MacIver News Service | Oct. 25, 2017

By M.D. Kittle

[Madison, Wis…] Dr. Kevin Tadych believes he is standing on a tectonic shift in health care, one that truly could bend the health care cost curve.

The health care revolution is primed, Tadych asserts, and it will be led by the free market.

“These are exciting times. I’m excited to be a part of this,” the Minocqua orthopedic surgeon told MacIver News Service in an interview this week.

Tadych’s Northern Wisconsin Bone & Joint Center is a purveyor of direct care or direct pay medicine. He’s cutting out the middlemen, the insurance company, the bureaucrat, the paper-pusher, and dealing directly with patients – at a significant savings for his customers.

Under the direct care model, doctors eschew insurance contracts and deal directly with their patients. Many charge a monthly membership for routine visits and drugs. They list their prices for procedures up front, prices that are often significantly lower than the standard insurance-driven model.

Direct care is empowering consumers and the free market to drive down the cost of health care and, as has been abundantly documented, improve outcomes. It offers the return of the true doctor-patient relationship because it shifts control from far away bureaucrats to health care consumers.

Price transparency up front. No negotiating. No haggling. No copays or deductibles or piles of insurance paperwork and administrative red tape. Just a flat fee for the medical service provided.

Need carpal tunnel surgery? The bill in Tadych’s office is $1,900 – everything included. In the market for total knee replacement? $15,000, or about half the going rate at traditional providers bound by standard insurance agreements.

“A guy called up all the way from Virginia. He found me online,” Tadych explained. “He said, ‘Is it true you do carpal tunnel procedures for $1,900.’ I said, ‘Yes it is.’ He said, ‘I’m getting a ticket and flying out to see you.’ The closest price he could get in his area for the same surgery was $13,000.”

Tadych didn’t invent direct care, but he and physicians like him – sick of the high cost of health care driven by falling reimbursement rates, cost shifting, and crippling federal regulations – are bringing medical care back to the basics.

State Rep. Joe Sanfelippo likes what he sees in the direct pay health care model that he says is “very slowly sweeping the country.” The West Allis Republican, who chairs the Assembly’s Health Committee, said he’s been looking at how to foster a direct primary care system, not bound by health insurance, in Wisconsin.

Legislation could be coming soon.

“It would empower individuals and employers to be able to go directly to a provider and bypass health insurance companies,” he told MacIver News Service last week during an interview on the Jay Weber Show, on NewsTalk 1130 WISN.

“By doing so we’re able to see very cost-effective and efficient prices being passed on to consumers,” Sanfelippo added. “It’s that kind of free-market thinking that, when you take all the constrictions that the federal government has on our health care right now, you take those off and you allow ideas like this to foster and take root.”

The lawmaker said he, his staff and some of his colleagues have spent the past couple of years examining ways to attack the escalating costs of health care in the Obamacare era. Sanfelippo said direct primary care could go a long way in controlling Wisconsin’s rising Medicaid costs. Doctors are getting about 62 cents on the dollar in Medicaid reimbursements, pushing physicians out and driving up costs for the insured.

Twenty-three states have some form of direct primary care law in place, and Sanfelippo said the savings from the “no insurance” billing and payments arrangements are 20 percent or more. Direct care could amount to significant savings to taxpayers, he said. Total Medical Assistance payments in Wisconsin have soared from $4.7 billion in 2004 to nearly $9.2 billion in the 2016-17 fiscal year, according to the Legislative Fiscal Bureau.

Sanfelippo pointed to Solstice Health, a direct primary care clinic in his district providing unlimited health care services for as little as $39 per month. The model is built on pricing transparency, and the monthly memberships come without per-visit fees, and with unlimited wholesale labs, wholesale imaging, and wholesale medications.

“It’s Your Money. Its Your Healthcare. Take It Back,” declares Solstice on its website.

Mequon-based Smart Choice MRI has been leading the direct care revolution for years. The growing magnetic resonance imaging chain charges a maximum $600 fee – about $2,000 lower than the average MRI.

Direct care providers such as Smart Choice presage a “fundamental shift toward more transparent, market-driven pricing” and changes in hospital capital allocation, health care industry consultant David Johnson told Crain’s Chicago Business earlier this year. “What’s happening in the private market will ultimately reshape health care more than government reimbursements.”

Tadych, fed up with the insurance chase, was inspired by Keith Smith and Steven Lantier, the physicians behind the Surgery Center of Oklahoma. The “free market-loving, price-displaying” cash-based medical provider lists the prices of all of its medical procedures on its website, like a restaurant menu but with body parts. The Surgery Center, launched in 1997, doesn’t take insurance and charges significantly lower rates than its competitors in the standard health care system.

Tadych helped launch a chapter of the Free Market Medical Association, an organization of medical professionals with a “mutual desire to change the face of healthcare.”

The northern Wisconsin surgeon, part owner of the Northwoods Surgery Center, has been employing the direct care model for nearly two years.

“I said it was time to get serious, so I dropped most of my insurance contracts and we’ve been growing ever since,” he said, adding that his practice will no longer accept Medicare after the first of the year.

Tadych acknowledges leaving the insurance fold has cost him. He said his revenues were initially cut in half, but he’s “not begging for bread.” He has seen his business climb as medical consumers do what consumers in general do: price shop. What they’re learning, to the dismay of the traditional health care players, is that lower price does not have to mean sacrificed quality, Tadych said.

“I’m not making the money I used to, but I’m still eating well. And it’s growing,” he said. “I feel good giving someone health care knowing it was in their range.”