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Price Competition for Medical Care

Posted Dec 09 2012 2:23pm

Stanley Feld M.D.,FACP,MACE

Thank goodness many physicians are starting to recognize the problems of abuse and waste in government run healthcare programs.  The run up in cost is secondary to the healthcare insurance industry taking 40% of the healthcare dollars off the top as patient care dollars and the hospital systems over inflating the costs to patients because of inflated operating expenses and administrative salaries.

Physicians realize that an efficient free market system will reduce the cost of care. Physicians are tired for being blamed for the entire healthcare systems problems. They do not deny being part of the problem.

Many physicians have decided to move forward and develop consumer driven free market systems of care. 

One example is Nextera Healt h in Longmont Colorado. I have discussed this previously.

Nextera Healthcare is a new model for delivering primary care at an affordable price. It follows many of the principles embodied in my ideal medical savings account model.  Nextera delivers compassionate care at an affordable cost and encourages patients to be responsible for their health.

Nextera Healthcare services all of a families needs at an affordable monthly cost. It is combined with a high deductible healthcare insurance plan to cover costly illness.  

The reason I am so high on Nextera Healthcare is that it closely fits a model of healthcare delivery that will work to decrease the cost of medical care. It will increase the quality of medical care and permit primary care to be a viable specialty. 

Nextera Healthcare has the potential to permit the patient to be responsible for managing their health and their healthcare dollars.

Nextera Healthcare has the potential to reduce healthcare cost to individuals, employer sponsored self insured plans, associations and even government funded healthcare plans while permitting consumers to make their own healthcare decisions.

Surgeons are developing their own innovative systems.  In free standing surgery centers they are developing surgical procedures that cost at least 70% less than Medicare is paying hospitals for the same procedure.   

 Dr. Keith Smith, co-founder and managing partner of the  Surgery Center of Oklahoma , took an initiative that would only be considered radical in the health care industry.

Dr. Smith posted  a list of prices  online for 112 common surgical procedures. Dr. Smith ,an anesthesiologists, became disillusioned about how patients were treated and charged at  St. Anthony Hospital  in Oklahoma City.  

Dr. Smith’s goal was to create a for-profit facility that could deliver first-rate care at a fraction of what traditional hospitals charge. The goal was to eliminate the hospital and healthcare insurance industry as the middlemen while decreasing the cost of surgical care without decreasing the quality of care.

He wanted to create a system in which consumers and their employers could receive surgical value at an affordable price. In the existing healthcare system patients have no incentive to look for dollar value.

A healthcare system in which consumers buy goods or services from a physician, surgeon or hospital systems all being paid for by the healthcare insurance industry or government does not constituent incentive for consumers to seek value and quality.

The lack of patient responsibility and value hunting is one of the major causes of exploding U.S. heath care costs.

Physician owned transparent Surgery Centers are becoming increasingly common as Americans look for alternatives to the traditional health care market which is unaffordable and out of reach.

Consumer-driven models are appearing as fewer people have healthcare coverage from their employers and are on their own

The unintended consequences of Obamacare are creating more uninsured not less. The Medicaid insurance coverage that Obamacare is offering is unappealing.

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. It is only going to get worse as we get deeper into Obamacare.

The Oklahoma Surgery Center demonstrates that it’s possible to offer high quality care at low prices. Surgeons can do twice as many surgeries in an outpatient surgery center than they can in a traditional hospital surgical suite.

Most industries try to improve efficiency. However, simple efficiencies have not occurred in most traditional hospitals. Surgeons spend half their time waiting for the patients to come to the operating room or for the availability of operating rooms and equipment.

The Surgery centers have solved these efficiency problems. They can service surgeons’ needs at less than half the cost without the wasted time.

A key reason is there are not multiple administrators creating multiple regulations and collecting multiple $500,000 to $3 million dollar a year salaries. Surgical centers have one head nurse responsible for everything and zero administrators.

The cost of a “complex bilateral sinus procedure” at the Surgery Center was an all-inclusive $5,885. The traditional hospital bill totaled $33,505 without the surgeon’s and anesthesiologist’s bill included.

It was discovered at the time of the nasal surgery that the hospital charged $360 for a dexamethasone injection. A dexamethasone injection cost the hospital $.75.

 A fentanyl shot which is a pain-killer cost the hospital system $1.50 but the bill to the insurance company was $630.00 dollars. Everyone has heard of the $45.00 hospital aspirin   

A traditional hospital discounted non-inclusive bill to the healthcare insurance industry for a carpel-tunnel release would be $7,452. The fee for the procedure pre-op is not be available. The same procedure done for the all-inclusive transparent cost at the Surgery Center was $2,775.

More tragic was that the patient would have had to pay $5,299 out-of-pocket  to cover her deductible and co-pay for the hospital bill before she even received the bills for physicians’ services. 

Below are some examples of the differences in costs for procedures.

  Transparency-Matters-larger jpg
A list of the surgical fee for the Oklahoma Surgery Center is on its web site.

The more the hospital bills the more the insurance company puts in reserve. The reserves are in the medical costs column and include the non-discounted costs. The result is greater profit for the insurance company.

President Obama does not want physicians to be innovative in this way. He wants physicians to be dependent employees of hospital systems. His goal is to control physicians and dictate their medical care.

President Obama has provided some non-transparent favors to hospital systems that are forcing physicians to be employed by hospitals. 

Hospital systems claim they must charge more to cover their overhead and bureaucratic inefficiencies. So fix your system. Surgery centers have.

Dr. Smith says: "Everyone can see what the prices are at the Surgery Center, and that affordable health care is possible. So the jig is up.”

Dr. Smith believes that despite the obstacles being put in the way by Obamacare, market-driven facilities like his will thrive and proliferate as consumers catch on to costly collusion between big government and big health care.

I totally agree. As Obamacare’s unintended consequences proliferate consumers and captured physicians (hospital employed) will pay more attention to physician innovation. The jig for big government and big healthcare will certainly be up.

 The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone

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