How one middle-America surgery center uses online price transparency to disrupt the medical industry

By Michael Carney , written on July 10, 2013

From The News Desk

Medical tourism is nothing new. Rapidly escalating costs have long driven Americans to travel south to Mexico in search of affordable dental care, to Asia for high quality but wallet-friendly plastic surgery, to Latin America and Europe for general surgery, and elsewhere around the world for more advanced procedures not yet approved in the US.

But, until recently, medical tourism within the US was unheard of. This is starting to change, thanks to a small surgical center in Oklahoma and the magic of Internet-powered transparency. The 15-year-old Surgical Center of Oklahoma, founded and operated by Dr. Keith Smith and Dr. Steven Lantier, has thrown the rest of their industry colleagues (er, competitors) under the bus by posting what they call “guaranteed all-inclusive surgery prices” online for the world to see.

“What we’ve discovered is health care really doesn’t cost that much,” Dr. Smith tells Oklahoma City’s KFOR.TV. “What people are being charged for is another matter altogether.”

“When we first started, we thought we were about half the price of the hospitals,” adds his partner Dr. Lantier. “Then we found out we’re less than half price. Then we find out we’re a sixth to an eighth of what their prices are. I can’t believe the average person can afford healthcare at these prices.”

The answer, of course, is that the average person can’t afford health care at these prices. There’s a reason that medical bills are the No. 1 cause of bankruptcy in the US, with more than 56 million Americans under the age of 65 expected to “struggle” with medical bills this year according to a NerdWallet study. While not all will end up bankrupt, each will encounter either collection calls, reductions in their credit score, increased debt, and/or the inability to pay for food and housing as a result, the study concludes.

Given this context, it’s no surprise that the Oklahoma facility is now regularly receiving patients from as far away as California and Canada -- the latter being particularly noteworthy, because our northern neighbors have state-sponsored health care.

KFOR offers an example of a 22-year-old California athlete who received surgery on a torn patella tendon at the Surgery Center of Oklahoma facility for just $5,700, a far cry from the $30,000 he was quoted in his home state. Similar price discrepancies exist at public hospitals within the same city. A fracture repair, for example, recently cost an OU Medical Center patient $20,456, while the Surgery Center of Oklahoma offers the same procedure for $4,855.

The Surgery Center of Oklahoma does accept private insurance, but cannot accept Medicaid or Medicare due to federal regulations that prohibit their style of price transparency. (Imagine that, the government legislating against transparency.)

Not only have these Oklahoma doctors changed the behavior of many patients across the US, but they’re also beginning to impact others in their industry. Several other nearby private medical facilities have followed the Surgery Center of Oklahoma’s lead by posting their own pricing online, KFOR reports, including McBride Orthopedic Hospital, Oklahoma Heart Hospital, Cancer Specialists of Oklahoma, Breast Imaging of Oklahoma, and Comprehensive Diagnostic Imaging.

Such is the power of the Internet to disrupt entrenched industries and business practices.

Drs. Smith and Lantier haven’t implemented any experimental or radical cost-saving technology. Rather, they’ve followed a model of radical transparency and sensible pricing utilized by countless ecommerce and other online businesses.

It’s an attractive concept for the consumer, but is not without its risks for health care providers. Many doctors already complain of not being paid enough, relative to the costs of malpractice insurance and the potentially stressful and demanding working conditions. Reducing the gross revenue of a medical center could potentially exacerbate this issue further -- not that patients burdened by outrageous bill are likely to care much. But on the flip side, private surgical centers need to market for and attract customers, like any other business. There’s nothing like plastering the Web with discount pricing to garner attention. To the extent that the company views its current pricing as sustainable -- and it’s been doing so for 15 years already, long before adding the online transparency aspect -- it looks like a winning model for all involved.

Surgery isn’t an industry that can ditch the world of bricks-and-mortar, and the Surgical Center of Oklahoma is unlikely to become Amazon, in terms of its scale. But as word gets out about the small company’s disruptive pricing model, it’s entirely possible that it could have similar impacts on its industry as a whole. If so, we can chalk up another victory for the internet and a pair of entrepreneurs willing to buck the status quo.

[Illustration by Hallie Bateman]