Q: How does the current lack of transparency affect the healthcare industry?
Dr. Makary — Think about it: We wouldn't consider the current business model acceptable in any other setting. Take the supermarket. Imagine that you couldn't see the prices at the store until after the cashier charged you, and you weren't allowed to ask for a refund or take items back. And when the products were rung up, you would see that items like oranges had a 4- or 6-fold markup. You would be shocked, and probably consider it an incompetent marketplace with tremendous waste. Essentially, that's what we have in healthcare right now with nontransparent markets.
Mr. Hadlock — Patients trust us immediately when they know the price. Right now, you can go online and see the prices for almost anything — except medical care. My center wanted to change that, so we took our website that featured only an address and a phone number, and put in the time and effort to publically post our prices. It's been really fun so far to see patients and their responses, especially when we can save them money.
Q: Why are patients suddenly concerned about the cost of their surgery?
Dr. Makary — Simply put, when people were covered by insurance, transparent pricing was not important since they didn't have skin in the game. Now, the biggest driver is high-deductible health insurance plans. Right now, the average deductible on Bronze plans in the health insurance exchange is $5,000 per household. Since patients are footing more of the bill directly now, they are more interested in value.
Q: Are insurers pushing price transparency as well?
Dr. Makary — Insurers are looking at it as a way to cut costs, but surprisingly some of the biggest players in this are self-insured businesses. Greater than 60% of large businesses having some form of self-insurance. These employers are increasingly interested in working with surgical facilities that offer predictable pricing. There's no bigger fear for an employer than doing business with an entity where they can't see the prices until the bill is final.
Q: So, how would these factors impact a facility's overall business then?
Dr. Makary — If you look at the history of the trend, you see it started with cosmetic surgery, and then really became popular with LASIK surgery. And with that procedure, eventually we saw that prices went down. Right now, this idea isn't widespread yet for non-elective or traditional surgeries, but there is a big demand for it. Consider the Surgery Center of Oklahoma, which is a pioneer in this area. People are now flocking to Oklahoma from all over the world just to undergo surgery. So while prices will likely come down over time as competition increases, a surgery center that gets ahead of the curve now has a huge opportunity to grow their business.
Mr. Hadlock — I can say that since starting to post our prices online 2 years ago, we've attracted patients from all over the country. Our facility is in the southern part of Utah, and we've gotten a good contingent of patients from Montana, California, Wyoming, Colorado, Texas and just about everywhere else. It's something that's really gaining traction as more patients become cognizant of the cost of healthcare.
Q: Okay, so what's the best way to get started?
Mr. Hadlock — One thing we had to determine first was the true cost of our procedures. What does a hernia repair, a breast augmentation, a gallbladder removal, an ACL repair, etc., cost? We formed a team that then went through the costs of each surgery with our purchasing director. Then, the administrator extrapolated the data to see the cost-per-hour in the OR for staff. Finally, we went to our surgeons and asked them about their expectations for fees, which were surprisingly lower than anticipated. After we got our baseline, we looked at the prices of other players in the game and aimed for a price that was competitive, but still made everybody happy.
Dr. Makary — Start by posting prices for your procedures that are ideal candidates — those with a low risk of complications and minimal variability. Ideally the goal is to say to patients, "We'll give you a predictable price for a predictable procedure."
Q: How do you expect the trend to evolve over time?
Dr. Makary — I firmly believe that quality transparency must accompany price transparency. We're still in the process of developing sound metrics to judge quality, but that's where we're headed. People increasingly want to know that healthcare is a competent marketplace, not one that lacks transparency.
Mr. Hadlock — We've decided to publicly share not only our prices, but also our infection rates and patient satisfaction scores. If you combine all of those transparency factors together, consumers can take the information and make educated decisions about their care, which is ultimately what healthcare is all about.