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The Miracles Wrought by Price Transparency


A surgery center in Oklahoma has started a bidding war by offering drastically lower prices than other providers and posting them online. The center describes itself as “free-market loving”—an unorthodox but welcome branding for a health care provider. The evidence of its success, however, is eye-popping. Where some hospitals charge more than $16,000 for a breast biopsy, Oklahoma Surgery Center charges $3, 500, according to a local Oklahoma news station. And that’s just one of many impressive examples.

It’s not specified exactly how the center affords to charge so much less. Critics accuse it of “cherry-picking the healthiest and wealthiest patients”, but given the massive amount of waste, fraud, and abuse in the health care system, it’s not impossible that a surgery center could survive with modest profits on this price scale if it eliminated existing inefficiencies. As Dr. Smith, one of the center’s co-founders, told Reason:

“One reason our prices are so low,” says Smith, “is that we don’t have administrators running around in their four or five thousand dollar suits.”

Or, as he’s quoted in the local Oklahoma story:

“What we’ve discovered is health care really doesn’t cost that much,” Dr. Smith said. “What people are being charged for is another matter altogether.”

As a result of the center’s price transparency, patients have begun demanding that other hospitals or centers match the posted prices. Some have caved to the consumer pressure, following the center in offering full price transparency.

This is an excellent example of the kind of progress we can see in health care if consumer pressure is allowed to exert itself on the system. It’s also a good reminder of just how much impact administrative costs have on the overall tab for health care. At the moment, there are countless barriers to a true free market in health care, but it looks like the Surgery Center of Oklahoma has found a way to tear down at least a few of them. This is exactly the sort of thing we need to see if we want to make serious headway in the health care crisis.

[Surgeon image courtesy of Shutterstock]

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  • Jim__L

    “cherry-picking the healthiest and wealthiest patients”

    Healthy, I understand. But how does cherry-picking the wealthiest patients reduce costs?

    Good for Surgery Center Oklahoma! Spreading this out over the rest of the country could have the huge positive impact we need, putting ObamaCare to shame.

    • dawadu

      The only way picking the wealthiest could be cherry picking is that even at reduced prices you could have patients who don’t pay if you select them w/o considering income.

      • Jim__L

        So, patients who don’t pay drive up prices for patients who do? Plausible. I wonder how much effect that really has.

        • dawadu

          Yes people who don’t pay do drive up the cost for those who do, only if the hospital/physician couldn’t find other ways to cover the dollar amount of the services provided.
          As to how much of an effect this has, in my opinion it is a factor but I don’t know how big a factor it really is.

  • rheddles

    Hmm. Seems a lot like the kind of attitude that needs to hit that other sinecure of government subsidy and protection, education.

  • Nick Bidler

    Would that other hospitals would follow their example!

    On the other hand, ‘other hospitals’ are probably the ones that charge the $16k and don’t want to publicize it.

    On the OTHER other hand, if enough hospitals post prices, the ones that don’t will be treated as ‘pleading the fifth,’ suspicious but not necessarily incriminating.

    On the Other Other Other hand, this bidding war would lead to misleading prices and ‘hidden fees,’ but would be better than the total opacity that is currently in effect.

  • ojfl

    Excellent news. When health reform was being debated some of us said that the best way for cost control was to introduce competition and economies of scale. Articles such as these prove we were right.

  • Splashman

    Mr. Mead, you reported that “according to a local Oklahoma news station”, a breast biopsy at Surgery Center of Oklahoma costs $3500. I’m no tech genius, but it took me all of 30 seconds to google “Surgery Center Oklahoma”, find their website, click the “pricing” tab, select the “breast” category, and scroll down to “mass excision/biopsy” which is listed at $2365.00 (32.5% less than $3500).

    When reading blogs, I’m always looking for evidence of credibility (or the converse). Regardless of the exact details in this case, it is disappointing that for an article mostly centered on the Surgery Center of Oklahoma, you would rather rely on a potentially erroneous 3rd-party link than do 30 seconds of research and link to the original source.

    A reminder: this isn’t 1970.

  • Splashman

    My sister just had an appendectomy. It hadn’t ruptured, and there were no complications. She was in the hospital for 26 hours, most of which was waiting for the surgeon. The hospital’s bill: just over $36,000. And that doesn’t include fees for the surgeon or anesthesiologist — she doesn’t even know yet how much those will be.

    She’s a cash patient, so it’s likely she’ll be able to talk the prices down, but what a stupid system. All thanks go to our well-meaning but tragically misguided government.

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