Market-based Medicine

The Capital Account show had an episode: How the market can cure the healthcare crisis, with Dr. Keith Smith. In the show, Dr. Smith demonstrated that his Surgery Center of Oklahoma generates reasonable profits which providing slightly below average cost on most operations.

Right after opening, he had clients visiting from Canada bypassing their own universal right (to wait) for health care and travelling beyond the slew of competing clinics near the border.

The firm is internally structured much the same way as a law firm, with partnerships that pay on a past-year performance basis. Prices are available up-front online through their website, and are not subject to insurance manipulations. In fact, by avoiding insurances (both federal and private) they avoid much of the bureaucracy and keep costs down.

The extra regulation isn’t necessary, because the posting of performance ratings encourages self-policing. Practitioners that cut corners tend not to stay around very long.

Dr. Smith also tells of how insurance companies and hospitals themselves cooperate via internal incentives to increase the price of care. This includes an explanation of how “not for profit” isn’t charitable, because it leads to artificially high prices that allow the business to post a loss.