I blog about free markets in medical care and transparent pricing.
It looks as if the Oklahoma legislature has provided the dowry to the Oklahoma State University osteopathic hospital that Mercy Hospital Oklahoma City was looking for. The state budget provides for $18.5 million to bail out this hospital, interestingly, $250,000 more than they said they needed.
Mercy, Oklahoma City was looking at an arrangement to “partner” with the Tulsa osteopathic hospital (no giant Tulsa hospital wanted anything to do with them, even with a dowry/bailout), but was waiting to see if they received this taxpayer gift.
If anyone knows how to make money at a not for profit hospital, it is Mercy. Of all the hospitals in the country, TIME magazine singled them out as price abusers. I predict that the bills from the osteopathic hospital will soon reach the level of the bills at their mothership in Oklahoma City. I also predict that the other Tulsa hospitals will raise their prices, knowing that all they really need to do is stay just below the new bankrupting standard across town.
As the free market movement in health care gathers steam in Oklahoma, I also predict that these medical corporatists will find that they have miscalculated. If patients are willing to travel to Oklahoma City from Mendocino, California, Charleston, South Carolina and Montreal, to mention just a few of our sources of referrals, patients from Tulsa will certainly drive to Oklahoma City to avoid medical bankruptcy.
Mercy got their wish then. They married the Tulsa hospital bride with an extra $18.5 million in her purse. Maybe they will use the extra $250,000 they hadn’t counted on receiving for a party, and invite taxpayers from all over the state and from whom this loot was extracted.
G. Keith Smith, M.D.
Here are some very exciting things that are happening at our facility that I wanted to pass along.
We will launch our new website very soon, one which will allow us to show the prices for even more procedures, and one which I can easily edit and expand. As competitors enter the marketplace, I want to be able to change pricing quickly or to add new procedures. We are very close to this becoming a reality. The new website will also allow us to better showcase our beautiful facility and fine staff, and utilize the power of video for patient testimonials, surgeon interviews or even video blogs.
I have been invited to appear on the John Stossel show. I will keep you posted on when they plan to air what sounds like a show dedicated to free market healthcare. As you can imagine, I am very excited to have been asked to appear as this will help us enormously in our efforts to promote price transparency and free markets in medicine.
And finally, the interest in our facility by large employer groups from all over the country continues. The savings to many of their health plans for the procedures we currently have listed on our site (soon to be much larger!) is such that paying travel and lodging expenses for their employees needing surgery can easily be covered….with lots of money to spare. Samaritan Ministries and similar organizations and their members are taking increasing advantage of the affordable quality care at our facility. I won’t be surprised if one year from now, Oklahoma City will be a “medical tourist” destination with numbers of patients traveling here rivaling even the largest out-of-country competitors.
As medical facilities all over the country begin to realize how they can simultaneously become more successful and serve patients better, by embracing the discipline of the free market, a massive deflationary medical price war will ensue. This could be one of the healthiest things the people in this country have ever seen.
G. Keith Smith, M.D.
Check this article out. Trudy Lieberman, an associate professor of public health has written what logicians refer to as a “straw man” piece. She compares our facility’s pricing to….well…she compares us to Nirvana…where everything is free!
Now I understand that a lot of folks read this blog, KevinMD. I suppose that lots of folks read blog posts like Ms. Lieberman’s and see her “point.” What the hell is her point?
We have said that “this is what we do and this is what we charge for it.” Patients have come to our facility from all over the planet, having figured out that the “trust” they placed in their local physician was misplaced, as their local physician many times had conflicts when referring them to the hospital that charged ten times or more what we have listed on our website.
Here is a quote from her blog:
“Are you going to say, “Hey, doc, I can’t afford the hospital you use, I’m going somewhere else?” What does that do for trust—that intangible thing that’s so important for healing? To me, the health care marketplace advocates have hardly considered that relationships and confidence might be as important as price.”
We haven’t had to consider it. We put our prices out there and the patients started showing up.
A few comments about our payment arrangements. We have had patients cancel personal checks they wrote to us. We have had patients call their credit card company only to tell them that they had been fraudulently charged by us. In an effort to keep our prices low, not having to pad for those who would stiff us, we have elected to make certain that we are paid with cash, cashier’s check or wire. That’s it.
$6495 for a bladder repair? Compare that to $42,000 for the same surgery at a local “not for profit” hospital! There really is no response to Ms. Lieberman other than this: the fastest growing part of our business are those folks who are anxious to take advantage of our pricing. Really don’t think anything else needs to be said.
G. Keith Smith, M.D.
Years ago, I hired a carpenter to build a deck in my backyard. This scraggly guy showed up with a pencil behind his ear, a spiral notebook and a tape measure. I told him what I was looking for, what kind of wood and how big I wanted it to be. He made two or three suggestions, we agreed and then he went to work measuring and taking notes. Fifteen minutes later, he handed me a piece of paper with how much it would cost. Then he was gone.
In two days, he called me and said he would like a payment for the lumber and told me how much it was. I sent it to him. Five days later, he showed up with the lumber-already cut. This guy knew what he was doing.
At the time, it blew my mind that he showed up with all of the lumber already cut, ready to assemble/nail. As I look back, I realize that this man, like so many others in a true market economy, did the most amazing thing, the very same thing we have done at our surgery center and what so many hospitals say is impossible: he gave me an up front price.
Now you want to say, “Smith! Building a deck isn’t surgery.” Contractors like this man, however, have run into unanticipated problems that make certain jobs more difficult than others. Experienced contractors anticipate these future problems when evaluating a potential job, factoring this into their price. Most of the time they get it right. Sometimes they get it wrong. If their error rate isn’t factored into their price, they go broke. If their error rate is low, they are able to be much more competitive in the marketplace.
I think of this carpenter often. I certainly had him in mind when I formulated our internet pricing. I knew that some cases would be more difficult than others. I knew that we would probably lose on some and make a little better marginal profit on others. This is what all businessmen do every day in every sector of the economy-except healthcare, it seems.
Eleven years ago, we began construction of the large facility in which we now work in Oklahoma City. The general contractor and the architect gave us a number. Not an estimate. A number. They had factored in to their calculation variables that could represent setbacks, still allowing for a reasonable marginal profit. I had been providing occasional prices for the uninsured and poor having surgery for years by this point, but found the contractor’s confidence in what our new facility would cost, fascinating and incredible.
When I think about the number of times I have heard the hospital folks say that fixed, upfront pricing in health care is impossible, I think about these builders/contractors. I think about my carpenter. Having provided transparent pricing to surgical patients, I have found that in some cases I was wrong. In some cases I was too high, in some cases I was too low. Adjustments were made. Not at the expense of the patient, though.
Transparent pricing is necessary for any concept of value to have meaning. Transparent pricing is necessary in order for appropriate signals concerning scarcity or abundance/surplus to have meaning. Non-transparent pricing is a hallmark of command economies, as Professor Robert Higgs explains in his brilliant book, “Crisis and Leviathan,” one which I highly recommend. There can simply be no meaningful competition when the prices aren’t transparent and known up front.
Not all medical facilities need to exhibit transparent pricing in order for a competitive and market economy to emerge in health care. Indeed, our internet pricing has allowed individuals to leverage their local medical facilities, as otherwise they would have gladly jumped on a plane and come to us for surgical care, the price for which was quantifiable. In spite of big hospitals’ attempts to denigrate this idea, they have found themselves in a competitive environment, whether they like it or not. Whether patients are willing to fly to Costa Rica, New Delhi or Oklahoma City, they have a price in mind and the local hospitals are shoved against the wall with this pricing, forced to explain why they are ten times more expensive while simultaneously claiming to not make a profit. In the absence of any evidence that they are ten times better, their position (6-10 times more expensive) is a weak one.
In Oklahoma City, upfront pricing is available at our facility and several others. A group of gastroenterologists, a group of oncologists, a group of radiologists with a breast imaging center, a group of cardiologists and cardiac surgeons with a physician-controlled heart hospitals, a group of orthopedic surgeons-they all have their pricing configured. A tertiary hospital has recently joined in this effort, providing upfront pricing for inpatient procedures too complex to complete at our facility. This is a very exciting development.
Since hospitals are responsible for the vast majority of medical costs in this country, slashing these outrageous charges brings incredible savings without even touching physician pay. Since we own our facility, we are content with solid fees for our professional services with no desire to plunder and bankrupt our patients with gigantic facility fees, unlike the so-called “not for profit” hospitals. We actually act more like a “not for profit” entity than those claiming this tax-free status.
Hospitals and their shills who claim that up front pricing can’t be done, know that it can be done. They just don’t like what that means for them. They want to work on a “time and materials” basis, a recipe for waste and inefficiency, as waste and fraud generate more revenue with this model’s lack of accountability. The more materials used (with their outrageous mark-ups) the more they make. Forcing medical facilities to be transparent with legislation is a mistake, I believe, as this is a violation of the “non-aggression principle” and also will more than likely provide legislators the opportunity to sell exemptions, with little or no transparency resulting. With the movement for medical price transparency on a roll now, better, I think, to let the much more unforgiving market deal with those who refuse to be transparent. Those who won’t divulge prices will lose out to those who will.
At The Surgery Center of Oklahoma we will continue to advocate a free market in medicine, one that’s possible only when accompanied with and characterized by transparent pricing. We will continue to encourage and recruit others to join us in this effort, one that will likely bring such significant health care price deflation, that the “crisis” the government is attempting to create in order to usher in single payer, will be delayed indefinitely if not thwarted completely.
As I told someone recently, “..the genie is out of the bottle. Price transparency is here and here to stay, whether the government or the health cartel they have created like it or not.” My partners and I are proud to have played a role in the transparency effort, one which we believe will bring price sanity to surgical care in particular, but ultimately to the pricing for all medical care.
G. Keith Smith, M.D.
The well-known inscription on the statue of liberty reads: ”Give me your tired your poor, Your huddled masses yearning to breath free….” Somewhere along the way, many of those coming to the U.S., rather than seek freedom, are seeking the best benefit package-the handouts. Just as the massive handouts in the U.S. serve as a magnet for freeloaders, is it crazy to think that individual states, having embraced Obamacare and its Medicaid expansion, may see the same sort of migration of folks to their states, seeking their imaginary “right” to health care from those states that have essentially declared that such a “right” exists.
One of the justifications for the expansion of Medicaid by the statists and crony healthcare capitalists is that tax dollars collected in a state that has refused the Obamacare Medicaid expansion, will be used to subsidize and pay for Medicaid patients in other states that have embraced Obamacare and the Medicaid expansion. Using this argument, I think that it would be appropriate for governors in states that have rejected the Medicaid expansion to consider the mobilization of an army of school buses and send those who are supposedly left “without coverage,” for the care they would supposedly and otherwise be denied, to the states accepting the “free” federal money for their care. Let these folks exercise their “right” to health care in states who believe in this “right.” Obamacare states are getting paid for this care anyway, aren’t they? These patients would be spared the bankrupting, “charge-master” billing rates of the big hospitals, as well.
The big hospitals are pushing for this Medicaid expansion, just as you would expect. After all, it consists of providing poor folks with a credit card to be used at their hospital, the ultimate bill for which goes to the taxpayers. Medicaid patients, those with the most moral hazard, will have the most medical credit. This is a recipe for even more gross profits by the big hospitals and that is why they are lobbying so hard for it, bashing governors who have refused to smoke this crack and rewarding governors who have succumbed. How about calling their bluff? Send otherwise eligible Medicaid patients to states embracing expansion for their care while simultaneously mitigating the burden of these folks on the poor hospitals in states rejecting the expansion.
This could be a whole new industry of Medicaid medical tourism. Governors that have embraced Obamacare wouldn’t really have anything to say about it, as they are supposedly the beneficiaries of Medicaid funds from states rejecting the expansion, money that doesn’t belong to them anyway. Governors of states packing the buses would be helping out the poor hospitals in their own states who just can’t bear any more non-Medicaid poor patients without going broke. Forgive my sarcasm.
Think this could work? You think it sounds crass? Patients are travelling from Canada and the outskirts of the U.S. to take advantage of our pricing, escaping the areas of the country where price fixing by the medical cartel is ironclad. Those states that have rejected the exchanges and Medicaid expansion could “ship em out” to the states that think this expansion is a good idea, getting patients to where the money is supposedly going to go for their care, anyway. Paying for patient travel would be better for a state’s budget than paying for care, no?
What would happen? The first thing you would hear would be the howls of the big hospital bunch. We would hear about why forced busing is a bad idea. That would be a public relations disaster, I think. We would hear that “Oklahoma should take care of their own,” an argument for federalism and state’s rights that could backfire on these cronies and other statists. What you wouldn’t hear is a sigh of relief that these hospitals no longer have to shoulder the burden of the health needs of the non-Medicaid poor. Don’t forget-they get paid even when they don’t get paid through the uncompensated care scam, sticking the taxpayers with a bill for the difference between what they bill and what they collect and bankrupting this patient group with their “charge-master” bills.
Advocating Medicaid medical tourism would expose their propaganda and lies, wouldn’t it? What the hospitals really want and can’t bear the thought of is losing out on this new gravy train, this new era of ”coverage for everyone,” an era that will be ripe for the up-coding fraud-masters that tend to infect the Medicaid world, the big hospitals being the largest offenders.
None of this, of course, will ever happen. But I think it’s instructive to think about what calling their bluff would look like.
G. Keith Smith, M.D.
Black Flag, a company that makes roach traps, known as roach motels started an effective advertising campaign years ago: ”Roaches check in, but they don’t check out.” As a big fan of the free market, it had never occurred to me that a hospital would embrace the roach motel model for patients. Welcome to Great Britain’s Staffordshire Hospital, where unlike death row where prisoners are fed, even given a last meal, patients are neglected to death, many dying of dehydration or starvation, only to be found by family members lying dead in their own excrement.
After reading this article, you Pharaohbamacare supporters have two philosophical options, I think: admit that this whole idea of socialized, government-controlled medicine is a bad idea, or argue that this hospital mass-murder is acceptable collateral damage….you know…for the greater good. It turns out that hundreds (they seriously don’t know how many, though they admit the number may be as high as 1200) of patients have died unnecessarily in this British hospital over a four year period. These deaths are in excess of what they expected and include as causes starvation, dehydration, infection from lying in soiled sheets, to just pure neglect from a calloused staff.
I am assuming that the number of deaths, in excess of “what they expected,” don’t include those patients who were murdered by the staff utilizing the Liverpool Care Pathway in an attempt to free up more hospital beds for more…victims. I think it is interesting,too, that the prime minister insinuated that these neglectful murders were not confined to this one hospital. I think it is clear from what he said in his remarks in the article that this style of “care” is widespread. Interesting too, is that these murders occurred between 2005-2009. That was four years ago! I wonder who politically benefitted from the timing of this report? I wonder how many murders might have been prevented had this report been released earlier?
I can already hear the apologists: ”It’s the price you must pay for everyone to have access.” A friend of mine who lived in England for awhile told me of an old saying there: ”The first thing you do if you get sick is buy a plane ticket.” I suppose this is one way a government can keep their health costs down….scare folks into becoming medical tourists to the greatest extent possible. Maybe the U.K. should change the name hospital to “Hostel,” so patients will know they are about to enter a horror film not unlike a Black Flag poisonous box.
G. Keith Smith, M.D.
I thought some of you might like to read the remarks I delivered last night at the AAPS regional meeting in Austin, Texas.
Almost 16 years ago now, Dr. Steve Lantier and I left the operating rooms of the big hospitals and began our practice in operating rooms that we owned. Looking back on our decision to leave our very busy hospital practices behind and take this risk, I now realize that we did this in spite of all of the information we had, in spite of all that we had been told by those involved in health care. Our distrust of hospital administrators and the corporate medical world had become so complete that what I now understand to be an entrepreneur’s business calculation was made assuming that all we had been told was false. This, it turns out, was good judgment on our part.
At a recent conference conducted by the Mises Institute in Houston, one which seemed to focus on the difficulty entrepreneurs have in the current business environment, I came to the conclusion that we started our surgery center not based on a typical business pro forma type of plan, but based on the belief that everything we were hearing from hospital administrators about the business of health care was untrue, propaganda meant to discourage physicians from doing what we were setting out to achieve. The anxiety we endured in pursuing this venture was mitigated by how troubled the hospital administrators were by our even considering making this move.
Indeed, we had been told numerous times that the operating room staff needed to be down-sized, because the hospital simply couldn’t make ends meet, the revenue generated by surgical cases inadequate to pay sufficient staff. Large and unacceptable patient to nurse ratios in postoperative surgical areas were justified with the same lies. The lack of proper equipment and supplies necessary to perform certain surgeries and a lengthy committee process for acquiring any new supplies were the order of the day, rather than the exception.
Dr. Lantier and I were convinced that something about this didn’t add up. We knew for certain who we were dealing with when after the Murrah bombing one hospital administrator in Oklahoma City publicly complained that his hospital hadn’t received their fair share of the victims. We opened The Surgery Center of Oklahoma in May of 1997 and knew within 2 months that the highest quality of care with a full staff was not only possible, but could be accomplished profitably for about a tenth of what these so-called “not for profit” hospitals were charging patients.
The hospital lies and propaganda have continued for many years, culminating in the one great lie that led so many to naively embrace Obamacare: that hospitals were struggling financially due to all of the uninsured folks utilizing their emergency rooms, leading to what we all know as “cost-shifting.” I have written about this lie extensively and we all now know that the hospitals get paid even when they don’t get paid, in fact, to the extent that they claim they don’t get paid, they are paid more. This is the uncompensated care system they don’t want anyone to talk about, a gift from Uncle Sam and one which happens to be one of the engines for giant hospital bill creation.
I would never have understood the various lies conjured up by hospitals to maintain the fiction of their “not for profit” status had I not owned and operated a medical facility. One of the first clues that something was wrong was that most insurance companies, in spite of our quality and pricing, avoided dealing with us. The answer to “why wouldn’t an insurance company like better and cheaper” although a mystery then, is apparent to us now. A look at the diagram located in this prior blog (“Anatomy of a Cartel”) will help you understand this seeming paradox.
The only way to shine a light on this price-fixing cartel was to post prices online for all to see, a move we made 4 years ago next month. Incredibly, the first patients to take advantage of our pricing were Canadians, followed by patients from those parts of the country where the tight grip of the cartel and the subsequent lack of any semblance of market competition has rendered the high prices you would predict from such an arrangement.
Our facility is now frequented by people from all over the country and outside, patients with high deductibles, patients waiting in lines, patients with no insurance whatsoever, and increasingly, patients whose care is paid for directly by the companies for which they work, the “self insured.” You can imagine the conversations that I’ve had with the CEO’s of large companies who have been paying $30,000 for operations that they now see could have been obtained for $3500 at our facility. You can also imagine the conversations they have had with their insurance brokers who have known about our facility and pricing and have nevertheless failed to alert their client of our existence.
Our price-posting has had another effect. Rather than travel to Oklahoma City, more and more patients are using our pricing to leverage rational fees at facilities in their hometowns. Just last month, a Georgia patient whose primary care doctor was aware of our website pricing, was quoted $40,000 for a trans-urethral resection of his prostate, whereupon he informed his urologist he was headed to Oklahoma City, where we would do this for $3600. Overhearing the disgruntled urologist’s reaction to losing his patient to Oklahoma City, the hospital CFO asked for details. The $40,000 quote was reduced to $4000. I think it is fascinating that our pricing saved this patient $36000….and we didn’t even do the case.
Before you give the hospital CFO too much credit, though, remember the shell game. You see, he will simply claim that he lost $36000, to bolster his “not for profit” fiction, plug that into his uncompensated care calculation and collect a portion of this “loss” from the taxpayers. Everyone, including this patient, as taxpayers, would have been therefore better off if the Georgia patient had come to our facility, after all.
The big hospitals’ nightmare of price transparency has arrived. This Georgia hospital and any others encountering patients familiar with our pricing have been thrust into a market economy whether they like it or not. Having eliminated potential competitors with certificate of need laws all over the country, these corporate hospitals must now contend with our facility’s and others’ fair and rational pricing, just a short plane ride away. That other facilities are doing this with more on the horizon removes several teeth from protectionist legislation like certificates of need, I think.
The medical price deflation resulting from a new competitive healthcare market, poses an incredible threat to the central planners who are counting on the runaway pricing and market chaos resulting from Obamacare, that price “crisis” intentionally created to usher in the sequel to their plan: single payer. As physicians who are paving the way for many to pursue third-party-free practices, AAPS members’ contribution to this deflationary obstacle to Obamacare’s ultimate design may have, in an effort to save themselves and their patients, discovered the soft underbelly of this latest attempt by government to crush the private practice of medicine. The deflationary effect of shunning third parties, will, I think, when we look back years from now represent the undoing of this horrible and deadly law.
G. Keith Smith, M.D.
Check out Jim Epstein’s newest video on medical tourism for Reason.TV. I told Jim in an email that “The Surgery Center of Oklahoma won’t be so easy to compete with!”
As we transition from “health care is too expensive” to “good health care is extremely hard to find” to “I’ll take what I can get,” a plane ride to escape cartel-dominated health markets in the U.S. will be more palatable and less scary for patients victimized by Obamacare’s wrath.
You should note that the centerpiece of the business plan of these foreign hospitals is price transparency. Never believe anyone who says this is not possible. As the world gets smaller, more of corporate healthcare will realize that they are in a competitive market, whether they like it or not.
G. Keith Smith, M.D.
Another great article from “Vermonters for Health Care Freedom.” Healthcare in Vermont will look like the service received at the department of motor vehicles very soon. Check out Vermonter’s for Health Care Freedom on Facebook. Great updates on the healthcare central planner’s Nirvana there regularly.
G. Keith Smith, M.D.
Quoting from Joan Lowy’s Associated Press article on airline fees:
“But as many airlines offer a proliferating list of add-on services, from early boarding to premium seating and baggage fees, the ability to comparison-shop for the lowest total fare is eroding.” Orbitz and Expedia are complaining that “airlines won’t provide fee information in a way that lets them make it handy for consumers trying to find the best deal.”
Simon Gros, chairman of the Travel Technology Association, quoted in the same article provides the punchline: ”What other industry can you think of where a person buying a product doesn’t know how much it’s going to cost even after he’s done at the checkout counter?” I can think of one.
Kevin Mitchell, chairman of the Business Travel Coalition is quoted, as well: …the harder airlines make it for consumers to compare, “the greater opportunity you have to get to higher prices.”
This gets even better. What do you think the reaction of the government is to this fee non-transparency? They are considering legislation to mandate fee transparency! These airlines are big and powerful companies but I guess they don’t have nearly the same swing that the big health corporations have, the most extreme fee-hiders.
I think it is telling that we never had a discussion or debate in this country about what health care should cost or how prices were determined, let alone entertain transparency. It is as if this was the very discussion that all of the players were trying so hard to avoid. ”Move on sir…there’s nothing to see here….health care is expensive and there’s nothing to be done about it, no reason to even talk about it…..hurry along….let’s just make sure that everyone is required to buy insurance and never talk about any possible savings or delivery alternatives….move along.”
We have shown our prices and the effect has been deflationary in our local area. This deflationary effect is affecting a larger and larger area as patients travel from farther and farther distances to take advantage of our pricing. The surgeons and facilities losing this business are scrambling, suddenly finding themselves in a market where they will have to compete if they don’t wish to lose further patients.
That is the nature of competition. Better care. Lower prices. Consumer/patient focused. In no other industry has free market, consumer-focused service and care been more discouraged than in health care. Now that I think about it, the lack of transparency in health pricing actually received cover from this government, not the sanctions the airlines are about to endure! Incredible.
G. Keith Smith, M.D.