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Hospital Price Transparency: Boon or Bust for Your Practice?

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Publishing surgical prices online makes good business sense for some organizations, and for many patients too.

Dr. Keith Smith and Dr. Steven Lantier first published the rates for procedures at their Surgery Center of Oklahoma (SCO) in Oklahoma City on the Internet over four years ago.

For most procedures, including orthopedics, ear/nose/throat, urology, ophthalmology, foot and ankle, and reconstructive plastics, their prices were a fraction of what patients were used to paying at other facilities.

For one knee surgery for a torn patella tendon, the price in California was $30,000, compared to $5,700 at the Center.

Smith and Lantier wanted to build a reputation as a high quality, low price surgical provider in the community and to appeal to uninsured people and large companies that self-insure. Slowly but surely the idea caught on, said Smith, a board certified anesthesiologist.

“In the last four and a half years every one of those goals has been achieved and in addition, we kind of started a price war,” Smith told HealthBiz Decoded.

Patients from all over the U.S. started flying to Oklahoma City for even minor surgeries, and the Center was flooded with new business.

But ripples of change spread beyond Oklahoma. Some patients took the prices they found online for Smith’s procedures and presented them to their local surgery facilities in a kind of retail price-matching strategy that actually worked, he said.

“There are patients all over the country that are receiving better priced care because they’re leveraging their local hospitals with prices we put online,” Smith said.

“One man in Georgia needed a prostate operation and was billed $40,000 by the local hospital. Our price online was $3,600, so he showed a plane ticket to Oklahoma City, in one hand and our price list in the other hand to this hospital administrator and the administrator caved and said ‘we’ll do it for $4,000’ so we saved that guy $36,000 to get his surgery.”

The Center is owned and controlled by the doctors who practice there, which is part of the reason they are able to offer such drastically low prices, he said.

In Oklahoma City, many other facilities have followed the transparency trend, and though they don’t publish their prices online, clinics and hospitals will give you a price if you call ahead and ask, Smith said.

Oncologists, gastroenterologists, outpatient radiology centers and even an emergency room at a hospital will now quote prices by phone.

“I’ll have competitors, and I’ll have people that will probably undercut my prices. I’ll either have to respond to that by lowering mine or by offering something of more value,” he said. ‘You don’t necessarily want to go to the cheapest place, you want good quality too. I think we’ve needed healthy competition in medicine for a long time.”

Smith would recommend price transparency to any other provider, even though that would mean more low-price competition for him.

“It’s a bit counterintuitive, but its one of the smartest things that we’ve done in our practice,” he said.

While Smith believes a free-market based system with transparent pricing would solve many of the problems in American healthcare, not all experts agree.

In “Why Pricing Transparency Won’t Affect Hospital Pricing,” Dan Munro notes that medical bills in the U.S. are exorbitant, but many hospitals are still losing money. Almost a quarter of U.S. hospitals are not profitable, according to Dr. Delos Cosgrove, CEO of the Cleveland Clinic.

Except in cases like Oklahoma where the facility is owned and controlled by its doctors, it’s unlikely all hospitals could afford to lower their prices drastically even if they were made transparent, Munro writes.

But for those who can, the move seems to make good business sense, Smith said.

3 Responses to “Hospital Price Transparency: Boon or Bust for Your Practice?”

Mike Joannides

Great idea!!!!! I hope more doctors can get involved and promote this in hospitals. Why are hospitals losing money? Is it insurance companies? Maybe we could see some of this logic in the insurance communities.

Ms. Barbara Watson

One of the best things I’ve read in a long time!

So much I’d like to say on this, but I’ll put my two cents worth
in later.

Earnestine Cury

I do feel that in some cases the services are too costly and If you can get the same services and good quality service then go for it.