Disruption of the Healthcare Syndicate

By: G. Keith Smith, M.D., http://www.aapsonline.org/

My introduction to the practice of medicine began before I went to medical school. Dr. Don Garrett and Dr. Richard Allgood, both thoracic surgeons, allowed me to spend enough time with them to absorb countless lessons, many of which remain with me to this day. While both of these talented surgeons are now retired, their dedication to their patients and the precision and intensity with which they approached patient care are legendary even now.

Their surgical practices were huge, by any measure. They performed more surgical procedures in a week than most surgeons did in a month. The hospital in which they worked owed its success largely to these two men. They let the hospital administration know what they wanted and what they needed. And they got it. The administration could hardly afford to consider the alternative. But the administrators’ resentment grew, and they bided their time, eager for the day when they could turn the tables and call the shots.

Enter the HMOs and PPOs. The Health Maintenance Organization concept was so poorly received that a different three-letter combination was needed, although the Preferred Provider Organization concept was basically the same. PPOs provided the infrastructure for the syndication (cartelization) of the healthcare industry, the opening that power- hungry administrative types had been waiting for. Indeed, this was the beginning of “steerage” of patients to hospital systems that had made deals with their insurance pals—deals from which everyone but the patient benefited.

This coercive, anticompetitive system has survived to this day, under government protection, resulting in the runaway costs and obscene corporate profits you would expect. This syndicate generates gigantic hospital bills, and the extent to which these bills remain uncollected provides the basis for the taxpayer subsidization known as the uncompensated care system, or disproportionate share hospital (DSH) payments.

The hospital charges $100 for an aspirin, collects $5, and claims to have “lost” $95. Such false losses maintain the fiction of the hospitals’ “not for profit” status. Often, insurance companies sell their “discounting” services. For example, they may reduce a bill from $100,000 to $20,000 and collect a percentage of the false “savings.” This is the “repricing” scam. This setup perversely inclines the insurance carriers to seek out the highest bills they can find, assiduously avoiding better priced alternatives.

Nothing could be more disruptive to this syndicate than a fresh dose of the principles of the free market, more specifically, upfront and transparent pricing. Not only does reference pricing expose the health care racket, but simultaneously provides a powerful deflationary influence, as fear of the loss of patients to a better-priced facility retains great power even in this corporatist soup.

A great disruption of the syndicate has arrived, beginning Jan 1, 2014, as several self-funded companies have formed relationships with facilities like ours. The company relieves its employees of their deductible and co-pay should they decide to obtain their care at our facility. Quite simply, the employers have discovered that they are financially better off paying their employee’s entire bill at our facility, rather than have their employee bear part of the cost at one of the traditional hospitals.It is not uncommon for the entire bill at our facility (including facility, surgeon, and anesthesia charges) to be less than the patient’s deductible and copay alone at one of the “not for profit” hospitals.

Now imagine the conversation in the primary care doctor’s office when the doctor (a hospital employee) recommends a surgeon who is also a hospital employee. The patient, an employee of the self-funded company, informs his primary care doctor that he is going to see a surgeon who works at the Surgery Center of Oklahoma, as this decision will save all his out-of-pocket expense.

All the efforts to control patient referrals and provide “steerage,” all the money spent to buy physicians’ practices—all of this is unraveling. We can’t come full circle soon enough, to a point where the physicians and not the suits are controlling patient care.

I believe that I will see in my practice-lifetime a shift back to the practice model I witnessed following my friends Don Garret and Richard Allgood. Their patients benefited both from their unique surgical giftsand from their ability to control their care environment.



gk_smithAuthor / Contributor bio:  Dr. G. Keith Smith is a board certified anesthesiologist in private practice since 1990.  In 1997, he co-founded The Surgery Center of Oklahoma, an outpatient surgery center in Oklahoma City, Oklahoma, owned by 40 of the top physicians and surgeons in central Oklahoma.  Dr. Smith serves as the medical director, CEO and managing partner while maintaining an active anesthesia practice.

In 2009, Dr. Smith launched a website displaying all-inclusive pricing for various surgical procedures, a move that has gained him and the facility, national and even international attention.  Many Canadians and uninsured Americans have been treated at his facility, taking advantage of the low and transparent pricing available.

Operation of this free market medical practice, arguably the only one of its kind in the U.S., has gained the endorsement of policymakers and legislators nationally.  More and more self-funded insurance plans are taking advantage of Dr. Smith’s pricing model, resulting in significant savings to their employee health plans.   His hope is for as many facilities as possible to adopt a transparent pricing model, a move he believes will lower costs for all and improve quality of care.

Dr. Smith resides in Oklahoma City, Oklahoma.


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