sick the question tonight is whether or not soldiers were adequately warned about its rare side effects serious life changing side effects. hello this is our top stories tonight chaos of the cost of living riots in the west bank leave palestinian leaders desperate for com thanks israel watches for signs of another uprising against that will keep. russia stands up for its energy giant gazprom saying the a use trying to force gas prices down moscow's possibly crease saying that anyone who's got a problem with a company would also have a problem with the government. the u.n. warns against taking sides in the syrian conflict send the rebels and the regime a share the blame for the bloodshed this western powers are again accused of turning a blind eye to rebel atrocities. right now as promised the kind with lauren that

step. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for monday september tenth two thousand and twelve republican presidential candidate mitt romney made headlines when he said this in an interview broadcast yesterday i'm not getting rid of all of health care reform of course there are a number of things that i like in health care reform that i'm going to put in place . this in the world of horse race political coverage it seems is news because it differs from previous rhetoric of repealing obamacare but what do you rather hear from politicians the real reasons why a trip to the e.r. in the u.s. for say a headache could amount to a ten thousand dollars bill so we think is important since they aren't we will and have we found the antidote we'll talk to a doctor from oklahoma who runs an independent surgical clinic and is bringing free

market competitive prices to surgery and he's offering customers lower prices as a result and patients flying in from all over the world including countries with universal health care systems to get surgery at his center plus switching gears former reagan budget director david stockman brought some sense to c.m. d.c. this morning take a look. he was the only one that was ready to vote in the senate is the heart of the problem we have destroyed the capital markets the money markets in his words mean nothing everything is trading all of who said. he was given a hat tip to ron paul before going into that tirade and he didn't stop there we'll talk about it let's get to today's capital account.

as i pointed out at the top of the show it's new is evidently for mitt romney to say he wouldn't get rid of all of health care reform but it is not news if we told you that health care costs in the u.s. have skyrocketed over the years with little to look forward to in the way of reform that's a story we all know well by now here's a chart to show the numbers though over the years health care costs in the us have increased from five percent of g.d.p. in the one nine hundred sixty s. to seventeen point four percent in two thousand and nine as you can see on the chart there this is five percentage points more than in the next two highest countries by the way now america has great health care institutions it has some great health care providers but why is health care so expensive while one area of politicians of use blames doctors for performing unnecessary procedures to bring

home the bacon here's a clip of brock obama talking about going to the doctor for a sore throat as an example you come in and you've got a bad sore throat or your child has bad short throat or has repeated sore throats the doctor may look at. the reimbursement system and say to himself you know what i'm a global one if i take this kid's tonsils out. the physicians we've spoken to doth protest saying they are being unfairly blamed and are easy targets that compensation for physicians has been declining since the introduced introduction of a network h m o's and politicians would rather point the fingers at doctors rather than look at the real causes of skyrocketing costs which may rock the boats of some major lobbies such as big pharma or big insurance or trial lawyers let's take one example just point out so according to a recent report from the institute of medicine the systemic waste within the u.s. health care system is a staggering seven hundred sixty five billion dollars this represents thirty

percent of total expenditures for some perspective now the report claims that two hundred ten billion dollars of that are wasted unnecessary procedures that tops a list of other things you can see such as excess it ministry of cost so as far as unnecessary procedures it says money's being wasted but that doesn't get insight into why physicians we've spoken to say sure there are bad doctors as much as there are bad seeds in any profession for example doctors that claiming condo or excuse me for example claiming that doctors what happened here i just spit this out so essentially there are bad seed sure but one thing that doctors cite is malpractise risks and malpractise suits and defensive medicine that they need to practice that they've learned over the years is the best way to cover themselves against not practice lawsuits so they test for every condition so there's something goes wrong they are covered and they can say we did what we needed to do we were not negligent

and this is what some would say is a huge incentive for excessive testing now this is just one part of the equation but it could help to explain why a patient walks into an e.r. with a simple every day headache and could go home with a bill ranging from three to ten thousand dollars depending on the region so nobody has a case to claim that the physician did anything wrong in reality that doctor could have done a good history physical exam and give the patient a tie. i am all for what we're told and sent him home with a bill for two or maybe three hundred dollars tops now if you don't buy that because i know that somewhat of a wedge issue as i discovered here in our news room earlier we all got into an argument about it don't worry there are other factors that our gas can get into about why these costs are so high the role of insurance companies of course is involved wasteful administration costs too and hospital inefficiencies so joining me now to discuss this and talk about an entirely different model of doing business is dr keith smith he's managing partner and medical director for the surgery center

of oklahoma thank you so much for being on the show and for coming to washington to see us thanks for having me absolutely so let's start with your model because you have a different model of providing health care it is market based you price you post all of your prices first surgery online there are no secrets patients know what they're getting and these prices you tell them is lower than the competition from from big hospitals and i did a simple search and they are lower the national average is given for these procedures for people that don't have insurance are paying out of pocket so why are you able to charge less in this world of such high healthcare costs well health care doesn't cost that much what that is shocking that is the. giant hospitals charge for it is another matter altogether. there's a woman in arizona that high profile scorpion sting for which she was charged eighty thousand to. forty thousand dollars doses of a scorpion in

a company in mexico makes for a hundred dollars i saw that you said that that hospital marked up that scorpion venom more than ten times for what they billed her so inclined to your model which will get more into in a second everybody has a story it seems like the one you just gave the scorpion venom and it's marked up ten times or our boss in our morning meeting was saying yeah i had a friend who got to get stitches and it was. five grant so what goes into those costs that make stitches cost five thousand dollars in this country if you say go to a big hospital well and they list two stitches don't cost five thousand dollars but the reason that that bill occurs is that there are a lot of players in the mix that benefit from that bill and not not in the way you would think can sort of a counterintuitive way hospitals create giant bills not because they hope to collect it all but that when they write off the portion that they're not paid they

can claim that as a as a loss and that helps them maintain the fiction of their not for profit status because most of these places are tax exempt. they also have to be clear you're saying that not for profit hospitals actually need losses to justify their tax exempt status that's right so that's one reason why they would make costs unpayable in some cases that's exactly right in and that makes them perversely inclined to charge a person who has no ability to pay them even the highest amounts because that's where the greatest losses come from they also are able then to shift that loss through what's called the uncompensated care program back to washington where they then receive a rebate to the extent that they were not paid on those claims so the and so is that in situations of medicare and medicaid that they would get reimbursed yes then their medicare medicaid payments then the next year are bolstered with these rebates in what's called disproportionate share hospital payments so the hospitals

are are incentivized to create these gigantic bills because they get paid even when they don't get paid the insurance companies another counterintuitive thing they they actually want the patients to go to the highest priced hospitals because they make a whole bunch of their money on something called claims repricing ok what repricing so in the instance of the arizona woman she had an eighty three thousand dollar bill in her insurance company paid fifty seven thousand of it so the insurance company wrote in to the rescue and discounted the bill by twenty seven thousand dollars well what they don't want you to know is that they then back charge the employer's group plan a percentage of that twenty seven thousand dollars fall savings and many times it's thirty five percent of the savings and

a lot of the money that the insurance companies make comes from claims repricing and if you if you think through their surance company is still billing for the discount that it worse than. yes exactly the packet it is a record to the extent that they negotiated a discount they are paid for that but if you take that the next step you realize then they're perversely inclined to seek out the people that are going to produce the most gigantic bills so if you're wondering how do sutures in your finger how did they get to be five thousand dollars to me that is the sort of vicious circle that these bills go through and then i noticed on your site you you list all your prices for surgeries but you say if we're filing insurance for you these prices don't apply why is that because i don't take the risk of nonpayment i don't have to pay a whole roomful of staff to deal with and fight with the insurance companies so you know we put our prices out there people will pay and and we're done interestingly

we've actually had patients that had insurance that told us that they didn't pay to use our website when they came in and then they filed the insurance the insurance company mistakenly paid them the regular chargemaster rate and the patients made out like bandits oh wow so they're there her they're creating a racket based on your business model so you also some other inefficiencies with hospitals that you talk a lot about have to do with administration which you just just mentioned and some other doctors that we've spoken to talked about some of the issues with labor for example we're operating rooms take two hours to clean because of the contracts with labor unions when it could cost there could could take fifteen minutes for example or contracts with suppliers that they have to go through to get supplies which is much more expensive than if they were just getting on more competitively so what role do these play in the inefficiencies for hospitals that you don't have well most most of the big hospitals are inefficient because no one has any skin in the

game there's no the staff doesn't have any incentive to perform or to be efficient . at my facility we bonus our staff every quarter based on the productivity and the profitability of the center so everybody everybody is got skin in the game the hospitals have multiple layers of ministration we don't have an administrator at our facility and many of these people are making six seven figure salaries so if you if you have a whole lot of chiefs and it just becomes a horribly bureaucratic very government like system in it it makes sense because most of their money comes from the government and i understand you don't take medicare or medicaid why not we don't take medicare medicaid because the price has been set below the market clearing price and we are not in business to do business for a loss i deal with medicare patients but i won't deal with their medicare so if they

are willing to show a share of that aside then i'm happy to deal with them but they're also all kinds all manner of rules and regulations to which we would have to comply or with which we'd have to comply if we took that money and we chose we chose not to do that and we've never taken a dime of federal money since we've opened in one thousand nine hundred seventy and those compliance regulations i'm sure would drive up their costs and absolutely not allow us competitive prices when we get back at you mention federal money i want to know why people in single payer systems come to you for their surgery instead we will get that answer with our guest after the break and also still ahead we'll get our guest take on the impact of obamacare of course does the president's health care initiative give the appropriate compensation or does it just give even more power to major hospital chains we'll find out after the break but first your closing market numbers.

welcome back we're talking about health care and before the break our doctor was talking about his enervate of model which is market based but why would patients somewhere where they have universal health care why would they travel to oklahoma to get surgery from him like from canada which i know he has patients who come here from that country to do just that to get their care so let's ask dr keith smith he's our gas managing partner medical director for the surgery center of oklahoma so dr smith let's just kick off with that why would a patient come from canada to get a hip replacement with you as opposed to their country which has single payer a single payer system that that amazed me i know when we first put our prices online the first people that showed up were the canadians and they they're in long lines they they have this right to health care whatever that means but it is it's a right for care. it's a place in line i mean that's all that's all that they have so when they saw our

prices they realize for a reasonable amount of money they could buy their way out of line. the whole cottage industry places for these canadians to escape all along the border i think our prices were significantly different and low enough that it made sense for them to travel a little farther and do that so let's get a little bit more into why you developed this this practice what made you and your associates decide to start your own surgical center where there administratively operational financial personnel issues that were important you know we an anesthesiologist partner mine he and i decided that we were tired of the way the hospitals treated they became very heavy handed back in the early ninety's seen anticipation of clinton's bill passing they became abusive of they were typically abusive of the surgeons and so they ran off the good surgeons that seem like abusive in what way they they were not getting the equipment they needed whatever

the patients needed on the floor in terms of. nurse staffing it just didn't seem like that was happening so you want to more control over your ally in your practice and they weren't really that good to the patients either so we thought we could complain about it or we could do something about it and so we bought an old surgery center that had been operational but was struggling and and went from there it's been a it's been quite a ride that was the nineteen ninety seven ok and your i know your prices are lower than than the competition what about your outcomes do you publish your outcomes do you base your compensation on outcomes you mentioned the role of profitability what about the role of quality care. you have to be careful with outcomes because for for someone who is say operating a necessarily doing something on a patient that doesn't need their outcomes are going to look great so i think you have to be careful with outcomes it's very patient specific we actually publish our

infection rate which is a very measurable outcome predictor for outpatient surgery centers the other very easy. number is and intice a paid hospital admissions so we we publish those. other than the prices work in we're transparent there too right and what i understand from a doctor that checked your website is that your infection rate is quite good are there differences between hospitals and centers like yours in terms of regulation you mention medicare and medicaid type regulations but what about others since we don't take federal money we don't have to participate in the electronic medical records for lack of a better word that's being foisted on the rest of the country and why do you say that's a scam because of the cost are privacy issues if if electronic medical records were a good idea in some instances they are in private physicians offices then when the government didn't need to force it down everyone's throat but that's exactly what

they did and i think that that is the tool they will use. the intelligence gathering tool they will use to come up with rationing ideas in the future and show that you know it about privacy issue very very much the electronic medical records is a real scary thing regulation wise i run an outpatient surgery center and we do operate under different rules and regulations but heavily regulated by the state health department in oklahoma but very few federal regulations because we don't take their money ok but there are state regulations so that you able to cut corners and relations but also when it comes to care ok got it and what mechanisms you have in place to monitor the quality of services i just hard the best people the simple formula and if surgeons are if we bring a surgeon in and he demonstrates himself to be something other than quality or an ethical then we kick them out because all we have is our reputation and we want those guys gone and we've done that and what is your business model i know

a lot of people in our audience are a businessman and they're probably quite curious medicine is it something that's typically synonymous with efficiency and so how is your practice organized and how are the profits distributed which i know you got a little bit into in terms of your incentives it's a it's a limited liability partnership that essentially operates like a law firm so we distribute profit space on a look back. just exactly like a law firm would and if we had taken federal money we would not be able to operate in that manner but it's disappointing because. because the profitability of each surgeon determines whether whether he is at a good compensation level as a partner for the next year or so they tend to not be wasteful it had to be not show up the way they tend to take the amount of time they say they're going to take for the operations and it's really self policing embracing that sort of market

market model ok how do you make sure that the profitability motive doesn't detract from the quality of care motive well we. we again have brought the right staff in in the right surgeons and i'm in the operating room with these guys all the time and if i sense there is any you know cutting corners or doing things that are inappropriate or unethical then those those surgeons don't stick around we we just let them go ok and i'm just i have course i want to know what you think the impact of obamacare will be in your view what you expect the ability to be are the impact to be on you and your ability to do exactly what you're doing now what do you think it will provide in terms of compensation to small health care centers versus large hospitals i think obamacare is going to be the disaster that it was intended to be and it's going to drive what i mean by that well it was written to fail in written so we'll see the sequel which is single payer so you think that this was actually

couldn't contrived in order to hail to lead to single handedly oh yeah i don't think there's any doubt about that now they've done what well the prices of health insurance premiums have already gone up and it's not even fully implemented if you look at massachusetts experience the health care the premiums for insurance there have gone wild since governor romney instituted his plan they are so i think they knew full well this was going to become outrageously expensive and then people do what they do they holler in big comes the government on the wide horse to bring part two i think that was their intent all along interesting. what what about in terms of the power that this gives to major hospital changed to hospital operators administrators i know they benefited when this was passed in terms of their stock or is it reacted but do you think that it will give them an unfair advantage kind of more monopoly power over small centers like yours that may want to come up. sooner we're trying to move completely away from an insurance model so i hope that

we're not impacted terribly from this at all hospitals and their lobbyists were a big part of crafting this bill and they've already capitalized on it in some ways by the hostile takeover of physician practices many physicians are in such abject fear right now they're willing to accept any offer in meetings hospitals are buying their practices only they had to turn around and bill two to three times what the physician was charging the day before they sold interesting and just before we go because at the beginning of the show i mentioned that malpractise argument that doctors practice defensive medicine to cover themselves which i've heard from a number of physicians that that factors into health care costs but you mentioned that you think even a bigger role than that i think to my producer is that hospitals are incentivized to charge more based on what reimbursements based on these uncompensated care scams based on the losses they need to post you know the hospitals want to show its giant of a loss if they possibly can it's all fictitious of course in order to maintain the

fiction of their not for profit status and to maximize their uncompensated care revenue take it's interesting i wonder if all those hospitals would be put out of business if everybody went to your model but i do know that hospitals have certain requirements such as research that that a small center may not but that's where we're going to leave it today appreciate you being on the show thank you so much dr keith smith medical director for the surgery center of oklahoma. ari before we go let's wrap up with a quick loose change because we wouldn't want to miss an opportunity to hear from dimitri cofan right on an episode good way so this was awesome when i came to work

and saw that on c.m. d.c.'s squawk box this morning reagan's former budget director said this about the fed disincentive eyes in washington from cutting spending from taking on interests such as the military industrial complex take a listen go never do it if you can keep borrowing free money forever right he said and these lunatics who are running and i use that word advisedly are basically telling the whole world on truths about the cost of money about the cost of risk about how you allocate you want to what we. go david stockman saying that on c n b c i mean there was so much that i could have chosen from just one minute of his analysis on that show that i just loved it's so nice to see an establishment figure a former establishment figure saying these things on c. and b. c. you're going to cloud computing you know a cloud to trade by computers on central bank policy like we've talked about of the

miscalculating credit miscalculating risk because what that's kind of like it's like you have a giant multi-car pileups and you're looking for who to blame amongst the drivers but you never look up to see that the traffic lights are all screwed up so it's not the drivers fault they're crashing into each other because the traffic lights are giving the mixed signals and that's the basic one of the basic flaws of having a central bank of the people it's the price of money that middle east interest rates and we know that whole analysis but never think that there is anything funny about it being a former reagan guy on a c m d c. doesn't have to talk about forces but i like that stuff like i like this i like this because it feeds on the whole thing about health care and in general we were problem society which is that we try to diagnose we try to treat symptoms with understanding and treating the disease and that's the problem and the fed is part of the disease and the symptoms show up in a malignant economy could no to end on air i don't have any airfare to the

mountains were doing all right let's leave it there because that's all we have time for thank you so much for watching be sure to come back tomorrow and the meantime you know you can follow me on twitter at lauren lyster give us feedback a you tube dot com slash capital account and have a great night.