What can an $83K hospital bill for a three-hour stay teach us about the United States healthcare system? Just about everything we need to know to uncover who’s responsible for the never-ending spiral of health costs.
Dr. G. Keith Smith, a board-certified anesthesiologist, who’s taking the bloated healthcare industry to task by publicly displaying his practice’s procedure costs for all to see, and which may lead to the downfall of many corrupt medical billing practices in this country, explains how the scam operates, in this eye-opening interview (19:28)
Dave Gahary, a former submariner in the U.S. Navy, is the host of AFP’s ‘Underground Interview’ series.
Be sure to check out all of AFP’s free podcasts. You’ll find them on the HOME PAGE, in the ARCHIVES & in the PODCAST section.
$83K Scorpion Sting Exposes Healthcare Scam
Obamacare responsible for keeping costs high due to corporate hospital lobbying
After being stung by a deadly bark scorpion this past June while opening a box of air-conditioner filters in her garage, Marcie Edmonds, 52, of Arizona, was relieved to find out that the United States Food and Drug Administration (FDA) had recently approved the first-ever scorpion antivenin, which she received two vials of during her three-hour hospital stay.
When she received her $83,046 hospital bill, however, her relief turned to shock. Although her insurer paid $57,509, the hospital demanded the balance, $25,537. Chandler Regional Medical Center, a not-for-profit hospital owned by Dignity Health, “the fifth largest hospital provider in the nation and the largest hospital system in California,” refused to reveal how much it paid for the drug, but a little math shows that Edmonds’ cost was $39,652 per vial. Ironically, Dignity, founded by the ministry Catholic Sisters, claims to “utilize explicit processes for making ethical decisions.”
Tracing this nation’s failure to produce treatments for scorpion stings and the above drug’s history is at the heart of understanding what ails the end users, like Ms. Edmonds, of the U.S. healthcare system.
In 2004 the U.S. depleted its supply of an antidote to scorpion bites, created by an immunologist prior to federal regulations, who retired and left only a tiny amount of the formula. Although 16,000 scorpion stings are reported annually by U.S. poison control centers, the world’s only remaining superpower was caught flat-footed, once again, and was forced to rely on a third-world nation to protect its citizens.
The scorpion antidote, manufactured in Mexico, costs around $100 per dose in pharmacies there. A Tennessee-based company, Rare Disease Therapeutics, Inc., which received FDA approval in August 2011 to exclusively distribute the drug (read: monopoly), which they named Anascorp®, sells the drug to distributors for around $3,500 per dose. Distributors, taking a small cut, charge hospitals around $3,780 per dose, which then mark this already-marked-up drug some more. So a drug that Mexican apothecaries most likely pay a few pesos for can cost your average American $40,000.
In order to gain a fuller understanding of this matter and how it impacts healthcare costs, AMERICAN FREE PRESS conducted an exclusive interview with Dr. G. Keith Smith, a board-certified anesthesiologist who co-founded an outpatient surgery center in Oklahoma City, Oklahoma, and serves as its medical director, CEO and managing partner. Dr. Smith is taking the bloated healthcare industry to task by publicly displaying procedure costs on the center’s website for all to see, which may lead to the downfall of many corrupt medical billing practices in this country.
Dr. Smith, in private practice since 1990, explained why he decided to take on the medical establishment, who tracks the sky-high medical pricing to when the federal government opened up the Treasury to healthcare in the 1960s.
“By 1997 I had had my fill of the big hospitals and how they treated the patients and me and the surgeons I worked with, so my anesthesia partner and I bought an old surgery center and we decided we would do it differently. We decided we would never take a dime of government money, and we haven’t still. And the other thing we did is we embraced what I now call ‘pricing honesty.’”
“Three years ago I decided to put our prices online, because I thought that that might even extend that reach outside of the Oklahoma area and bring outside patients in who had similar thoughts as the ones we attracted locally, and also thought it was time to shine the light on what these big so-called ‘not-for-profit’ hospitals were doing, because it’s just wrong and I just thought it was terrible.”
“The first thing that happened is the Canadians started coming. They saw our pricing and realized for a reasonable amount of money, they could buy their way out of the lines they were standing in, which many times were years long.”
Dr. Smith explained, by using Ms. Edmonds’ case, how the system is perversely designed to keep Americans paying higher and higher prices, and to add insult to injury, being forced to subsidize these huge corporate-controlled hospitals with tax dollars. Basically, U.S. taxpayer funding allows these corporate-medical behemoths to continue to charge these outrageous sums.
“The hospitals create these gigantic bills, not just because they want to collect that kind of money, but it is absolutely necessary for them to show losses. So even though the hospital had $7,500 of cost in these drugs, they were paid $57,000, so they basically have a clear $50,000 profit. They will claim that they lost money to the extent that the $57,000 is less than the $83,000 that they charged. And this helps them maintain the fiction of their not-for-profit status. So these hospitals are looking for red ink wherever they can find it, and oftentimes they manufacture it, they create it, by producing bills like this that are completely crazy.”
“Also, to the extent that they claimed that they lost money on this, this $26,000 for instance, that they may or may not collect on the rest of that bill, that goes into a fund called the Uncompensated Care Fund. And that is sent up to Washington, D.C., and then they receive basically a rebate from Uncle Sam, because they ‘lost’ all that money. And that is something called the Disproportionate Share Hospital Fund. Hospitals get paid even when they don’t get paid. So if they claim that they are providing charity care, it’s just simply not true.”
Then, Dr. Smith outlined another player in the game to keep prices high.
“Insurance companies actually make most of their money on something called ‘claims repricing.’ Claims repricing works like this: The $83,000 bill came to the insurance company, the insurance company paid $57,000. They then write back to the employer and say ‘we saved you $26,000 on this bill, we repriced this claim down to $57,000. Then, at the employer’s office, they collect their percentage on that false savings; industry standard is 35 percent. So the employer, not understanding this game, happily ponies up six or seven or eight thousand dollars, thinking that this insurance company has really been working hard for him. The insurance company is perversely inclined to seek out hospitals like Chandler Regional Medical Center that produce bills like this. And then the circle is complete.”
AFP asked how his practice deals with insurance companies.
“Insurance companies want nothing to do with us, with these reasonable bills, because then they turn their back on all of the money that they make from this claims repricing. Most of our procedures are less than $5,000, and they include the surgeon, anesthesia and the facility.”
Dr. Smith explained why prices remained, and will remain, high.
“This model of physician-ownership has just taken a beating through the years because the big hospitals have lobbied hard to make sure their competitors have been hamstrung. In fact, there is a ban on any expansion of physician-owned hospitals in the United States as part of the Affordable Care Act [Patient Protection and Affordable Care Act (PPACA), informally called Obamacare].”
“If the doctors own it, in all likelihood the prices are going to be reasonable and fair because the doctors owning it eliminates the most inefficient and greedy component of the whole system, and that’s the big corporate hospital.”
The mainstream media has been predictably silent on this.
AFP asked what a physician-owned urgent care facility would have charged Ms. Edmonds to treat her scorpion sting.
“The physician would’ve charged probably two or three hundred dollars to see the patient, and the facility probably would’ve charged the cost of the drug,” he explained.
Obviously, Dr. Smith’s pricing model works for both patients and doctors.
“We are making a great living charging a tenth, sometimes a twentieth, of what is charged across town.”
There may be hope. There are signs that other doctor-owned and urgent care facilities are following Smith’s transparent model.
Provision in Obamacare Targets Hospitals Owned, Run by Doctors
By Keith Johnson
A contentious provision in the healthcare reform law known as “Obamacare” is getting no attention from the mainstream media, leaving patients and doctors to ask: why are once-popular physician-owned hospitals (POHs) going the way of the dodo bird?
According to a recent report by the Americans for Limited Government Research Foundation, “In 2010, Obamacare limited the expansion of POHs and banned the establishment of new ones. By the end of 2010, Obamacare forced up to 84 new POHs in various stages of development to be abandoned. These hospitals would have provided nearly 30K jobs.”
Section 6001 of Obamacare bars any new POH from accepting Medicare payments and forbids existing POHs from accepting Medicare if they expand their facilities without approval from the Department of Health and Human Services (HHS)—a process that could take years. Even if they are approved, Obamacare mandates that no POH can grow beyond 200% of the size it was in 2010.
At first glance the new law may seem like no big deal. But to some it smacks of special treatment for interest groups that lobbied on behalf of wealthy nonprofit hospital corporations.
Physician Hospitals of America (PHA) spokesperson Leslie Fossey says that POHs have come under attack because of intense lobbying efforts from politically connected rivals—particularly nonprofits—which struck a deal on Obamacare to accept less money for services as long as the government agreed to abolish the competition. PHA is an advocacy group for doctor-owned institutions challenging the constitutionality of Obamacare
“The American Medical Association (AMA) has lobbyists in Washington spending millions of dollars fighting POHs,” added Fossey.
Fossey said that the Obamacare provision aims to eliminate competition within the medical profession. This, he said, will ultimately lead to higher prices and substandard care being practiced across the board.
“When a doctor is financially invested, he assures the best outcome for his patients,” said Fossey. “Every other profession in the U.S. allows a person to own a business. A lawyer can own his law firm. A journalist can own a newspaper. Why is it that a physician can’t own his own hospital?”
When Obamacare was passed on March 23, 2010, the Texas Spine and Joint Hospital (TSJH) was one POH forced to abandon a $30M expansion of their facility, even though they had already spent $3M on the project. POH joined a lawsuit filed by lawyers for PHA.
After their suit was struck down by a U.S. district court, PHA took up an appeal with the fifth circuit, which ruled in mid-August that providers like TSJH must first take their complaints to bureaucrats in HHS and can only seek redress from the courts when the agency decides against them.
Proponents of Obamacare accuse POHs of driving up Medicare costs by ordering more tests and procedures. But Fossey countered: “We have statistics to prove that POHs are actually less expensive. The AMA is throwing out accusations like this all the time. And when we ask them to produce the data, they can’t.”
Keith Johnson is an independent journalist and the editor of “Revolt of the Plebs,” an alternative news website. Keith is also a licensed private detective.