Every once in a while information meant to stay secret leaks out.  Like Integris’s revenue numbers with the Garth Brooks case:  $200,000,000.  Tidbits like this raise all sorts of questions, many we’ve raised on this blog.  Here’s another.

 I stumbled across an article in the trade journal, “Outpatient Surgery,” by two lawyers, Sokol and Kaye.  It is a general forecasting article with predictions regarding the ambulatory surgery center industry.  They predict that more and more surgery centers will be acquired by large health systems.  Typically large health systems (big hospitals) buy physician- owned surgery centers and…ready?….close them!  That’s right.  Shut them down.  They don’t want the facility.  They want the patients.  They want that revenue.  The most aggressive offenders are (surprise!) the not-for-profit health systems.  I quote from the article,”Some health systems have gained a considerable competitive advantage in the ASC (ambulatory surgery center) market through their third-party payor contracting. ASC’s affiliated with these health systems are often able to receive substantially higher reimbursement than individual ASC’s from commercial payors for the very same procedures, with all of this heightened reimbursement falling right to the bottom line.”

Later,”Alternatively, the health system, ASC company and physicians will each own interests directly in the ASC.  The ASC and its physician-partners benefit from the management expertise of the ASC management company as well as the higher commercial reimbursement rates of being associated with the health system.

Later, “Of 179 closures (of ASC’s) since 2009, about one-third were a result of purchase by a hospital, according to research by the Ambulatory Surgery Center Association.  ASCA research shows that nearly 40% of facilities that closed in 2011 have been purchased by a hospital. 

This is blockbuster stuff.  Think about what these guys are saying.  If you go to a surgery center that is affiliated with a hospital, it is going to cost more than if you go to one that is not.  Period.  Ouch.  This fact has been well-known to those of us in this industry for some time, but here it is in black and white.  These two lawyers are, of course, saying this is a good thing and is a great reason to affiliate with a hospital if you run a surgery center, but as followers of this blog you know better. 

Price distortions created by cartels are short-lived and are dishonest, and affiliating with a hospital to “jack up” the reimbursement rate for the very same medical procedure falls in to this category.  What should the price of care be?  That is the question that requires an answer and the free and open market is the only source of the answer.  Short term, cartels make a killing.  Long term, they get killed, as the victims of their schemes increasingly resent their price-fixing theft and seek out market solutions like those promoted by our facility.

There’s more.  Those who manage the benefits programs of self-insured companies now understand that if they deal with a physician-employee of a large hospital, they are going to pay more.  That doctor’s fee is higher and he is much more likely to order unnecessary diagnostic testing in order to stay on good terms with his employer or to meet his monthly production number.  This employee doctor is going to refer his surgical and specialty referrals to an employee surgeon.  This surgeon’s fee is going to be higher than his non-employee counterpart.  The surgery done at the mothership health system facility is….well…you know the rest…going to be much more expensive.  Your colonoscopy by an employee doctor is going to cost more.  I could go on.  

This article is a devastating revelation of what many of us in this industry already know to be true.  The article represents a confirmation of what benefits managers and many patients are beginning to learn.  It also represents a vindication for the transparent and open free market approach that The Surgery Center of Oklahoma has taken.  We remain independent and affiliated with….well…no one.  We will continue to post our prices online and welcome inquiries from those of you who are tired of being fleeced and scammed by our friends in the large “health systems.” 

G. Keith Smith, M.D.