoma Council of Public Affairs passes on this quote from the late, great Joseph Sobran:
“What puzzles me is why journalism should be so reflexively on the side of government. During the Watergate era, we heard about the ‘watchdog press,’ the ‘adversary press,’ the press as the ‘fourth branch of government.’ That old skepticism about government, largely illusory then, hardly survives today even as a pose. Today the press seems to see itself as government’s partner, assisting and promoting the expansion of the state. The only politicians it treats with skepticism, verging at times on open hostility, are those who try to put the brakes on government. You might think that after a century of tyranny, total war, genocide and mass murder, not to mention organized robbery through taxation, inflation, debauched currencies, and redistribution, all of which have generated more corruption and social decay—well, a little skepticism toward the modern state itself is long overdue. But the news media still persist in the faith that government is the natural instrument for the betterment of the human condition.”
As I read this it occurred to me that while the modern state and its crimes and folly tend to get a journalistic free ride, any individual even suspected of committing any of the same acts or crimes makes headlines. One of the concepts I encountered when first reading the classical liberal scholars was the notion that the “state” should not be allowed to do anything an individual could not get away with. In short, if an action is considered a crime by an individual, that same action should be considered criminal for the state. This restraining concept, perhaps more than any other, serves to limit the scope of government to a more proper role.
It also occurred to me that while the modern press makes headlines with the possible conflicts of interest physicians may have owning the facilities in which they work and to which they refer, the same journalists look the other way as self-dealing hospitals account for 60% of personal bankruptcies in this country. The gravity and depth of the conflicts of interest present in the every day corporate hospital dwarf the worst examples of physician conflicts to which you could point. After all, if you were trying to make money by self-referral, which would you rather own, an MRI machine, or the doctor and the MRI machine? Which would you rather own, the hospital, or the doctor and the hospital?
Are there doctors who own MRI machines who are by virtue of this arrangement more likely to order an MRI? No doubt they are here and there, ordering the studies that are indicated and a few that are not. The price of these MRI’s are almost without exception, however, the lowest in town, wherever you look. Are there hospital employed doctors who are told to order more MRI’s by their boss? Duh. This overutilization pressure is widespread and standard operating procedure. These hospital MRI’s are, by contrast, the most expensive studies in any town or city you might examine.
What is more damaging? A few doctors who think they can get away with ordering a few unnecessary MRI’s for a low price, or widespread and institutionalized overutilization and abuse of high-priced hospital MRI units? Which of these situations gets the most press? Which of these situations is likely to worsen, the physician owner who acting unethically constantly runs the risk of ruining his reputation and practice by acting in this manner, or the physician employee, who out of fear of his job, orders as many MRI’s as he is told to by his boss?
Conflicts of interest seem to have escaped the notice of lawmakers, as well, when pertaining to the giant hospital interests, while the very name “Stark,” referring to the California ex-congressman, strikes fear in the hearts of many doctors, as this man made a career of restraining physician entrepreneurs, all to the giddy applause of his hospital crony pals. “Stark” laws have served to regulate the manner and the extent to which physicians can own medical facilities in an ostensible effort to curb self-referral abuses. Hospitals in the meantime have been hiring physicians whose various diagnostic and specialty referrals are thereby controlled and funneled to their employers’ institution, representing self-referral abuse on steroids. Exhibiting perhaps the ultimate conflict of interest, many giant hospitals have started their own health insurance companies, another massively corrupt story and missed opportunity by modern media.
Perhaps the crimes of the “state” and the gross hospital conflicts of interest are less noticeable or offensive due to their anonymity. The press actually provides cover for institutional abuses by headlining an individual physician as a “self dealer,” as this provides a useful distraction for the wildfire of entrenched hospital “self-dealing” going on right in front of our face.
The ultimate in self-dealing occurs, of course, in Washington, D.C., the Unaffordable Care Act representing perhaps one of the most gross examples of this “pay to play” game. It is always important to remember that the only thing worse than unethical businessmen and tyrannical government is when the two work together generating laws like Obamacare, a law that will make corporate medicine even richer and grant unimaginable power to would-be tyrants. Keep in mind that this law prevents the construction or expansion of any physician owned hospitals. Keep in mind that this law will result in bundled Medicare payments to the hospitals, from which the doctors will be paid an increasingly smaller portion . Keep in mind that private practice physicians will be paid 40% less than their hospital-employed counterparts for the same services. Keep all of this in mind when you read a front-page account about some individual doctor accused of self-dealing.
Just as the crimes of individuals pale when compared to those of the “state,” the conflict of interest issues of individual physicians (while making great headlines) pale when compared to the well-established and institutionalized self-dealing of the big hospitals. It seems obvious to me that the best way to deal with ownership conflicts of interest in health care would be to prohibit hospitals from employing doctors. That no lawmaker has ever suggested this demonstrates, I think, that the gang in D.C. means to protect their hospital pals more than they wish to curb any abuses of self-referral. Is the press really missing this or are they just looking the other way? After all, if it isn’t ok for doctors to own hospitals, why is it ok for hospitals to own doctors?
G. Keith Smith, M.D.
Joseph Stalin and Adolph Hitler weren’t exactly friends, but ideologically they were on the same page about many issues, the right to health care and the right to due process, amongst them. They were proponents of the former and obviously, not so much the latter. Sound familiar?
What they were actually in favor of was control of the healthcare their citizens received. Hitler and his National Socialist Democratic Party actually used this issue of the “right” to healthcare to politically destroy Otto von Bismarck, whose power was already tenuous given the economic devastation intentionally inflicted on the Germans after the First World War, a “crisis” economy that begged for a tyrant like Hitler.
Control over healthcare gave the statists control over the very lives of their citizens, arming the state with the authority to decide who got healthcare and who did not, for many, who lived and who did not. As all totalitarian regimes value individual citizens strictly as a function of their value to the state, and as the citizens began to believe the “we’re all in this together” sort of nationalistic chant, this grant of power over healthcare given to the state therefore had credibility and even seemed to be a necessity to many of the affected citizens.
While the Allied nations worked hard to publicly paint Hitler as the monster he was, these same nations quietly and privately embraced his economic fascism. Frederick Hayek’s “Road to Serfdom,” an unintentional best-selling blockbuster in the United States, was written as a warning for the British people, a warning that the fascist corporate state so decried by the British government, had in fact, been embraced by the British government! The proud British paid no attention and quickly adopted what we now know as the National Health Service, a system that is actively and admittedly euthanizing patients in these modern times to make bed space for those in the waiting room.
This could never happen in the United States could it? Only the most naive wouldn’t recognize that we are on the same path as these failed and murderous states. One very sinister activity that is escaping most people’s attention is the move by the federal government designed to promote the hospital employment of physicians. This arrangement erodes the patient-doctor relationship and therefore disenfranchises the patient, as the doctor’s boss is the hospital, not his patient. Physician employees are much easier for tyrants to control. Hospital administrators controlling large groups of doctors and the government controlling a small group of hospital administrators-that is the goal. Private practitioners, those with their patients’ best interest at heart, never mind what the state has to say, must be marginalized if not eliminated completely, for the complete takeover of medicine by the state to succeed. This effort is well on its way.
This article in the Wall Street Journal provides a glimpse into how the productivity of hospital-employed physicians falls, but doesn’t go far enough to show the true devastating effects of this employment arrangement, I think. While patients can appeal to their personal physician for help, their appeals to their employed doctors are more likely to fall on deaf ears, as these employed doctors must follow the old proverb, “whose bread I eat, his song I sing.” These doctors must ultimately advocate for their boss, not their patient in the event their interests are not aligned.
Here are some examples of how the current system is rigged in favor of the physician-as-employee arrangement. Medicare pays hospital-employed doctors 40% more for the same service as non-employees. Physicians must buy prohibitively expensive electronic medical record systems (promoted in the name of “safety”) or face even lower payments from Medicare. Physicians who do not demonstrate “meaningful use” of their electronic medical record systems (if they can afford them at all) will face further cuts from Medicare. “Meaningful use” includes transmission of confidential patient information to Uncle Sam, by the way, without the patient’s consent. One part of Obamacare calls for bundled Medicare payments to hospitals, which then divvy up the money to the doctors, as they see fit. One part of Obamacare prohibits the construction or expansion of physician-owned hospitals, institutions demonstrating better outcomes and lower prices consistently. Recently, the federal government issued regulations providing for profitable administration of chemotherapy only to hospital-based oncology units, not the non-hospital private practitioners, who can only charge a price less than their cost for these drugs. I could go on.
If your doctor isn’t working for you, he or she is working for someone else. It is only a matter of time before this represents a conflict, your interests as a patient suffering as a result. This is a necessary part of the national health care plan, where rationing from the central planners will be used to balance health care budgets.
The response to shortages (invariably the result of state intervention) by the free market and its entrepreneurs, is to look for new and more efficient ways of providing the service, activities that lower prices and improve access for everyone. Entrepreneurs see shortages as opportunities, while central planners, not only cause these shortages, but respond with the usual rationing and price controls. The Independent Payment Advisory Board (IPAB), an integral part of Obamacare will be the price control mechanism, the mission for which will be to price services below their actual market price, ensuring that little supply of these services is available and therefore balancing health budgets with this subtle, behind-the-veil rationing.
This is the compassion of the state, where central planners decide who gets what from a shrinking supply, whereas market players deliver more supply at lower prices. Employed doctors will be much more easily controlled than independent ones when this system is fully operational. Hitler and Stalin understood this. The current regime in the United States does, as well.
G. Keith Smith, M.D.
“I don’t want to have anything to do with the money part of medicine.” ”I just want to practice medicine and leave all of that money stuff to someone else.” ”I’m not any good at the business stuff.” ”I just want to do what I know I’m good at and pick up my check at the end of the month.” ”Someone else can deal with the headache of my overhead, employees and malpractice.” ”If I talk to patients about money, they’ll think I’m greedy. They’ll think that’s why I went in to medicine.” ”I just do the right thing, no matter what it costs. ” “Discussing costs makes it look like you are willing to cut corners.” ”I only practice the best medicine. If people can’t afford it, that’s their problem.”
If you are a physician reading this, you’ve heard physicians say some of these things, particularly the younger ones. If you are not a physician reading this, I am going to help you understand what doctors who say these things really mean and what it means for you.
The statements above are quite simply a cop out. In this day and age, in particular, financial abandoning of the patient, leaving them easy prey for the hospital wolves and others, is simply unethical, however difficult it may be for some physicians to read this. “Not for profit” hospitals are busy buying physician practices so that they will develop this mentality, one which serves to make these corporate giants even richer.
“They charged me $8300 for that scorpion anti-venom! I didn’t know it was going to be that much and am not sure how I’m going to pay for it.” “Doctor, why would you send me to a hospital that charges $730 for a drug that an outpatient surgery center like the Surgery Center of Oklahoma won’t charge me for at all?” ”I wish someone had told me what my options were so I’d have an idea how much all of this was going to cost.” ”That antibiotic you prescribed for me was $650. I would have liked to know about other options.”
What doctors who treat their patients as if money is no object and pretend to be disinterested in the financial part of health care, really mean by abandoning their patients is this: ”you’re on your own.” ”I’ve done my part, and now I’m out of here.” ”Good luck.” This, of course, is exactly what the hospital-employed doctor is thinking. He has a salary and a practice whether you come back or not. He has an income whether he sends you to a horrible hospital-employed colleague or not. He really could not care less whether you are bankrupted by the hospital wolves. He is likely bonused by bankrupting you and very likely punished for any move on his part to curtail patient costs. The automatic ordering of tests and referrals by the electronic medical records systems used by many corporate hospitals as a method of controlling their doctor employees, serves to run up the cost of care for anyone that comes in contact with it.
This is what I call “churning.” This maximization of profit seeking from patients who have insurance, particularly if they’ve not yet reached their lifetime limit, is commonplace now. Divorce lawyers are famous for “churning,” that is, conspiring to stir up trouble during a difficult divorce, so both sides benefit from the ensuing litigation. Corporate hospitals, are also into this game, ordering unnecessary lab and nutrition consultations and the like. Making this sort of robbery routine is easy now with electronic medical records systems, the physician orders for these money squeezing games no longer necessary, just part of the default program.
“Doctor, my husband died in a car accident two days after my surgery at your surgery center.” ”I simply don’t know how I am going to pay you.” Owning and operating a facility gives the doctors the ability to control the quality of care in that facility and gives complete control over the financial exposure of the patients. Facility ownership brings another level of accountability to the patient, a financial accountability. The doctor can no longer say, “if the hospital is bankrupting you, that’s none of my affair. You’ll have to talk with them.” On the contrary, no physician can simultaneously bankrupt a patient while claiming to be their advocate! Physician ownership of facilities allows for the operation of a true “not for profit” enterprise, one where on a case by case basis, patient circumstances can be considered and no facility profit can be dictated if this is appropriate. Physician ownership was the rule until the 1960’s with the appearance of the community hospitals. Many times these facilities took the place of those owned and operated by local physicians. Thus was born the extreme profit seeking and greedy corporate hospitals, the most gigantic profit seekers in health care today. Beginning to see why physician-owned hospitals were outlawed by Obamacare while the adoption of the electronic medical record systems was mandated?
Let your physician know that you want to talk about the financial aspects of your health care when you see them. Don’t waste your time though if he/she works for a hospital. They’re not working for you.
G. Keith Smith, M.D.
Here is one of the most devastating hospital criticisms in Dr. Marty Makary’s new book. Makary relays the story of Dr. Guy Clifton a Houston neurosurgeon who made an interesting discovery during his attempts to work with his hospital administration to lower the incidence of postoperative surgical complications in his hospital. ”He (Clifton) learned how the business of medicine works-the reason there was no business case for his plan to lower complications was that hospitals profit from bad medical care. He realized that hospitals get more money for each complication, X-ray and extra patient day in the ICU. One well-known national study that was, ironically, released around the time of his departure estimated that a hospital gets paid $10,000 extra per surgical complication.”
So from a strictly business stance, who does a hospital want to hire when they are out hiring surgeons? Think they want the best guy with almost no postoperative complications? Makary’s simple story of Dr. Clifton illustrates a point that I have made repeatedly on this blog, that the doctors that physician-owned facilities kick out and the doctors we facility owners avoid like the plague tend to migrate to the big hospitals where their unethical and/or incompetent behavior is rewarded and welcome. This is a point that begs to be made at this point in his book but which Makary misses, primarily because he is a salaried doctor in a big multi-specialty clinic.
Physician-owned facility owners boot bad surgeons because they don’t want to be associated with them professionally for the stain on their own reputation and they don’t want the added liability that these buffoons bring to the facility in which they have ownership. That these incompetent physicians represent huge sources of revenue for the big hospitals and are welcomed with open arms at these facilities makes sense once you read Dr. Clifton’s story. This failure to connect all of the dots in Makary’s book is unfortunately a constant annoyance, even though the point he makes is devastating.
Here’s another. Makary writes,”When choosing a hospital, beware of clever marketing. When a company wants to sell soda or a designer wants to market its two-hundred dollar blue jeans, they will pump endless amounts of money into advertising campaigns to make their product appealing to consumers. Hospitals are no different but, unlike choosing a pair of jeans, choosing the wrong health care provider can have permanent consequences. Don’t be taken in by fancy banners like ‘center,’ ‘top hospital,’ or ‘best docs.’ ” Insist on finding out how many patients they treat each year for your condition. Hospitals create ‘centers’ to lure business, but remember, one doctor-or even a few-does not constitute a ‘comprehensive center.’ ” Patient-satisfaction surveys do not capture quality medical care, and ‘top’ scores and rankings in magazines are often paid for.”
This hard-hitting writing makes the book worth reading. However, these remarks come at one quarter of the way through the book and he still hasn’t mentioned prices and their role in cleansing the marketplace of frauds and butchers. He never does. He never connects his great message of quality transparency with price transparency. What a missed opportunity.
G. Keith Smith, M.D.
A legislative healthcare expert in Washington D.C. recently told me that the Medicare payment to “not for profit” hospitals here in Oklahoma City for any of the surgeries for which we have listed prices on our website is double what we have listed. For Medicare.
We are told that Medicare is going broke when surgical care for half what they pay is present in the same city. We are also told that these “not for profit” hospitals are going broke at these rates of payment, while they continue to build their marble and mahogany temples all over the place, each of which serves as an instrument of bankruptcy for all levels of government and individuals.
I read with interest the piece by Jaclyn Cosgrove who writes in the September 7th edition of “The Oklahoman” about a poor patient who needs a colonoscopy. ”Put yourself in that place…your’re making $10 an hour, you’re 50 years old and you need a $1000 test…what are you going to do? Nothing,” said Lou Carmichael, the CEO of Variety Care.
Variety Care operates a group of what are called community health centers, designed specifically to help the poor, particularly those who fall through the government cracks. That their CEO quotes $1000 as a reasonable price for a colonoscopy shows that even charitable organizations such as Variety Care (they take some government money but are also partially privately funded) are not immune from the hospital mercenaries.
A physician-owned gastroenterology lab here in Oklahoma City will do a colonoscopy for $550. Best gastroenterologists in the state in my opinion. All-inclusive. All day long. And make money doing it. Gastroenterologists who are employees of hospitals perform colonoscopies for their boss for 6 times this amount at one hospital I know of here in Oklahoma.
The director of a charity here in Oklahoma City once told me that they could provide three cochlear implant procedures at our physician-owned surgery center for every one they paid for a the “not for profit hospital.” Greedy doctors!
You can obtain open heart surgery here in Oklahoma City at a physician-owned facility (best cardiac care in this entire region) for about the same price as one year’s insurance premiums. I hope that everyone will begin to understand that health care doesn’t really cost that much. What the giant hospitals charge for healthcare is another matter, altogether though.
When asked to explain why we charge so little, rather than justify my charges, I typically turn it around and remind people that it’s the institution charging 6-10 times what we do that has some explaining to do, not me. The big hospitals do this while claiming they are not making a profit, paying no tax, building like mad, engaging in brazen hostile takeovers of private physician practices, paying their administrators millions of dollars (each) and bragging about their contribution and benefit to the community.
You don’t think the hospitals would “donate” to organizations like Variety Care in an attempt to control patient referral patterns do you? If they did, I’m sure they would claim this as part of their benefit to the community, as well, charging $3000 for the colonoscopy, taking $1000 and “benefitting” the community with this $2000 “donation,”part of which they will be rebated through the uncompensated care scheme!
Insurance policies are designed to keep you from asking what health care costs, as people typically only care about their “out of pocket” expense. It’s time to start asking how much your healthcare costs. In my opinion, this alone could cut spending on health care by as much as 50%. That Medicare pays hospitals twice what is listed on our website is evidence of this, I think.
G. Keith Smith, M.D.
There is more insight to glean from the Phoenix scorpion story. Imagine that this poor patient went to a hospital that her personal physician owned. How would things be different if this woman’s personal physician were taking care of her in an emergency room he owned? You think that this greedy doctor would take her for all she was worth? Or, as her personal physician and advocate, would he bear some additional responsibility for her financial well-being. Not discussing the cost of the anti-venom would represent a betrayal of this patient-doctor relationship, would it not?
In addition, the outrageous profit-seeking of the “not for profit” hospital would be mostly absent, as this doctor could not in good conscience financially abuse this patient in his hospital any more than he could in his own office. He would be happy to just recover his cost on this drug. He would be really happy that she didn’t go to the Chandler Regional Medical Center, an outfit that he knew would bankrupt her. Contrary to what the goons at the American Hospital Association and their lobbyists would have you believe, physician-owned facilities are bargains compared to their “not for profit” competitors across town.
But in all likelihood, the insurance company that paid the hospital $57000 wouldn’t “contract” with this physician-owned hospital. They would be “out of network.” Why? Because the insurance company makes more with the hospitals that charge the most! This is so important to understand. Most of the insurance company’s money comes from money management and “repricing” fees, not from premiums, according to several insiders I have talked with.
The doctor that recommended and administered this antivenom in Phoenix didn’t work for the patient, though. The lack of any patient-doctor relationship results in a lack of accountability of the doctor to the patient, medically and financially. This emergency room physician is not likely to ever see this patient again. Some emergency physician groups labor under performance contracts with these mercenary hospitals where their compensation directly reflects the extent to which the hospital has profited from their efforts. These arrangements guarantee almost unlimited and unnecessary testing and expensive drug administration like the Phoenix case.
It is also important to understand that the giant hospital gets paid even when it doesn’t get paid. Overcharging the poor and inflicting exaggerated bills on the sick inflate the uncompensated care claim by these outfits, and that’s just what they do. This pads the pockets of their insurance friends who ride in to the rescue and “mark down” the bills, hoping no one realizes they skim 35% of the marked-down amount.
Now that you know this, wouldn’t it be a great idea to put these giant hospitals in charge of all of the care in the country? Well, that’s exactly what the Unaffordable Care Act calls for! Beginning in 2014, Medicare payments will go to the big hospital systems and they will dole out the money to the doctors. No more trustworthy and charitable bunch than the “not for profit” administrators!
Maybe a black market for scorpion anti-venom will develop. The FDA’s granting exclusive distribution rights for seven years to the company distributing this drug is sort of like prohibition. The same drug for $100 could be purchased over the counter in Juarez or Nogales and sold at an anti-venom kiosk outside of the emergency rooms all over Arizona were it not for the wonderful “deal” the FDA struck with the Tennessee fellows.
The only thing worse than total corporate control or total government control of medicine is these two syndicates together. This episode in Phoenix is a window in to understanding the control the cartel has over health care in this country.
G. Keith Smith, M.D.
We used to do knee and hip replacements at our surgery center. Patients were kept overnight then transferred to a rehabilitation unit for the balance of their recovery. As an outpatient surgery center we are limited by our license to keeping patients for one night only. We were able to provide this operation for a tenth of the price charged at the “hide a profit” hospitals. If you are thinking that many people received this surgery that would otherwise have been unable to afford it, you get a gold star. If you are also thinking of “what is not seen,” the money that many of these people didn’t waste on their surgery at a big hospital, money they used for other things, you get Bastiat’s gold star.
A market was created for these rehabilitation hospitals, as these units provided exactly what post-operative patients needed: less intensive nursing care and more attention to regaining their strength and transitioning to independence. Physical therapists and their aids were seen in large numbers protecting patients from falls while they tested the limits of their recuperation, coaching and coaxing them all the way. The use of rehabilitation units helped to “decompress” the full service hospitals, making these beds available for other patients. Operating rooms were no longer under constraints to restrict surgeries based on the availability of rooms for the patients afterwards.
Specialty hospitals took note of this. Orthopedic and spine specialty hospitals, in particular, could operate even more efficiently as their rehab units could absorb these patients easier than their scarce hospital beds. Economies of scale had the effect you would expect: surgical prices in these facilities fell dramatically. The care patients received in these rehab units was also more suited to their needs and the incidence of falls and injuries plummeted. Facilities like mine could offer our affordable surgical care to vastly more patients, many of which, as I said above, would never have been able to afford these more intense operations.
If you’ve guessed already that the reaction of the federal government was to shut down these rehab units you go to the head of the class. At the height of their popularity, the rehab units were basically outlawed. These units had to comply with new “population ratios,” that, impossible to comply with, shut them down. Basically, none of these units could accept a patient for post-surgical care until they had accepted 9 others that had suffered strokes. Understand that these rehab units could be completely empty, and be proscribed from accepting patients needing their services! Political hacks masqueraded as protectors of access to care for stroke victims, all the while stuffing their pockets with cash from the true beneficiaries of these new regulations.
Cui bono? Certainly not the patients. This move was primarily directed at the specialty hospitals, physician-owned centers of excellence with which the “not for profits” couldn’t compete. Physician-owned specialty hospitals represented lower prices and extreme quality like none ever seen. What would you do if you were the CEO of a big hospital chain? Why, go to your legislator, of course! If you can’t beat ‘em, have ‘em outlawed. Future construction and even expansion of specialty hospitals was outlawed by the Unaffordable Care Act. Seeing a pattern here?
This move also made affordable joint replacement surgeries at our facility, more difficult if not impossible to do, although more and more outpatient facilities are doing these operations, sending patients home after an overnight stay and relying then on home-health agencies.
I am writing this blog so you will better understand the significance of the recent zoning approval in St. Louis (home of SSM health care and the Sisters of Mercy…both gigantic hospital systems) for Dr. George Paletta’s outpatient surgery center. He obtained permission to keep patients for 3 days after surgery, without having to swallow the “hospital license sword.” This is an incredible achievement and development. You can read about the reaction of the hospitals here. This will embolden others to try the same thing, allowing even more patients access to extremely high quality and low priced care previously unavailable to them due to the cartel’s lock on the gate.
Great progress often times starts with small steps. I’m not sure Dr. Paletta realizes what he has done, but countless future patients and their pocketbooks could be the beneficiaries of his work. Until Uncle Sam rides in to the rescue.
G. Keith Smith, M.D.
Someone asked me in disbelief earlier today how we could charge so little for surgical care at our facility. You can see our prices here. ”It’s one thing,” I said, “that our prices are so low. It is another thing, altogether, that you can view them online.”
Posting our prices is what my friend Jay Kempton of the Kempton Group calls, “doing the unthinkable.” Jay is the principle of The Kempton Group, a firm that provides benefit advice to and processes claims for companies that choose to self-fund, for purposes of health benefits for their employees. Imagine how his clients feel about paying a fraction of what they were paying for the same surgeries (and I would argue better quality) at “not for profit hospitals” and that they know in advance how much it is going to cost.
Continuing with questions from this morning: “How did you come up with these numbers,” I was also asked? ”What percentage of Medicare?” I explained that physicians basically bill for their time and that we know how long surgery will take most of the time and that as the managing partner, I know what the supply costs are and basically how much it costs to run an operating room for an hour. I also explained that “Medicare reimbursement” doesn’t really mean anything to me. Anyone setting fees will be wrong, one way or the other, as the market clearing price will vary from place to place, day to day and vary according to the facility or surgeon. A very busy, high quality surgeon will be unlikely to make himself available for Medicare rates, for instance.
I informed this individual that I stopped accepting Medicare and Medicaid funds in 1994. “This doesn’t make sense.” ”Since you are running a physician-owned facility and are self-referring, your prices must be higher than the ‘not for profit’ hospitals, since they are not as greedy for profits.”
I explained that it is precisely because we are a physician-owned facility that our prices can be reasonable, as, unlike our mis-named “not for profit” hospital competitors, we don’t care if the facility makes a bundle, we just don’t want the facility to lose money. As long as our professional, physician fees are reasonable, we don’t need for the facility to charge much above what it actually costs, to be content. Physicians’ (taking in less than 10% of the health care dollars) fees are cheap compared to the typical institutional fees.
“So you’re telling me that I am more likely to find a reasonable price at a physician-owned facility that at a “not for profit hospital?” Followers of this blog know by now that this person had never seen my blog.
In a completely different tone now: ”Is it fair to say then that physician-owned facilities will lead the way in price transparency and reasonably priced delivery of health care?”
“Yes,” I said. I restrained myself from telling them to go to the head of the class with this remark.
Continuing, I said, “that is why the Unaffordable Care Act specifically stopped the development of any new physician-owned hospitals, some even already under construction, like the Texas Spine and Joint Hospital. This proscription gave the cartel cover, protecting them from high quality and affordable competitors, consistent with the intentions of the bill’s authors, increasing the cost of care dramatically.”
I have come to believe that the reasonable amounts we charge at our facility are not the most radical departure from the rest of the medical industry, but rather our display of those charges. That our display of prices is seen as so radical is, however, an indication of how sick the medical economic system is in this country, as every other industry must contend with price calculation challenges.
The answer to our problems from Washington? More government, price controls, less competition for the big hospitals, more regulation, insurance industry consolidation bordering on monopoly, budget caps, tax code tweeks, mandated computerized medical records and mandated first dollar insurance purchases. And it’s called the Affordable Care Act?
G. Keith Smith, M.D.
From now on, I am going to refer to “not for profit” hospitals as “not show a profit” hospitals. I believe that no other group deserves more blame for the disastrously expensive state of health care in this country than these big “not show a profit” hospitals. They, of course, have an incredibly powerful lobby, the American Hospital Association, which has bribed sufficient players in D.C. to allow them to have their way with the sick. I thought it might be useful to review their role to date.
These big hospitals were granted a concession of tax-free status when required to see all patients (that could pay or not) that came through their doors. The value of this concession is incalculably huge and while sufficient to cover the costs of indigent care and finance hospital expansions, was nonetheless insufficient to slake the greed of those running these outfits.
The poor mouthing tactics of the “not show a profit” hospitals have gone on for some time but reached a fevered pitch in the mid to late ‘90’s when physician-owned specialty hospitals made their debut (my apologies to those physician-owned hospitals that predated this time). “Doctor owners are cherry picking,” was their cry! “They are leaving us with all of the patients who can’t pay,” they screamed. Here in Oklahoma, a state-commissioned “Trauma Task Force,” was hijacked by these goons, using that vehicle to make an anti-competitive case against these new physician-owned facilities. A libertarian-leaning legislator saw to it that I was put on this task force. Here I learned first-hand the lengths to which these hospitals would go to avoid the competition that is present in every other sector of our economy.
All the while, the hospitals were lobbying for disproportionate funding from Medicare and Medicaid, compared to physician-owned facilities. They prevailed and today if you have your knee replaced at a “not show a profit” hospital in Oklahoma City, Medicare will pay them twice what the physician-owned (and far superior) orthopedic hospital will be paid. Those greedy doctors! Summing this up, big hospitals successfully lobbied to be paid more, lobbied to have physician-owned facilities be paid less, screamed they were going broke and accused the greedy doctors of cherry picking.
Let’s keep going. Unsatisfied with their tax-free status and disproportionate government payments, the hospitals pulled off their ultimate heist: the uncompensated care scam. Declaring any amount of their bill which they did not collect, “charitable care,” they managed to secure even higher Medicare and Medicaid funding based on this fiction. Uncle Sam provides DSH (disproportionate share hospital) payments to hospitals based on the amount they claim they didn’t collect. This incentivized the hospitals to produce the most outrageously fictitious bills they could, as this padded their DSH payments. This “uncollected” amount also helped maintain the fiction of their “not for profit” status. The more hospitals “lost”, the more they made, kind of a reverse-Enron, overstating losses instead of gains.
(Insurance companies discovered that they could “sell” their services to “re-price” these false bills and make billions in this way. I have discussed the mechanics of this in prior posts. Let’s stay on these hospitals, though.)
Still not satisfied and continuing the poor mouthing lie, hospitals justified their outrageous bills by saying that they were going broke from all of the “charity” care they were delivering. You can see now that they were being paid for this “charity” care by the taxpayer even if the patient wasn’t paying them. The hospitals began more aggressively “shifting the costs” to those who were paying their bills, even though there were no costs to shift.
(Insurance companies were drowning in their champagne as they saw this as this gave them justification for raising premiums and padded their “re-pricing” profits.)
Think I’m wrong? Look at the building cranes in front of these large hospitals. The largest crane I’ve ever seen is in front of St. Francis Hospital in Tulsa as I write this. The Catholic Hospital Association, of which they are a member, pushed hard for the Unaffordable Care Act, as they stand to make money like never before, getting paid by “insurance” while continuing their uncompensated care scam.
Look at the devastation of rural hospitals inflicted by the big hospitals. First the giant hospitals buy all of the doctors in town, turning them into referral tools, requiring that they transport every patient they can to the mother ship, then they buy the rural hospitals in a hostile takeover, having bankrupted them with this scheme.
One Catholic hospital system has made so much money with the above schemes that they simply can’t figure out what to do with all of it. So they set up a separate supply-purchasing company that after procuring goods for their hospitals, marks it up to themselves, allowing them to dump unlimited profits from their “not show a profit” mother ship.
I suppose I should mention that the administrators of these facilities make millions of dollars every year. The head of the Catholic Hospital Association (a nun) makes 1 million dollars a year! That’s a bunch of cash to cram in her habit.
That vulnerable and sick people have been bankrupted by these criminals, makes me mad. They couldn’t have done it without the willing assistance of our friends in Washington, D.C., however, the same folks who have brought us the Unaffordable Care Act. State governments bear much of the blame, as well, as powerful state hospital associations have showered local legislators with enough dough to shut out the hospitals’ would-be competitors.
Out of one side of the legislator’s mouth, we hear about “access issues” and the “high cost of health care.” Out of the other, they say to their hospital buds, “…thanks for the check. I’ll see to it that no other facilities open to make you price-competitive.” “I’ll tell the voters it’s for their safety and that we need to protect the integrity of our hospital systems so you’ll be there when we need you.”
G. Keith Smith, M.D.
One of the tragedies of the debate on health care that led up to the Unaffordable Care Act (UCA) was the lack of any serious discussion about the justification of the high cost of care. Hint: it isn’t justified. The careful avoidance of this topic was intentional, as any realization of the availability of high quality surgical care at 1/5th-1/10th of the price at a “not for profit” hospital, for instance, would have taken a large amount of steam out of the argument that “everyone needs health insurance.” Someone might have said, “Whoa! Let’s take a few deep breaths before we insure everyone based on Lamborghini prices.” That would have spoiled the plans for BCHIP (big computer, hospital, insurance and pharma), the players that wrote this bill.
Why do hospitals charge so much? ”Because they take care of so many indigent patients and must maintain an emergency room,” most would say. Answer me this: why is there a construction crane in front of almost every emergency room at large hospitals in the U.S.? Would you build on to a part of your business that was bankrupting you? ”Not for profit” hospitals don’t pay tax. The value of this concession far outweighs the value of any indigent care they deliver. Seriously, what is the additional marginal cost of treating an indigent patient in an emergency room that is already staffed and open?
There’s more. Much more. Hospitals charge gigantic amounts to intentionally rack up points in the “Uncompensated Care” scam. ”Uncompensated Care” is simply hospital bill charges minus their collections. Hospitals claim they supplied care equal to this number for which they weren’t paid and submit that to Uncle Sam. Taxpayers reward them for their “charity” with padded Medicare and Medicaid payments called DSH (disproportionate share hospital) payments. This means that hospitals get paid even when they don’t get paid. This means that hospitals are perversely inclined to charge the most to those who have the least, as this difference will significantly contribute to their DSH account.
Sorry, there’s more. The extent to which hospitals don’t collect on their charges, actually helps them maintain the fiction of their “not for profit” status. This means that they probably need all of the “non-payers” in their emergency room they can get, as billions in the black require false billions in the red. Building campaigns are another way to dump massive profits, and we have seen hospitals building satellites, clinics and buying out competitors. They also dump profits by engaging in hostile takeovers of physician practices, paying with money they can’t afford to keep. Here’s a new one. One hospital I know of formed a buying group company for their supplies, which marks up the price sold to their own fleet of hospitals. This ingenious strategy is yet another way hospitals can dump massive profits by overpaying for their own supplies. You didn’t think they would pass any savings realized from forming a large buying group to the patient did you?
Now the shocking part. What if I told you that the higher the hospital bill, the more the insurance companies make?! The “repricing” of claims is the reason and it works this way. An insurance company pays $10,000 on a hospital bill of $25,000. The insurance company then charges the employer insurance group a percentage of the “savings.” They make more by doing this than they do on the premiums they charge. This is the primary reason that no politician on either side of the aisle will advocate a change in the tax code that currently discriminates against individual purchases of health insurance in favor of business purchases. This gift to the insurance companies enables their ”repricing” profiteering, the termination of which would have a devastating effect on the fundraising efforts with the big insurance companies.
The more hospitals charge, the more the insurance companies make. The more the hospitals “lose,” the more they take from the taxpayers in DSH payments. It took me a long time to figure this out, but as a physician and managing partner of a surgery center it never made sense to me why insurance companies didn’t want to make sure patients they insured came to my facility, where the quality is as good or better and the prices are a fraction of what they are charged by the hospitals. This didn’t happen overnight. Politicians competing with each other for the political contributions of the insurance companies have bestowed these gifts to their contributors over the years. Nothing has changed, except the democrats are now the party of big insurance. Did you see what the court’s decision did to the BCHIP stocks?
The UCA will drive the costs of insurance and medical care through the roof. Maybe this will finally result in an examination of the costs and the perverse incentives in this distorted marketplace.
And you thought it was the greedy doctors that were responsible for the high price of care.
G. Keith Smith, M.D.