Hospital price transparency: Surgery Center of Oklahoma

Filed Under: Costs, Patients, Providers

(Updated, August 2019) One of the first surgical providers to post prices online in volume was the Surgery Center of Oklahoma, an ambulatory surgical center with 52 surgeons and anesthesiologists  in Oklahoma City. Dr. Keith Smith, a co-founder, is proud of the center’s record for transparency. We caught up with Dr. Smith for a phone interview not long ago, in advance of rolling out our new hospital price database.

The Surgery Center’s website speaks proudly about price transparency. It says, in part:

“It is no secret to anyone that the pricing of surgical services is at the top of the list of problems in our dysfunctional healthcare system. Bureaucracy at the insurance and hospital levels, cost shifting and the absence of free market principles are among the culprits for what has caused surgical care in the United States to be cost prohibitive. As more and more patients find themselves paying more and more out of pocket, it is clear that something must change. We believe that a very different approach is necessary, one involving transparent and direct pricing.

“Transparent, direct, package pricing means the patient knows exactly what the cost of the service will be upfront.”

These prices are cash prices — the site is very clear to say that if the center’s filing insurance, then the prices will be very different.

Dr. Smith, 53, got his M.D. from the University of Oklahoma. His ambulatory surgical center has been in business since 1997, and it sees about 7,000 patients annually. Here’s our interview, lightly edited for clarity.

When did you start publicizing prices, and why?

We put our prices online five years ago this month. We did it for several reasons. We did it because we wanted to become more visible to people who pay their own bills — people with high deductibles, high insurance payments, employers.

We’ve become more aware that the U.S. health-care system worked more like a Mexican drug cartel than it did as a free market — we wanted to expose what I like to call a syndicate, to say that the providers and the insurers work hand in hand to make sure that high-quality, affordable care is not part of the mix.

We wanted to show that an ambulatory surgical center could do these procedures for one-tenth of the price. We wanted to show that free markets do apply in health care, contrary to what people think. We wanted to start a price war, get some competition, because that makes us all better.

Indeed that’s what’s going on.

There are a few that are putting prices online. There are a lot that are about to. In the next 12 months, you’ll see a lot of price displays, all over the United States.

If you want to go outside the United States, you can find all kinds of prices. The domestic medical tourism industry and concept is now growing quite rapidly.

In the next 12 months, you’ll see dozens if not hundreds listing prices. We have started  a platform where like-minded people in the industry can meet, like Match.com.

They will be visible here  to those who are seeking them out. They will be able to exchange information: here’s what I do, and here’s what  need to get paid to do it.

This Free Market Medical Association is a trade association, where physicians, hospitals, surgery centers and imaging centers will be members, and also  self-funded businesses, third-party administrators.

There are four of us involved: I’m one of the principals.  if it’s a physician or a facility, they can join and either use the association as a resource to help them get to a place where they can display prices, or they can actually display their prices.

On your Surgery Center of Oklahoma site, how often are the prices updated?

I’ve changed our prices three times in five years, other than adding new procedures.

Two times the price change was lower; last time some of the prices went up, because I discovered some math errors.

Overall we have not had an increase in our prices online for the 5 years that it has been running.

We do change prices from time to time — if I hear that someone is undercutting our prices. Local facilities are feeling the pressure, seeing patients walk in to the hospital with our price list in their hand.

People from all over the U.S. say they are using our prices to leverage a deal in their local market. If I hear one of our local providers is matching us or undercutting us, I can easily change our prices online.

Do you know of others who are doing similar things with price transparency, besides Ocean Surgery in California, which you blogged about recently?

There are several in Texas, also  one is Pine Ridge Surgery Center, Monticello, Va., run by Dr. William Grant; a surgery center in Charleston, S.C.; Regency HealthCare in Manhattan; and General Surgeon in Las Vegas, Nev.

I think we’re in a transition now where people who who do not reveal prices will if you call. What I think we’re about to see is a widespread display of pricing.

People ask us a lot about quality: they say “we don’t want the cheapest surgery — we want the best value.” What’s your best advice for people seeking good quality metrics?

Quality is hard to measure in health care partly because there are so many people in hospitals that game the quality metrics; if a lot of unnecessary surgery is going on at a hospital, their results will be quite good, because there was nothing wrong with the patients to begin with.

The push for quality and outcomes-based pay is a rationing tool.
The very sick patient is going to have a hard time getting in to see a surgeon whose profile will be modified by that patient’s outcome.

There’s no relationship between price and quality.

The only thing the price of health care tells you in a given region is how monopolistic the practice of health care is in that area, or the extent to which a health care system has complete control over health care in that area.
For instance, if you have one giant health care system in a town, or even two, the prices will be much higher than if you had 6 or 7 in that area.
Price has nothing to do with quality, and everything to do with acting in a monopolistic situation. They’ll get patients anyhow — they don’t need to work

If you see a low price somewhere, that’s an indication that providers want to compete.

Lower prices in health care most of the time indicate higher quality. Higher prices indicate lower quality, that the free market is absent, that there isn’t much competition.

At a surgical center, look at infection rate, unexpected readmission. Anything else is easily gamed.  We put our infection rates online for everyone to see [Editor: Here is the Frequently Asked Questions page, which displays that rate.]

I encourage people to take any value judgement that they see in health care with a grain of salt.

What do you think the landscape for pricing transparency will look like in 2 years? 5 years? 10 years?

The price transparency movement is a cat out of the bag that is not going to go away, even  for those who want it to.