The Cash Market for Medical Care

Jun 28, 2021

Traditional fee-for-service medical care has seen an unsustainable rise in costs over the past 2 decades. There are many factors behind which include: 1) hospitals charge bill high rates for certain tests and procedures to subsidize nonprofitable services; 2) insurance companies charge ever higher premiums to offset these charges; 3) commercial insurance companies are for-profit and publicly traded and therefore focuses on revenue growth; 4) medical and surgical costs are shrouded in an opaque system that discourages price transparency and free-market competition; and 5) patients have few tools to shop for cost-effective care and thus cannot act as conventional consumers as in other product and service markets. Medicine remains the only industry where you find out the price only after you have already “purchased” the product.

In response to this “cost crisis,” many self-insured businesses have been financially taxed  by this system and are desperate for alternatives that allow care at a fair price with fixed and transparent costs. The principle currency for such a solution is cash or direct contracting for care. In this model, companies can contract directly with physicians, imaging centers and surgery centers for medical and surgical care while avoiding the insurance-based model altogether. This concept is not new and was pioneered by the Surgery Center of Oklahoma over 10 years ago. This center took the bold step of advertising cash prices for all procedures performed at its center allowing employers and patients to know the cost of care in advance of the treatment rather than afterwards. This avoids any “sticker shock” that is so commonly associated with the fee-for-service model.

The direct-employer contracting model is beginning to gain traction across the country as more companies realize the potential cost savings which can add up to hundreds of thousands or even millions of dollars. Our practice is one of the few if not the only regional practice now offering fixed-price bundles for a variety of orthopedic procedures. By strictly controlling the episode of care costs in partnership with Stratham Ambulatory Surgery Center, we can substantially reduce the cost of care with no impact on quality. Furthermore, we can help navigate travel arrangements for patients coming from a distance for surgical care as we have done for patients from Canada and those travelling from other areas of New England. 

If you are interested in learning more about our bundled payment program or direct-employer contracting options, please contact our knee, hip and shoulder center here.