Okla. Surgical Center Reveals Prices to Patients

New tactic could help keep down skyrocketing medical costs.

August 23, 2013, 4:25 PM

Aug. 27,2013—, 2013 -- When Ira Horner, 62, found out how much his knee surgery for a torn meniscus was expected to cost, he worried that he would spend the rest of his life in debt.

A floor associate at Hutchinson Oil, in Woodward, Okla., Horner had health insurance through his employer, but it was unclear as to what he would ultimately be expected to pay.

After talking to friends and nurses at the medical center where he was being treated, Horner estimated the surgery would cost at least $16,000, and he'd end up paying about 20 percent of that plus his $1,000 deductible.

But his doctor never gave him an actual number, he said.

Horner, who in January of this year was getting through his day without fully extending his leg, worried he would be left "thousands of dollars in debt." The surgery wouldn't bankrupt him, he said, but it would require years to pay off.

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He was planning to schedule his surgery when his insurance administrator held an informational session about certain providers in the state that would provide less expensive care for certain procedures. If Horner picked one of these providers, the insurance company would pick up the entire tab.

One provider was the Surgery Center of Oklahoma, an ambulatory surgical center 140 miles away from Horner's home in Woodward, which would perform the knee surgery for approximately $3,400 total. The center is one of the few medical centers that provide up front inclusive pricing for services.

"I thought, Wait a minute … something is wrong with this process," Horner said. The price included the facility fee, the surgeon's fee and the anesthesiologists' fee.

Horner immediately went back to his doctor and gave him an ultimatum: Either work out a lower price plan with my insurance company or lose me as a patient.

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It worked: Horner's insurance administrator worked out a lower price with his original medical center and Horner ended up only paying the $1,000 deductible for his surgery. Everything else would be covered by his insurance.

Horner never even had to travel to the Surgery Center of Oklahoma for so much as a consultation.

It's a tactic that experts say could help keep down skyrocketing medical costs for both patients and insurance companies.

In most industries, prices are posted online, but in the medical field it can be almost impossible to get a procedure's price before the bill arrives. As healthcare costs continue to rise at a rate higher than inflation, some experts are hoping that more medical centers will offer transparent pricing.

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According to a study from the Kaiser Family Foundation, the average annual family premium for 2013 is $16,351, about 4 percent higher than the average premium in 2012. Since 2000, the Health care costs have increased in the U.S from $4,878 per person to $8,680 per person or 2.7 trillion in 2011, according to the Centers for Medicare & Medicaid Services.

Four years ago the administrators at the Surgery Center of Oklahoma decided they would post prices for their surgeries, since they felt their center was more reasonably priced than other medical providers in the area.

Navigating online, patients can figure out pricing for surgeries including rotator cuff, hernia and ligament repair surgery. Prices listed include facility fee, surgeon's fee and anesthesiologists' fee in addition to the initial consultation and anything involved in an uncomplicated follow-up.

There is some fine print about additional costs. Overnight stays, for instance, certain diagnostic tests and implants are not covered in the price.

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Co-founder Keith Smith said that by putting their prices online they've attracted a variety of patients who never would have come to Oklahoma for care. Patients have flown in from across the country and abroad.

Today the center has approximately 40 staff members and 50 doctors who perform more than 7,000 surgeries annually.

"Being upfront with our pricing, I haven't felt like anyone has tried to compete with me," said Smith. "But I'm ready for that and I'm ready for some healthy competition."

Experts say that if other centers decide to be transparent on pricing, it could have a wide-ranging effect."The prices [for medical care] make absolutely no sense out there," said Gerard Anderson, director of Johns Hopkins Center for Hospital Finance and Management. "If one hospital is going to open the veil of pricing, then everybody else is going to have to do the same thing. But so far they've all been unwilling to open the veil."

Smith said he has received multiple emails from people who say they successfully argued for a lower-priced procedure with their local health provider after printing out prices from the Surgery Center of Oklahoma's website.

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Although the Surgery Center of Oklahoma is a relatively small medical center, the push to have more transparent medical pricing has reached a national level.

In May the Centers for Medicare and Medicaid Services released data for the 100 most common in-patient and outpatient procedures covered by Medicare. The data revealed an incredible range of prices to treat the same ailment, sometimes even in the same city. The cost to treat heart failure ranged from a low of $21,000 to a high of $46,000 in Denver.

"Currently, consumers don't know what a hospital is charging them or their insurance company for a given procedure, like a knee replacement, or how much of a price difference there is at different hospitals, even within the same city," Secretary of Health and Human Services Kathleen Sebelius said in a statement. "This data and new data centers will help fill that gap."

Experts, however, caution that the information can be misleading for patients, since the hospital's original charge or chargemaster price is almost never paid in full by an insurance company.

However, those who are uninsured and lack an insurance company's barging power, are often charged the full amount.

A number of states have laws about health care transparency; New Hampshire has an online database that estimates healthcare costs for different procedures at certain hospitals in the state.

Larger medical centers face other obstacles in making their prices public. Experts point out that prices for procedures and medication varies wildly depending on who is paying. Different insurance carriers can have negotiated certain prices for procedures, which can vary greatly, and the uninsured can be charged prices astronomically higher than those paid by private insurance carriers or Medicare. Additionally, since usually it is the insurance company that will cover the majority or all of the bill, the patient has less incentive to find out the price or argue for a lower one.

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Medical centers with hundreds or thousands of employees also have much higher gross overhead costs than the relatively small Surgery Center of Oklahoma. They also have to treat all patients that are in need of care, whereas the Surgery Center of Oklahoma offers specialized care.

Katherine Hempstead, the senior program officer at the Robert Wood Johnson Foundation, said that transparent pricing may not affect many customers because their insurance will cover the price. Instead it could be more helpful for insurance companies to make clear what different medical centers will cost for each individual policy holder through their deductible or co-insurance payment.

"A lot of consumers don't necessarily care," said Hempstead. "Pretty much, they're not sensitive to price information."

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Others worry that by providing price transparencies without also being transparent about the quality of care, patients could end up at medical centers that don't provide a good standard of care.

"In the absence of quality information, you shouldn't assume that cheaper is better or more expensive is better," said Rosenthal.

However, Rosenthal thinks by learning more about healthcare costs, patients can begin to demand more from both their insurance companies and their healthcare providers.

"[I want to] be careful of excessive early optimism," said Rosenthal. "[But] the conversation -- Why are we paying so much? -- is escalating, and that's important."

For Horner, the ability to price shop was key to staying out of debt and receiving appropriate care. More than six months after Horner's surgery to repair his knee, he is able to walk just as well as before his injury, and no medical bills are lurking in his mailbox.

"I've had a few surgeries in my life and it's always a guess [on the price] when all the bills showed up," said Horner."[With this surgery] I had no more additional costs. It was a huge relief to me."