My introduction to the practice of medicine began prior to medical school.  Dr.’s Don Garrett and Richard Allgood, both thoracic surgeons, allowed me to spend enough time with them to absorb countless lessons, many of which remain with me to this day.  While both of these talented surgeons are now retired, their dedication to their patients and the precision and intensity with which they approached patient care are legendary even now, for those who knew them.

Their surgical practices were huge, by any measure.  They performed more surgical procedures in a week than most surgeons did in a month.  The hospital in which they worked owed its success largely to these two men.  They let the hospital administration know what they wanted and what they needed.  And they got it.  The administration could hardly afford to consider the alternative.  Growing resentment was inevitable, the hospital administration biding their time, anxious for the day when they could turn the tables and call the shots. Enter the HMO’s and PPO’s.

The Health Maintenance Organization concept was so poorly received that a different three letter combination was needed, although the PPO (Preferred Provider Organization)concept was basically the same.  The PPO’s provided the infrastructure for the syndication (cartelization) of the health care industry, the opening power hungry administrative types had been waiting for.  Indeed, this was the beginning of “steerage” of patients to hospital systems that had made their deals with their insurance pals, deals from which everyone but the patient benefitted.  

This system has survived to this day, although it has mostly run its course, as its coercive, anti-competitive nature, along with government protection of this racket has resulted in the runaway costs and obscene corporate profits you would expect.  This syndicate is characterized by gigantic hospital bills, and the extent to which these bills remain uncollected provides the basis for the taxpayer subsidization of the scam known as the uncompensated care system, or disproportionate share hospital payments.  These false losses (charging $100 for an aspirin, collecting $5 and claiming to have “lost” $95) maintain the fiction of the hospitals’ “not for profit” status.  The insurance companies many times “sell” their discounting services (reducing a bill from $100,000 to $20,000 for instance) , collecting a percentage of the false “savings” they provide by reducing these already fictitious bills.  This is the “repricing” scam.  This setup perversely inclines the insurance carriers to seek out the highest bills they can find, assiduously avoiding better priced alternatives.  If this sounds crazy, it is.

Nothing could be more disruptive to this syndicate than a fresh dose of the principles of the free market, more specifically, upfront and transparent pricing.  Not only does reference pricing expose the health care racket, but simultaneously provides a powerful deflationary influence, as fear of the loss of patients to a better priced facility retains great power even in this corporatist soup.

The next great disruption of the syndicate has arrived, beginning Jan. 1, 2014, as several self-funded companies have formed a relationship with our facility (and others) which relieves their employees of their deductible and co-pay should they decide to obtain their care at our facility. Quite simply, the employers have discovered that they are financially better off paying their employee’s entire bill at our facility, rather than have their employee bear part of the cost at one of the traditional hospitals.  It is not uncommon for the entire bill at our facility (including facility, surgeon and anesthesia charges) to be less than the patient’s deductible and copay alone at one of the “not for profit” hospitals.

Now imagine the conversation in the doctor’s office when the doctor (a hospital employee) recommends a surgeon (also a hospital employee) who doesn’t work at our facility.   The patient (self-funded company’s employee) informs his primary care doctor that he/she is going to see a surgeon who works at the Surgery Center of Oklahoma, as this decision will result in their having no “out of pocket”expense. The patient’s skepticism will likely be aroused when they see “their” doctor’s reaction to this news.

All the efforts to control patient referrals and provide “steerage,” all the money spent to buy physician referrals, all the money spent to buy physician practices…all of this is unravelling.  We can’t come full circle soon enough, where the physicians and not the suits are controlling patient care. I believe that I will see in my practice-lifetime a shift back to the practice model I witnessed following my friends Don Garret and Richard Allgood.  Their patients benefitted from their unique surgical gifts and their ability to control their care environment.  I believe this latest disruption of the cartel’s control will bring us even closer to the high quality and low prices that only the free market can deliver.

G. Keith Smith, M.D.