The movement for medical price transparency is happening

The movement for medical price transparency is happening

Years ago, I hired a carpenter to build a deck in my backyard. He showed up with a pencil behind his ear, a spiral notebook, and a tape measure. I told him what I was looking for, and he made a few suggestions. After 15 minutes of measuring and taking notes, he handed me a piece of paper with how much it would cost.

In two days, he called me and asked for a payment for the lumber. I sent it to him. Five days later, he showed up with the lumber—cut, ready to assemble.

Amazing? Yet many do this every day in a free economy. They state an up-front price, and get the job done. But some say that isn’t possible in medicine. After all, building a deck isn’t surgery.

Contractors like this man, however, have run into unanticipated problems that make certain jobs more difficult. Experienced contractors anticipate these problems and factor them into their price. Most of the time they get it right. If they get it wrong too often, they go broke. If their error rate is low, they are able to be much more competitive in the marketplace.

I think of this carpenter often. I certainly had him in mind when I formulated internet pricing for our surgicenter. I knew that some cases would be more difficult than others. I knew that we would probably lose on some and make a little better marginal profit on others. This is what all businessmen do every day in every sector of the economy—except medicine.

Eleven years ago, we began construction of the large facility in which we now work in Oklahoma City. By this time, I had been providing occasional prices for the uninsured and poor, but still found the contractor’s confidence in what our new facility would cost fascinating and incredible, having heard hospital folks saying so many times that fixed, upfront pricing in health care is impossible.

But we did it anyway. Sometimes I got the price wrong. In some cases I was too high, and in some cases I was too low. Adjustments were made. Not at the expense of the patient, however.

Transparent pricing is necessary for any concept of value to have meaning, and to send appropriate signals concerning scarcity or abundance. Non-transparent pricing is a hallmark of command economies, as Professor Robert Higgs explains in his brilliant book Crisis and Leviathan. There can simply be no meaningful competition when the prices aren’t transparent and known up front.

Not all medical facilities need to exhibit transparent pricing in order for a competitive and market economy to emerge. Indeed, our internet pricing has allowed individuals to leverage their local medical facilities, as otherwise they would have gladly jumped on a plane and come to us for surgical care for a known price.

In spite of big hospitals’ attempts to denigrate this idea, they have found themselves in a competitive environment, like it or not. Whether patients are willing to fly to Costa Rica, New Delhi, or Oklahoma City, they have a price in mind, and hospitals are having to explain why they are six to ten times more expensive while simultaneously claiming to not make a profit.

In Oklahoma City, upfront pricing is now available at several facilities, in addition to ours, by gastroenterologists, oncologists, radiologists with a breast imaging center, cardiologists and cardiac surgeons with a physician-controlled heart hospital, and orthopedic surgeons. A tertiary hospital has recently joined in this effort, providing upfront pricing for procedures too complex for an outpatient center. This is a very exciting development.

Since hospitals are responsible for the vast majority of medical costs in this country, slashing their outrageous charges brings incredible savings without even touching physician pay.

I don’t advocate legislation to force medical facilities to be transparent. I believe this is a violation of the non-aggression principle and might also provide legislators the opportunity to sell exemptions. The movement for medical price transparency is happening. It is better to let the much more unforgiving market deal with those who refuse to be transparent. Those who won’t divulge prices will lose out to those who will.

Price sanity is coming to surgical care, and ultimately to all medical care.

G. Keith Smith is an anesthesiologist and a member of the Association of American Physicians and Surgeons.

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  • http://www.facebook.com/danny.long.7758 Danny Long

    KevinMD I must say I like the conclusion of letting the free market decide, as we know any law can be miss-used ad circumvented. :-)

    • ProudOkie

      I own a private practice NP clinic in a very rural area of Oklahoma. I frequently refer my private pay patients to this facility and others like it. As a primary provider, my patients always receive a total price in the room BEFORE any services are performed. I must say this is new to them. They are amazed and always pleased with the cost and quality of care.

      • http://www.facebook.com/beau.ellenbecker Beau Ellenbecker

        Unfortunately this just isn’t possible with insurance patients due to coding. Life would be much better if outpatient visits had only four codes: New Simple, New Complex, Established Simple, Established Complex. Then pricing would be much more direct.

  • Noni

    I hope you are right about transparency. We desperately need it. It’s scary to imagine being a patient in this country.

  • http://drpauldorio.com Paul Dorio

    I have long been dissatisfied and amazed by the seemingly haphazard pricing that occurs in health care. I applaud any move towards transparent pricing and would also like to see pricing stability across regions throughout the USA. For example, why should a gallbladder surgery cost more in Texas than in New York or Florida? Why doesn’t a CT scan of the abdomen and pelvis of a 100 pound female cost the same everywhere? Part of the explanation for rising health care costs is related to these factors. We can do better.

    • Suzi Q 38

      I have had to have several MRI’s this past year.
      I call and compare prices. I also ask for the manager of the billing department and ask for the prices. This process leaves them flabbergasted. It always takes a day or two to come up with the answers. I then have to choose the facility with the cheapest price.

      One surgeon claimed that the images did not come out clear, though, and I had to repeat the MRI’s.

      • http://drpauldorio.com Paul Dorio

        It’s a bit ridiculous, isn’t it? I wish that the health care system worked just like Walgreen’s – where everyone expects to pay (at least a portion) of the costs of “goods and services received.”

        And just a polite correction: it was the RADIOLOGIST, not the surgeon, most likely, who felt that the MRI needed to be repeated. Typically, that happens when the images are not clear enough to allow for an accurate interpretation. There are several reasons why that can happen but that’s a different topic.

        • Suzi Q 38

          For me, it was the surgeon. He insisted on his own facility’s MRI machines. He also had a certain kind of scan he wanted me to take.
          since I had spinal stenosis, I wasn’t going to argue and say “no.”
          The reason why I knew it came from him, was that he asked me to book the new MRI’s after our office visit.
          He said that they weren’t clear.

          I complained to my insurance company about the first set of MRI’s not being clear. The imaging center steadfastly said that they were clear.

          Who was right? I don’t know.

          • http://drpauldorio.com Paul Dorio

            Thanks for the clarification. Fascinating stuff that is unfortunately not uncommon with non-radiologist-owned imaging centers. There are doctors who read studies and who are not radiologists. Some of them probably know what they are doing and do just fine. But to me the issue is one of a financial bias

      • Homeless

        I was told by a orthopedist that different MRI machines give different quality of images. Of course, he criticized his competitors quality to influence me to get the MRI on the machine he owned.

        • Suzi Q 38

          That was my suspicion.

  • http://www.facebook.com/beau.ellenbecker Beau Ellenbecker

    Upfront pricing may be available at your facility (good for you), but should it not have always been?

    Also you are upfront about pricing…but does everyone pay the same. I can and do tell all my patients that ask what my visits cost but most do not pay anywhere near that amount.

    Cash pay get 20-30% discounts based on when they pay. Insurers reimburse at 40-60%. of my fees.

    Transparency isn’t just about telling a price. Its also about actually charging that price to everyone.

    • ProudOkie

      At our clinic our prices are set…..same for everyone, cash credit, check, doesn’t matter. I shop the local lab companies online, the quick clinics, and the “order your lab online” sites and adjust my prices to be more than competitive with them. It is the free market in action…..

      • southerndoc1

        You don’t accept any insurances?

        • ProudOkie

          Oh sorry for the confusion southerndoc….yes we accept all insurance. The prices are for private pay, no insurance patients. I said “same for everyone” – meant everyone without insurance! Sorry!

          • southerndoc1

            The big problem here is that the insurers don’t want their fee schedules revealed, which would show how grossly overpaid someof the powerful medical centers are.
            Most docs in private practice would love to make public their negociated fees with each payer, but they’re prohibited by contractual agreement from doing so.

          • LeoHolmMD

            Most of the people in medicine abhor a free market.

    • Suzi Q 38

      I have asked hospitals for a “cash price.” I did this for my colonoscopy. We got a 30% discount.