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Archive October 2020 XXI, No. 10

Business Advisor

Price Transparency Is on the Way

G. Smith

G. Smith, MD


Bryan Terry
OPEN FOR BUSINESS Dr. Smith wants patients who undergo surgeries at the Surgery Center of Oklahoma to know exactly how much their bills will be well in advance of their procedures.

The beauty of the price transparency model lies in its simplicity. You present all-in pricing for each procedure your surgery center offers, and patients pay the advertised amount. That's it. There are no hidden costs, no surprise bills and your facility, surgeons and anesthesia providers get paid upfront for each case.

Increasing numbers of forward-thinking facilities recognize price transparency can fix a broken healthcare system built on price gouging and profiteering. Joining the movement now will allow you to capture more business in the short term and set your facility apart from the competition as transparent pricing gains traction. Here's how to get started.

1Set your prices

Poll your surgeons. Simply ask them how much money they want to make for each procedure they perform. Do the same with anesthesiologists. Ask them to put a price on their time. For the facility fee, take a time-and-materials approach to calculate how much it costs to run each of your ORs for 30 minutes. Calculate your fixed costs — staffing, utilities, insurance — and pad it a bit to cover variable supply costs for each case. I suggest using the price list we created for my surgery center as a starting point ( Customers visit the website to see exactly what they'll pay for procedures, from $4,000 for a one-sided cataract surgery to $38,000 for a single-level lumbar fusion.

The Free Market Medical Association can also help you jumpstart your journey to posting transparent prices ( FMMA is full of providers, companies who self-fund their employees' medical expenses and third-party administrators. As a founding member, I teach my competitors how to copy what we've done.

You can tweak procedure pricing moving forward as you perform cases under the model and have additional conversations with surgeons, anesthesiologists and other members of your ownership group. Many physicians will be surprised to learn that they would get paid more from your advertised bundle than they do with any insurance carrier they currently work with. Remember, the idea isn't to make the facility a huge profit generator. The idea is to pay the people who are doing the work handsomely. This model works best for physician-owned private surgery centers, as facilities with private investors have another mouth to feed. Their prices must be higher to give these investors the 10% to 20% returns on their capital they expect.

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