G. Keith Smith, M.D.

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.

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 April 27th edition of the Daily Oklahoman contains an article by Silas Allen about the impending closure of Oklahoma State University’s osteopathic hospital in Tulsa.  Hospital officials think they can stay open though if a bunch of taxpayers that never utilize their facility pony up $18.25 million bucks to bail them out.  This isn’t their first bailout it turns out.

In 2009, a trust was formed by the city of Tulsa to prevent a shutdown, a trust into which $5 million dollars of “state” money was pledged every year for 5 years.  St. John’s Hospital in Tulsa managed the hospital during this time, but their agreement has expired and they are no longer interested in being involved.  

To make its case for a bailout the hospital claims that it provides a vital role in preventing an even more severe doctor shortage in Oklahoma by providing residency training programs for students enrolled in the osteopathic school.  The thinking is that residents who train in Oklahoma will stay in Oklahoma to practice.  That this “stay-home-itis” would trump practice conditions and financial considerations young physicians examine when deciding where to locate is not credible as evidenced from all of the foreign trained physicians who practice in the state, but let’s move on.  

Here is a quote from the article…see if this sounds familiar:

“An economic impact study released Friday shows the OSU Medical Center contributes 2,375 jobs to the Tulsa area, generating more than $120 million in income.  

According to the internal study prepared by OSU’s Oklahoma Cooperative Extension Service, the hospital generated about $1.2 million in state sales tax during the 2011-12 fiscal year.”

Think of all of the jobs they could have created if they had lost $100 million dollars!  Why, they could have eliminated unemployment from this whole region if allowed to lose a billion.  Medicaid expansion, socialism and crony capitalism (corporatism) all share this faulty and absurd model of finance and economics, don’t they?  No one ever asks how many jobs were destroyed by the tax confiscation inflicted to keep this entity afloat, do they?  Even fewer recognize that this failure is due to the lack of a market for this enterprise.  

It turns out that the giant St. Francis Hospital wants nothing to do with the osteopathic hospital either.  If you guessed that there is one hospital system (one singled out for their abusive billing practices by TIME magazine) that is interested in “partnering” with the osteopathic hospital, you would be correct.  Here is the Tulsa World’s account of this “merger.”  Mercy Oklahoma City, however, wants no part of this marriage without a dowry, Mercy’s future bride much prettier with an $18.25 million taxpayer bailout in her purse. St. Johns and St. Francis don’t even want her with a stuffed purse!  Talk about ugly!

Maybe Mercy is afraid that there aren’t going to be enough doctors around for them to employ and they want their own doctor production factory.  Or maybe they are planning on charging so much for the “care” delivered there that the facility will become a profitable not for profit hospital.  In either case, the people in Tulsa will be ringside witnesses to the economics and finance of Medicaid expansion, crony capitalism and corporatism should this bail out and merger materialize.   This merger, of course, will be destructive of the goal of recruiting physicians to work in Oklahoma.  I still say letting the rural physicians own the hospitals in which they work (just like the old days) would be the greatest recruiting move ever for rural medicine, a much better move than the taxpayer shakedown about to happen in Tulsa.

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.

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.

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.

One of the reasons that our prices are so low (a sixth to a tenth of what the so-called “not for profit” hospitals charge) is that our facility is completely owned and controlled by the physicians working here.  This ownership arrangement allows us to limit the facility charge (traditionally that portion of the surgical/hospital charge that makes up the majority of the total bill) to one that includes a small, forecasted marginal profit.  Stated another way, our ownership structure eliminates the most greedy and inefficient profit seeker from the equation:  the “not for profit hospital.”  Ironically, we are acting more like a not for profit institution than these hospitals who beg everyone to notice how charitable they are while simultaneously accounting for over 60% of personal bankruptcies in this country.

The hospitals don’t like the fact that doctors own their own facilities.  They rather prefer that facilities own doctors.  Here are some of the hospital talking points, followed by what they don’t want talked about.

1)Greedy doctors can’t be trusted with the conflict of interest that arises from facility ownership.  They will do unnecessary surgery.  The truth is that surgeons doing unnecessary surgery are found predominately in hospitals where they are employed.  No physician wants to be partners/co-owners in a business laden with the liability of some unscrupulous surgeon/physician.  Because of this, these folks are rarely found in facilities where physicians share liability with one another.  The true conflict of interest resides with hospital employed physicians, who are not only told many times to upcode or up-charge for their care, but who are forced to refer their patients not to necessarily the best specialists or surgeons, but rather to the other physician employees in the hospital “network.”  The outrageousness of this conflict, one which places the interests of the patient dead last, cannot be overlooked or overstated, in my opinion.

2)Greedy doctors will skimp on quality, as they first, can’t be trusted to police themselves and second, won’t use the latest technology because this expense comes right out of their pocket.  The truth is that the lack of administrative layers allows for the purchase of new technology almost immediately once it is proven and available.  We have had new surgical devices and technology delivered the same day as requested at our surgery center!  This is one of the primary reasons that surgeons want to own and operate their own facilities:  so that they will have what they need to perform surgeries in a state-of-the-art manner, without having to make their case to someone making more money than them with no clinical knowledge, whatsoever.  Low quality surgeons tend to be removed or kicked out of facilities because, once again, no one wants to share their liability.  So much for a lack of policing ourselves.

3)Greedy doctors will not see uninsured, Medicare or Medicaid patients in their facilities.  This ”cherry picking” will leave all of the folks the payment for whose care is below cost, to be seen at the “not for profit” hospitals.  We started quoting prices in 1997, the year we opened.  Almost all of the patients were the uninsured, patients left in the street by the outrageous pricing of the big hospitals.  What the giant hospitals don’t want you to know is that they have very successfully lobbied for much larger reimbursement from Medicare and Medicaid for their facilities, while simultaneously having incredible success lobbying for lower reimbursement for their physician-owned competitors!  For the hospitals to subsequently claim that the physician-owned facilities are “cherry picking” neglects the fact that any patient that walks through the hospital doors is a cherry.  Various rules and regulations apply to physician owned facilities that accept federal money, rules and regulations that don’t apply to the big hospitals.  In spite of these facts, almost all physician-owned facilities deal with federal health programs.  We have never taken a dime of federal money at our facility.  I still see Medicare patients, but they leave their Medicare card in their car and we work out a fee that seems fair to both of us.

4)Patients will die unnecessarily in physician-owned facilities because a cardiologist or a neurosurgeon, while immediately available at a large hospital, would be completely unavailable in a specialty hospital or outpatient surgery center.  This is ludicrous for two reasons.  First, if I need a cardiologist at my surgery center, I pick up my cell phone and call one.  They show up in minutes.  In fact, I’ve been told that in hospitals that employee pulmonary doctors and cardiologists, getting them to show up quickly or even at all, is very unlikely!  Private practice physicians, particularly specialists and surgeons, live and die by the quality of care they deliver to patients and the service they provide as consultants to the referring physicians.  I was actually talking to a cardiologist on the phone about a patient in our recovery room years ago, when he walked into my recovery room unannounced to see the patient (and to see me talking to him on the phone!).  

5)Left to their own devices, greedy doctors will order unnecessary lab tests on their patients to create more revenue for themselves.  I have had relatives and friends have surgery at big hospitals in the past, only to have unnecessary EKG’s, lab and xrays done prior to the surgery.  The surgeon didn’t want this.  The anesthesiologist didn’t need this done.  It was hospital policy.  If you guessed that this is the hospital policy because it is a huge revenue generator, you get a gold star.  Hospital-employee doctors are under constant pressure to order more MRI’s and xrays in order to “pump up their production numbers.”  The hospitals having paid top dollar to buy out many of these physician practices routinely lean on them to churn patients for revenue in order to realize a return on their “investment.”

6)Physician owners are just in it for the money.  Oops!  Check out our prices online, compare them to the hospital prices and try saying this out loud with a straight face!

G. Keith Smith, M.D.

1). It is expensive to provide health care.

It actually is not that expensive.  What most hospitals charge for healthcare is another matter altogether.  Even the supply costs are not that expensive and as a health care facility owner/manager I can speak from experience.  Understand that medical facilities are not economically unlike utility companies that incur high fixed costs at startup, but once they are up and running, the additional cost of adding another consumer/patient approaches “zero.”  In other words, hospital overhead doesn’t significantly increase with the addition of more patients.

2). Big city hospital emergency rooms are a big money loser.  

See #1.  Also, if this were true why is there a crane in front of almost everyone of them, building on?  This hospital department represents the portal to some of the most lucrative activities a hospital encompasses with imaging, laboratory and surgery.  One hospital system in Oklahoma is building free standing emergency rooms!  Enough said.

3). Cost shifting is necessary for hospitals to stay afloat.

I’d say they have overdone this a bit, as plenty of money is available for the sponsorship of sports franchises, hostile takeovers of physician practices (particularly those in rural communities), subsequent hostile takeovers of rural hospitals, building and advertising campaigns….I could go on.  Also keep in mind that when hospitals admit to shifting costs to those who pay from those who don’t, they are admitting that they provide no indigent care, after all.  All they are doing is fronting the money to one they are going to take from another, while complaining that they have “lost” money.

4). Not for profit means not make a profit.

It actually means, “don’t pay tax.”  How would you like this deal?  Charging giant sums and “writing down the balances” allows these entities to maintain the fiction of their “not for profit” status.  As I’ve said before, “the one thing these not for profit hospitals are good at is making money.”  Over sixty percent of personal bankruptcies are due to the medical bills that these “charitable” hospitals create.  

5). Physicians referring their patients to the facilities they own represents a conflict of interest, while doctors employed by a hospital referring to their mother ship does not.

Doctors who over-utilize, doctors who do unnecessary surgery are out there.  They typically work for corporate hospitals, though, as fellow physicians don’t want to be co-owners with these idiots due to the increased liability involved.  Seriously, why is it not ok for physicians to own hospitals but it is ok for hospitals to own physicians?  Hospitals lean on their employed doctors to order more MRI’s and lab and do more surgeries all the time, so that they will “earn their keep.”  Exaggerating the complexity of daily hospital visits by hospital-employed physicians, using “cut and paste” electronic medical record technology, is also widely encouraged.   

6). Upfront and transparent pricing is impossible in health care.

We have done it.  Enough said.  Hospitals can’t do this.  Hospitals are doing this.  Ok.  I said more than I should have.

7). Free market principles don’t apply to health care.

Free market principles always apply, in spite of all attempts by the state to thwart them.  Acting in concert and consistent with free market principles allows for the most rational and fair and least wasteful and most moral allocation of resources.  Acting in concert with the free market and its characteristic open competition causes quality to soar and prices to plummet.  Every time, no exceptions.  Patients from all over the country are using our online pricing to leverage better deals in their local medical markets, as our facility and others embracing transparent pricing are only a short plane ride away!  As hard as many hospitals are trying to avoid it, they are in a competitive marketplace whether they like it or not.  Those in the medical industrial complex who say that free market principles don’t apply to their industry are typically those who benefit from avoiding competition at all costs.

8). Patients have no idea how to shop for quality health care.

I have found just the opposite.  Most patients are adept at spotting a charlatan doctor or a poor quality facility.  The first thing many notice is the “treated like a number” feeling.  Patients tend to trust the doctors that will take time to talk with them and explain their condition and options, not force feed them some canned speech.  Contrast this with patients going to see corporate hospital employee doctors, having no idea that these doctors are sending them to specialists and surgeons they are told to patronize, not specialists who are any good.  I think that patients are better off shopping for quality themselves, rather than leaving this to the “network” of employed doctors.  These doctor-employees are too conflicted and compromised.

9). The more you pay for healthcare the better it must be.

Actually the less you pay for health care the more likely it will be of higher quality!  This is counterintuitive but let me explain.  A new participant in the medical marketplace must compete in order to draw patients.  Price is one way to compete.  High quality is another.  Medical entrepreneurs risking their own capital are like any others in that they compete on price and quality to mitigate the risk of losing their shirt.  On the flip side, corporate medicine (most hospitals) has taken steps over the years to insulate their facilities from competitors (licensing requirements, certificates of need, etc.) and feeling less need to compete, don’t risk nearly as much by ignoring quality in their institutions.  When someone recently said to a large hospital CEO,” ..shouldn’t it bother you that your hospital is the worst value, highest priced player in the market,” the CEO said,  ”No.  We have leverage.”

10). Obamacare was promoted by people who care about our health care.

The stock prices of corporate health care soared after Justice Robert’s ruling.  These are the true beneficiaries and the reason this legislation was pushed.  Rather than serve customers and profit from this market action, these corporate hospital players will extract their loot from the taxpayers, the quality of their product or service divorced from any quality or value perception by the patient.  Poor patient care in hospitals will now be treated the same as poor outcomes in public schools.  More money will be thrown at them.  This model of rewarding incompetence will insure that the health care bureaucrats, those who promoted this “law,” will thrive.

- G. Keith Smith, M.D.

I once wrote about how happy one of my mother’s friends should have been when Medicare decided to no longer pay for her B-12 shots, as the private sector would figure out a way to make sure there were no shortages of B-12 injections. Ever.  Central planners, on the other hand, those in medicine in particular, who assign pricing to products and services always get it wrong.  This is the fatal conceit, about which Hayek warned us.  A bureaucrat can never discover a market clearing price (that price at which there are neither surpluses or shortages) because this price must emerge from market interactions, not be imposed on an economy.

Thousands of Medicare patients with cancer are getting their first glimpse of what the death panels will look like.  In this article by Sarah Kliff of the Washington Post, thousands of Medicare patients are reported to have been turned away from their usual cancer treatment centers because the government has decided on a different price these centers are to be paid.  If you guessed that they got it wrong on the low side, you go to the head of the class.

The real story actually has a sinister side.  Kliff touches on it but doesn’t know and probably can’t even imagine the mercenary tactics at work here by the big hospitals and Uncle Sam.   Remember that hospital-employed physicians are paid 40% more by Medicare for the very same service as physicians that are in private practice.  Likewise, hospitals are paid more by Medicare for the administration of chemotherapy than private clinics.  Keep this in mind when you hear some government apparatchik moaning about the impending bankruptcy of Medicare.  These Medicare cuts, affecting only the private clinics, will not only put them out of business, but that is the intent, the goal, the very purpose.

Remember the lesson from Jim Epstein of Reason Magazine:  “industry consolidation is the smoking gun of government corruption.”  Or apply Murray Rothbard’s penetrating question: “cui bono?”…who benefits?  If you said the big hospitals, you get a gold star. 

The short term solution, of course, to save Medicare money on chemotherapy, is to insure that no Medicare patients are treated in a hospital!  This is far too logical, though, and the private clinics don’t have the money to throw at lobbyists that the corporate hospitals do.

This is a great example of Jane Orient’s quote that “coverage doesn’t mean care.”  These thousands of Medicare patients are getting a feel for what this president means by a “right” to health care, aren’t they?  What they really have is a right to hope for chemotherapy.  The current regime doesn’t care if you have “coverage.”  They don’t care if you get care.  What they want is control of your healthcare.  Collecting premiums from the taxpayers while simultaneously denying care is a recipe for a profitable “insurance” enterprise, no?

Welcome to Obamacare.  We haven’t begun to see the worst.  I remain hopeful, however, that this tyranny will usher in a market economy in medical care.  I remain hopeful that rather than be corralled into health camps and clinics, the American people will take matters into their own hands and seek alternative sources of “coverage” and “care.”  These patients with cancer really haven’t been given much choice though, have they?

G. Keith Smith, M.D.