I blog about free markets in medical care and transparent pricing.
The Oklahoma Council of Public Affairs passes on this quote from the late, great Joseph Sobran:
“What puzzles me is why journalism should be so reflexively on the side of government. During the Watergate era, we heard about the ‘watchdog press,’ the ‘adversary press,’ the press as the ‘fourth branch of government.’ That old skepticism about government, largely illusory then, hardly survives today even as a pose. Today the press seems to see itself as government’s partner, assisting and promoting the expansion of the state. The only politicians it treats with skepticism, verging at times on open hostility, are those who try to put the brakes on government. You might think that after a century of tyranny, total war, genocide and mass murder, not to mention organized robbery through taxation, inflation, debauched currencies, and redistribution, all of which have generated more corruption and social decay—well, a little skepticism toward the modern state itself is long overdue. But the news media still persist in the faith that government is the natural instrument for the betterment of the human condition.”
As I read this it occurred to me that while the modern state and its crimes and folly tend to get a journalistic free ride, any individual even suspected of committing any of the same acts or crimes makes headlines. One of the concepts I encountered when first reading the classical liberal scholars was the notion that the “state” should not be allowed to do anything an individual could not get away with. In short, if an action is considered a crime by an individual, that same action should be considered criminal for the state. This restraining concept, perhaps more than any other, serves to limit the scope of government to a more proper role.
It also occurred to me that while the modern press makes headlines with the possible conflicts of interest physicians may have owning the facilities in which they work and to which they refer, the same journalists look the other way as self-dealing hospitals account for 60% of personal bankruptcies in this country. The gravity and depth of the conflicts of interest present in the every day corporate hospital dwarf the worst examples of physician conflicts to which you could point. After all, if you were trying to make money by self-referral, which would you rather own, an MRI machine, or the doctor and the MRI machine? Which would you rather own, the hospital, or the doctor and the hospital?
Are there doctors who own MRI machines who are by virtue of this arrangement more likely to order an MRI? No doubt they are here and there, ordering the studies that are indicated and a few that are not. The price of these MRI’s are almost without exception, however, the lowest in town, wherever you look. Are there hospital employed doctors who are told to order more MRI’s by their boss? Duh. This overutilization pressure is widespread and standard operating procedure. These hospital MRI’s are, by contrast, the most expensive studies in any town or city you might examine.
What is more damaging? A few doctors who think they can get away with ordering a few unnecessary MRI’s for a low price, or widespread and institutionalized overutilization and abuse of high-priced hospital MRI units? Which of these situations gets the most press? Which of these situations is likely to worsen, the physician owner who acting unethically constantly runs the risk of ruining his reputation and practice by acting in this manner, or the physician employee, who out of fear of his job, orders as many MRI’s as he is told to by his boss?
Conflicts of interest seem to have escaped the notice of lawmakers, as well, when pertaining to the giant hospital interests, while the very name “Stark,” referring to the California ex-congressman, strikes fear in the hearts of many doctors, as this man made a career of restraining physician entrepreneurs, all to the giddy applause of his hospital crony pals. “Stark” laws have served to regulate the manner and the extent to which physicians can own medical facilities in an ostensible effort to curb self-referral abuses. Hospitals in the meantime have been hiring physicians whose various diagnostic and specialty referrals are thereby controlled and funneled to their employers’ institution, representing self-referral abuse on steroids. Exhibiting perhaps the ultimate conflict of interest, many giant hospitals have started their own health insurance companies, another massively corrupt story and missed opportunity by modern media.
Perhaps the crimes of the “state” and the gross hospital conflicts of interest are less noticeable or offensive due to their anonymity. The press actually provides cover for institutional abuses by headlining an individual physician as a “self dealer,” as this provides a useful distraction for the wildfire of entrenched hospital “self-dealing” going on right in front of our face.
The ultimate in self-dealing occurs, of course, in Washington, D.C., the Unaffordable Care Act representing perhaps one of the most gross examples of this “pay to play” game. It is always important to remember that the only thing worse than unethical businessmen and tyrannical government is when the two work together generating laws like Obamacare, a law that will make corporate medicine even richer and grant unimaginable power to would-be tyrants. Keep in mind that this law prevents the construction or expansion of any physician owned hospitals. Keep in mind that this law will result in bundled Medicare payments to the hospitals, from which the doctors will be paid an increasingly smaller portion . Keep in mind that private practice physicians will be paid 40% less than their hospital-employed counterparts for the same services. Keep all of this in mind when you read a front-page account about some individual doctor accused of self-dealing.
Just as the crimes of individuals pale when compared to those of the “state,” the conflict of interest issues of individual physicians (while making great headlines) pale when compared to the well-established and institutionalized self-dealing of the big hospitals. It seems obvious to me that the best way to deal with ownership conflicts of interest in health care would be to prohibit hospitals from employing doctors. That no lawmaker has ever suggested this demonstrates, I think, that the gang in D.C. means to protect their hospital pals more than they wish to curb any abuses of self-referral. Is the press really missing this or are they just looking the other way? After all, if it isn’t ok for doctors to own hospitals, why is it ok for hospitals to own doctors?
G. Keith Smith, M.D.
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.
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.
Dave Chase, writing for Forbes Magazine, has this to say about the Surgery Center of Oklahoma. After visiting with Mr. Chase for over an hour a few days ago, I expect to see more articles like this from him and others about free market driven healthcare and pricing transparency.
G. Keith Smith, M.D.
I spoke to a group of legislators this morning about the price transparency phenonomen here in Oklahoma City at the Oklahoma Council of Public Affairs. Brandon Dutcher served as master of ceremonies, beginning the affair with a short introduction then showing the Reason Magazine video about our facility. A 45 minute question and answer session then ensued.
A point I’ve heard many times was made this morning, a point that detractors have made in an attempt to discount the significance of our having placed surgical prices online. Very simply, “…what you are doing is great, but you are such a small niche piece, the hospitals can’t possibly do this.”
In the past, I’ve attempted to explain that the hospitals could do this, reviewing the process we had undergone at our facility to generate our pricing. I no longer have to argue about this. You see, a large tertiary care hospital here in Oklahoma City has approached me about working with us in this effort. While they won’t post prices, due to vague regulatory issues, I’ll post their prices for them.
This is an extremely exciting development, as the list of surgeries on our website will grow tremendously, including surgeries done typically on an inpatient basis. I answered the question this morning with this revelation and you could have heard a pin drop!
Here is my interview with Brandon Dutcher of the Oklahoma Council of Public Affairs just after the meeting this morning.
G. Keith Smith, M.D.
Jim Epstein, writer and producer of the Reason Magazine video mini-documentary featuring our facility, has written a new blockbuster piece you can read here. He once again uses our facility as an example of free-market healthcare delivery. There are many links to important information in the article. One is to our new friends at “SnapHealth,” run by the emergency room physician and entrepreneur, Dr. David Wong from Houston. Another links to Dr. Eric Bricker’s Dallas-based company, “Compass Healthcare,” another powerful force bringing much-needed price transparency to medicine, all the while promoting the consumerism that more than anything will cause the price of healthcare to plummet.
Jim Epstein was one of the first to see through Steven Brill’s TIME magazine piece as a corporate pitch for single payer. He reponded to Bricker in just the way you would think a writer from the libertarian Reason Foundation would respond. His response to Brill is here. Many thanks to Jim and the Reason Foundation for getting the word out on the workability and applicability of free markets to the healthcare industry. Their work has been and will continue to be without a doubt, vital.
G. Keith Smith, M.D.
Here is my talk earlier today with Alex Chamessian, president of the Duke School of Medicine’s chapter of the Benjamin Rush Society. The video is about an hour long, beginning with the Reason.tv video of our facility, the end of which was a little jumpy. I talk about our facility then answer questions from Alex and some of his classmates.
G. Keith Smith, M.D.
What if I were to tell you that those hospitals which were “outed” as charge abusers by Steven Brill in his massively boring TIME Magazine article will ultimately be the biggest beneficiaries of this diabolical piece of journalism?
Stay with me and we’ll go through it. Looking back at my initial reaction to this piece by Brill, I was excited that he revealed how obscenely wealthy these poor-mouthing hospitals really were. I was troubled, however, by what he didn’t mention (the uncompensated care scam and PPO cartels and repricing schemes) and even more troubled that he embraced the efficiency of Medicare. I am now convinced that the reason this piece appeared in TIME (no bastion of libertarianism) at this time is to fuel the movement for a single payer system. Here’s how I came to this conclusion.
I have maintained all along that Obamacare was meant to fail, designed to fail. The purpose of this legislation was to introduce such chaos into the medical marketplace, eliminating what little was left of the free market in medicine, that prices for care would soar, prices for “insurance” would soar and that access to medical care would be restricted. The creation of this “crisis” will lead to a crying out for the government to ride in to rescue us with their final solution, the sequel to Obamacare: single payer. Watch this 37 second youtube video of Barney Frank where he carelessly reveals the ultimate goal.
Nothing in Brill’s article is new. Charge-master price gouging by these big hospitals has been going on for years and many articles have been written about it. The full effect of Obamacare’s “high price crisis” haven’t yet been felt or realized by the public, so corporate healthcare must tell everyone how expensive health care is at these out of control hospitals….with a megaphone. Brill’s article pours gasoline on the “crisis,” a crisis the most gigantic beneficiary of which are the big hospitals!
Jim Epstein of Reason Magazine encouraged me while filming his mini-documentary about our facility to look for industry consolidation in all its forms. This, he maintained, was the smoking gun of government corruption and bribery. The primary purpose of Obamacare is just this, fewer players in the hospital and insurance industry, with all health care dollars going to them. Can you imagine the money flowing into the D.C. cesspool when discussions begin about carving the country into regions, each region provided “insurance” by a single company or care provided by a single hospital health “system?” The intention of Brill’s piece, I believe, was the creation of the outrage, a necessary precursor of “crying out for a solution.”
Karl Denninger devastates the Wall Street Journal’s pathetic response to Brill’s article here. Denninger gets it. One thing Denninger left out, however, was the Hill-Burton legislation and the devastation that followed that piece of crony-benefitting legislation. He is right to call the WSJ out for their silence on how we got into this mess.
Corporate healthcare and their Wall Street chums are licking their chops right now, as Brill’s article brings the crisis from which they will all profit from so obscenely, closer and closer. I’ve decided that Brill is a shill. I’d bet that Brill’s stock portfolio is full of corporate health care stocks, too.
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.