Oklahoma Doctors vs. Obamacare

Surgery center provides free-market medicine.

Three years ago, 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: He posted online a list of prices for 112 common surgical procedures. The 51-year-old Smith, a self-described libertarian, and his business partner, Dr. Steve Lantier, founded the Surgery Center 15 years ago, after they became disillusioned with the way patients were treated at St. Anthony Hospital in Oklahoma City, where the two men worked as anesthesiologists. In 1997, Smith and Lantier bought the shell of a former surgical center with the aim of creating a for-profit facility that could deliver first-rate care at a fraction of what traditional hospitals charge.

The major cause of exploding U.S. heath care costs is the third-party payer system, a text-book concept in which A buys goods or services from B that are paid for by C. Because private insurance companies or the government generally pick up most of the tab for medical services, patients don’t have the normal incentive to seek out value.

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.

"In any other industry, tons of attention is devoted to making systems more efficient, but in health care that's just completely lost."The Surgery Center demonstrates that it’s possible to offer high quality care at low prices. "It's always been interesting to me,” says Dr. Jason Sigmon, “that in any other industry, tons of attention is devoted to making systems more efficient, but in health care that's just completely lost." Sigmon, an ear, nose, and throat surgeon, regularly performs procedures at both the Surgery Center and at Oklahoma City's Integris Baptist Medical Center, which is the epitome of a traditional hospital. It's run by a not-for-profit called Integris Health, which is the largest health care provider in Oklahoma serving over 700,000 patients a year.

Sigmon says he can perform twice as many surgeries in a single day at the Surgery Center than at Integris. At the latter institution, he spends half his time waiting around while the staff struggles with the basic logistics of moving patients from preoperative care into the operating room. When the patient arrives, Sigmon will sometimes wait even longer for the equipment he needs.

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-profit's 990 tax form. There are no administrative employees at the Surgery Center.Dr. Sigmon is half as productive when he's working at Integris Baptist Medical Center, which is the epitome of a traditional hospital.

Because bills charged by Integris are paid primarily by insurance companies or the government, the hospital gets away with gouging for its services. Reason obtained a bill for a procedure that Dr. Sigmon performed at Integris in October 2010 called a “complex bilateral sinus procedure,” which helps patients with chronic nasal infections. The bill, which is strictly for the hospital itself and doesn't include Sigmon's or the anesthesiologist's fees, totaled $33,505. When Sigmon performs the same procedure at the Surgery Center, the all-inclusive price is $5,885.

The Integris bill for the same nasal procedure went to Blue Cross of Oklahoma, so the patient had no compelling reason to question its outrageous markups. They included a $360 charge for a steroid called dexamethasone, which can be purchased wholesale for just 75 cents. Or the three charges totaling $630 for a painkiller called fentanyl citrate, which all together cost the hospital about $1.50. 

While patients and their insurance companies rarely pay the full price on a hospital bill, the bigger the bill, the more the hospital gets. Uninsured patients at Integris generally get a 50 percent discount, while private insurance companies pay closer to 60 percent of the full bill, which is still greater by orders of magnitude than what the Surgery Center collects.

Integris Health declined to make a spokesperson available to be interviewed for this story. But in a statement, the company defended its outrageous bills on the grounds that it needs a way to cover losses on services offered free. Whatever the merits of that argument, Integris must also cover overhead costs and bureaucratic inefficiencies that the Surgery Center has managed to abolish.

There are no administrative employees as the Surgery Center of Oklahoma.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 500 companies 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.

This was the brainchild of Jay Kempton, who is the president of The Kempton Group, which administers health care plans for self-funded companies. When Kempton met Keith Smith, he had been looking for a way to help his clients deal with their exploding health care costs. "Cutting edge procedures are justifiably expensive," Kempton concedes. "But what we also see are soaring increases in relatively garden-variety procedures, like a knee resurfacing or a carpal tunnel release. Those things should not be experiencing 10 or 15 percent inflation every year."

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  • Nick M||

    What are the chances continued success from places like the Surgery Center encourage similar places to open up around the country?

    Unfortunately, my gut tells me this place will be seen as a threat and it will meet an unfortunate end, due, at least in part, to government intervention.

  • Almanian.||

    "Nice little 'surgery center' ya got there...."

  • Brutus||

    And now that the medical establishment has a one-stop shopping locale for all their rent-seeking needs, it's a cinch that they'll find a way to strangle these market-based outlets.

  • Being Waterboarded||

    The surgery center is clearly dangerous because it is "for profit". There is nothing more dangerous than "for profit". The government needs to protect us from these doctors that expect to profit from our injuries and need for doctors. I mean, if they are making a profit, they must be cutting corners and doing dangerous things.

  • DaveAnthony||

    Chances of these hospitals spreading are very low -- two main reasons. Obamacare bans any new physician-owned hospitals. The other problem is that many states require a "certificate of need" to open a new hospital basically giving current hospitals veto power over any new competition. In Virginia, and other states, not only do you have to get the certificate of need for a new hospital, you also have to get it for a lot of the equipment you would put in a hospital (MRI, radiology equipment, etc.).

    http://www.vdh.state.va.us/olc/copn/

  • ||

    CON was rescinded in OK in 1989. However, medical equipment is pretty tightly regulated, and the ObamneyCare provisions for medical device taxation and regulation is the real bitch.

    It's hard to fix the chassis that is the human body without the proper tools.

  • Almanian.||

    CONNNNNNNNNNNNNNNNNNNNNNN!!!

    /Kirk

  • R C Dean||

    This isn't a hospital (as near as I can tell). Its an ambulatory surgery center, which are typically separately licensed as such.

    It might very by state, but I don't recall ASCs being subject to CON.

    Not that the Total State won't find a way to put the clamps on, but I don't think it will be CON.

  • Marshall Gill||

    You are correct, RC. I had a hernia repair surgery at this place. They had me in and out in a few hours. They also provided me with a "pain ball" which appeared to provide something like 50 hours of local anesthesia to the repaired area. It was almost entirely pain free.

    This place rocks!

  • Janet||

    I forwarded this to all my friends. Keep up the good work!

  • Rick Santorum||

    Unfortunately, my gut tells me this place will be seen as a threat and it will meet an unfortunate end, due, at least in part, to government intervention.

    I had someone tell me the other day that government-funded health care was a "moral obligation" rather than a "financial obligation" because doctors took the Hippocratic Oath. It seems to me that, in the peculiar place of the liberal mind, providing a for-profit system of health care is in itself a denial of the "moral obligation" (thus immoral) and should be made illegal to protect the community from exploitation. Or something.

  • Raston Bot||

    here's a factoid from the Hippocratic oath page...

    In a 1989 survey of 126 US medical schools, only three reported usage of the original oath, while thirty-three used the Declaration of Geneva, sixty-seven used a modified Hippocratic oath, four used the Oath of Maimonides, one used a covenant, eight used another oath, one used an unknown oath, and two did not use any kind of oath. Seven medical schools did not reply to the survey.

    and sometimes it's helpful to point out this passage from the original Hippocratic oath:

    Similarly I will not give to a woman an abortive remedy

  • Brutus||

    Can be denying the sacrament of abortion, now can we?

  • ||

    I took a modified HO, and osteopaths also take an oath to uphold the core principles of osteopathic medicine:

    -The body is a unit, and the person represents a combination of body, mind and spirit.

    -The body is capable of self-regulation, self-healing, and health maintenance.

    -Structure and function are reciprocally interrelated.

    -Rational treatment is based on an understanding of these principles: body unity, self-regulation, and the interrelationship of structure and function.

  • Tonio||

    GM are you a DO?

  • ||

    Yes, Tonio. I thought you already knew that. I completed an MD residency for surgery, however. Best of both worlds, IMHO.

  • Tonio||

    I forgot. My memory is far from perfect and I don't have Sug's preternatural abilities to track down anything ever said here. Good for you, though.

  • Tonio||

    and sometimes it's helpful to point out this passage...

    And sometimes it's not, particularly when the discussion has nothing whatsoever to do with abortion; then it's just self-serving bullshit. It's not that you people are wrong, it's that you refuse to let any discussion take place without injecting your pet issue into the conversation; you are why we can't have nice things. DIAF.

    Also, the original Hippocratic oath was written by people who didn't know that blood circulated and who didn't know jack about the disease model. So although there is some good in there, there's also some ignorant bullshit:

    I will neither give a deadly drug to anybody if asked for it... (IOW, no physician-assisted suicide)

    I will not use the knife, not even on sufferers from [kidney] stone... (IOW, no surgery)

  • Rick Santorum||

    Actually, Tonio, the girl was arguing that adherence to the Hippocratic Oath required government-funded health care. Pointing out that little tidbit would have put a nice troll hole in her reasoning.

  • Mensan||

    Progressives don't reason; they rationalize.

  • Jay K.||

    Excellent video, but the title is extremely misleading.

    The real problem is that nearly all healthcare in the United States is paid for by a third party, whether it's an insurance company or the government, which leads to the massive markups discussed in the video. Obamacare unfortunately does not fix this, it only brings more people into the already broken system.

  • Almanian.||

    ^this. Third party pmt is THE issue. Fix that, and the rest starts to self adjust.

  • Brutus||

    I agree, though I'd amend that to say that first-dollar third-party payments are the problem. We have 3PP in other insurance fields, too, but my homeowner's policy doesn't cover my electric bill and repainting job.

  • sarcasmic||

    If car insurance covered oil changes, my $26 trip to Jiffy Lube would cost ten times that or more.

  • Brutus||

    And, more importantly, you'd pay $10 of it and never, ever know what the final price was.

    I've been going to the doc a fair amount lately, and I'm astounded at the cost of things and the byzantine billing practices. I am vowing to price shop it all soon...let's see if any of these providers even know what the price of their services is.

  • sarcasmic||

    My daughter was admitted last Friday for breathing problems. No time to shop when the kid's lips are turning blue.
    The wife used up the HSA earlier having an ovarian cyst removed.

    I'll be paying this one off at fifty bucks a month for the next three years.

  • Mensan||

    Is she okay? Was it new, or is this a recurring thing (e.g asthma)?

  • Raston Bot||

    regulated to death in 3.. 2..

  • Tak Kak||

    Lew Rockwell recently interviewed Dr. Smith for his show.

    http://www.lewrockwell.com/lew.....ical-care/

  • OldMexican||

    Don't mention the "L" word around here, Tak.

  • BelowTheRim||

    Do Mention it. They are competitors. Albeit Lew Rockwell is an old fashioned man with a very old fashioned site.

    One of the reasons (ha reasons) why I opt this site over his is bc:

    a) no comment boards
    b) read enough of LR's writers and they will put together some really really poor articles and op/eds.

  • NoVAHockey||

    Is this a physician owned hospital? Because the ACA goes after those hard. Of if its an ambulatory surgery center, the hospitals fight to restrict what can/can't be done on an outpatient basis.

  • Brutus||

    Boom. See my 3:33 comment above.

  • ||

    It is, but does not maintain an ER. That's the big difference. And even though a free standing surgicenter (I matriculated to one after I stopped accepting CMS and is in the process of being bought out when I left the US), it still maintains ties to IBH network and all the surgeons are required to have hospital privileges with nearby hospitals for Level II and III surgeries.

    They do the most predictable outpatient ambulatory procedures that don't require hospital stays and accept patients with low risk health HX's.

    Their biggest danger, besides ObamneyCare going after boutique medical centers and practices, actually comes from the State of Oklahoma itself by means of the OK Health Care Authority, an unaccountable advisory board appointed for both SoonerCARE (Medicaid), and InsureOK (subsidized employer insurance), and basically forcing the Surgery Center to accept ANY patient as opposed to "cherry picking" patients, since EMTALA does not technically apply here. The other peril posed is one of the big names in OK health, like SJMC or Ardent Health Networks swallowing up these satellite practices via legislation.

  • C. Anacreon||

    The other peril posed is one of the big names in OK health, like SJMC or Ardent Health Networks swallowing up these satellite practices via legislation.

    Agreed. I think that we will see a lot of cash-based alternatives to Obamacare emerging in the next couple of years -- with even more quickly emerging legislation right afterwards to make such places illegal.

    I wonder how long boutique practices will be permitted, or anything done outside of the web of ACA-approved health insurance. Remember Hillary Clinton's plan back in the 90s would have made it a FELONY for any physician to provide care outside of an insurance arrangement (thus, you could have technically gone to prison for writing an antibiotics prescription for your spouse.)

  • rts||

    A similar idea here in Canada, with predictable results:

    Westbank First Nation hospital likely unconstitutional, says expert

    A B.C. First Nation's plans to build a private hospital in the Okanagan will most likely be challenged by the federal government, according to one constitutional expert.

    ...

    "This proposed health facility would raise Canada Health Act concerns if insured persons are charged for insured health services provided there."

    In other words, "fuck you, go spend your money in the US".

  • Brutus||

    Soon that will be "...spend your money in Mexico."

  • OldMexican||

    Pretty much. Monterrey is filling up with good quality hospitals and clinics, and it is close to the border...

    Isn't entrepreneurship magical?

  • Hyperion||

    Self-funded companies, like individual patients, can negotiate directly with hospitals for lower prices. Recently a handful of self-funded Fortune 500 companies struck deals directly with major hospitals to care for their patients for a negotiated fee.

    Are you saying that all of these companies and people working for them do not have health insurance? I thought that is outlawed under Obozocare?

  • ||

    Don't forget Hyperion, a ton of companies got waivers (remember THOSE?) from ObamneyCare, and can be either extended and rescinded at the will and sole discretion of Sec. Sibelius and HHS.

    I imagine as long as these companies' lists of approved coverage mandates are congruent with current diktat, they will very likely keep those waivers in effect.

    It's good to have friends in high places, no?

  • Hyperion||

    Thanks, that was the variable that I had forgotten about. I thought though, that those are only temporary.

  • Drake||

    I'm 46 and I've never seen a doctor with prices on the wall. About damn time.

  • Red Rocks Rockin||

    This is actually one of the things the government should mandate. Can you imagine the competition if hospitals had to provide a price list of their services, and the Preferred Provider monopolistic bullshit was eliminated?

  • R C Dean||

    Why do you hate contracts, Rocks?

    That's all preferred provider networks are, is contracts between doctors/hospitals and insurance companies, or even plain old companies that self-insure.

  • OldMexican||

    Yeah, with the current system, it is pretty much like this.

  • Rick Santorum||

    The bill, which is strictly for the hospital itself and doesn't include Sigmon's or the anesthesiologist's fees, totaled $33,505. When Sigmon performs the same procedure at the Surgery Center, the all-inclusive price is $5,885.

    The Integris bill for the same nasal procedure went to Blue Cross of Oklahoma, so the patient had no compelling reason to question its outrageous markups. They included a $360 charge for a steroid called dexamethasone, which can be purchased wholesale for just 75 cents. Or the three charges totaling $630 for a painkiller called fentanyl citrate, which all together cost the hospital about $1.50.

    Whoa, whoa, whoa. Is Reason seriously implying this is a bad thing? The hospital, being extremely wealthy, will use that money to reinvest and grow the economy. The administrators making $413,000 a year? Those are job creators. This kind of class warfare stuff is NOT something I appreciate.

  • ||

    Is Reason seriously implying this is a bad thing?

    I'd ask if you're an idiot, but that's pretty obvious. It's a bad thing for the CONSUMERS. Healthcare costs are a big concern, especially as our government uses them as an excuse to meddle in our lives. And you can't honestly call approval of COMPETITION, that the government seems to be against by the way, as "class warfare". You're either really stupid, or a REALLY bad troll.

  • Rick Santorum||

    There are only two classes in society: the makers and the takers. Those hospitals making big bucks? Those are the makers. They're job creators. The people wanting cheap health care? They're the takers stealing the makers' fortune.

  • seguin||

    The hospital and administrators are making large amounts of money because of regulatory capture. That would make them takers, not makers.

  • Mensan||

    Another nice thing about the surgical centers is that they are much more willing to cut you a deal on price than a hospital is. Even though I work in healthcare, I don't have insurance. There are several reasons I won't go into, but suffice to say I've chosen not to have insurance at this time.

    Recently, I had an open umbilical herniorrhaphy done at a surgical center. The average price for this procedure is around $8,000 at a surgical center if insurance is paying, and up to $25,000 at a hospital. The place I went wasn't all inclusive, but after haggling with the surgeon, the anesthesiologist, and the surgical center each separately, my total cost was $1,977.

  • amelia||

    Nice to know it's there. Since I'm uninsured, if I need non-emergency, routine surgery, I might be taking a trip to Oklahoma.

  • 0x90||

    "Patients may have no choice but to look outside the traditional health care industry."

    FIFY. Because that's where you're going. It's not fair that one person is able to afford more medical care, and not for the obvious "eww, rich people" reason: it is because the care he purchases should rightly have gone to someone else. You see, a child died so that you could have that LASIK done. Because the doctor who did it, he should have been doing something else. We have other jobs for him. So go buy some glasses, and help make sure the glasses factory doesn't have to be shut down. There are lens-grinders whose children are counting on you.

  • hotsy totsy||

    When I gave birth to my first child in 1972, the hospital bill was about $700, which was for my grad school student husband and myself, about a month's income.

    When my daughter gave birth last year, the co-pay was $2,000 and $1,000 had to be paid in advance. Total bill was around $15,000, and that didn't include the prenatal care. $15,000 was around six months' income for them.

    Both uncomplicated births, which could have even happened at home, but understandably, medical professionals were on hand just in case of a complication.

    I don't see why an uncomplicated birth should cost six times more in 2012 than in 1972. I don't see the Cadillac vs. Corolla comparison here. Basically the co-pay now, adjusted for inflation, is equal to what we used to pay for the whole thing.

  • TheBigCheese||

    Well, the insurance executives must get their annual bonuses from somewhere.

    Contrary to popular belief, doctor's fee makes up a very small fraction of the hospital bill. When you get rid of the middle man and deal directly with your physician (the way it used to be), cost of care drops dramatically.

  • Ellen K||

    The fault lies in the failure to enact tort reform. All those trolling lawyers that send up daytime TV ads are looking for enough complaints to make a class action suit. Medical insurance providers are notoriously shy of publicity and will settle suits out of court more often than not. I knew an OB/Gyn who was sued by a woman who showed up in his office literally days before delivery. She won an undisclosed claim despite the fact that the doctor had ample evidence it was fraud. When you have to have insurance on every provider from the charge nurse to the equipment and even the medical facility, that adds layer upon layer of additional cost. Remember, every fee, every penalty, every tax is ultimately paid by the consumer. This is why Obamacare is such a total fiasco. And this is why the cost of care is skyrocketing rather than dropping.

  • edcoast||

    Just had a shoulder procedure done at a similar place in Oregon. The surgeon was one of the owners of the surgery center. The total bill is about 1/3 of having it done at the hospital the surgeon is affiliated with. A part of their model is that the clinic does not participate in ANY insurance network, but they accept the payment as if they do. The other thing is when you walk in for your surgery, you better have your checkbook or a credit card. They collect the copay up front. The care was outstanding, personal, fast, and I had a great result. And if you look at the data, these places generally have lower rates of infection that hospitals.

  • Thomas O.||

    Any offices in Ardmore or Durant (planned anyway)? Inquiring Metroplexers want to know.

  • ||

    greater by orders of magnitude

    What does this supposed to mean? Two orders of decimal magnitude is "a hundred times"; maybe the hospital charges/collects one (decimal) order of magnitude more than the Surgery Center, but certainly not by two or more orders of magnitude.

  • Rick Santorum||

    Shut up, you autist.

  • Ellen K||

    As a teacher, whose policy through my school starts Sept 1 every year, I saw the first 15% rise in premiums back in 2011. I saw another 15% this year, along with a $5000 copay.. Every time I have gone to the doctor on top of my copay I get a bill of $135 for an office visit. I have badgered them to tell me the cost of things up front as I am the only one working, but every time we end up paying more. When my doctor told me to get a mammogram I asked the cost. Imagine my surprise to find out that if I used my insurance I would be billed for $311-and be stuck for the whole amount, but if I just paid without insurance, the costs would be $175. I pay over $500 a month for just medical care-we had to drop vision and dental-don't I deserve some sort of break?

    The worst case was my newly married daughter's insurance debacle. She had gotten insurance privately through Blue Cross on her own because the policies at her company were not very good and too expensive. Imagine her surprise that as a married woman under the Obamacare mandates, she is covered for birth control, she is covered for abortion, but she is NOT covered for pregnancy. It turns out that NOBODY is writing policies for pregnancy coverage for private insurance policies. So there's your Real War on Women and the Obama view of "reproductive freedom".

  • Rick Santorum||

    You can't insure against pregnancy.

  • MoreFreedom||

    No wonder hospitals seems to be gold plated with overpaid administrators. They, along with the big health insurers, are now in bed with government. But being in bed with government is like doing deals with the Mafia. When government starts running out of money, they'll be changing the rules to take money from the hospitals and the insurers, and cutting into their $5000 dollar suits. We've lost our freedom to handle our own health care.

  • joey89924||

    Similarly I will not give to a woman an abortive remedy.
    ""&B125;&""

  • mkvalsvik||

    To me, it seems that this Oklahoma medical center is voluntarily incorporating they key cost control measures that ACO's are being incentivized to take in Obama's ACA law ("Obamacare"):
    http://en.wikipedia.org/wiki/A.....ganization

    If that is not the case, could someone set me straight? (With facts or reasoned arguments, please.)

    Thanks,

    Mads

  • Modern Health Talk||

    This article clearly shows that while Obamacare is a good start, more needs to be done to remove 3rd-party private insurers from the equation, and The Surgery Center is one example. WhiteGlove Health is another.

    Obamacare does include a focus on wellness, prevention, positive outcomes, mandates to cover preexisting conditions, and requirements that 80% of insurance premiums must go to actual medical care, but it still relies on insurance companies that have perverse profit incentives to drive UP the costs of care. Insurers also promote fear of lawsuits and the practice of defensive medicine so they can also sell malpractice insurance, rather than addressing the real problem of medical errors in the first place.

    A lot can be learned from medical tourism and innovation elsewhere (see www.mhealthtalk.com/2011/10/innovation-in-india/), and The Surgery Center is an example of innovative ideas here too, with early adopters coming primarily from privately insured employers. Others want single payer universal healthcare, which has worked well for other nations, but how could we deliver that and still encourage innovation and competition? See www.mhealthtalk.com/2012/08/hybrid-model/.

  • achamess@gmail.com||

    Here is a web conference I just did with Dr Smith that expands on the ideas he discussed in this video.
    http://www.youtube.com/watch?v.....e=youtu.be

  • Jordan Thomas||

    This seems like a brilliant idea. However, to qualify it as "vs. Obamacare" is not only reckless, it's sham reporting. Third-party paid procedures have been around for quite some time.
    My only question is why is this not more common?

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