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Shopping for Surgery
How to make the self-pay model work for you and your patients.
Jerry Hadlock
Publish Date: June 4, 2015   |  Tags:   Financial Management
knee surgery priced THE PRICE IS RIGHT Facilities that promote all-inclusive prices for surgery are poised to tap into a growing market.

It was in the pages of this magazine where I first read about anesthesiologist Keith Smith, MD, the medical director at the Surgery Center of Oklahoma in Oklahoma City, who has championed price transparency in surgery with the aim of revamping the U.S. healthcare system to the benefit of facilities, surgeons and patients. Since that light-bulb-illuminating moment, we've followed Dr. Smith's lead by providing one-time fees on our facility's website (sgsc.net): $4,990 for a shoulder arthroscopy, $5,935 for an ACL repair and $950 for a colonoscopy, just to name a few. Each price includes 1 pre-op visit, the facility fee, the surgeon's fee, the anesthesia charge and 1 post-op visit.

Is price transparency where health care is heading? We think so. Sure, more Americans have health insurance thanks to the Affordable Care Act, but they're also shouldering much more of the financial burden for their own care. Ready or not, showing patients exactly where their healthcare dollars are going is set to be one of the hottest surgical trends in the coming years.

Setting the wheels in motion
Turning an idea, no matter how promising it sounds, into reality is a huge challenge. Making the price transparency model work here at our surgery center in rural Utah wasn't as simple as posting prices online and watching patients line up at the door. It was a dramatic change in business strategy that required an honest assessment of our future clinical and financial goals.

We first had to decide if we could handle an increase in case volume that the pricing model was expected to bring, based on the success of the Surgery Center of Oklahoma and other facilities across the country that have adopted the price transparency model. We knew it'd take time to build up to the number of self-pay cases Dr. Smith's center hosts, but we had to enter into this plan with success in mind. Space was not a problem. We were only running at 40% capacity and had the room to fill our ORs with extra cases.

Surgeon buy-in is obviously an important consideration, and it was essential for our physician-owned surgery center. I told our docs that there would be some investment in technology, and a lot of time and effort needed to get the program off the ground. The big selling point: I promised them self-paying patients, and if they'd tell me how much they wanted to get paid for the surgeries they perform, they'd have a check waiting for them on the day of surgery. That certainly got their attention.

Improving the way our facility communicated and connected with patients were other huge priorities. We had to upgrade our website in order to present online pricing options in an intuitive and interactive format, so patients could locate a price for surgery in just 2 or 3 clicks. We felt that they'd lose interest if they had to dig too deep or navigate through too many tabs.

An outsourcing firm helped with the website's redesign, which required an investment in the tens of thousands of dollars. That's a significant amount, and it's growing as we increase the number of procedures for which we post prices from 72 to our target of 200, but streamlining the website's interface has been a critical part of our success.

PRICE TRANSPARENCY
Instant Online Price Quote

online quote

When prospective patients visit the St. George Surgical Center website (sgsc.net), the first thing they see is an interactive tool that lets them get an instant surgery quote. Consumers can either click on a body diagram or use a pair of dropdown menus (procedure category and the procedure itself) to see a list of procedures and prices. A sampling of the all-inclusive pricing.

Free Instant Surgery Quote

PROCEDURE

ALL-INCLUSIVE PRICE

Colonoscopy

$950

Dilation and curettage

$1,600

Adenoidectomy

$2,395

Pars plana vitrectomy

$2,395

Incisional hernia

$3,750

Rhinoplasty

$4,545

Achilles tendon repair

$5,265

ACL repair

$5,935

Abdominoplasty

$6,810

Hip arthroscopy, complex

$8,590

What's a fair price?
We're not a charity — our facility needs to make money and so do our surgeons — so we had to set prices that patients can afford, while leaving reasonable profit margins. We also knew that setting a fair price for procedures would make or break us, so we set out to determine how much to charge patients based on our case costs, what surgeons wanted to make and a lot of market research, including what other facilities involved in price transparency were charging for the same procedures.

First, we gathered surgical nurses, personnel in charge of buying supplies and the staff who manage our current supply inventory, combed through surgeons' preference cards and used data management software to look up how much we spend on the 50 to 100 items used by each surgeon for every case. It was an arduous process that took months to complete, but it let us drill down to the penny on what we spend on procedures.

If a surgeon orders basic labs that we do in-house, we include the cost of the tests in the one-time surgical fee, so patients don't have to pay extra. We charge patients the wholesale cost of implants, and we're more than happy to show them the invoice to prove that we don't make any money by marking up items.

Next, we had to determine how much surgeons wanted to get paid. Working with them to negotiate their fees was an interesting and eye-opening process. We found that many didn't know what they're worth, and had to check with their billers to find out what they charge for the surgeries they perform.

Most surgeons came in a lot lower than we expected. We talked to the few outliers who would have priced us out of the market to let them know where we needed to be in order make the self-pay model work. They were willing to come down a few hundred dollars, because they saw the big-picture value in the pricing model. We started with 15 surgeons who were part of the program, and have been able to recruit 10 more interested surgeons who brought in cases we weren't currently performing.

There isn't a set profit margin we're aiming for when pricing each case. We rely more on the current market as a benchmark to set our prices. We make different amounts on all of our procedures, depending on what surgeons charge and how much we spend on supplies, with some per-case profits better than others. But we're turning profits, our surgeons are making money and the patients are happy. It's a win-win-win for everyone.

COMPARISON SHOP
Surgical Pricing Search Engines Pop Up Online

searching online ONE-TOUCH SHOPPING Savvy patients are searching online for surgical deals.

Patients have an increasing number of options at their disposal to shop around for surgery's best prices. Here are a few places they can search and comparison-shop for outpatient procedures, and where you can post prices to attract the self-paying crowd.

— Daniel Cook

  • clearhealthcosts.com A search engine that uses reported pricing from patients and providers to relay the cost of procedures performed in New York City and its suburbs, San Francisco, Los Angeles, Houston, Dallas, San Antonio and Philadelphia, with more cities to be added soon.
  • pratter.us A secure portal where hospitals and surgery centers upload their prices for procedures, providing access to self-pay patients. The portal provides links to participating facilities' homepages to direct interested individuals.
  • ineedasurgery.com Connects both insured and uninsured patients with participating surgery centers nationwide, which agree to provide the patients' surgeries at pre-arranged, all-inclusive prices.
  • medibid.com Gives elective surgery patients who are willing to pay out of pocket the ability to choose from a range of physicians and hospitals bidding, eBay-style, to provide the surgery they're seeking.

Earning trust, and business
Dr. Smith says he wants to make money, but likes to make deals that are fair for everyone. We're going down the same road. For example, we charge $2,750 for a hernia repair. One of our self-pay patients from California was quoted $18,000 at his local hospital for the same surgery. That didn't include fees for anesthesia or the surgeon's cut. The patient was a small business owner with a high-deductible insurance plan that would have forced him to pay $12,000 for the procedure. He found us and was ecstatic to spend less than $3,000, all in.

The price transparency model is predicated on fairness in pricing. It takes a certain amount of responsibility to show patients exactly what you're charging. Are enough surgeons and facilities willing to do that to make this model work across the country? I'm not sure, but I do know patients shouldn't incur the charges of a 2,000% markup on a pill, Band-Aid or device that a facility gets a discount on. That's not where we want to make our money. We want to develop enough trust with our patients and deliver outstanding care so they come to us whenever they need surgery and send friends and family members our way, too. We want to make money by providing excellent care with fair pricing that will drive up our case volume, not by gouging patients.

We began working on our program 16 months ago, and we're just now starting to see the fruits of our labor. In January of this year, approximately 10% of our cases were self-pay. Our goal is to get that up to 50% or more, and we're moving steadily in that direction.

Ultimately, we didn't want to have a government agency mandate price transparency. We wanted to show good faith to patients before that happened, and set up the program on our own terms. Price transparency is the future of health care, and we're positioned well ahead of the curve, ready for future growth and success.

LONG DISTANCE INTEREST
Self-Pay Patients Come From All Over

St. George, Utah\ DESTINATION SURGERY Patients head to St. George for surgery and the amazing sites within a short drive of the downtown.

Patients absolutely want price transparency and are willing to travel long distances to get surgery done at facilities that offer it. Still, getting the word out to potential patients about our pricing system has been the most difficult and frustrating aspect of this process.

So many factors go into trying to market your facility and your services. I reached out to every major news outlet in the St. George, Utah, area and reaction was tepid. However, a local news service did do a story that increased our web traffic by 500 times its normal volume and other outlets started picking up on the story. Now I get requests for interviews nearly every day. We're on the cusp of an exciting time.

People know about St. George, a beautiful location close to the Grand Canyon and Zion National Park. We felt like patients would appreciate coming to this area for surgery, and perhaps tack on a few days to their stays to check out the beauty of the stunning landscapes within short drives of our center.

We're also close to Las Vegas, and trying to break into the Los Angeles and Phoenix markets that are just an hour's flight away. St. George is also a popular destination point for tourists from the Salt Lake area. We've launched local marketing initiatives and word of mouth has been a huge part of our current success, but a lot of patients are finding us through Google searches. To increase our online presence, we've hired a team of marketers that specialize in optimizing our website's SEO to get our facility's name at the top of search engine results.

Roughly 75% of our patients come from outside of our area, with the biggest interest in California. We've had patients drive 14 hours for surgery and end up staying an extra 4 days to check out the area. I've taken calls from Canada and New Jersey, so interest is growing, and we expect that to continue.

— Jerry Hadlock, CRNA

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