Podcast Interview: Price Transparency in the ASC Space

Innovate & Excel: The ASC Leadership Podcast is also available on Spotify.

Emmanuel Soto: In practical terms, could you explain what price transparency looks like at the Surgery Center of Oklahoma? To what degree are patients informed of the price breakdown?

Keith Smith: So in 2009, before I launched the website with all of our prices—and we were the first to do that—I imagined myself viewing this website through the lens of a patient. I realized I would not want to write separate checks to anesthesia, the surgeon, the facility, and the pathologist. I would want to write just one single check. So, I formed a clearinghouse called the Atlas Billing Company, where we also display various prices. This clearinghouse allows patients to write just one check, and this infrastructure has made the implementation of our bundled pricing very easy.

I actually make the Atlas Billing Company available to any facility that wants to jump into the bundled price surgical world until they figure it out on their own. They can then remove our "training wheels" and operate independently if they choose.

The implementation of these bundles is straightforward. I start by asking the surgeon how much they think is fair for their fee. This is a real "circle around the campfire" moment because if anyone gets greedy, the bundle price gets too high, and buyers lose interest. So, everyone has to behave reasonably. The most egregious price gougers are typically on the institutional side, usually it's the facility that struggles with fair pricing.

When I ask the surgeon for a fair price, the answer I get is often lower than expected. Anesthesia must also determine what their time is worth, and the facility must adopt a time-and-materials approach, similar to a general contractor.

Then, it's just basic math: add those amounts together to get the price. If you need to add a cushion for uncertainty, do so, and then go with that. After the cases, review the prices. If you're right, great; if not, adjust accordingly. This is part of what happens in a competitive marketplace.

One thing I've encouraged ASC administrators to do is to look at the pricing on our website, double it or increase it by 1.5 times, and then figure out the distribution retroactively. That's a good way to start. This approach led to the creation of the Free Market Medical Association, where we teach our competitors how to copy us. This might seem counterintuitive for a so-called "greedy capitalist pig," but it’s actually very collegial and cooperative. Those who subscribe to this market discipline help each other, and I help people copy us all the time.

Emmanuel Soto: What are some stories you could share with our audience that are evidence of the positive impact the price transparency movement has had on the patient experience?

Keith Smith: One of the most powerful stories is the one I've already mentioned about the woman with the breast mass who paid $1,900 instead of $19,000. We also had a patient from Georgia who needed a transurethral resection of his prostate, and our online price, all-inclusive, was $3,600.

He went to his urologist in Georgia, and they got a quote from the hospital for $40,000. The patient told his urologist, "I'm going to Oklahoma City." It turned out this urologist had lost another patient to us about two months earlier.

So they went over to the hospital, walked into the administrator's office, and the urologist said, "You guys are killing me. This will be the second patient I've lost because you're quoting these insane prices." The administrator asked what the price was in Oklahoma City, and the urologist replied, "$3,600."

So, they matched our price. The patient then reached out to me, saying, "Do you realize you saved me $36,000 and you didn't even perform the procedure?"

That's the beauty of the market. When I launched the website in 2009, I hoped this would happen. I wanted us to be more visible to those experiencing sticker shock and to allow people to use our prices to leverage a better deal, whether they came here or not, to start a price war.

I also wanted to understand more clearly the scams at work that keep facilities like mine, which are cheaper and better, from being completely full of patients. I can tell individual stories and institutional stories. Oklahoma County, the largest county in Oklahoma, is a self-funded group with 1,100 lives. In the first year they were with us, they saved $3.75 million.

The prices we made available to them are the same we make available to everyone—no volume discounts. The prices were so reasonable compared to what they were accustomed to paying that they were able to waive all out-of-pocket costs for their employees. So, if an employee or a dependent needed a tonsillectomy, they could come to the Surgery Center of Oklahoma, and Oklahoma County would waive all out-of-pocket costs for them. They didn't have the hurdle of a deductible, which many people can't afford.

We have patients and families come to see us around Christmas time every year, telling us, "We were going to have Christmas or a tonsillectomy, but now we're having both thanks to this program."

The prices are so reasonable that institutional self-funded buyers can waive all out-of-pocket costs for their members. This is changing lives, making companies financially healthier, and allowing individuals and patients to keep more money in their wallets for their families and children. This is truly life-changing.

There are too many stories to tell since we've been doing this since 1997, but it is very important and the right thing to do.

Everyone who works at my facility and those who have modeled after us love coming to work because this is missional.

Ultimately, we are profitable, but we are also dealing face-to-face with patients, advocating for them medically and financially.

We hope you enjoyed this excerpt of our interview with Keith Smith. Click here to listen to the full interview on Spotify.