One price, posted

The spread

The price of a knee is not a price

Employers and private insurers paid hospitals an average of 254% of what Medicare would have paid for the same services at the same facilities — 279% for hospital outpatient services specifically 1Ref 1Whaley CM, et al. (RAND Corporation) (2024).Prices Paid to Hospitals by Private Health Plans: Findings from Round 5.1 of an Employer-Led Transparency Initiative.In 2022, employers and private insurers paid on average 254% of what Medicare would have paid for the same hospital services at the same facilities — 254% for inpatient facility services, 279% for hospital outpatient facility services, and 184% for associated professional services — across >4,000 hospitals in 50 states; several states exceeded 300% of Medicare.Most recent published round as of June 2026 (Round 6 expected September 2027). Figures verified via the peer-indexed RAND Health Quarterly mirror (PMC11916091) and RAND's May 13, 2024 press release; rand.org blocks automated fetches.. Medicare itself pays 97% more for most services in a hospital outpatient department than in an ambulatory surgical center, and the commission that advises Congress found that aligning a tractable set of rates would have saved $6.6 billion in one year, plus $1.7 billion in patient cost sharing 2Ref 2Medicare Payment Advisory Commission (MedPAC) (2022).Aligning Fee-for-Service Payment Rates Across Ambulatory Settings (Chapter 6, June 2022 Report to the Congress: Medicare and the Health Care Delivery System).In 2022 Medicare paid 105% more for a midlevel office visit in an on-campus hospital outpatient department than in a freestanding physician office, and 141% more for the first hour of chemotherapy infusion; of 169 service APCs, 57 (most frequently delivered in physician offices) could safely be paid at physician-fee-schedule rates — alignment would have cut 2019 Medicare program spending by $6.6 billion and beneficiary cost sharing by $1.7 billion.. For the knee itself: $11,317 in Montgomery, Alabama; $69,654 in New York City; roughly four-fold spreads between hospitals in the same market 3Ref 3Blue Cross Blue Shield Association / Blue Health Intelligence (2015).A Study of Cost Variations for Knee and Hip Replacement Surgeries in the U.S..Total knee replacement prices ranged from $11,317 (Montgomery, AL) to $69,654 (New York, NY) across 64 US markets — a 6x spread — against a national average of $31,124, and identical procedures could vary roughly four-fold between hospitals within the same market.Industry (insurer) claims study, not peer-reviewed; figures verified from BCBSA's official press release (January 2015), based on >53,000 procedures, claims 2010-2013 across 64 markets..

How do patients land at the expensive building anyway? Ownership. When a hospital owns the admitting surgeon's practice, patients are dramatically more likely to be treated at the owning hospital — including when it is the high-cost, low-quality option 4Ref 4Baker LC, Bundorf MK, Kessler DP (2016).The effect of hospital/physician integration on hospital choice.Using Medicare claims matched to physician-practice ownership data: a hospital's ownership of an admitting physician's practice dramatically increases the probability the physician's patients choose the owning hospital, and patients are more likely to choose a high-cost, low-quality hospital when their admitting physician is owned by that hospital.Abstract findings verified via NBER Working Paper 21497 and ScienceDirect; the published abstract characterizes the effect as 'dramatic' without a single headline percentage — do not attach an invented number. — and vertical integration raises prices and total spending without offsetting volume 5Ref 5Baker LC, Bundorf MK, Kessler DP (2014).Vertical integration: hospital ownership of physician practices is associated with higher prices and spending.Among the privately insured (Truven MarketScan, 2001-2007), increases in the market share of hospitals with ownership of physician practices were associated with higher hospital prices and spending, and the price increases were not offset by volume decreases.. The referral is the rail; the rail is owned.

The unlock

The regulation moved. The evidence held.

The regulatory door is already open: CMS removed total knees from the inpatient-only list for 2018, removed total hips for 2020, and added knees to the ASC covered-procedures list the same year 6Ref 6Centers for Medicare & Medicaid Services (2019).CY 2020 Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems Final Rule (CMS-1717-FC).Effective CY2020, CMS removed total hip arthroplasty from the Medicare inpatient-only list and added total knee arthroplasty to the ASC Covered Procedures List — completing the regulatory unlock that began when TKA was removed from the inpatient-only list for CY2018.Regulatory source; confirmed via Federal Register/GovInfo listings and CMS fact sheet (CMS-1717-FC). TKA's earlier removal from the inpatient-only list took effect January 1, 2018 under the CY2018 OPPS final rule (CMS-1678-FC).. The payment evidence held up its end — mandatory joint-replacement bundles cut $812 per episode with complication rates unchanged 7Ref 7Barnett ML, Wilcock A, McWilliams JM, et al. (2019).Two-Year Evaluation of Mandatory Bundled Payments for Joint Replacement.Medicare's mandatory CJR bundled-payment model produced a differential decrease in institutional spending of $812 per joint-replacement episode (-3.1%, P<0.001) over two years (280,161 treatment vs 377,278 control procedures), driven largely by a 5.9% relative decrease in discharge to post-acute care facilities, with no significant change in complication rates (P=0.67)., and the longest-running hospital experiment cut episode costs 20.8% with quality stable or better 8Ref 8Navathe AS, Troxel AB, Liao JM, et al. (2017).Cost of Joint Replacement Using Bundled Payment Models.At the five-hospital Baptist Health System (San Antonio) under Medicare bundled payment 2008-2015, average hip/knee replacement episode costs declined 20.8% while quality of care was unchanged or improved.. And the cash precedent is two decades old: the Surgery Center of Oklahoma has posted all-inclusive bundled prices — surgeon, anesthesia, facility — online since 2009, and competitors followed it 9Ref 9Carter R (Oklahoma Council of Public Affairs), re: Surgery Center of Oklahoma / Keith Smith MD (2022).Price-transparent Oklahoma doctors attracting medical tourism.Surgery Center of Oklahoma has posted all-inclusive bundled cash prices online since 2009 — bundles covering surgeon fee, anesthesia, and facility charges — and its transparency prompted other facilities (Oklahoma Heart Hospital, McBride Orthopedic Hospital) to publish prices; example: a $1,900 all-inclusive breast-mass removal vs a nearby hospital's $19,000 facility-only charge.Non-academic source (think-tank journalism, Dec 5, 2022; Smith is an OCPA trustee — treat as sympathetic coverage). SCO's official site posts bundled prices but blocks automated verification (HTTP 403). Use only for the documented precedent, not for outcome claims..

The turn

The arbitrage, operated solo — in the patient's favor

An orthopedist in an ASC posting one transparent bundled price is arbitraging the 254%-of-Medicare world legally, openly, and to the patient's benefit. What made that hard to operate alone was never surgical: it was the back office — eligibility, bundle administration, billing, collections, the post-op follow-up stream. On Gale the software is free, follow-ups arrive triaged with the patient-reported outcomes attached, and the platform earns the billing cost plus 15% of that cost on paid claims. The system kept the spread. She posts it.

References

Every number above, sourced