A fellow fan of the free market and a supporter of our transparent pricing model at the surgery center put this question to me during an interview:  ”Detractors may say you are sacrificing quality to minimize cost.  What do you say to that?”

Here was my answer to him…I thought you might find it interesting:

“This question makes certain assumptions I’d like to address individually.  First, for anyone to assume that there is any relationship between the quality of medical care and the cost of medical care is simply not justified.  There is no relationship between cost and anything in medicine, as markets have been severely disrupted by the federal government and the cartel they have helped to create.  Second, detractors that have made this charge are using “normal” hospital charges as a legitimate frame of reference.  Once again, this is not well founded.  We bill for what we do.  Hospitals bill for what they use.  Hospitals are thus inclined to embrace waste as their reimbursement depends on it.  That we charge $3740 for a knee arthroscopy and a hospital charges $25,000 for the same thing doesn’t mean that our charge is too low.  It suggests the extent to which we have all been conditioned to expect bankrupting bills for medical care, bills that have no justification that I can ascertain.  Have you ever thought, “how did they come up with that amount,” when you have been to a hospital?  Here’s how we did it.  I looked at the range of payments surgeons were willing to accept from various third party payors for the procedures they perform.  I wanted the surgeons to be paid very well, so that when I called them, they would jump through hoops to work patients in right away.  As an anesthesiologist, I basically bill for my time and I knew what each of the procedures would require, so the anesthesia component was pretty cut and dried.  The facility charges are representative of the supplies used to perform a case and the amount of operating room time required for each case.  We have been in business since 1997 and these variables are all available to us.  A reasonable margin was applied and we had our numbers.  This margin represents profit or wiggle room if we need it for something unforeseen.  This leads me to my final point:  we don’t know if our prices are “right” or not.  We won’t know this until someone else or lots of people start posting their prices.  True and open competition will reveal the true “market clearing” price, that price where neither shortages or surpluses exist.  This varies from day to day, place to place and person to person.  This concept once understood indicts any fee schedule or price control for the insanity that it is.  We don’t want to necessarily be the cheapest.  Everyone understands the concept of value and that is our goal:  best value.  That we happen to charge 1/10th of what the local so-called not for profit hospitals charge is a great starting place we think.  No hospital that I know of would dare go head to head with our facility in a comparison of quality parameters.  We publish our infection rate online in our FAQ section.  I’d also like to reiterate that none of our surgeons are hospital employees and therefore have no conflicts that would interfere with quality care.  Hospital employees are often times conflicted about what’s best for the patient versus what’s best for their boss.  This is a significant quality parameter in my opinion, one which any patient or organization should take very seriously.”

G. Keith Smith, M.D.