Alternate Universes and Healthcare Prices

Theoretical physics, sci-fi and even comic books predict the existence of alternate universes. Beings in alternate universes exist in the same place as the same time but are oblivious to one another.


While space enthusiasts dream of life in another universe, and Bezos and Musk spend their fortunes on populating far off galaxies, I feel as though right here on Earth we have an alternate universe. A recent publication proved it.


Cullin Coates published a brief opinion piece in the Wall Street Journal mentioning that a free market really exists in medicine. You just need to look at the discretionary care for Lasik eye surgery, cosmetic surgery and dentistry—cares that are not generally covered by healthplans.


He goes on to say that ordinary healthcare is “…almost completely controlled by government and private insurance companies as the “buyers” of the services…” and that these discretionary services, not being under those controls, can be bought and sold for cash under free market principles.


Free markets for regular day-to-day healthcare have existed for years in my universe (which has including seeing healthcare from the viewpoints of private practice, large clinic administration and now  healthcare delivery transformation.)


Self-funded employers do direct contracting with providers through businesses like The Zero Card and get market-based prices. Here’s how it works:


The employer’s covered member needs, say, a gallbladder removal. A surgical facility—which can be an ambulatory surgery center or a hospital outpatient department—has a gallbladder bundle available that covers care from pre-op testing to post-op office visit, including the OR fee, the surgeon’s and anesthesiologist’s fee and everything else. There’s just one price and one bill.


The direct price in this low-friction arrangement is good enough that the employer offers covers 100% of the cost if the covered member accesses this direct arrangement. It’s free to the employee—a true market incentive.


The surgical hospital get paid promptly, in full and has no collection expenses or accounts to carry or series of bills to send the employee. That’s a market incentive to do direct contracting.


What about the price? The surgical facility needs to pay all its expenses, pay the surgeon and anesthesiologist, and make a certain margin. The employer needs to save enough money to cover what the employee would normally pay under the healthplan or else there won’t be an incentive. The employee needs the $0 incentive.


Just like in any free market, there’s a price that works–a price that satisfies the hospital, the employer and the employee. Yes, the free market is alive and well in healthcare and doesn’t need to be reinvented.


I asked my friend Keith Smith, MD, Director of Surgery Center of Oklahoma, a pioneer in bringing free market principles to healthcare, why people who see market principles actually work seem to exist in an alternate universe, unseen and unheard by so many who decry the cost of healthcare.


His answer was pithy: “If it isn’t their idea it can’t be real.”


Stan Schwartz MD FACP


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