Controlling medical costs through price transparency

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On Monday in Oklahoma City, the Oklahoma Council of Public Affairs, Oklahoma's free-market policy think-tank, hosted a forum on health care, highlighting the value of transparency and direct payment in medical pricing, and the accomplishments of the Surgery Center of Oklahoma in Oklahoma City in providing high-quality health care for reasonable prices.

The Surgery Center, founded in 1997, began posting its prices online a few years ago. The prices only apply to those paying up front (either on their own behalf, or covered by a self-insuring employer), but not to those who have the Surgery Center file an insurance claim for payment. The flat fee covers fees for the surgeon, anaesthesiologist, and facility, initial consultation, and uncomplicated follow-up care. Any hardware and implants needed are quoted in advance and priced at cost -- no markups. The center's website sets out the rationale behind their approach:

It is no secret to anyone that the pricing of surgical services is at the top of the list of problems in our dysfunctional healthcare system. Bureaucracy at the insurance and hospital levels, cost shifting and the absence of free market principles are among the culprits for what has caused surgical care in the United States to be cost prohibitive. As more and more patients find themselves paying more and more out of pocket, it is clear that something must change. We believe that a very different approach is necessary, one involving transparent and direct pricing.

Transparent, direct, package pricing means the patient knows exactly what the cost of the service will be upfront. Fees for the surgeon, anesthesiologist and facility are all included in one low price. There are no hidden costs, charges or surprises.

The pricing outlined on this website is not a teaser, nor is it a bait-and-switch ploy. It is the actual price you will pay. We can offer these prices because we are completely physician-owned and managed. We control every aspect of the facility from real estate costs, to the most efficient use of staff, to the elimination of wasteful operating room practices that non-profit hospitals have no incentive to curb. We are truly committed to providing the best quality care at the lowest possible price.

The forum began with a screening of a short Reason.TV story about the Surgery Center.

It's remarkable that the chairman of the ear, nose, and throat department at Integris Baptist Medical Center, but "prefers to do his procedures at the Surgery Center of Oklahoma."

Some companies have found they can provide better employee surgical care more cost effectively by paying places like Surgery Center directly (and in some cases also paying for travel costs and lodging) rather than paying for conventional insurance.

The forum was broadcast on Ustream and is archived for watching at your leisure. The session starts at 4:40 into the video, introduced by OCPA vice president for policy Brandon Dutcher. You can find it embedded on the OCPA blog or directly on the Surgery Center of Oklahoma's Ustream channel.

(Note to the cameraman: Next time don't be so shy -- get up close!)

Pat McGuigan's story on Oklahoma Watchdog about the forum includes a note on how the center deals with people who can't afford the published price (even though it's typically far more affordable than the same procedure at a non-profit hospital).

In dialogue with CapitolBeatOK, [Surgery Center founder] Dr. [Keith] Smith said the center's approach is helping to restore an old-fashioned medical ethic for provision of charity care. Many referrals to the hospital come from churches and other groups helping the poor. Patients are encouraged in those cases to pay what they can, while physicians and anesthesiologists can (and often do) waive their fees for individuals in need.

Surgery Center does work with insurance companies, but that triggers a separate pricing structure. Dr. Smith explained, "We take on a lot of risks when we file with insurance companies, so we have to charge for that risk."

MORE: Dr. Smith has a frequently updated Tumblr blog commenting on health costs and policy.

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Graychin said:

Sounds like boutique medicine to me. Doctors love it because they can control the number of low-pay (and no-pay) patients they treat. The doctors also have a fondness for getting paid up front, and not having to mess with trying to pry money out of their adversaries in the insurance bidness.

Insurance companies realize their profits by collecting premiums, and then delaying and denying payment of claims. Yet these fine folks have a central and government-protected role in America's "greatest in the world" health care system.

Demand for medical care has very little price sensitivity. When we need eye surgery for cataracts, we don't do much price shopping. We want the surgeon most likely to leave us with good eyesight and least likely to leave us blind. Those who believe that a free market solution solves every problem haven't thought this one through.

But is this really about bringing down the cost of medical care? What percentage of the population has enough money in the bank to pay up front for surgery? Isn't it really about creating a parallel system catering to wealthy patients?

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This page contains a single entry by Michael Bates published on December 18, 2012 8:35 PM.

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