Sunday, August 7, 2011

Dropping the Price of Surgery

The following anecdote is by Dr. Jeffrey Rice, MD, JD - CEO of

I would like to share a story about my son’s recent surgery that, while only one simple case, reveals the foundational problem with the U.S. health care system.

I write this story as a father of a 12 year old boy who has cerebral palsy. Jack is fortunate to be healthy and active with minor medical needs. As he has grown he experienced some issues with contractures in his right lower leg which recently required a minor 2 hour outpatient surgical procedure. That is where our saga begins.

When Jack’s surgery was scheduled I started the time consuming process of getting price estimates from the surgeon, anesthesiologist and the facility since we have a high deductible insurance plan. The physician fees were straight forward and relatively easy to obtain, not so with the facility. Jack’s surgery was scheduled at the local hospital’s outpatient surgical facility. I called the hospital to request a price for the surgery and they said they couldn’t really tell me. They offered to send the procedure codes to an external reviewer who would provide a general idea of the anticipated charges. Three days later the answer came back at $37,000. I reiterated that I had high deductible insurance and needed to know the actual price they would bill me after an insurance adjustment to the network fee schedule.

The hospital next referred me to my insurance company. The insurance company referred me to their PPO network. The PPO network said that they could not reveal the prices until after the case was performed. I called back to the hospital.

At this point the hospital said that they could not tell me how much the discounted price would be either and they also wouldn’t negotiate a cash price with me. They expected the discounted price to be in the range of $15,000 to $25,000. They also offered to limit my out of pocket portion to $10,000. I am now on day six with over a dozen phone calls; not the price I expected for a 2 hour outpatient procedure.

I asked my son’s surgeon if he ever operated at any independent Ambulatory Surgical Centers (ASC) and if so would that be an appropriate place to perform my son’s surgery. As it turns out there is an ASC in the ground floor of his office building and it would be no problem to do the surgery there. One phone call and 10 minutes later I have the exact price for his surgery- $1,515.

My son had his surgery and is doing well. We got a fair price because we demanded more of the system.

This simple surgery makes me pause to consider so many issues we face in our health care system. Why does it take days and dozens of phone calls to get pricing information from hospitals? Why can’t hospitals provide upfront prices for their services? Why do they expect to bill patients unknown amounts that they determine after patients have already received care? And what about the patients that don’t know the system. Would a patient facing a $40,000 bill delay or defer surgery when they might get the care they need if they were able to use the $1,500 center? Do they know to ask? No. Does anyone really help them? No.

And what about the healthcare providers. Why didn’t my son’s surgeon recommend the ASC in the first instance? Why hadn’t the surgeon done a single procedure in the ASC in over 2 years? At 10 cases per surgical day, at about $20,000 more per case; how much has this practice cost patients, employers and insurance companies? Millions each year for one surgeon and his patients?

It all goes back to our foundational problem with U.S. healthcare. The business model of our health care system is based on third-party payments from insurance and government. This has evolved to the point that many patients and providers don’t stop to consider why they shouldn’t spend $37,000 for something that could easily be delivered for $1,500.

It is not easy being a patient-consumer, but it can be done. Let’s hope the system moves in a direction that allows this to happen.


  1. Sorry to leave an unrelated comment, but I couldn’t find any contact info for you. I’m wondering if you’d be interested in a guest post. Please drop me an e-mail at Thanks!

  2. Thank-you for your story!

    I faced the same blank walls as you did in trying to plan ahead for my routine out- patient procedure. In the end I just threw up my hands and gave up and paid a very high, (5,000.00 out of pocket) price for my frustrations.
    Your outcome was much more hopeful than mine.
    Who knows? Perhaps some day soon, the convoluted thinking of our "health care " industry will straighten out.
    R. Kinney

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  4. Great thoughts you got there, believe I may possibly try just some of it throughout my daily life.

    ASC Coding

  5. The "military-industrial complex" used to draw many furtive glances and occasionally-justified criticism, but it did not hold a candle to the hospital--insurer complex for inflated fees and obfuscation. Perhaps a more appropriate name would be the hospital-insurer-government complex, for it is truly a tripartite entity.

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  7. Great post. Thanks for sharing this useful insurance information.

    Jackie from Central MA Car Insurance