I’ve featured the market-based, consumer-driven Surgery Center of Oklahoma in Oklahoma City several times before on CD, see posts here and here. Unlike most other medical providers, the Surgery Center actually posts transparent pricing and offers deeply-discounted, payable-in-advance, cash-only medical procedures. If any competitor offers a lower price, the Surgery Center will match or beat it, so patients can be guaranteed of getting the lowest price possible.
Reason.com features the Surgery Center in the video above and on the Reason website, where Jim Epstein points out that:
The Surgery Center’s consumer-driven model could become increasingly common as Americans look for alternatives to the traditional health care market—an unintended consequence of Obamacare. Patients may have no choice but to look outside the traditional health care industry in the face of higher costs and reduced access to doctors and hospitals.
To understand how deeply discounted the Surgery Center’s fees are, consider that a nearby local hospital in Oklahoma City, Integris Baptist Medical Center, charges more than $33,000 for a “complex bilateral sinus procedure.” When the same surgeon performs the same surgery at the Surgery Center, the total cost is less than $6,000. Reasons? The hospital is receiving payment from a third party (insurance company or government), and not the patient, who therefore has no incentive or reason to question or monitor the price. Another reason that the hospital charges 5 times more than the Surgery Center for the same procedure is the huge difference in administrative overhead. Reason explains:
Except for the clerical staff, every employee at the Surgery Center is directly involved in patient care. For example, both human resources and building maintenance are the responsibility of the head nurse. “One reason our prices are so low,” says Smith, “is that we don’t have administrators running around in their four or five thousand dollar suits.”
“In 2010, the top 18 administrative employees at Integris Health received an average of $413,000 in compensation, according to the not-for-profits’ 990 tax form. There are no administrative employees at the Surgery Center.”
Could this market-based health care model be the future of American medicine as an alternative to the third-party payer model?
The rising cost of health insurance has been driving companies to look for ways to cope with the third-party payer system. Health maintenance organizations, or HMOs, have been one approach. Today, a growing number of firms are dumping their health insurance providers and becoming “self-funded,” meaning they pay their employees’ health care costs directly out of their revenues. This model was virtually nonexistent 30 years ago, and today an estimated 60 percent of Americans work for “self-funded” companies.”
“Self-funded companies, like individual patients, can negotiate directly with hospitals for lower prices. Recently a handful of self-funded Fortune 500companies struck deals directly with major hospitals to care for their patients for a negotiated fee. In Oklahoma City, there’s an alternative health care market taking shape in which hospitals offers competitive flat fee prices to self-funded companies. And it’s all modeled after the Surgery Center.
Bottom Line: The market-based, low overhead, consumer-driven Surgery Center model of health care with transparent pricing for all procedures could be the perfect antidote for Obamacare, which will likely deliver exactly the opposite: high overhead healthcare based on traditional third-party payments that are not transparent to patients, with costs that will tend to escalate over time due to the lack of market incentives and competition.