I blog about free markets in medical care and transparent pricing.
Here is an update on some of what’s happening at The Surgery Center of Oklahoma.
We have recently decided to accept credit cards for payment of services. The price online will be adjusted at the time of payment to reflect the percentage the respective card company charges us. We are very excited to see how this develops.
I am travelling and speaking all over the country about medical free markets and price transparency. The greatest demand for speaking opportunities seems to be from self-funded employers and their benefits administrators who are interested in sending us referrals from out of state.
Our new website and logo will be launched/unveiled in a few weeks now. This new website will allow me to nimbly change prices as new competitors in the marketplace appear, will allow me to add new procedures with pricing and will also allow for video display….even some video blogs. This has been a huge undertaking but will allow for us to showcase our facility and staff.
Many of you already know that I have been on the John Stossel Show and CNBC. There is much more national media exposure to come. As I wrote recently, this message has been received as “good news in a bad news industry.” It is hard to criticize cheaper and better, although the statists always seem to find a way. Our local media are beginning to get in on the act, interestingly risking alienating some of their largest media buyers in doing so.
Patrick McGuigan, modern-day Joseph Sobran, has asked me to contribute a biweekly column to his publications, Capitol Beat OK, The City Sentinel and OklahomaWatchdog.org. I look forward to contributing to his fine outlets. Many of the writings will be blogs, but will reach a large audience otherwise not exposed to our message.
We are in the process of organizing a national symposium on free markets in medicine and price transparency, involving everyone in the medical industry that is participating, businesses who are increasingly demanding this, benefit administrators who “get it,” and think tanks and even policy makers. I’ll keep you posted on this as it progresses.
G. Keith Smith, M.D.
Here is a link to my portion of the interview with John Stossel for those of you that are interested. This interview led to my interview tonight with CNBC Asia-Pacific with host Bernard Lo. I’ll post that link as soon as I have access to it. These two shows have reached huge audiences and the response has been impressive, particularly the number of people that are requesting price quotes. Our website actually melted down due to the traffic Sunday night during the Fox News Channel broadcast of Mr. Stossel’s show.
The price war has begun. The competition in health care on quality and price has begun. The beneficiaries will be patients and their pocketbooks. Nothing will create better quality at lower prices than the free market. Nothing will create unaffordable care and poor quality like state involvement in health care. Thanks to all of you who are helping to spread this message, essentially good news in an otherwise bad news industry.
G. Keith Smith, M.D.
Let’s say that i have advertised the price of an anterior cruciate ligament reconstruction (all-inclusive) at $6990. Let’s say that the implants (screws, fixation devices, etc) are included in that price (I don’t mark up implant costs). Let’s say that 1 of the 10 surgeons at my facility that does this operation insists on using an extremely expensive implant, one coming from a manufacturer with which he has a “relationship”….no such partner exists here…this is just for illustration. I can either send him patients (business) which means we lose money at the surgery center, or I can charge a whole lot more if he does the surgery, which prices him out of range, or at least begs the question of why is he so much more?
This is the market at work. While central planners would work to institute price controls in the market place, the unfettered market would place the outlier physician’s price under the microscope. Transparent pricing would quickly reveal that something didn’t smell right. While legislators would outlaw physician owned distributorships, transparent pricing would empty the waiting rooms of physicians who play these games.
Who benefits from non-transparent pricing? All of the folks who would suffer if their shenanigans were discovered, that’s who. The only way that unethical physicians, pharmacies, hospitals, physical therapy clinics, etc. can thrive is for pricing to be veiled to some degree. Otherwise, comparison shopping would create value questions, none of which would have satisfactory answers in the case of the gougers.
The answer to “implant” profits is not a tax on implant makers any more than the answer to fraud in medicine is government goons. The answer is price honesty and a movement away from third party payment, government payment for healthcare, in particular. What is Obamacare? If you guessed “just the opposite,” you go to the head of the class.
G. Keith Smith, M.D.
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.
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.
“Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all.”
More wisdom from Bastiat. I think when muddy-headed folks say that health care is a “right” they are making the mistake of blurring the distinction between government and society. A desire to make health care available to the most vulnerable and poor is, after all, distinctly different from inviting government corruption to the task.
The socialist would say,” charity won’t adequately provide for the poor!” This is the primary justification and argument of the socialist for the compassion of collectivism, the barbarity of entitlements and the widespread violation of property rights. Here are three ways to respond to this argument.
First, “I don’t care what you do with money stolen from me. All I care about is that I’ve been mugged.” After all, the government doesn’t have any money to pass out that it didn’t first take from someone at gunpoint. This argument is sufficient in itself. Nothing more really needs to be said. That someone else should claim a “right” to your property, means it was never your property to begin with, as no right can exist, the exercise of which violates another’s rights, property or otherwise.
Second, government handouts consist of the value of the handout plus the overhead of administering the bureaucracy in charge of theft and distribution of the loot. This is very inefficient and is not what any economist would call an ideal or maximal utilization of resources.
Third, we will never know if charity would have sufficiently provided for the poor, as denied the use of money through confiscatory taxation, many are denied their opportunity to be charitable. The great libertarian Leonard Read wrote angrily about this, seeing this denial of the “right to be charitable” as an incredibly destructive influence on communities and society, distancing and depersonalizing the plight of the unfortunate in need of help.
Expand Medicaid? Government health care for all? Just because liberty-minded folks are opposed to government involvement in health care, doesn’t mean that they are opposed to the poor having access to health care. In fact, it is the innovation of individuals in a free market that brings prices down to levels that more and more people can reach, levels that in other industries like cell phones and computers would have been unimaginable 20 years ago. It is the involvement of government that guarantees limited access, skyrocketing prices, fraud, corruption and death.
How much more of the carnage of socialism must we endure before we abandon this way of thinking? Free markets in health care will help us to avoid the rationing and death that has characterized government health systems all over the world. Our model is a free market one. There are many others in the works dedicated to price transparent, high quality, reasonably priced health care. No economic system known to man makes better use of scarce resources than a free market. To maintain otherwise, particularly with a service as important as heath care, is either ignorant or duplicitous.
G. Keith Smith, M.D.
The American Enterprise Institute has taken notice of our price transparency as well as the CATO Institute.
G. Keith Smith, M.D.
Here’s an interesting little article from the New York Times sent to me from Steve Gonzalez at PokitDok.com. You would think that a first rate paper like this would look into why a total hip replacement is $12,000 at one facility and $125,000 at another. You might even think that someone would raise issues about whether making sure that everyone had “coverage” was appropriate before dealing with the actual price or cost of care. You would think so, but that would only be so if the architects of Obamacare cared a lick about how much health care was costing folks. They didn’t and they don’t.
Price transparency, you see, is a disaster for those who benefit from its absence in the health marketplace, exposing the “repricer” schemes, the uncompensated care scam and all the other non-transparent activities that serve to make so many in corporate health rich. Many of these special interests buy lots of expensive advertising in the major media outlets, essentially insulating them from any true journalism. I suppose the folks at the “Times” can sleep better for just having raised the issue.
G. Keith Smith, M.D.
Prior to the Hill Burton Act of 1946, many if not most of the hospitals in the U.S. were owned by the physicians who worked in them. Passage of this legislation created what we now think of as a community hospital. These new government hospitals brought to life all sorts of typical government baggage, including, not surprisingly, inefficiencies and higher costs. The appearance of these “community” hospitals also brought to health care an additional profit-seeker, one that was now unhinged from the physician’s control. I mean by this that the physician, no longer in control of the facility, was powerless to financially intervene on behalf of their patient when subjected to bills from these new hospitals. Think of this as the birth of the medical industrial complex.
Always greedy for more and more money, like any other government enterprise, and conjuring every excuse imaginable to get it, these hospitals were given the ultimate gift: Medicare and Medicaid. The creation of these entitlement programs put the taxpayers, rather than the patient, on the hook for the payment of hospital bills. It should go without saying that the hospitals much preferred collecting from the taxpayers than directly from the patients. Vicious price inflation in medical care was off to a good start.
Fast forward to today. Many health insurance policies now cost so much, that for many, the risk/benefit proposition of having this coverage makes no sense. This decision by many people to avoid the purchase of health insurance is a beautiful example of the market at work. These uninsured folks show up at the hospitals, though, sometimes with colds and sore throats, sometimes with brain tumors. That the insurance companies have priced themselves out of the market has now left their cartel pals, the big hospitals with some patients who are not able to pay. Not satisfied with the reimbursement from the uncompensated care scam they had previously arranged, the hospitals and insurance companies got together with their old pals in D.C. and came up with a solution: make everyone buy insurance for themselves and make everyone buy Medicaid for those who can’t afford to buy insurance. This move is not to help with access to health care. This move, just like the immediate post-Hill Burton history, was made to line the pockets of the corporate health care players, the hospitals and insurance companies. Unsatisfied with the success of their bankrupting collection practices with individual patients, they have once again successfully lobbied to transfer the burden of the bills they create to the taxpayers. This is history repeating itself.
One of the great ironies of Obamacare is the clause that prevents the expansion of or new construction of physician-owned hospitals. Crushing this trend was key to keeping this “pre-Hill Burton” medical model, one characterized by higher quality and lower prices, from getting too many people’s attention. The facility-owning physicians in this country, particularly those of us embracing and promoting price transparency, hope to bring the market back to health care, producing true health care reform that will benefit patients, not the corporate cronies for whom this legislation was written.
G. Keith Smith, M.D.