Image by jodeng from PixabayOver the past decade, Oklahoma City has seen an influx of visitors from out-of-state, and it’s not just for the National Cowboy Museum.
The city is home to health care’s new frontier, according to Dr. Keith Smith of the Surgery Center of Oklahoma (SCO).
“A $3,000 procedure at my facility is a $30,000 procedure in Miami, Idaho or California,” Smith told ASC News.
SCO, co-founded by Smith, is one of the first ASCs in the U.S. to embrace fixed, transparent pricing. His facility offers a wide range of surgical specialties, including orthopedics, podiatry, urology, gynecology, general surgery, oral surgery, ears, nose and throat (ENT) procedures, and more.
“We have no insurance contracts whatsoever,” Smith said. “We do not accept money from Medicare or Medicaid. All of our patients either pay us directly, or their employer pays us. We have hundreds of contracts with self-funded employers in the United States, all of whom fly their employees to Oklahoma City to have their surgery and waive all of their out-of-pocket expenses.”
Smith and his partner, both frustrated by the excessive charges hospitals were imposing on patients for simple procedures and the decreasing fees for physicians, decided to start their own surgery center in 1997. Their goal was to offer transparent pricing, informing patients up-front about the total cost, whether they had insurance or not.
They began by creating a list of procedures with fixed prices, covering the surgeon, facility and anesthesia.
In 2009, they published their prices online, attracting uninsured patients from across the U.S. and even from Canada. Eventually, self-funded employers began contracting with SCO, flying their employees to Oklahoma for surgeries, as the costs at Smith’s facility were dramatically lower than those at traditional hospitals – often 6 to 10 times cheaper.
Smith calculates the costs by adding the surgeon’s fee, his anesthesia costs and the operational costs, ensuring a fair, transparent pricing model, he said.
SCO’s prices are often lower than what Medicaid and Medicare reimburse hospitals, he said.
“This is because of the price difference between what we have posted online and what is typically available at a so-called not-for-profit hospital in almost any part of the United States,” Smith said.
The advantages of this model extend beyond patient satisfaction, Smith said. Surgeons at SCO are compensated significantly more than they would be under traditional insurance contracts.
“We essentially operate as a pass-through with very little profit,” he said. “The surgeons make multiples of what they would receive elsewhere, and they get paid quickly – often within 30 days,” he said.
“Financially, I’m able to attract the best surgical talent in the whole region, because we pay them so handsomely,” Smith added. “Everything about it, all the employees here have smiles on their faces. None of the patients are here because they’re in some network, and they feel like they have to be here. The patients that are here want to be here, and so they are, typically, more full of gratitude toward the staff than then your average facility.”
The free market movement
SCO isn’t alone. The fixed pricing model is gaining traction across the country, largely due to the efforts of organizations like the Free Market Medical Association (FMMA).
Co-founded by Smith of the SCO and Jay Kempton, FMMA promotes transparency in health care pricing, and it facilitates relationships between surgery centers and self-funded employers.
“ASCs that are open and honest with their pricing should win in the marketplace, just like in every other industry,” Kempton, who also is owner of The Kempton Group, a third-party administrator, told ASC News. “The key to this is not being forced to compete on hospital terms, but to provide a better product at a lower price for the self-funded health plans.”
About 40 states have ASCs that have begun offering bundled cash pricing, Kempton said. These facilities range from physician-owned ASCs to rural hospitals, with the most significant growth happening in states like Oklahoma and Texas.
And, in recent years, the federal government has made it known that fixed pricing is a growing priority.
The Transparency in Coverage Rule, finalized by the Centers for Medicare & Medicaid Services (CMS) in 2020, requires most health insurance plans to disclose detailed pricing and cost-sharing information.
Similarly, the Hospital Price Transparency Rule, implemented in 2021, mandates that hospitals publicly post the prices for various services, including negotiated rates with insurance providers and cash prices for uninsured patients.
“For too long, Americans have been in the dark about the cost of their health care until after they obtain services and receive a bill,” CMS wrote.
Another fixed pricing pioneer
Located in Zionsville, Indiana, WellBridge Surgical is also pioneering a fixed-pricing model by offering bundled, up-front pricing for outpatient procedures that include the facility, surgeon and anesthesiologist fees.
Their pricing, which can be 30% to 60% lower than traditional health care systems, is highly attractive to self-funded employers, self-pay patients and those with high-deductible insurance plans, Jeff Williams, co-founder of WellBridge Surgical, told ASC News.
“Patients don’t get five or six bills later with no idea what they mean or what the total cost is going to be,” he said. “We post our prices online, and what you see is what you pay. This is especially important for people with high deductibles who essentially end up paying out of pocket for their care.”
WellBridge has seen considerable success in Indiana, partnering with approximately 65 self-funded employers, covering 65,000 lives across the state, Williams said. The center’s transparency and fixed pricing are key elements in their ability to attract new patients.
The unique approach of WellBridge includes a “zero-tier” model, which allows employees of self-funded employers to undergo surgery without a deductible when they choose WellBridge.
And WellBridge may be looking to expand its operations by acquiring new facilities and establishing additional locations across the U.S., Williams said. Despite initial skepticism in the Indianapolis area, where WellBridge has been operating for three years, the center has proven that its model of transparency and affordability in health care is both possible and needed.
“Consumers want transparency in their health care and in the quality of care,” Williams said. “They want to know what they’re going to pay because they’re really sick of overpaying. The No. 1 reason for bankruptcy in America is health care, and it doesn’t need to be that way. So yeah, we’d love to set up more of these centers. We’re currently looking at a couple of cities and states, and our goal is to establish as many as we can.”
Best practices for ASC operators
For ASC operators considering adopting a fixed pricing model, Kempton suggested starting small and focusing on areas where the center excels.
“We have an expectation that if a foreseeable complication occurs in one of these cases, it is the responsibility and financial burden of the ASC to essentially absorb that complication,” Kempton said. “You want to make sure that it’s something you’re highly confident in, with a high probability of being able to deliver great outcomes consistently.”
After getting their feet wet, operators can, at their own pace, choose to start expanding their free market offerings, he said.
“I wouldn’t want to go out there and offer everything,” Kempton said. “I always tell the providers, put your best foot forward to begin with.”
Facilities don’t need to abandon insurance contracts entirely, but they should consider quoting prices for self-funded employers or cash-paying patients, Smith said.
“Post your prices,” he said. “Be upfront with patients about what they will pay and provide excellent care. You’ll see patient flow you might not have otherwise.”
Additionally, ASCs should prioritize targeting self-funded employers, as they are highly motivated to find cost-effective, high-quality care for their employees, Kempton said.
“This movement is really, really geared towards the participants that are most successful,” he said. “They focus their efforts into driving value to the patient and to the buyer, whether it be a self-funded health plan, an employer health plan or the key is a self-funded health plan.”
Unlike other industries where delivering the best product at the best price leads to success, health care doesn’t always follow this principle, Kempton said.
Many ASCs, despite offering better services at lower prices, struggle because they are often overshadowed or forced to sell to large hospital systems. These ASCs try to compete on the hospitals’ terms, which puts them at a disadvantage.
Instead, Kempton suggests that ASCs should focus on reaching price-sensitive buyers, such as self-funded employers, who value both quality and affordability. By targeting this market, ASCs can better position themselves for success.
“[ASC operators] need to start reaching out to the price-sensitive buyer who experiences sticker shock,” he said. “Aside from individual patients, the other price-sensitive entity in this market, which also seeks high quality, is the self-insured or self-funded employer. ASCs would be remiss not to target that market.”
