Inspired by an Oklahoma surgeon known for posting his prices online, two brothers have opened a clinic with transparent prices, called Texas Free Market Surgery (TFMS), providing up to an 80 percent reduction in the cost of care.
Prospective patients can view hundreds of surgery offerings, descriptions, and prices using a drop-down menu at the TFMS website, which resembles that of Dr. Keith Smith’s Surgery Center of Oklahoma. Clicking some entries, such as the $4,750 “Hernia Repair, Incisional,” provides users with information about symptoms and surgical and nonsurgical treatment options, plus detailed lists of services the price includes and excludes.
Each clinic’s website enables prospective patients to research surgery prices before choosing providers, most of whom do not post prices online.
Dr. Patrick Kelley, CEO of TFMS, co-founded the clinic in 2015 along with Sean Kelley, TFMS president, and Lars Hegstrom, technology and data chief, in the Austin, Texas suburb of West Hills.
“TFMS is inspired by Dr. Keith Smith and his partners at Surgery Center of Oklahoma who have blazed a trail for us and others to follow,” the website states.
Following the Money
Sean Kelley says the first step in exploring their business model was counting the cost.
“Our first target was to do a deep dive into the cost of surgery to find out where the money was flowing,” Sean Kelley said.
The brothers experimented with cost bundling in Patrick Kelley’s specialty, cleft lip and cleft palate surgery. Cost bundles combine the expenses of all services associated with a procedure, making prices easy for patients to understand.
The potential patient savings they found were staggering, Sean Kelley says.
“We compared our results with what [insurance] claims data showed, and our cost to produce a high-quality outcome was 60–80 percent less,” Kelley said.
Smith generously provided details of best practices as the brothers launched TFMS, Kelley says.
“[Smith] has been amazing, teaching us what to do and what to avoid and who the customers were,” Kelley said. “He even went so far as to connect us with his best customers.”
Smith views TFMS as more of an ally than a competitor, Kelley says.
“I’ll never forget what [Smith] said as we thanked him for all the help: ‘There is no reason anyone from Texas should have to cross the Red River to get a fair deal on a quality surgery in Oklahoma if you guys are doing it in Austin,'” Kelley said.
Land of the Free?
Dr. Deane Waldman, director of the Center for Health Care Policy at the Texas Public Policy Foundation, says free-market health care reformers in Texas face threats from special interests and unnecessary laws.
“Texas tries to be free-market friendly, but the Texas Medical Association sometimes behaves like a cartel, which by definition suppresses free-market forces,” Waldman says. “An example would be the constraint on advanced practice [registered nurses] using the Prescriptive Authority Agreement.”
Texas law limits the authority of advanced practice registered nurses (APRNs) to prescribe controlled substances and forbids APRNs from prescribing medications without first obtaining “prescription authority” delegated by a physician, according to the education and advocacy site Coalition for Nurses in Advanced Practice.
Waldman says TFMS could increase its value as a free-market provider by posting indicators of care quality alongside prices.
“The key element missing from the TFMS [website] is data for risk-adjusted positive patient outcomes,” Waldman said. “Why should you take the quality on faith?”
State of Independence
Interference by the federal government is the chief obstacle to free-market health care advances in Texas, Waldman says.
“The root cause of health care system failure is federal control of health care,” Waldman said. “Therefore, the cure and my recommendation is that Washington, DC replace Obamacare with nothing, get out of the health care business, continue to provide support to the states, and let each state decide how best to provide care for its people.”
Providers will find or create efficient health care systems when the federal government devolves power to the states, Waldman says.
“If Texas wants a free market, let Texas do that,” Waldman said. “As long as we get back the proportion of our tax dollars that Washington, DC is currently spending on state health care, Texas can to better for Texans both medically and fiscally than Washington, DC can.”
Changing the Industry
Kelley says most of the medical community is taking a wait-and-see approach to innovative practices.
“Like most disruptions, we will live in the shadows until we convince enough people that what we’re doing is the right way to go,” Kelley said. “If they work in big hospital-system medicine, then we might be scary [to them].”
Surgeons will increasingly abandon the prevailing system for transparent pricing models, Kelley says.
“We offer them a new, simpler, better way of delivering health care,” Kelley said. “For many of the routine outpatient procedures we do, it will be very hard for incumbent systems to compete based on quality and price.”
Posting transparent prices online to help patients shop around is the future of medicine, Kelley says.
“Once you get into it, it becomes incredibly clear that this is where medicine needs to go,” Kelley said. “One day, in the not too distant future, what we do will be commonplace.”
Tony Corvo ([email protected]) writes from Beavercreek, Ohio.
Tony Corvo, “Surgeon Posts Prices Online to Improve Transparency, Competition,” Health Care News, The Heartland Institute, April 2016.
Tony Corvo, “Health Care Leaders Gather to Urge Use of ‘Free-Market Force,'” Health Care News, The Heartland Institute, October 5, 2016.
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