Surgery Center of Oklahoma exposes opaque medical prices

In 1997, anesthesiologist Keith Smith helped establish the Surgery Center of Oklahoma, an institution that challenged one of American medicine’s most entrenched conventions: the concealment of prices from the people expected to pay them. He had entered private practice expecting the familiar exchange between physician and patient, but soon encountered a financial apparatus whose interests seemed increasingly divorced from the provision of medical care.

Smith recalled watching patients undergo relatively minor operations at ostensibly nonprofit hospitals, only to encounter ruinous bills afterward. His participation troubled him because he was administering the anesthesia that made those operations possible. As he explained to me, “I was basically an accomplice.” Patients were being “financially assassinated by these so-called not-for-profit hospitals,” while physicians continued to supply the services that generated the charges.

His solution was institutional independence. Smith and fellow anesthesiologist Steve Wontier established a physician-owned surgical center where they could exercise authority over both the quality of care and its price. They recruited surgeons according to a straightforward criterion: Would they entrust themselves or their families to these physicians?

Nearly thirty years later, Smith reports that the center has 145 surgeons on staff. It does not contract with conventional insurance carriers, and in 2009 it began publishing comprehensive surgical prices online. The quoted figure combines the surgeon’s fee, anesthesia, facility charges, and specified follow-up care. Patients can compare prices before committing to an operation, a privilege that remains surprisingly uncommon in American medicine.

The center has attracted patients from across the United States and Canada. Canadian patients presented a particularly instructive case because they possessed government-sponsored coverage but sometimes faced substantial delays in obtaining elective surgery. As Smith observed, “They just don’t have access to the care that so many of them need.”

That distinction between possessing insurance and obtaining medical care deserves attention. Coverage may offer financial protection, but its nominal presence cannot guarantee timely treatment or an affordable transaction. American patients with substantial deductibles may find themselves confronting the same practical question as uninsured patients: What will this procedure actually cost?

Smith’s answer also appeals to self-funded employers, which bear much of their employees’ medical expense directly. Some have arranged to purchase surgery from providers offering predetermined prices, even paying travel expenses when the total cost remains substantially below local hospital charges.

The economics become particularly revealing when one examines the billing machinery itself.

During our conversation, I described a recent LabCorp bill for routine laboratory testing ordered through One Medical. The initial charge was $825. After contractual adjustments, my responsibility fell to approximately $140, while the insurance company paid nothing. The laboratory accepted the smaller payment, leaving the original charge difficult to reconcile with the actual transaction.

Smith offered a parallel example in which laboratory testing obtained through a direct-primary-care arrangement could cost approximately $45. Different service bundles can complicate direct comparisons, but these discrepancies raise an obvious question: What determines a medical price when the same institution may accept radically different payments from different purchasers?

Smith contends the answer lies partly in the peculiar economics of claims repricing. Consider a hospital that submits a $100,000 bill, then discounts it to $20,000. An intermediary may receive compensation calculated against the purported $80,000 savings. Under such an arrangement, the intermediary’s revenue depends partly on the original charge and the negotiated reduction. Inflated list prices can therefore serve purposes beyond collecting payment from patients.

Smith described companies that profit from administering these transactions, sometimes without providing medical care themselves. His account challenges the conventional assumption that negotiated discounts necessarily represent genuine savings. A discount against an arbitrary price may tell us little about the cost of the service or the efficiency of its delivery.

I was reminded of the Hanseatic League, the medieval commercial confederation that organized trade among merchants and cities around the Baltic and North Seas. Such arrangements could protect participants and facilitate exchange, but they also established privileges for insiders. Modern healthcare networks present a different institutional structure, yet the analogy raises a similar question about who may participate in commerce and under whose terms.

Smith is particularly critical of the relationship among hospitals, insurers, and government. He argues that regulatory privileges, reimbursement conventions, and politically protected institutional arrangements interfere with ordinary price competition. In his account, the persistence of extraordinary charges is no accident; the system rewards financial behavior that an open market would expose.

“It is working exactly as designed,” he observed. The phrase captures his central contention. American healthcare’s enormous expense need not arise solely from medical technology, physician compensation, or the unavoidable costs of treating illness. A substantial part may originate in the financial arrangements surrounding the transaction, including administrative fees, opaque contracts, and institutional incentives that reward higher nominal charges.

Smith’s proposed remedy is practical rather than theoretical. Let medical providers publish their prices; let patients and institutional purchasers compare them; and let physicians receive payment for a specified service without navigating the entire conventional claims apparatus.

Oklahoma has provided an example through arrangements allowing state employees to obtain certain procedures from participating direct-price providers without conventional out-of-pocket surgical charges. Smith sees institutional purchasers as particularly capable of exerting pressure because they control substantial healthcare expenditures and have financial reasons to question prevailing prices.

This model does not eliminate the need for hospitals or insurance against catastrophic medical expense. Complex emergencies, prolonged intensive care, and uncertain courses of treatment present different pricing problems from scheduled outpatient surgery. Smith’s achievement concerns the considerable portion of medicine for which the service can be defined, the provider selected, and the price established beforehand.

Physicians should find his experience especially instructive. We are trained to advocate for patients’ physical welfare, yet financial injury can also arise from the medical services we recommend. Smith concluded that he could not be an adequate patient advocate while remaining indifferent to the economic consequences of his work.

He now encourages physicians and patients to examine the Free Market Medical Association, which promotes transparent, direct purchasing arrangements, and to consult the Surgery Center of Oklahoma’s published surgical prices before assuming substantial financial obligations.

In 2009, publishing surgery prices online was unusual enough to attract national attention. Seventeen years later, patients still struggle to obtain reliable advance prices from much of American medicine. Smith’s experiment has survived nearly three decades, offering a pointed challenge to the assumption that medical care must operate under fundamentally different commercial rules from other professional services.

The question is no longer whether a physician-owned surgical facility can publish prices and remain in business. Keith Smith has answered that question. The remaining question is why so many competing institutions continue to resist doing the same.