Transparency & Free Market Healthcare in the Face of the Affordable Care Act

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Written By:   J. Wayne Kempton

As consumers, we expect to know the value of the things we buy. Before setting out to make major purchases, we scan the landscape of advertisements and consumer reviews. We look for quality products and determine a fair price we’re willing to pay. We ask critical questions like, “Can I get this cheaper at another retailer or online?” However, in one area of our lives, all critical analysis of cost versus value seems to cease, our healthcare purchasing decisions.

To be fair, there are reasons why we shy away from asking, “How much?” when pursuing healthcare options. When it comes to the point in which we need medical treatment, we want it as quickly as possible to alleviate the pain or fear, which accompanies our ailments. Further, we naturally trust our physicians to be the experts. When they recommend a course of treatment, it’s natural to assume that the cost is irrelevant.

Regardless of these reasons we shy away from inquiring about cost, it stands to reason that a patient in pursuit of actual pricing for medical treatment should be able to obtain that information. Frustratingly, that is not always the case. The American healthcare system functions on the predication of a lack of transparency. It’s purposely complex. As more and more Americans begin to scrutinize their own healthcare in the face of rising insurance premiums and the implementation of the Patient Protection and Affordable Care Act (ACA), the cries for greater transparency are getting louder.

Healthcare transparency provides consumers with the information and the incentive to choose healthcare providers based on value. Value is not just about price, but rather price and quality. Providing reliable cost and quality information empowers consumer choice. Consumer choice creates incentives at all levels and motivates the entire system to provide better care for less money. We already see this working in certain areas in our healthcare system, i.e. LASIK, cosmetic surgery, etc. These areas are driven to be valuable as consumers demand great quality for a reasonable price.

True free market healthcare is consumer-driven. We are taught that valuable healthcare has to be expensive and that the highest quality will cost more. However when it comes to health services, the opposite is true; the quality of healthcare is not related to price. Most of the time better, quality care is LOWER in price. A recent study indicated that if everyone in the U.S. got their care from the Mayo Clinic, health costs would sharply decline. Research by John Wennberg and his colleagues at Dartmouth Medical School suggest that if everyone in America went to the Mayo Clinic, our annual health-care bill would be 25% lower and the average quality of care would improve. If everyone got care at Intermountain Healthcare in Salt Lake City, our health-care costs would be lower by one third. (Goodman, John C.,“Perverse Incentives in Health Care”, Wall Street Journal, 4/5/2007)  The Mayo Clinic provides excellent quality care, but their prices are far less than the competition.


The History

Before the Health Maintenance Organizations (HMO) and Preferred Provider Organization (PPO) era of the early 90’s, Americans paid for every day care out of their own pocketbook, carrying major catastrophic insurance. When HMO’s became popular, they took the consumer out of the cost equation, implementing a provider network with copays for minor and every day office visits and tests. PPO plans further removed the consumer from the cost of their care by allowing participants to go to any physician that was “in-network” who had agreed by contract to treat patients for a discounted price. This discount was calculated off ‘billed charges.’ A few years after this system had been in place, patients began to demand access to more doctors in their network, which in turn, provided less incentive for the doctors to give good deals to payers. At the same time, doctors realized that ‘billed charges’ could mean whatever they wanted. They could mark the bill up 1000% of their former rate and then have the PPO take their 20% discount. This created a perfect storm of healthcare inflation that has driven the cost of care to the point where in 2013; citizens cannot afford to pay for their care without insurance help.


Fairly Priced Treatments

A lack of transparency across the board has made determining the “fair” price for medical treatment difficult at best and maddening at worst. Only recently have the effects of the digital information age and democratization of information begun to influence medical transparency for the better. Free services such as Healthcare Blue Book (available online at, and via iPhone and Android Applications), modeled after Kelley Blue Book for determining the value of automobiles, aggregate the prices of medical procedures offered in a geographic region to determine a fair price. Healthcare Blue Book encourages patients to look at healthcare with a consumer point of view, breaking free of the “leave it up to the insurance company” mindset. As health insurance premiums continue to rise and patients face greater out-of-pocket costs from higher deductibles, knowledge of fair pricing leads to consumer empowerment, ultimately encouraging more responsible buying decisions and accountability in healthcare.


The ACA and the future of Medical Transparency

Although the Affordable Care Act requires hospitals to provide patients with pricing before a procedure is performed, the Department of Health and Human Services has, as yet, failed to write the rules implementing the mandate. In public comments, hospital owners claim that the average patient is not savvy or educated enough to the types and complexities of medical services and therefore, would never understand a schedule of prices (

While most healthcare providers and hospitals have a great deal invested in the status quo of the healthcare system, some have begun to adopt the principle of transparency. The Surgery Center of Oklahoma (SCO) is one such facility. Founded by Dr. Keith Smith, SCO posts the actual costs for procedures on its website, a practice basically unheard of in the medical community. With prices well below those charged by other facilities, some insurers have opted to waive deductibles and cover travel costs for procedures performed at SCO.

“It makes me mad that a lot of people are bankrupted by our current healthcare system, when the costs are, many times, completely unjustified.” – Dr. Keith Smith

The transparency movement pioneered by Surgery Center of Oklahoma and The Kempton Group, a third party administrator of self-funded employee benefit plans, is starting to impact healthcare in Oklahoma and Texas. The Kempton Group is continually seeking out providers like the Surgery Center, while innovatively applying transparent, free market principles to employer sponsored health benefit plans. Through their Kempton Premier Provider TM program, which rewards members for using these high value providers by waiving all out-of-pocket costs and covering travel expenses, Kempton has reduced claims costs by over $4 million in less two years for non-emergency procedures.

“When people think of medical tourism, they don’t usually think about options inside the United States, but it only makes sense for insurers to incentivize patients to get care at facilities that have maximized efficiency and lowered costs.” – Jay Kempton

The proof that free market, transparent healthcare works can be found by looking at the dollars saved. When consumers become aware that high value healthcare is far less costly, they begin to change the way they perceive their healthcare buying decisions. Healthcare services can and should be viewed just like any other purchase we make, based on VALUE, including both quality AND price. Whether you are a business owner providing healthcare benefits to your employees or a consumer concerned about the rising cost of healthcare in America, only your persistent demand for transparent pricing from providers will revive a true free market healthcare system.


Jay Kempton came to the Kempton Group in 1992 and became the President and CEO in 2003. For nearly 2 decades, he has been working with Oklahoma employers to ensure their employee benefits fit the needs of our community. Mr. Kempton has a Bachelor of Science degree in Business Administration from Oklahoma State University and is Life, Health, AD&D, and Property and Casualty Insurance licensed in multiple states.


“Thank you Jay Kempton for contributing your insight to this Journal. The effect that Employer Self Insurance may have in the future of our healthcare system may astonish. This is one of the brightest examples of how the free-market system may allow consumers to take over the healthcare system and increase quality while lowering cost and eliminating waste.”

– JFSEM Editorial Staff

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