The key to a well-functioning, cost-efficient health care system in the U.S. could very well be on display at an out-patient surgery center in Oklahoma City, Okla.
Twenty years ago, after decades of witnessing firsthand a dysfunctional health care system that “is bankrupting the country,” Dr. Keith Smith envisioned a self-sustaining, market-oriented health care facility that would operate completely outside the bounds of government control.
After selling the idea to a few physicians in the Oklahoma City area, Smith co-founded the Surgery Center of Oklahoma, a 32,535 square foot, state-of-the-art multi-specialty facility, owned and operated by approximately 40 of the top surgeons and anesthesiologists in the area.
Smith’s surgery center is unique not only for its unparalleled success, but because it posts the prices of its services online. Everyone knows precisely what they will be charged when they walk in the door, offering customers a complete diversion from the current market for health care in America.
Smith calculated the market prices for the center’s procedures by adding up the cost of labor and materials. His prices are actually less than what Medicaid, the government health care program for low-income Americans, pays.
“We are perfectly happy to charge less than the amount these hospitals claim is bankrupting them,” Smith told TheDCNF. “And we are making money.”
The surgery center does not accept insurance in any form. “Individuals pay us up front and in full. If it’s a beneficiary of a self-funded plan, we just charge the plan,” Smith said. “We work with all cost-sharing ministries, also.”
Typically, when a patient in the U.S. asks what the cost of a given procedure or treatment will be, they are met with one question: What insurance do you have?
Price gouging is so pervasive in the health care market because the cost to the patient is not set, it’s determined by “how much can be extracted from each patient on a case by case basis,” Steven I. Weissman, Florida attorney and former hospital president, told TheDCNF.
Effectively, what Weissman is spelling out is there is no base price for any service in the industry. Because billing rates are not set and publicly listed, the industry is essentially able to prey on patients at their most vulnerable state. (RELATED: Former Hospital Chief Sending Trump Petition To End Predatory Pricing In Healthcare)
Having no legitimate pricing is easily one of the largest and most pervasive problems with health care in America, and the chief reason the market is obfuscated. Instead of being set by normal market forces like supply and demand, health care prices in America are set behind closed doors by federal regulators and insurance providers.
Americans have seen the cost of their health care skyrocket more in the past year than any other time since 1984. Adding to consumers’ woes, the rising cost of obtaining insurance on the exchanges has become almost prohibitive. (RELATED: This Key Government Mandate Is Driving Up The Cost Of Healthcare In America)
“You can trace all of the problems [in the health care market] back to government intervention,” Smith told TheDCNF. “Government intervenes in the marketplace for the benefit of the folks who have paid for those interventions and benefit from them.”
When the Affordable Care Act, commonly called Obamacare, was passed, “these giant deductibles came about” as a gift to the insurance companies, Smith told TheDCNF.
While the recent rocket in premiums is well known and reported, a little covered aspect of Obamacare is the ever rising deductible rates. If people think of premiums as the cost of having insurance, deductibles can be similarly thought of as the cost of using insurance. A deductible, by definition, is the amount of money an individual has to pay out before the insurance company will begin to pay.
Nearly across the board, on average, deductible costs now run in the thousands of dollars. Average deductibles for bronze, silver, and gold plans obtained on the Obamacare exchanges increased by 8.4 percent, or $265, in 2016. The second most popular plan on the Obamacare exchanges–the Bronze option–have average deductibles of $5,629.
The average American household brings in just over $55,000 a year, and so paying up to $5,600 before insurance kicks in is not a viable option for most families. Insurance companies love the new higher deductibles, as it further insulates them from the cost of providing care to each individual policy holder.
Smith and his colleagues knew that they could provide patients better quality, more effective care at a fraction of the cost that big hospital systems provide, if they could just extricate themselves from how the current marketplace operates.
“The largest part of the industry is dominated by the corporate hospitals, and they don’t want any part of free markets or transparent prices because the veil would be pulled back,” Smith told TheDCNF. Large corporate hospitals have a “hit-and-run mentality of billing,” that has become “very successful subscribing to the idea of what can I get away with,” Smith said. If consumers could shop around for the best price, as they can in virtually any other aspect of the economy, hospitals “would not be able to successfully price gouge anyone.”
Realizing the ripe opportunity, Smith listed the prices of his facility’s services online. “Most of these procedures on our website can be purchased for lower than the deductibles on the Obamacare plans,” Smith said.
When patients realize that their out-of-pocket costs will be less than the cost of meeting their deductible at a large hospital, “they are happy to pay our full bill,” Smith told TheDCNF. If patient’s compare the price of any surgery listed on the center’s website to what is traditionally paid in hospital systems, “they will find a ration of 10:1 or 6:1.” For example, “a $3,000 procedure at my facility could easily be a $30,000 liability for self-funded plans at a not-for-profit hospital,” Smith said.
Costs are not the only benefit of choosing Smith’s facility. The Surgery Center of Oklahoma also has markedly lower rates of post-surgical infections than traditional hospitals. In 2011, “we had none that entire year,” Smith explained. In other years, there have “only been one or two infections for about 7,000 to 8,000 cases,” Smith says.
The surgery center “does not accept federal payments,” and, as a result, does not have to “comply with Medicare” or other mandates that come with accepting federal funding.
“We decided early on we were not going to accept any federal payments. We really started with exactly the same model that we have now, with the only difference being we now post our prices online. It’s been an easy sell. What used to seem like radical ideas (refusing federal payments, posting prices, eschewing insurance companies), are starting to seem smart,” Smith said.
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