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The Free Market Medical Revolution

Jeff Deist: Welcome, Dr. Smith. I know you are a University of Oklahoma alum and your surgery center is in Oklahoma City. Are you an Oklahoma native?

Keith Smith: Yes, I am. I was born in Tulsa and lived in the Southeast corner, in the Southwest corner, and ended up right in the middle.

JD: Do you think being a Midwesterner informed your worldview or your medical career?

KS: I think so. Part of the reason I’ve remained in this area is it’s always been my impression that the ratio of people to doctors in this part of the country is higher.

JD: We know each other through your involvement with the Mises Institute, and I’ve spoken to your organization, the Free Market Medical Association (FMMA). You understand me when I ask this loaded question: Medicine in the United States is in big trouble, isn’t it?

KS: Yes. As an eternal optimist, I would say that big medicine is in big trouble. The system is dysfunctional, but people are waking up. There are alternatives out there that are free market, and people are becoming aware that they exist, that they work. With this awareness, it becomes real tough for the big monsters—that is, the cartel that controls the strings with their pal, Uncle Sam—to continue driving the getaway car in this heist.

JD: I hate hearing the term “system” to describe medicine! Nobody talks about the American shoe leather system or the Doritos distribution system. Somehow, we’re able to get all these other goods and services without a “system.”

KS: It’s a system because we in this country look at people as a collective and as groups. And anytime we look at people from a medical perspective as groups or a system, that begs for a central, system solution, and that’s part of the problem.

JD: How did the United States go from having doctors and facilities envied by the world to this third-party nightmare we have today?

KS: I think it happened in the early sixties, when the federal government decided to inflict this monster they called Medicare on us in 1965. It’s no coincidence that this happened right after Harry Truman’s Hill-Burton Act in 1946, which populated the entire country with hospitals in almost every county, whether there was a market for them or not. Those hospitals did not want to deal directly with patients to receive payment, so the federal government created this trough that hospitals could plug into to be paid directly. I believe Medicare followed the appearance of all these government hospitals to ensure that they would all be paid. That was disruptive of what was otherwise a functioning marketplace.

Physicians in the early days objected to this, but the federal government knew that they could buy the support of the physicians by agreeing to pay 100 percent of whatever they billed. Thus, physician charges, no surprise, soared, and physicians were making a lot of money for many years under the Medicare system. Eventually all the objections to it broke down except in very small enclaves of real, true-blue free marketeers, like the members of the Association of American Physicians and Surgeons. Medicare popularized the idea of third-party payment. It increased the wages, the payments to physicians and hospitals for services they provided. That probably was the most pivotal and disruptive move and what brought us this third-party monster that we have now.

JD: So, the federal government was the original third party. How did the ostensibly private third-party insurers, big HMOs and PPOs, for example, become so involved?

KS: It grew quickly in the early 1990s as the Medicare trust fund, whatever that is, began to see that they were running out of money and the current contributions taken from people to support it didn’t begin to satisfy what was going out the door. Medicare then started draconian price cuts. As an anesthesiologist, I was paid $1,100 when I started practice in 1990 for the service I provided in open heart surgery on a Medicare beneficiary. In 1992, President George Bush inflicted the resource-based relative value scale on the Medicare system and on physicians, and the payment I then received for that same procedure was $550. These folks from Harvard decided that they could assign a price to every physician service that was supplied. A year later they came in with round 2, and the last payment I received for a six-hour open heart surgery was $285 for the anesthesia component.

JD: Wow.

KS: So, I quit. I quit filing claims. I don’t mind being charitable, but not at gunpoint. I quit participating in the Medicare system. I took care of Medicare patients, but I quit filing claims. When that happened, it caused a lot of fear across the medical community, and some physicians became attracted to non-Medicare payment sources. That worked for a little bit, but then non-Medicare payment sources, whether it was Blue, Untied, Cigna, Aetna, Humana, whoever it was, realized that they could continue to charge high premiums but use the Medicare fee schedule as a benchmark and pay for medical services at a lower rate, therefore increasing their profitability and their power. That was sort of a marriage where this public-private mess got started, and that’s still where it is now.

JD: And then, of course, Obamacare comes along and literally mandates so-called health insurance for the public. It creates these exchanges and everyone starts talking about the healthcare “marketplace,” but the exchanges represent anything but. You are required to have insurance under pain of penalty, and that insurance is not priced according to your actuarial risk. It must cover things like pregnancy or alcohol abuse. You’re not allowed to have a bare-bones catastrophic policy. Some marketplace!

KS: It’s actually worse than that. They pulled the big companies in to secure their support and had to give them concessions. One was called the medical loss ratio that allowed the bureaucrats and the politicians to use a heavy-handed approach with the insurance carriers and dictated that no more than 30 percent of their revenue could be used for administrative purposes. So that meant all of the insurance companies, except for the giant ones, closed their doors. It was a consolidation and it was intentional. Now there are only four: Blue, United, Cigna, Aetna, and they all had a hand in seeing with that regulation that only the most giant players could endure.

Obamacare also banned the construction or expansion of physician-owned hospitals. That was necessary to gain the support of the American Hospital Association. The administration also recognized Big Pharma’s profits were going to come increasingly from new biologic drugs, and as more and more pharmaceuticals went generic, there was less profit for Big Pharma. To secure the support of Big Pharma, they promised a ban on foreign competition in biologic drugs, and a week after they made this promise, the FDA declared foreign biologic drugs unsafe. There were all sorts of shenanigans like that. It was anything but a marketplace. It’s very devious to call it a marketplace.

Ironically, Obamacare was great for the Surgery Center of Oklahoma because in another big favor to the insurance companies, the federal government allowed deductibles to go sky high. So, the prices we had listed online were increasingly cheaper than people’s deductibles. Obamacare actually drove patients to the Surgery Center of Oklahoma because they became shoppers. They had sticker shock. They were spending their own money to buy the service that they needed and that we provided. It was very ironic that people found out, like the Canadians, the only single payer they could count on, really, was themselves.

JD: In Mises Institute circles we talk about the “financialization” of the economy, referring to how central banking has brought about low interest rates, encouraged mergers and acquisitions activity, encouraged malinvestment, and created a lot of leverage and other distortions in the economy. Insurance for everyday basic services seems to have “medicalized” the country. Many people are sick and addled, using dialysis and taking ten prescriptions.

I was in Pennsylvania recently and saw a billboard touting the largest employer in the state. It’s not a steel company. No, the biggest employer in the state of Pennsylvania is the University of Pittsburgh Medical Center. And it really struck me as artificial.

KS: It’s on both sides. The presence of the third-party payment system, it makes the buyer, the consumer, the patient, more inclined to enter the system if the barriers are low. The presence of a third-party payment drives utilization beyond what it should be. It also invites the unscrupulous on the seller’s side. It was no mistake that when the federal government assigned pricing through the resource-based relative value scale, they got everything wrong and the prices that were too low resulted in shortages in those services and the prices that were too high caused an abundance. Some of the services that were grossly overpaid were in abundance. Suddenly there were residents deciding, I want to go into that field because Medicare pays through the nose for that stuff. The financialization affects both sides. It invites and incentivizes unscrupulous behavior on the seller-physician-hospital side, but it also drives utilization on the patient-consumer side. It’s like Ambrose Bierce said: accountability is the mother of caution. There may indeed be some unhealthy habits that people have undertaken that they might not if they thought “I’m going to have to pay for acting like this.”

JD: Let’s talk about your story. You go through medical school and residency in the late 1980s. Some of the doctors training you at that time (older doctors in their fifties, sixties, and seventies) would have cut their teeth when the country still had an excellent cash system in America. Those days were not so long ago.

KS: I was fortunate to be around some of those physicians, and so I knew it was possible for there to be a real market. My great-uncle Walter was the only physician in a town in southwest Oklahoma. Walter Bayes was a great man. He was the guy that got on his horse in the middle of the night, in the winter, went to someone’s home and delivered a baby or saw to the sick. He was a very wealthy man, and he charged very, very little but he did very, very well. He was in a cash market, but sometimes it was pigs and chickens. He was beloved. People in the town of Chickasha still call their hospital—the old timers call it Bayes Hospital because the first hospital in town was the bottom story of his house. He lived in the top story. So, I knew, in spite of much of what I was taught and learned in medical school, in residency, that there could be a market. I was market leaning when I finished my training, and that made it all the more painful to realize once I got out and into practice that I was really aiding and abetting a robbery, a real crime. I was an accomplice, and I was helping hospitals rob patients that came through the doors and had surgery in which I participated.

JD: He was your great-uncle?

KS: He was my great-uncle. My brother’s also a physician, and he has a special room in his office that displays Dr. Bayes’s exam table and his tools and books, and it’s kind of a museum room. It’s very cool.

JD: What was your first job, then, out of medical school and residency?

KS: My first job out of residency and fellowship was here in Oklahoma City. In 1990, I joined an anesthesia group that serviced three hospitals. I was focused primarily on cardiac anesthesia and pediatric anesthesia. I might do a cardiac procedure or a vascular procedure at four or five different hospitals in one day. I was very busy and traveled all over town.

I was self-employed in my first real job. I never received any kind of salary. I never received any kind of income support. When I came to Oklahoma City, I joined this group, and what that meant was I was someone on the list, that when surgeons called our group, I was available. I was one of the anesthesiologists that was available, and all of the people that were part of this anesthesia group were all friendly competitors. If a surgeon liked me better, then he would ask for me on Tuesday instead of anybody else in our group. I borrowed money to buy the anesthesia machine, borrowed living expenses, and went to work and worked as hard as I could. I was scared to death of not being busy enough. I was scared of the debt that I’d incurred. We lived very modestly, and I was out of debt within six months. I paid off all the debts. I provided good service to the surgeons I worked with, and I was very popular with them and got very, very busy and very, very successful.

JD: Did you already have a wife and children at this point?

KS: Yes, I had a wife, a child, and one on the way, so I had reason to be a bit anxious. I wanted to be successful. I had real responsibilities. I was trained very, very well. I did my anesthesia training at the University of Arkansas and was fortunate, very fortunate, to meet people who were true mentors, some of which had been in private practice and were at the end of their career and just decided that they wanted to teach. When I arrived in Oklahoma City, I hit the ground running, very well trained, very confident, and loved what I did. I still have a full-time anesthesia practice, and I love it, particularly the pediatric part.

JD: Do you worry that young people in med school today don’t have those kinds of mentors?

KS: I do, and for that reason, I’m supporting the Benjamin Rush Institute chapter at the University of Oklahoma. I was contacted by a medical student whose husband is an Austrian economist. She’s a second-year medical student, and she wanted to know if I would help her establish a Benjamin Rush Institute chapter at OU. For your readers who are not familiar with it, it is the institute that helps medical students think about practice in a free market—in other words, not to be employees.

We had our first meeting, and I provided all the pizza and beer they could eat and drink, and we had twenty-five medical students show up, which is about a sixth of their class. The next meeting was even bigger. I brought bankers in, and I had the bankers talk to these medical students about why they should rent their soul to a bank, because they can get it back, instead of selling it to a hospital as an employee, where they can’t get it back as easily. I’ve had physicians come in who were employees who broke away and can tell them, “You know, as an employee, it’s not what it’s cracked up to be, it’s really awful, and now that I’ve broken away, I not only love my practice, but I regret that I ever was an employee.” I’m bringing speakers in to help these students understand that there is another way and it’s a more ethical and honest way, and it’s a more patient-centered, patient-focused way, and they should live and die by the market discipline, just like every other business. They shouldn’t have a full waiting room just because they’re signed up on some third-party PPO plan. They should be busy because they’re really good at what they do, and if they’re not really good, they ought to find something else to do.

That’s the way the market works in every other industry, and that’s part of the problem. What we see in this country is not a failure of the free market. That’s not the system we have. The system we have is a disaster because the free market is not at work. Everywhere it is at work, you see prices fall and you see quality soar. I’m happy that I am living to see this healthy resurgence of market principles in this industry. I think that this cheaper and better approach is impossible to argue with, and I think we’ll just see it spread.

JD: We hear about the medical school debt some of these young doctors have. They can’t buy equipment or afford malpractice insurance. Their expectation is to be an employee of some big organization like Kaiser. That’s so unlike your great-uncle’s experience.

KS: That was part of why I was so excited to connect with medical students, because the people who have backbreaking debt are the residents. By the time someone gets to residency, they may be too far gone, either financially or ideologically.

JD: Terrible.

KS: I was very excited to connect with the medical students because they’re not too far gone, either financially or ideologically. You just had to be there to see it, the dropped jaws and the wide-open eyes of these medical students when a banker tells them, “I want to help you, I want you to be my customer, and I will do a good job and I will treat you right because I want you to be my customer long term, whenever you have other financial needs.” And the idea that yes, there is capital out there that I can access without selling my soul. I think that a lot of the folks in medical training who are further along are so down deep in a hole that this sort of a message is less appealing to them. That’s why I was excited to get to them early.

JD: You need to do a barnstorming tour of undergraduate schools and deliver a speech called “Before You Go to Medical School”! So, pretty early on in your career you conceived of breaking away and starting the surgery center?

KS: After I dropped out of Medicare and stopped filing claims in 1993, I realized that I was part of a profession that was not governed by market principles, and that started to bother me. I saw the care that patients were rendered in the hospital dwindling, and I didn’t want to be a part of that. The quality of the care and the cost of the care were not favorable to the people receiving and buying the care. I knew the only way as an anesthesiologist that I could ever be a part of a more market-based, more patient-focused practice was to own and control the institution, the facility. It’s not the physician charges, typically, that bankrupt patients. It’s the hospital charges that are so difficult for patients. It wasn’t always that way.

In 1993, I was aware of a surgery center that was in trouble, and I made several overtures, to buy it and they were all unsuccessful. There was talk amongst many physicians in the Oklahoma City area who were disgruntled with what they were able to collect for services rendered and how the hospitals were mistreating their patients medically and financially. I started talking and gathering people together with the idea of building a facility. We had about eighty surgeons originally involved, but it was like herding cats, and they started to splinter off and do their own thing. This turned out to be a good thing because some of what these individuals did worked better and was more efficient in a small group rather than part of a larger group. Everything sort of fell apart after awhile.

I wound up on a hunting trip by pure accident and in the lodge met the two people that I needed to talk to about this failing facility. When I told them I wanted it, they jumped at the offer because they needed to unload it. And so, Steve Lantier, my partner in crime and anesthesiologist, and I bought it, and the Surgery Center of Oklahoma was born on May 28, 1997, twenty-five years ago. We bought everyone out and had 100 percent control. It was almost five years from the time I thought “I’ve got to get out of here and control my own place” to getting it done. We were wildly successful very early on, so successful we decided to build our own place, and that’s the facility we occupy now.

JD: I’ve heard you tell a story about when you got that first call regarding a procedure and you didn’t know what the hell to charge.

KS: That’s right. We bought this place with the idea that we would provide the highest-quality care at a reasonable price, that patients would always know what they were going to pay us, and that we would never take a dime of money from the government.

A week after we opened, a young woman called and wanted to know how much we would charge her to have her breast mass removed. I had no idea. I put her on hold and called the surgeon and asked him how much he wanted, and of course, he didn’t know. I pressed him and he said $500. I said, “That’s great,” and hung up on him before he changed his mind. I knew the procedure would take about twenty or thirty minutes, and as an anesthesiologist, I bill for my time. I kind of had the number in mind for what the surgery center should charge in order to be profitable. Then I realized she would want to know if she had cancer. So, I called a pathologist friend and asked him how much he wanted to examine the specimen. He didn’t know, and he finally said $28. I added it all up, while she was still on hold, and I said it would be $1,900, and she said, “For what?” I said, “Well, for everything.” She then told me the so-called not-for-profit hospital down the street wanted $19,000, and that was just for the facility.

After the surgery, we sharpened our pencil and looked at everything and realized we made a profit. Since that time, we have found, pretty much, we are 80 or 90 percent cheaper, most of the time, than those who claim to not make a profit at these big institutions, big hospitals. Still we don’t make a lot of money. We have a good marginal profit, but it’s not a grand slam, and we’re very, very happy to run our facility in that way. I’ve had phone conversations with countless patients from foreign countries, in all fifty states, just like that one for any number of procedures, from knee replacements to cochlear implants, you name it.

JD: When you were starting and developing a menu of cash prices for surgery—all-inclusive anesthesiologist, surgeon, and after care—surely vested interests in the state of Oklahoma opposed you?

KS: You know, we had had many legislative battles, and it was coming at us from the insurance companies and the hospitals. I think by the time I put the prices online, they thought they had killed us. There was one legislative move that really hurt us, and that was when the insurance commission in the state of Oklahoma allowed the stacking of deductibles. Patients who went out of network had to meet their in-network deductible before they started again at zero out of network. That put us out of financial reach for a lot of patients, and it hurt us. It almost killed us. So, when I posted the website in 2009, it was almost as a last act of defiance. And I do think at the time, the hospitals and insurance companies thought they had finally finished us off. When I posted the website, I think it was ignored at first. Then they chuckled about it and thought this was kind of funny, a desperate thing. Then it wasn’t funny anymore and they got angry, but there really wasn’t anything they could do about it. By that time, the Republican legislators at the state capitol had begun to waive the free market flag, and they didn’t attack us like they did in the early days to protect the hospitals that were their clients. They didn’t know how to attack us.

I receive inquiries from patients who need inpatient surgery, they need their colon removed for cancer, or they need part of a lung removed or some gigantic spine surgery or heart surgery. And now I actually contact these hospitals that tried to put us out of business and ask them, “Do you want to help this patient from Florida who has a pituitary tumor? Just give me your pricing and let’s not haggle. Give me a good price so you can set that up. Otherwise, they’re going to go somewhere else.” So, these hospitals that were dead set on killing us are now vendors of a clearinghouse that I run that pays the surgery center and all the physicians at my facility. I pay hospitals too and their surgeons. This move has actually overwhelmed these hospitals that were so opposed to it in the beginning. Now, even though they’re cloaked and kind of in the closet, they are participating in this movement because it’s too powerful for them to ignore.

JD: In those early years did you have to take time away from your professional work and go lobby or testify? Did you have to get involved politically on a personal level?

KS: Yes, I did. I spent a lot of time at the state capitol defending us. We made some friends at the state capitol initially. They were Democrats. They saw us as underdogs. They found it very refreshing that we did not accept money from the government because it wasn’t that sleazy conversation where I wanted a favor. I was asking them, “Just leave us alone and let the market work.” Who goes to see their legislator and says, “I don’t really want anything from you, just please resist the attacks on us that were meant to hamstring our operation.” One of our early Democrat defenders was an avowed socialist. Our approach and our demonstration that markets work in this industry has turned my socialist colleague into a true libertarian. He just didn’t know how markets worked, and once he did, he’s as true-blue a libertarian as anybody I know now. What we did changed his whole worldview.

There was a national effort to ban physician ownership of facilities, and there were some people here in Oklahoma who were a big part of that effort. I went to Washington a couple of times and actually testified before a committee. But most of our challenges were here at the state capitol. The state health department was even weaponized against us at one point. So yes, there were a lot of challenges, there were a lot of hurdles, and I think that it helped me. It sharpened my teeth. I was in situations that I was not trained for as a physician, dealing with people who were very savvy communicators, people who could speak their mind very eloquently, even under fire. I found myself in those situations, and it made me sharper, and it made me better, and it prepared me for much of what I later had to face opening and running a surgery center. We have 116 surgeons here now, and I’ve had many media appearances, not all of which have been friendly. And, all of those experiences back then, as stressful as they were at the time, now that I look back, I know just made me better.

JD: You quoted a woman $1,900 total for a procedure that her local hospital wanted $19,000 to perform— and that was just the facility fee! These kinds of disparities, ten times or more, are incredible. Imagine the ungodly sums, the billions of dollars wasted on surgeries alone in this crazy nonmarket system. You are a threat. That’s an awful lot of money for that local hospital to leave on the table.

KS: I think we are a threat, but it’s difficult to argue against cheaper and better. Initially there were some salvos in our way to suggest quality-wise, maybe we weren’t as good as someone who charged ten times what we did. That didn’t go anywhere because we had already established a reputation in Oklahoma City and in the state of Oklahoma.

We took care of all of the Division 1 athletes. As a pediatric anesthesiologist, Steve Lantier and I had anesthetized most of the corporate execs’s children in the city. We had a solid quality reputation. Those attacks gave me a chance to talk about price equality and how the reason prices are high is that there’s no competition going on, and if there’s no competition, you don’t have to be any good. That was very uncomfortable the first time I said that to a hospital exec. A hospital exec one time asked me under fire, “How do I know that your surgeons are any good?” And I said, “Well, unlike your surgeons, we don’t make more money when something goes wrong.” Through these attacks, we learned to help make sure that their attacks backfired.

Again, I think we are a threat, but some of the big players know that this is coming. I had a major Blue Cross executive, who’s head of an entire state for Blue Cross, recently tell me that he’s a big admirer of what we’ve done but that it scares the hell out of him. They know that it’s coming and they’re going to have to accommodate this all-inclusive transparent price-approach to care.

I’m helping hospital execs get into this business. There is a network of hospitals here in Oklahoma and four or five other states that are involved. “Do you want this patient from Alabama or California?” Patients they would never know about otherwise. There’s not that much risk to them to step into this world. Working together, we help create and curate inpatient bundled prices, all of which are listed, by the way, at a different website called Atlas Billing Company.

I think people also know—even the big dogs in this industry know—it’s going this way and they want the help of someone who’s on the inside. That balances a little bit the desire they have to destroy the movement. I think that it’s gone too far for them to kill it. I knew when Donald Trump signed an executive order that mandated price transparency that as wrongheaded as that was, in terms of the results that it had, it changed the narrative. Now the weirdos are the ones who won’t tell you how much a tonsillectomy is. Now it’s the people that said “Well, we don’t really have any idea. We don’t know how long that surgery’s going to take” or “We don’t know if the patient’s going to spend a lot of time in recovery room.” Those people are seen as the sleaze that they are. The narrative has changed, and that’s one of the reasons, even though we’re a threat to the system, that the system doesn’t know how to attack back.

JD: Some surgeons and certainly some healthcare administrators must make far more money under the current system than they should.

KS: That is absolutely right. I’ll say this, though: by and large, physicians are moral, ethical folks who do the right thing. There are people out there who are operating unnecessarily, and those are the folks who are making a ton of money, people who are doing procedures that ought not to be done. We don’t allow those people in our facility, and the market has a way of sniffing those people out. One thing I’ll say is when hospitals employ primary care doctors, the primary care doctors are valued and judged, paid and bonused, based on the extent to which their referrals make money for the mother ship. So, primary care doctors refer to surgeons who are employed by hospitals, and the more surgery they do, the bigger bonus the primary care doc receives. It’s really awful.

There are administrators who shouldn’t have a job at all, and you look around a hospital and you shake your head and wonder what is it that this person does that contributes to patient care. But multimillion-dollar hospital CEOs have a lot of responsibility. We don’t have an administrator at our facility, or rather, I’m the administrator. This top-heavy administrative apparatus that sits on top of the industry is a result of government regulations, which the big players in the industry have welcomed, and it’s also a result of the third-party payment system that I think is breaking down.

JD: I suspect that those million-dollar hospital CEOs actually detract from patient care with their busywork. You had a lot of stress getting the cash surgery center up and running and breaking the mold. Your life could have been more comfortable as an anesthesiologist in the system. Was it worth it not to deal with government and third-party insurance and all the medial billing bureaucracy?

KS: Mises said, “People go from A to B because they prefer B to A.” All in all, my life is satisfying. Stress-wise, it’s the stress I’ve chosen. And the stress of the market is real. You have to perform. You have to have good results. You have to have good outcomes, or the market will murder you. We have embraced that because everyone in my organization is confident of their abilities. We’re not afraid to compete, but there’s a stress that goes along with that too because the expectations for those of us out in the marketplace embracing that discipline are higher than they are for the cogs in the wheel. But yes, I feel vindicated, and all of the battles that we endured in the early days have borne fruit. There are countless patients, tens of thousands of patients, who have benefited from our approach, whose assets and wealth have been preserved, whose children have had surgery who otherwise could never have afforded it. There are many, many success stories over the years, so I’m paid in that way too. I have a very rich existence because of the friends and relationships that I’ve had with coworkers, surgeons, employees, and people who have supported us. Yes, it’s been hard, but it’s been very, very rewarding.

JD: And of course, some of your patients come from places like Canada, where a so-called single payer system gives them “free” surgery only after a long wait.

KS: That’s right. They’re paying with their time. We operated on a Canadian recently, and this is a common story now, the woman needs a hysterectomy and is in line waiting for three years.

JD: Wow.

KS: Their system is so dysfunctional. It’s three years of getting transfusions because of her bleeding. And for $8,000, she can end her nightmare and have a hysterectomy. The wait for a knee replacement is also three years right now. And in fact, when I launched the website in 2009, the first patients to come were Canadians. People come from all over the place. About 40 percent of our patients, in any given week, sometimes even higher, are not from Oklahoma. They travel here because they hear about us for one reason or another. We turned twenty-five years old, as I said, this week, and we had a big party. We had a big crawfish boil and invited three hundred people. Ron Paul and Steve Forbes sent congratulatory videos. Larry Van Horn, a healthcare economist from Vanderbilt I’ve become friends with, he sent a nice video of congratulations.

The people in Oklahoma, the employees that I’ve worked with at the Surgery Center of Oklahoma, we know we are part of something that’s bigger than just your average surgery center. It’s provided sort of a model for others who have followed up. WellBridge Surgical in Indiana just launched and it’s a carbon copy of the Surgery Center of Oklahoma. These facilities will begin to pop up all over and there will even be some hospitals putting their toe in the water. They will do this because they are afraid that people will leave their community and travel to Oklahoma or to the guys in WellBridge to get their surgery.

JD: At those prices, you can fly first class to Oklahoma City and stay at the Four Seasons! You talked about the Surgery Center of Oklahoma and its tertiary care: anesthesia and surgical services. But there is also a revolution at the primary care level. Direct primary care (DPC) doctors who accept cash for frontline family-practice medicine are growing. You know and are friends with many, many doctors in this movement through your work with the FMMA. Can you just give us a brief sketch of the DPC revolution and where it is going?

KS: The direct primary care movement, I believe, is the most disruptive component of this free market healthcare movement. It was founded by two physicians in the United States with very different approaches: Lee Gross in Sarasota, Florida, and Josh Umber, in Wichita, Kansas. They were aware of the concierge movement, where physicians charge patients $10,000 a year whether they see them or not, just so the patient can have immediate access. Lee and Josh thought, Why can’t we have a blue-collar version of that where we offer care that regular people can afford? They kind of backed into it by thinking, How much money do I feel I ought to make as a doctor? What is fair? And I wonder if I had six hundred patients or eight hundred patients in my practice instead of three thousand, like many primary care doctors do, and they paid me $70 a month, and I’ll be at your beck and call. See me whenever you want. You can text me. This movement has exploded. And the most disruptive part of it is these are self-employed, right-up-against-the-wall capitalists and are not hospital employees. When a patient walks into the office of a direct primary care doctor, that direct primary care doctor is working for that patient. They’re not working for the hospital, and all the conflicts of interest are gone. If that patient is attracted to a direct primary care doctor, they also probably have sticker shock. They’re a member of a cost-sharing ministry or they’re part of a self-funded plan which pays for these direct primary care subscription memberships.

Recently a patient walked into a direct primary care doctor’s office with appendicitis. I get a call, “Can you do an appendectomy on this guy?” Well, yes. And that whole episode of care cost less than $6,000. Just think about that: patient goes to the ER because they don’t have access to a direct primary care doctor, and then they’re hospitalized and have an appendectomy in one of these giant price-gouging hospitals, and you’re looking at $30,000 or $40,000 minimum.

I’m proud to be friends with many in the direct primary care community and really do view their role in this movement as a most critical one.

JD: Can we conclude that big medicine is in big trouble, but the evolving cash market gives us reason for optimism? Would you agree with that assessment?

KS: I would agree with that. I keep coming back to Rothbard’s quote that the market is beautiful but it’s also powerful. We’ve been witness to that. We are seeing the beauty of the market discipline at work and how it is making prices fall and quality soar all at the same time. But we’re also seeing how this tiny movement, these individual direct primary care doctors, this surgery center in Oklahoma City, has exerted an incredibly powerful influence on the market, as small as we are. So, big medicine is, I think, in big trouble, and it’s because of market discipline and the power that it wields.

JD: Excellent, Dr. Keith Smith. I want to thank you for your time.

KS: It’s always good to talk to you.

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