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How to manage health care

December 22, 2013

I’ve mentioned price transparency for health care before. This article in The Freeman describes a surgeon who’s making it happen. And he confirms my long-held idea that what makes medical care so expensive is all the paperwork and overhead.

Can This Man Save Healthcare?

While the country focuses its attention on the sputtering implementation of the Affordable Care Act (ACA), one man is quietly revolutionizing American medicine. Dr. Keith Smith, founder of the Surgery Center of Oklahoma (SCO) in Oklahoma City, is bringing market forces to healthcare by posting his prices online.

Healthcare costs in the United States have increased at an average rate of 7.7 percent per year since 1980, compared to 4.6 percent for the consumer price index. Smith believes price wars and other market mechanisms, not increased government control, are the best way to stem and reverse this inflation. With the ACA’s implementation, the prospects for formal healthcare policy changes are limited. Smith hopes, however, that he and a handful of other transparent fee-for-service providers will be the vanguard of a free-market movement that runs parallel to the ACA. “The price transparency and price deflation,” Smith says, “aims at the soft underbelly of the beast.” […]

Healthcare Doesn’t Cost That Much

According to Smith, “Healthcare doesn’t cost that much, but what healthcare professionals charge is another matter.” By cutting out hospital administrators and the bureaucracy involved with third-party payers, the SCO is able to offer healthcare services at deep discounts. For example, for a patient with a bad back, the SCO was able to perform a two-level disc decompression for $8,500. That paid for the surgeon, anesthesia, and supply costs as well as an overnight stay. The patient’s next-closest bid was $60,000, saving his company’s health plan $51,500. While few would argue that high four- to low five-figure treatment costs are cheap in absolute terms, in relative terms they are. For major spine surgery, the SCO charges $16,500, which Smith admits “is a lot of money, but people are flying here from Alaska and Massachusetts to get this price because in their home states it’s not uncommon for this surgery to cost $175,000.” […]

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