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Oklahoma Hospital Stirs Controversy with Online Prices

Jan Lee
Jan Lee | Wednesday July 24th, 2013 | 11 Comments

Oklahoma_Hospital_John_Crawford_National_Cancer_InstituteHealth care is a hot topic these days – and not just for patients who are struggling to cover medical bills. Last year, one Oklahoma hospital  began posting prices on the Internet for approximately 100 surgical procedures. This transparency is forcing a closer look at the reasons why the U.S. has some of the most expensive health care in the world. And the answer isn’t necessarily what you would expect.

The Surgery Center of Oklahoma, based in Oklahoma City, which was started by two anesthesiologists, Dr. Keith Smith and Dr. Steven Lantier, has been challenging the conventional health care model in the U.S. by appealing directly to patients’ pocketbooks and showing that the price for many surgical procedures these days is grossly inflated.

The Surgery Center, which bills itself as a “free-market-loving, price-displaying, state-of-the-art … doctor-owned multi-specialty surgical facility in Central OK” offers prices that would make any hospital executive balk – especially since some of them have been low enough to be paid out-of-pocket by the patient. One uninsured patient for example who suffered a torn patella was able to pay for the procedure outright, to the tune of $5,700, instead of $30,000. Similarly, a fracture repair, which can run into the tens of thousands at a major Oklahoma hospital, is less than $5,000 at the Surgery Center.

What’s their secret? According to Lantier and Smith, it isn’t reduced services, although they admit that the Surgery Center operates a bit differently than the mega-hospital in the same city:

  • Different allocation of duties. Just like in many small business models, employees wear more than one hat. A nurse is still a nurse, but she or he may also have the added duties of overseeing a function outside of a nurse’s standard job description. This keeps staffing costs down for functions that don’t take a 40-hour-a-week position to do.
  • Billing for the services, not for the insurance approval. Instead of billing with an eye on what insurance may or may not allow, they bill for what the actual job costs. When the nearby auto mechanic bills your insurance for a fender bender, he knows (and the insurance adjuster knows) that he often must figure high to offset any limits or incidental disallowed costs by the insurance company. According to this Oklahoma hospital, that isn’t the way health care was meant to work.
  • Smaller size, less overhead. It remains to be seen whether this particular Oklahoma hospital model could keep its prices to a fourth or fifth of its competitors’ bill if it were four or five times its current size. Odds are, however, prices would still be lower than what health care costs on average today. Incidentally, health care costs in British Columbia, Canada went through much the same conundrum in the 1970s when its healthcare needs exploded and it began building hospitals with more staff and more services. While B.C.’s system was based on a socialist government concept, it’s still worth asking: could the Surgery Center really duplicate its model with significantly more demand?

oklahoma_hospital_RLHydeIt’s interesting that Lantier’s and Smith’s concept of health care services has many of the benefits built into it that the Affordable Health Care Act – or Obamacare – touts: more patient control, less restrictions, more transparency. Yet Smith’s blog makes it clear that he is anything but a fan of federally controlled health care.

“Repeal and replace.  This has been the strategy and slogan of the Republican party with regards to TUCA (The Unaffordable Care Act). By and large what they want to replace it with is another ‘plan.’  … Here’s a different idea for the Republicans.  Repeal and acknowledge. Acknowledge that government has no role in health care at all, never mind what the central plan looks like.”

Many of Smith’s ideas are laudable, such as his assertion that “cancer doesn’t have to represent a bankrupting experience.” But given the fact that the Oklahoma hospital doesn’t accept Medicare patients (according to Smith, “they should rely on charity care instead”) I wonder how well this model would work in all instances. The Surgery Center’s prices are dramatically less expensive than what would be paid at many large hospitals, but are they affordable for the millions who are just emerging from America’s latest recession and may be without insurance or adequate salary? Does this model take into account that America’s Medicare population is represented by the baby boomer generation, many of whom aren’t in a position to pay out-of-pocket? In assigning those cases to charity, do we risk endorsing a two-class medical system?

One thing is for sure: this small Oklahoma hospital has forced patients, insurance companies and hospitals to take a closer look at what the real problems are with America’s health care system. Maybe the main problem isn’t so much an issue of cost of materials and services as the need for ethical repricing of one of America’s biggest businesses. And the cure for that woe may take more than the nudging of a few doctors with stellar ethics and big hearts.

Photo #1 courtesy of John Crawford and National Cancer Institute

Photo #2 courtesy of  RL Hyde


▼▼▼      11 Comments     ▼▼▼

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  • http://sustainablestate.blogspot.jp/ Chad Brick

    “”Acknowledge that government has no role in health care at all, never mind what the central plan looks like.”

    Many of Smith’s ideas are laudable””
    These two sentences should never follow one another.

    • J_N_Lee

      Point taken … and well said. Thanks Chad!

    • Martha

      They don’t. I haven’t seen government create a model like this that serves both the patients and doctors. The government serves the ones who support their campaigns. Patients and doctors, especially Medicare and Medicaid patients/doctors lose. Doctors are paid pennies on the dollar for their services making it near impossible for them to stay in the game, and the patients lose when there are fewer and fewer doctors who accept them.

      • J_N_Lee

        Thanks Martha for your points. If I may jump in here: I come from a different background. I spent part of my childhood in five countries, two of which endorsed socialist models for medical care. I agree that government can get in the way of healthcare, but so can certainly, inadequate oversight and regulation. As I’ve mentioned below, I don’t think Medicare and Medicaid are ruined by government oversight per se, but by lack of standardization that mitigates, if not prevents, partiality due to political views. If we are to have insurance companies involved in medical care questions, there needs to be government regulation and standardized access – including for Medicare and Medicaid patients.
        Just my two cents.

        • Martha

          You have more first hand experience of socialized healthcare than I! Those challenges government faces are exactly the reason they should stay out. The insurance companies are more decentralized than the government and their focus is only on health insurance, so in a world without perfect information, (There’s no way for one person to know exactly what another wants, much less a company or a government) a company has more boots on the ground and more incentive to provide what the customers want because their income depends on them. Government income depends on taxes which can be altered in their favor. That being said, I think that the entire definition of insurance has changed today. We want to pay a third party (the insurance company) to pay the second party (our doctor) for every little medical thing. It’s like buying auto insurance that has free car washes. Insurance was never meant to cover the small things like well visits and birth control, even thought that’s what a lot of Americans want. Insurance is there for accidents and catastrophes. I’ll give you three government intervention events that had unintended consequences. 1st: During WWII, the government blocked any wage raises in the private sector because they needed the men for the armed forces. Businesses found their way around it by offering benefits, like health care. This started a trend that we still have today and thus changes expectations about where we can get health insurance. 2nd: 1986, the Emergency Medical Treatment and Active Labor Act required hospitals to provide care to anyone needing emergency healthcare no matter what. This sounds good, but in fact, those without insurance went to county hospitals. They were funded on the local level, so there was a lot more involvement in the operations and the bureaucracy wasn’t as cloudy. But with this law, county hospitals declined as everyone just went to the private hospital and the county, whose patients were now using the private hospitals, were not reimbursing the hospitals. At some point, those hospitals were losing a lot of profit, so they started to shift their costs onto the insured. 3rd: If you are self-employed, or decide to buy insurance on your own, all that money you spend on health insurance is taxed! When you go through a company, it’s not taxed. So, if I had a plan that cost $100 a month, I’d have to make more than that to cover the amount that I need to pay for my insurance. Those unintended consequences will never go away, the difference between the government and the market is that the market can react quicker to changes and provide exactly what is being demanded. If government gave the same tax break to people who buy insurance on their own, I can guarantee you that self buying insurance market would explode. Companies would be competing with each other for those customers.

        • J_N_Lee

          Interesting points. I look at each one of those examples a little differently, but I would sum it up this way: government is meant to be a consensus representing what we want. If we don’t like a) government putting a freeze on raises because of a world war; b) that county hospitals are declining or c) you have to pay taxes as a self-employed worker (which I do), then its up to us to change the representation to reflect consensus and fix the problems. As to c), that example is true, but I am afraid, not the complete picture, because many self-employed can’t get insurance because the insurance companies have the right to decline coverage for arbitrary and inconsistent reasons. Again, the only way to fix the problem is to elect representatives, institute laws representing our wishes, and be active in ensuring that they meet the expectations of the majority.

          We are very quick to say it’s government’s fault, but government is we ( the people), through a smaller lens. If it isn’t, then it’s as much our task to change that, as the government’s.

        • Martha

          That is an excellent point, as citizens of a constitutional republic, we choose to elect people to represent us and make the big decisions for us. Pure democracy (where everyone votes on every thing) has not worked historically because in a democracy, the majority imposes their rule on everyone. The problem with enacting specific laws to fix problems is that there is no end point. Laws have unintended consequences, especially when they’re very specific and not easy to understand (the affordable care act, for example). Then you need new laws to fix the problems with the law originally enacted. As Basiat put it, law is meant “to protect persons, liberties, and properties; to maintain the right of each, and to cause justice to reign over us all.” Conflicts arise when you’re trying to determine at which point a law protects persons, but fails to maintain the right of each. The compulsory nature of the healthcare act is something, to me, that treads onto my right as an individual to not purchase health insurance. I understand where your argument for government protection comes from, as individuals we can’t know everything, but we need some way to protect us when our research and vigilance is not enough. My argument is that we don’t need government to protect us because there are already examples of independent groups who look out for others. UL is global independent safety science company. Take a look at your household gizmos and you’ll most likely see a UL sticker somewhere on the box or the device. They’re protecting the consumer by providing the companies they work with incentive to create only the safest best product. Rather than inspecting devices after manufacture, they are at every step of the process to make sure all the components are correct. Companies pay to have that seal put on their products because UL is trusted. UL has no other interests other than putting safe products on the market. The government has a multitude of interests, and to top it off, the officials of government have re-elections to worry about and fail to really take care of business when it counts. The internet is another great example of modern consumer protection (even in healthcare). You can browse a multitude of sites and find reviews about anything and everything. It’s the first step in the process of finding a plumber, mechanic, doctor, but it’s more information than we have ever had at our fingertips. Angie’s List is one in particular that maintains independent expression. Companies cannot pay to put themselves on the site, it’s all based on the experience of real consumers. The fact of the matter is that whether it is government or an independent group, it cannot save every consumer on every heartache. But the government has so many competing interests, it’s hard to make sense of what they’re doing.

        • J_N_Lee

          Good points Martha. And good countries have had revolutions for similar reasons, and in much less time than U.S. generations have been complaining about such disagreements. I tend to think that is why we still exist as a country: we try to work out our differences because we believe the nation is stronger than the differences. And, because no democracy is ever perfect; there’s always somebody or some group that is feeling aggrieved.

          I would only add as well, that the UL is governed by laws too. So is the Better Business Bureau, and the Consumer Union. In countries run by dictatorships that I have been in, finding such advocacies (at least out in the open) is difficult. So I still think the key issue here is that we are a country run by a government that at least on the surface, is governed by consensus.

  • insurance bob

    “do we risk endorsing a two-class medical system?” I think we already have at least a two class medical system. Ask any Medicaid beneficiary if they feel the quality of care they are getting is superior. Cheap, yes, superior, rarely. But this comment also exposes a typical flaw…considering all medical care to be equal and similar. With Obamacare, I think the “class-ness” of medical care will increase substantially. For instance, we have a tremendous shortage of primary care doctors. For the millions of new potential patients coming to get care because of O’care, many will not be able to access a doctor in a timely manner and many will not be able to see a doctor, but rather be seen by a nurse. I don’t have a problem with this second item, per se, but even in primary care, there are complicated situations that require more than a nurse can bring. And if seeing a doctor urgently is critical yet not possible, many will either jump to a specialist or jump back to the emergency room so they can get the care they think they need.

    • J_N_Lee

      Thanks for your comment.

      I actually agree with you about Medicaid and the current two-tier system. And it is accentuated by the ability of states to call the shots politically on what constitutes Medicaid and what the individual deserves. I have cared for a family member for the last 14 years in three different states. Each felt it was within its purview to determine whether she deserved social services support, caregiver support, or adequate access as part of Medicaid. Yet all received federal funding for that program in order to ensure it existed. A two-tier and two-quality system exists, but making care for elderly who can’t work and have paid into a system all their lives charity cases is endorsing that problem further. I am not sure I understand how ensuring that all have access to care will make it harder for others to access doctors in the long term; like any country that has redesigned its medical care to fit population changes, there will be challenges.

  • KenD

    RE:

    “2-tier system”: Mulitipe-tiered ‘systems’ exist in a wide-range of goods/services. People w/more money can simply afford things people w/less money can. Not a whole lot of folks whine that relatively wealthier people can afford houses than poorer ones can. Its not a compelling argument against freer HC system or freedom in general.

    “What about the poor?”: The fedgovt. has been waging a ‘war’ on poverty for 50 years now, and has been meddling in the HC industry for far longer than that for the alleged purposes of ‘helping’ society. The USA is VASTLY less wealthy and HC is VASTLY more expensive after decades of meddling. Proponents of govt. meddling need to open their eyes and look around at the failure of govt. programs.

    If I were to say “govt. should have no role in who I marry” or “govt. should have no role in who I choose as an internet service-provider”…no one bats an eye. But, for some weird reason, its different for HC?

    Proponents of govt. HC meddling, for reasons unknown to me, somehow think forcibly placing a distant and unwanted 3rd party (govt.–which is just a collection of strangers who claim the right to run others’ lives) between doctors and patients can improve HC. Why?

    If one honestly looks at HC, one will see that the VAST majority of the current problems w/it stem from prior govt. interventionism in HC and the wider economy (if the overall level of wealth is decreased via taxation and regulation, less wealth remains for HC–or incentives/disincentives which distort markets are created).

    Inserting a politician or bureaucrat between an individual and his/her doctor will NEVER make things better. Doctors/HC providers are HUMAN-BEINGS who provide a service/product for profit (as we ALL seek to profit from providing goods/services)…they ARE NOT “public resources” to be manipulated and bandied about for political reasons and because of jealous hand-wringers who ‘care’ about the poor.