Silicon Valley's New Boom Pits Doctors Against Insurance Companies

Doctors in Silicon Valley are fighting back against the insurance companies in their quest to “earn a decent living,” setting a nasty precedent in the country’s already beleaguered health care industry.

By channeling decades of rage against insurance companies, Bay Area Surgical Management has formed a coalition of doctors, which promises members 200 percent on their investment, according to a report by Bloomberg. Founded by Bobby Sarnevesht and his mother, Julia Hashemieh — who likens herself to a modern day medical Robin Hood — the company is the culmination of a movement to protect surgeons, whom she considers “the poor slaves” of healthcare.

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Bay Area Surgical “steals from the rich” by price-gouging “out-of-network” patients. At Bay Area Surgical, fixing a bunion costs $53,000:

Knee arthroscopies that cost $3,000 in Aetna Inc’s network earn nearly $20,000 in facility fees at Bay Area’s surgery centers, according to Aetna, the Hartford, Connecticut-based health insurer. A bunion repair that costs $3,700 in-network got almost $53,000 for Bay Area Surgical Group, one such center. A disc surgery for lower-back pain, called a laminectomy, costs about $6,000 in network yet reaps nearly $120,000 for Bay Area Surgical.

This works because of the way common insurance plans are set up in the U.S. If you are on an HMO plan, you only get access to “in-network” care, meaning you have to choose your provider from a pre-determined list. With these providers, insurance companies have a set policy in place that defines the price doctors can charge for certain operations.

For PPO plans, which usually have higher co-pays and command 20-30% higher premiums if you get coverage through your employer, you also have access to “out-of-network” providers, places that don’t have pre-existing policies with your insurance company. This is where the price-gouging takes place. Operations like Bay Area Surgical woo PPO patients and oftentimes will waive upfront costs for the patient, such as a co-pay, knowing that they can always make that cost up on the back-end and stick it to the insurance companies.

“They’re bloodsuckers,” said Hashemieh, speaking of the insurance companies.

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While groups like this are common, Bay Area Surgical is notable because of its legal fire power, cutthroat profitability, and loyal trust among its member surgeons. The center keeps 15 to 20 percent of the take and gives the rest to its surgeons. Profits for its 60-strong partner base at rates of return that exceed 200 percent a year, many magnitudes higher than any Wall Street shark could hope for. Over time, the organization has attracted the area’s best talent, including Kenneth Akizuki, who performed surgery on San Francisco Giants closer Brian Wilson’s pitching elbow, along with Michael Dillingham, who operated on Joe Montana’s elbow, Steve Young’s shoulder and Jerry Rice’s knee, as well as other local doctors affiliated with professional sports.

Even doctors like Los Gatos orthopedist Nathanial Cohen, who initially declined the opportunity because of legal and ethical concerns, eventually found the deal irresistible. “You feel like an idiot for not doing it,” Cohen told Bloomberg.

Hashemieh, herself a product of the American Dream (fleeing revolutionary Iran in the 70s as a single parent), feels no sense of moral ambiguity as she helps mere millionaires become the multi-sort. “They’re bloodsuckers,” said Hashemieh, speaking of the insurance companies. “I could not be more honored to have come here penniless with a sick child, and now to be sued by a Fortune 500 company for helping doctors earn a decent living and not taking patients’ money. I’m not going to throw my doctors into the ditch. I’ll fight for them to the last drop of my blood.”

In her mind, by charging patients less upfront and sticking it to the insurance companies, she’s doing people a public service. Instead, this Robin Hood steals from the rich, then steals from the poor, all the while enriching himself and his band of merry medicine men. “These exorbitant prices are ultimately taken out of everyone’s wages and contribute to the continuing escalation of health-care premiums,” said Dan Lansky, president of the Pacific Business Group on Health in San Francisco.

The inflation of out-of-network costs contributed to a 4.4 percent rise in U.S. healthcare costs, according to the Kaiser Family Foundation. Insurance companies are often targeted for driving up healthcare costs, says Lansky, but this time it’s the doctors “using deceptive tactics to exploit unsuspecting patients.” The sad truth is that with a system this broken, the ones that suffer will always be the everyone else.