Tuesday, April 8, 2014

Director  of  Surgery Center of Oklahoma Believes Consumer-Driven Care’s Future Is Bright

Many people want the government to protect the consumer.   A much more urgent problem is to protect the consumer against the government.

Milton Friedman (1912-2006),  economist


What follows is an interview with Keith Smith, MD, a 53 year old anesthesiologist. He has been managing partner and medical director of the  Surgery Center of Oklahoma in Oklahoma City for 17 years. He co-founded the center in 1997  with a fellow anesthesiologist, Doctor Steve Lantier.   Fifty two surgeons now  operate at the center.   It offers bundled prices, which include all fees, for its services.  It posts these prices online at surgerycenterok.com.  For more information, you may go to their website or call 1-405-475-0678.

Two kinds of health reform exist – top-down government reform and bottom-up consumer reform.  The reform described here is physician-driven,  in this case by two visionary anesthesiologists.   It is a superb example of disruptive innovation, a term coined by Professor Clayton Christensen of Harvard Business School( The innovators Dilemma, Harvard Business School Press, 1997).  At the surgery center, the innovation consists of transparent bundled prices available online.  The innovation produces lower prices for surgical procedures,   convenient access to surgeons in the community,  and greater satisfaction for payers,  patients,  surgeons, and anesthesiologists.


Q:  Your center has been a huge success, hasn’t it?

A:  Yes, we’ve boldly embraced the free market, and it’s working out beautifully.  

Q: I understand you price online.

A: We started doing that five years ago this month.

Q: What has been the response?

A:  The first thing that happened was Canadians started showing up.  Uninsured patients from Oklahoma came next.   Then we attracted the national media – CNBC, O’Reilly,  The Huffington Post, Reason Magazine, and others.  That attracted national attention among people who thought surgery was unaffordable at the so-called not-for-profit hospitals.  We’ve had patients come here from  from every state except Hawaii.

Response to Bundled Prices

Q:   It is true your prices are bundled and include the anesthesiologist and other fees?

A:  That’s  right.  Every price you see online is all-inclusive and they are listed  upfront online at our website, surgerycenterok.com. Also listed are prices at other facilities who do not have a website.  In other words,  we  list prices at our website done at other facilities.

Q:  You mentioned the national media response.  What about Oklahoma City, which has a metropolitan population of 1.5 million among patients,  hospitals, businesses, and health plans?

A:  Self-funded  businesses are just thrilled about what we are doing, not just because they know now what to expect but because of the deflationary pressure it has put upon others.  It is not uncommon now for patients to hold hospitals feet to the fire about their high prices.  The mood of the business community,  particularly self-funded businesses, is very excited about us.  

One of the most incredible success stories is recent. Oklahoma County,  the largest  county in Oklahoma, entered into an agreement with us, effective March 1. 

In the first three weeks,  the County  calculated their savings to be almost a quarter of a million dollars. 

The business community and county officials  are happy to deal with a group of physicians who embrace the market concept.

Hospital Reactions 

Q: How have the hospitals reacted?

A:  It’s strangely quiet.  All we hear from the hospitals are excuses about why they can’t discount their bills and attempts to discredit transparent pricing.  They portray us as a niche player.  They say they can’t do what we’re doing.   One of the most devastating counters to that argument is that one of administrators  came to us and asked, “ How can we help you? Can you help us?  Are there any synergies?”  We are now working closely with a hospital here in Oklahoma City, Deaconess.

Q: I know Deaconess.  I was a pathologist there for 5 years, and as Chairman of their PHO, my partner and I  developed bundled fees for over 100 hospital procedures,  which the Blues refused to acknowledge.

A: Not all surgical procedures are done in an outpatient setting.  When  I call or email Deaconess about the need for a hospital-based procedure within an hour they will give me a price.  Guaranteed upfront pricing is possible.

Response of Health Plans

A:  How have health plans responded to your hospital initiative?

Q: The carriers have never done any business with me.  They want nothing to do with transparent pricing.  Their attitude stems from the Chargemaster type of pricing that makes it possible for carriers to make money from the claims adjudication process.   When I say a gallbladder at our facility is $5865, that is devastating to the carrier who is making money discounting that claim. The carriers want no part of what we are doing. It is just not in their interest. 

Number and Specialties of Participating Surgeons

Q: How many surgeons participate in providing your services?

A: We have 52 surgeons, and we anticipate having 60 by the fall.   We have general surgeons,  gynecologists, urologists,  pediatric surgeons,  ophthalmologists, ENT, dentists, oral surgeons,  reconstructive plastic surgeons, podiatrists.  All of the services provided are on the website.

Q:  Do you offer overnight services?

A:  We do offer overnight stays for some services like  hysterectomies or spine surgeries.  We do not do joint replacements except for an occasional shoulder replacement.  There is a doctor-owned joint replacement center next door, and we do not compete with them.

Q: Do you deal with  concierge, no-insurance, cash only practices? Are your procedures covered by 3rdparties?

A:  We deal with  a number of physicians with 3rd party-free practices?   They direct their patients our way. We have connections with direct pay practices in Texas and Idaho. We file insurance as a courtesy for many patients, whatever the charges are applied to their deductibles. We’re rapidly transitioning to the point where we won’t deal with 3rd parties at all.  I’m hoping we are able to do so within 12 months.

Surgery Centers Elsewhere

Q: Are there similar surgical centers in other states?

A:  There are other surgical centers who are posting their web prices.  There’s one in Monticello, Virginia, operated by Dr. Bill Grant.  There’s Regency Healthcare in Manhattan.  The medical director there is Doctor Bob Haar.  There’s another in Torrance, California.  There are others in South Carolina, Vegas, and elsewhere.  The self-funded community knows surgery centers  are a step forward, and there see no excuse for not establishing them  and sending them patients. The demand is going to grow beyond what anybody can now imagine.  Even without  government endorsement, this movement is unstoppable.

Barriers to Surgery Centers

Q: In some states,  state legislators have forbidden or discouraged physician-owned surgery centers.  Isn’t that true?

A:  In some states, Certificates of Need exist. You have to make your case before a panel, usually composed of people who don’t want these centers. You can imagine how fast those applications go in the trash can. It’s simply cronyism in many  of these Certificate of Need states.  There are also states who have laws about how income can be distributed.  These laws make it difficult for physicians to own and operate their own facilities. 

The Unaffordable Care Act has a clause which forbid physician-owned hospitals that accept federal money.

There is no doubt these barriers have the fingerprint of big hospitals.  When hospitals have difficulties competing, they just get their checkbook and run to their state capitols to make their competitors’ lives miserable. 

Impact of ObamaCare

Q: What impact,  if any, has ObamaCare had upon your business?

A:  We will celebrate the full implementation of the Unaffordable Care Act as a non-event.  It will have  a positive  effect on us.  We do not accept federal money. So we do not have to abide by ObamaCare’s  electronic health record insanity. We will not accept patients who sign up for these exchange plans. 

If anything, the Unaffordable Care Act has helped us.  The government never gets its right.  By allowing their insurance pals to generate these giant premiums and  giant deductibles,  they have channeled patients our way. 

Now we have a whole segment of the population who prefers to buy their health care and pay or it out-of-pocket. It’s easier.  It’s cheaper. It’s more convenient.  

Inadvertently, the  federal government has created  a consumer market.  People who spend their own money want to know how much things cost in advance, and they want it guaranteed and they want it  in writing. The Unaffordable Care Act is directing  more patients our way.

Q:  Funny you say that.  I’ve been interviewing direct cash, no 3rd party doctors across the country,  and they all independently say ObamaCare is their best salesperson, and navigators are their top sales force.

A: That’s the good news.  It was never the government’s intention to create a consumer market.  They wanted to crash and trash the market so they could usher in the sequel. It’s crazy.  The rest of the world with single payer systems is going the other way. Intense privatization efforts are going on in Canada, Sweden, and France.  French public television is going to do a documentary on our facility.

Growth Rate

Q: What is your yearly growth rate?
A: I don’t know off hand. But I  know this. A year ago, 3% of the cases we were doing came to us because of our web pricing.  Now it’s up to 25%.  We have seen a huge growth in that segment of our business. Another rapidly growing part of our business is people who have insurance. But they ask us to treat them as if they didn’t have insurance. Their co-pays and deductibles cost them more out-of-pocket than if they paid our website fee.  They don’t even want to show us their insurance card. They say, “Yes, I have coverage, but don’t worry about it.”

Concluding Remarks

Q: I  will conclude this interview with this question: Are you optimistic about the future, and if so why?

A:  I’m extremely optimistic.  The more government and its associated cartels try to tighten the noose, the more liberty-loving people slip through their fingers. Once people get a taste of freedom in a consumer free health market, it becomes more and more difficult to go any other direction. This is especially true among the young people. They have thumbed their nose at government because they regard it as a Ponzi scheme.  They are tired of being ripped off, stolen from, paying Medicare and Social Security taxes,  and they see the Unaffordable Care Act  and health exchange plans a Ponzi scheme.

Q: When you say the Unaffordable Care Act,  surely you mean the Affordable Care Act, don’t you?

A: I  never call it the Affordable Care Act, or by its official name, the Patient Protection and Affordable Care Act.  It does not protect patients.  It is not affordable, and it has nothing to do with care.  It is not even law, because it originated in the Senate, and Congress makes the laws.  It’s a tax, as Chief Justice John Roberts pointed out.

Q: Thank you.

Tweet:  Dr.  Keith Smith,  Surgery Center of Oklahoma director,  believes transparent bundled bills for surgical procedures listed online represent the free market at work and is a wave of the future.

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