Fifty Percent Off. Of What?
By Amy Willis
Can you imagine a surgeon who tells a patient they don’t need surgery to ameliorate their condition? According to doctor-entrepreneur Keith Smith, this often happens at the Surgery Center of Oklahoma, of which he is a founder. In this week’s episode, EconTalk host Russ Roberts invited Dr. Smith to describe how this completely transparent (they post prices and infection rates on their website!) free-market surgery facility operates.
Would you travel to another country or state to save money on surgery? What if your employer paid the bill? Do you agree with Smith that, “the engine that will ultimately move the United States more toward a market system.”
1- The Surgery Center accepts no health insurance. What does Smith mean when he says, “…the insurance companies- they started this.” Why would insurance companies not want to deal with them?
2- Roberts and Smith spend a good bit of time discussing the pricing of health care. This suggests lot of questions…
- How does the way surgeons are paid in ‘regular’ hospitals compare to the way they are paid at Smith’s facility?
- What does it mean to Smith to have “disintermediated the system?” What does it mean to have surgeons paid “based on their relative value unit production?”
- Smith remarks, “Hospitals are paid to the extent that they claim that they were not paid.” What does this mean? uncompensated care. What do “disproportionate share hospital payments” and “claims repricing” mean, and how do they contribute to the cost of services at traditional hospitals?
- Why is it so costly to open a new hospital?
3- Smith says there are two economic models that can be employed in running a health care facility- maximizing revenue, and maximizing value. What’s the difference between the two? Which is Smith’s facility an example of? What characteristics does it have that indicates its model?
4- How is waste in a big hospital encouraged compared to surgery centers? What are some of the ways the Surgery Center of Oklahoma deals with waste by contrast?
5- The conversation ends with perhaps the most vexing question of all: What about the poor??? How does Smith respond? To what extent does his response satisfy you, and why?