EXECUTIVE SUMMARY

The healthcare industry is changing as surgeries move to ambulatory surgery centers (ASCs) and price transparency grows.

  • Some ASCs post their surgery and procedure prices online, increasing their volume.
  • An online platform that matches patients and surgeons seeks to make the healthcare industry more efficient and improve quality through transparency.
  • Highly inflated health system prices hurt some uninsured patients and keep the industry from growing and evolving as needed.

The healthcare industry is undergoing a seismic shift as surgeries and procedures increasingly move to ambulatory surgery centers (ASCs) and other outpatient sites. Consumer demand and greater efficiency are driving this change, but there’s a growing new trend that also could push even more business to ASCs: transparency in pricing.

“There’s a growing demand for it, and we’re seeing a growth in price transparency,” says Martin Makary, MD, MPH, FACS, professor of surgery at Johns Hopkins Hospital in Baltimore.

Some states will require medical centers to post prices. A small (but growing) number of ASCs are posting bundled surgery prices online. A new study found that price transparency brought increases in revenue and patient volume to surgery centers. Patient satisfaction also improved, says Makary, one of the authors of a recently published study about surgery center price transparency.

Additional benefits to price transparency were increases in third-party administrator contracts and reductions in administrative burdens.1 The study authors identified eight centers that listed all-inclusive fees on their websites, including facility, surgeon, and anesthesiologist fees. Five of these centers participated in the study, reporting their administrative costs, marketing costs, and other information.1

ASCs involved in the study reported that their leading barriers to making prices transparent include discouragement from another practice, hospital, or insurance company and resistance to change within the practice.

Some study participants also said they find it difficult to determine fixed prices for procedures or encounter challenges when trying to change prices. There also was some fear of state or government regulations, along with the barrier of educating employees.

There were some repercussions from making the change to price transparency. For instance, some ASCs were harassed by healthcare organizations. Some payers were not interested because they benefit from discounts that are kept secret from consumers, Makary notes. “It really takes a tipping point for this trend to disrupt the market, and we’re starting to see the real success stories,” he adds.

One of the success stories is the Surgery Center of Oklahoma in Oklahoma City, which was included in the study.

“We were the first in the United States to do this,” says G. Keith Smith, MD, managing partner of Surgery Center of Oklahoma. “We’ve had prices online now for almost a decade. Our prices are all bundled. People come in, and pay us with cash, credit card, cashier’s check, gold bullion, silver coins, and bitcoin.”

The website’s listed surgery prices are significantly lower than the rates uninsured patients would pay at hospitals, and they’re even low enough that some insured patients with high deductibles or out-of-pocket costs save money by just paying for the surgery at the center, he says. (Editor’s Note: Read why Smith believes pricing transparency works for his facility later in this issue.)

“When someone pays for their surgery at our place, and then when they walk away after surgery, they know they’re done paying,” Smith says. “There won’t be some bill for physical therapy, durable equipment, home health, pain medication — it’s all included.”

For example, the ASC’s website lists the price for an inguinal hernia at $3,060. A similar procedure at a hospital could cost as much as 10 times that amount, Smith says.

“High pricing means there is not much competition going on,” he says. “Lower pricing typically means there’s more competition, and the people who compete don’t just compete on price, they have to compete on quality, too.”

Quality has to be better for ASCs that offer transparent pricing because people become quality-skeptical when a price is lower than average. “We have to demonstrate in tangible ways that our quality is higher, so we also publish all infection rates online on our FAQ page on the website,” Smith explains.

ASC are in an ideal position to provide price transparency because many of their services fall below the current insurance company deductibles, Makary says.

“For the first time, we’re seeing a true free market for surgical care,” he says. “It’s not by design because no one expected people to pay so much for surgical expenses on top of paying for healthcare, but we live in a high deductible world.”

Patients are growing more cost-conscious when seeking medical care, and they are unhappy if they believe they’re charged more than a fair market price for a procedure, he adds.

“Our previous research suggests that mark-ups in healthcare are at an all-time high,” Makary says. “We found mark-ups that are as much as 23 times the Medicare-allowable amount.”

Providers sometimes justify the high mark-ups by arguing these cover the losses the providers sustain when caring for poor patients who have Medicaid or worse insurance. But research suggests this is a fallacy.

“For example, we found that in some wealthy areas where the mark-up was the highest, they had minimal indigent care, and yet they carried the most mark-up,” Makary says.

Another myth is what health industry leaders often say: “No one really pays those inflated prices.”

“Our research has found that several groups are being asked to pay that full price, and if they don’t pay it, they’re harassed by collection agencies and even having their credit history ruined,” Makary says.

For these reasons, price transparency in surgery is growing in popularity and, through at least one online platform, is spreading nationally, Makary explains.

Price and quality transparency are better for patients, but the healthcare system isn’t working on patients’ behalf, says Sanjay Prasad, MD, FACS, founder and CEO of SurgiPrice in Rockville, MD. SurgiPrice is a HIPAA-compliant platform where people can find surgeons who meet their quality and price needs. Since the platform launched in 2014, nearly 10,000 surgeons have signed up.

“Posting prices online is the first step, and that’s great to bundle all prices together,” Prasad says.

Transparent pricing and alternative models for surgery referrals are saving employees and employers money, Prasad says. “It’s forcing the whole system to become much more efficient,” he adds. “A lot of these procedures and surgeries are being culled from the hospital setting to the ASC setting — but only if it’s safe.”

The healthcare referral system sends patients to surgeons based on their health insurance network’s preferred providers or the surgeon’s relationship with the referring doctor, not necessarily based on the price and quality of care. An online platform can help patients self-refer based on what matters most to them: both quality of care and price.

SurgiPrice’s platform connects patients directly with surgeons, allowing them to choose according to their own cost and quality preferences.

“We contact surgery centers that are already bundling and give them the opportunity to vary their price according to the complexity of price,” Prasad says.

Price transparency can work when cases are similarly complex and patients do not present with comorbidities, but when patient cases are complicated, the one bundled price might not work as well. Another option is to let patients seek a medical opinion by downloading their records and imaging to the platform, which shares the records with various surgeons. The physicians offer their opinion on whether surgery is necessary and what it might involve, Prasad says.

This model works with self-insured employers, offering patients in their health plans a direct connection to providers and qualified surgeons, Prasad explains. When patients are matched to a surgeon, they see only their part of the cost.

“Our mission is to find zero deductible, co-insurance options when patients need surgery,” Prasad says. “In this system, patients are in control. They select their surgeon based on cost and past experience data.”

The market is rewarding ASCs that use fair and transparent prices, Makary notes. “When they post prices, there sometimes is a massive surge in patient volume,” he says. “This represents the opportunity for surgery centers and medical centers, in general, to start making prices transparent.”

REFERENCE

  1. Mehta A, Xu T, Bai G, et al. The impact of price transparency for surgical services. Am Surg 2018;84:604-608.