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The Human Action Podcast
Dr. Keith Smith on the Health Insurance Cartel
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- [00:03]
A
This is the Human Action podcast, where we debunk the economic, political, and even cultural myths of the days. Here's your host, Dr. Bob Murphy.
- [00:14]
B
Folks, before we start the interview, let me bring to your attention the fact that the Mises Institute is going to be in Oklahoma City on February 21st for the Mises Circle entitled Entrepreneurship Beyond Politics. And they're going to be featuring speakers such as Ryan McMaken, Caitlin Long, per Bylan, Timothy Terrell, and my guest today, Dr. Keith Smith. So if you want to go ahead and book your tickets, go to mises.org okcha that stands for Oklahoma City Human Action. And once again, mises.org okcha for the February 21st Mises Circle. And so here to sort of tease you and give you a flavor of what's in store and why you should definitely go out there, is Dr. Keith Smith himself. Keith, welcome back to the podcast.
- [01:00]
C
Thanks, Bob. Always good to see you.
- [01:02]
B
Nice seeing you. Well, I thought maybe, because I've interviewed you several times over the years and, you know, we're probably going to retread some of the same ground here, but can you maybe just take a step back for people who know of you, sorry, give the origin story, like, how did you get into, you know, do you call yourself a libertarian? Do you, you know, do you like Austrian economics, specifically? Anyway, I just realized I don't know exactly how you got to be the superhero you are today.
- [01:32]
C
Sure. I, I've always been a fan of mutually beneficial exchange. I think I grew up in a, in a Christian home that thought the Golden Rule meant something. And so, you know, over time, I, I began to realize after I'd entered practice as an anesthesiologist, that I was involved in exchanges that were anything but mutually beneficial. And I began to be really, really bothered by that. I think that I entered the realm of interest for economic concepts. Milton Friedman had a, a series on that was actually on pbs. And they later wrote a book, I can't exactly remember what it was called,
- [02:24]
B
but the Free to Choose.
- [02:26]
C
Free to Choose. Yeah. And I bought the book and read that and was kind of interested in it. And my dad actually heard Lew Rockwell on a radio show, guy named David Gold who transmitted out of Dallas. And he said, you know, this economics thing is interesting. He's got this Mises Institute, which should check that out. And then I was off to the races. So I'm going to give Lou most of the credit for my interest. And then I think I've made a habit of kind of scouring myself for Inconsistencies, because every time I've been defiant and challenged the mainstream, I've been challenged and, and I was always aware that any argument that I was making was weakened if I was being hypocritical or had terrible inconsistency. So I studied up pretty hard and I had to, because I was challenged pretty ferociously as I began to step back from the mainstream, at least in an economic fashion, how you should practice medicine. So when I started my anesthesia practice in 1990, I was part of the big institutional sort of mainstream practice. But it did not take very long to realize that I was an accessory to a financial crime and increasingly an accessory to a medical one. Forced to work with surgeons that I knew were unethical or incompetent. And as an anesthesiologist, the only way to escape that was to walk away and own and control my own facility. And so like minded buddy Steve Lantier and I did just that. We walked out of what I think anybody in the United States would have described at that time as extremely lucrative anesthesia practices. Very successful. And we quit. We just, we started our own facility, put everything we had into getting it. And our mission was to provide the highest quality care possible, always for patients to know prior to arrival what they were going to pay us. Never any surprises. And then, partly because of the study of property rights and Austrian economics, I knew the government didn't have any money, they didn't steal. And so we committed to never accepting a dime of money from the government because that was accepting stolen property. And we took that seriously. So we started the Surgery center of Oklahoma in 1997, immediately quoted cash prices over the phone, all inclusive bundled cash prices, with no clue really of how radical that was. We were very successful. 2003, built the very large facility in which we now work. And then in 2009, really, really, as a statement of our commitment to market discipline, I published a list online of our all inclusive prices. I, I've said before that I fancied myself a bit of a free marketeer over the years. And the more I learned, the more I realized I had to learn and the more changes I needed to make in order to be really honest in making that claim. But I think when we posted prices online, said, here is what we do, here's what we charge for it. Let the market judge us. I think that was a radical enough step. I can actually accurately make that claim now to be a true adherent to free market discipline.
- [06:36]
B
Well, yeah, and just to pull that thread a little Bit and forgive me, Keith, I've used this analogy before with you, but it's the best one I've come up with in terms of just getting people to see you're right. How it shouldn't be radical, but it is, it's actually radical when you realize that what you did was radical. That imagine the, you know, the car market, folks, and where you would go, you go down in the dealership, they'd show you the various models, the colors. What do you want? Okay, yeah, we can get that for you next Tuesday. And, and you sign it and you've agreed legally, you just bought that vehicle. And at that point they tell you how much it cost. I mean that, what, what do you think that would do to the price of cars? You know, and that's how medicine works right now. Such that Keith, posting the prices online so that people could know before they agree to get a procedure. How much is this going to cost? That, that's so scandalous that like you've had other, you know, groups badmouthing you for doing stuff like that. Like that's going to ruin things. That's going to hurt medicine.
- [07:31]
C
Well, and I struggled to be honest because my first inclination was wondering, why are we not busier? You know, why are more patients not coming to see us? Why don't insurance companies want cheaper and better? And so I thought, I need to ask my friends who, you know, run self funded companies, how much are you paying for a tonsillectomy? Tell me and I'll beat it. And then I thought, no, I need to tell them what my price is. I need to declare my worth in the marketplace and let the market judge me. And then they can decide in the privacy of their office whether we're a value or not. And then my wife convinced me, you know, if you're going to do that, there's going to be a lot of blowback. You might as well tell everybody. And that's why I posted the price in 2009. And I, I was pretty ready for the blowback that we got. But yeah, it was really, it was really something.
- [08:39]
B
Geese maybe to help the listeners who are new to you, haven't heard of you before, what you're, what you guys are doing there, the surgery center of Oklahoma to appreciate like what do you talk about blowback? Can you give an idea, like if you have some examples of like what the standard rate would be for a certain kind of procedure than what you guys were charging.
- [08:58]
C
Yeah, the, one of the most, one of the craziest stories within two weeks of opening the center in 1997. And this is prior to launching the prices, A young lady called us with the breast mass and wanted to know what we would charge her. She had no insurance, and so with that sticker shock, she really needed to know. And, you know, we all kind of high fived when she called because, you know, this is why we opened. I mean, we opened to help people and, you know, provide great care at a reasonable price. But when she asked that, I actually didn't know the answer, But I thought I knew how to put it together. So I called a surgeon and asked him, how much do you want for your fee? And of course, he didn't have any idea. So I told him, give me a fee or I'm going to assign one to you. This lady's on hold. And he said, $500. And I thought that was cheap. So I hung up on him before he changed his mind. And then I knew the case was going to take about 30 minutes. So as an anesthesiologist, I bill for my time. I had to figure out what's 30 minutes of my time worth for this case right then on the spot. And the surgery center supplies I knew were not going to be that significant. And so I was about to take her off hold and she said, well. And before I did, I realized she's going to want to know if she has cancer. So I called a pathologist and asked him, how much do you want? And he didn't know. And he finally said, well, you know what? I get paid $28 by Medicare. So $28. So I told her, after adding everything up, it'll be $1,900. And she said, for what? I said, for everything. And she said, well, that's funny. The hospital just down the street from you wanted 19,000. And that was just for the facility. So after posting prices online in 2009, we found this to be a pretty reliable rule of 10 to 1. I'm proud to say, having posted prices online in Oklahoma city, that ratio is now much smaller because they're actually feeling the market pressure. And when someone has ticker shock is told by a hospital that their hernia procedure is going to be $30,000, they can show them online that my price is $3,875. And then things get moving and the price starts to lower. So anyhow, 10 to 1, what anyone sees on our website is not uncommon at all. More commonly, it's like six or eight times what we have listed online. There are certain places in The United States, where hospital systems or insurance carriers have essentially monopolies. And the legislature has obviously helped them achieve that. Alaska's 1, North Carolina, Alabama, Georgia, North Texas, which has been great for us because it's not a very far drive from the Dallas area to our facility. We had a patient, a family, that was quoted $72,000 for tonsillectomy at a Dallas area children's hospital. And our price, I think, is $3,450. So, you know, that's 25 to 1. So, you know, there. It's absolutely insane.
- [12:36]
B
And so with that, you would think your best friend in the world should be the health insurance companies because they can just route their patients to you. And you're laughing, but again, I mean, you understand where I'm coming from with that. And I know your answer. That's why I loaded you up with that. And I knew you were going to think that was funny. But can you explain it? Because in other words, any individual, you know, if something bad happens and they have a procedure that, geez, you know, that's going to cost me 50 grand or more if I have to go to the hospital. Oh, I'm glad. These. But that's kind of a rare thing usually, hopefully for most households. Whereas, yeah, the insurance company that's their business is paying these fees. So you would think they would love you and they would go ahead and work out deals with you. And yet that isn't, you know, what's happened. So can you maybe explain that a little bit more? Like, why haven't you been their best friends?
- [13:23]
C
Yeah, that was one of the great mysteries when we launched in 1997. I mean, we knew we were cheaper. We darn sure knew we were better than the folks who were delivering care at the big box hospitals. None of the insurance companies would let us in their networks. And it was a huge mystery. We thought, well, you know, this is our business plan. You know, cheaper and better wins every time. There ought to be a line around the block. And we found out our business plan was flawed. There was a lot we didn't know. When I posted the prices online, I thought the pressure would be so outrageous that we might actually see some of the insurance carriers crawl and ask to work with us. And it never happened. And it was only after about a year after posting the prices that I became aware of how insurance companies actually make a ton of money. One of the ways they do they make money is they collect premiums and they pay claims and they keep the difference. And that is logical. And that Makes sense to everyone the other way. That's not so apparent. The insurance company will receive $100,000 bill from a hospital. They'll discount that bill to 20,000 and then they will claim that they saved the employer health plan $80,000. Never mind the $20,000 payment was pre negotiated between the hospital and the insurance company. So there really is no discount. It's a complete fiction. But having made that claim of saving the employer health plan $80,000, they are then due per terms of their contract with that employer health plan, a commission on that savings and it's typically between 25 and 30%. So the hospital of course is happy to write 80,000 off of what they of their $100,000 bill because that helps them maintain the fiction of their not for profit status and they frankly need all the red ink they can find to get to accomplish that. So the insurance company wants a gigantic bill to which they can apply a discount. And so with my prices online that was an opportunity foregone. And with our prices reasonable at all, cheaper was a disaster for them. So they wanted no part of dealing with me and still don't.
- [15:58]
B
And I think related to everything you just said there is that I certainly know in my experience when I was younger and I've been fortunate to be healthy but you know, you have, you have a kid or something, you get the bills in the mail and yeah. And you see like what the, what the original price was and then oh, Blue Cross adjustment or something.
- [16:17]
C
Right.
- [16:17]
B
And then it gets taken, weighed down and you're oh, I'm so glad that I, you know, kept my insurance in force and I, and I'm a responsible citizen and father and I pay my premiums every month because look at, I would be out in the wilderness and I would be completely helpless if I didn't have Blue Cross in my corner. And you know, and other I'm just picking them, you know, because name recognition and one of the. I had so and I'm realizing now talking with it besides the specifically you're saying here, Keith, but if I were going to a place, I guess what I'm saying is when you see those pre adjustment prices, everybody thinks I would be completely vulnerable without I need health insurance. Otherwise I'm dead in the water.
- [16:55]
C
That's right.
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B
Whereas if someone's going to your place and you realize no, I could actually just like you know, if I need to get an oil change, I pay for that out of pocket. And if I need to get a tonsillectomy for my kid and it's $3,800 or whatever. I could swing that by you bringing prices down so much, people realize, oh, why do I even need health insurance?
- [17:15]
C
That's right. And I learned this because people would whisper to me anonymously in a corridor, in a hallway, you need to maybe be aware of this scam called claims repricing. And that's what I just described. But there. And there was a lawyer who actually sent, anonymously sent me a copy of an employer contract with one of the carriers that managed their employee health plan. And it fairly, very clearly stated that, you know, we, we retain the right to debit one amount from your health plan, pay whoever provided the service a lower amount, even a lower amount that were contracted with them for, keep the difference and not disclose it to you. So it's just, It's a horrible industry.
- [18:15]
B
And so if I could just circle back to, you know, what? I was asking your origin story, and you were, I forget the exact wording used. You said something like, though, that, you know, you as an anesthesiologist were working with people that you could, you started to realize were acting unethically and doing things. So, not that you got to name anybody or anything like that, but can you just give us an example? Like, what kind of thing did you mean? Like when you were plugged, you know, when you were still in the matrix and you were doing it the conventional way, like, what. What kind of things happen that are just commonplace but that, like, once you realize what was going on, you. You just thought, I can't go along with this.
- [18:49]
C
Well, there are some surgeons that are just plain awful and they have a lot of complications. And hospitals don't mind having those people on their staff because the more stuff that goes wrong, the more money they make. So a patient goes to the ICU unexpectedly, that's a windfall financially for that institution. So surgeons would just have real complications that they should not have. There also were surgeons that would perform unnecessary procedures. And it doesn't take you very long in the operating room to look, for instance, at a. When somebody's performing a shoulder arthroscopy, and you can see there's no pathology, there's nothing wrong. And they are still doing some procedure that is, that's just completely unnecessary. And they're just turning, you know, doing this, doing this to make money. Having said that, there are a lot of companies now, it's a huge industry that claims to be able to objectively measure quality and outcomes. And I always ask the question, how do you deal with the unnecessary surgeries that are performed and those outcomes, because those patients always do really well because they don't have any underlying pathology. And so I would caution anyone to put too much faith in companies that claim to objectively measure quality because there's just too much, there's too much to consider in unnecessary surgery is certainly one of those factors that needs to be considered.
- [20:46]
B
Yeah, that's a good point too. Just even thinking like a particular surgeon's success ratio or something like, yeah, such and such percent of my patients, you know, report that their arm feels fine six months later. And you know, well, yeah, but if they didn't need that in the first place.
- [21:01]
C
They didn't need it in the first place. That's right.
- [21:03]
B
Interesting. Okay, so I can see how that works, I suppose maybe just again, to unpack a little bit for people who aren't familiar, some might think, okay, so what you guys do at the Surgery center of Oklahoma is like real simple procedures that, you know, somebody's. Whatever. That's what you do. Right. But I mean, if you got into a car accident, you got to go to the hospital or, you know what I mean? Like, or, you know, I got to get something really intense done. I still want to go to the big hospital with all the, all the best surgeons and so forth in the city. I mean, can you speak to that in case that's what people are assuming must be the case here?
- [21:42]
C
Yeah, that was one of the big arguments that the naysayers made when we first opened in an attempt to close the Surgery center of Oklahoma is that we were cherry picking. We would only do the simplest of cases. And eventually I realized the right answer to that is, even if that's true, which is not, so what? Right, we need hospitals. We just need them to be in the hospital business and not bankrupt people for very simple procedures. But yeah, we do knee replacements, shoulder replacements, cochlear implants, hysterectomies. We do a lot of big surgeries here. Three of the anesthesiologists in my group are pediatric trained. And so we do a lot of procedures on children. So we, we do more uncomplicated procedures than hospitals do. But hospitals are there to perform complicated procedures. And almost everything that we do, not everything, because we have emergency stuff come up that we do, but there's uncertainty all around us in any industry, and there is in this one as well. But why wouldn't you want a single really all inclusive kind of commodity like price on predictable surgeries and have maybe this thing called insurance for the stuff that's uncertain, that's the way it was for a long time. I know when I was a child, I had my tonsils out, and I've seen that bill, and this was in 1965, and my dad was enraged because it was $85 and they just paid for it. There wasn't any insurance. You just paid for it. So in my lifetime, this industry has just gone completely haywire that we do a lot of complex procedures here. We do more and more every year as technology and techniques improve and hospitals do less and less. But there's plenty for them to do, and there are plenty of sick people out there that need to be in the hospital. And for those episodes of care that are attached to significant uncertainty, insurance has a role.
- [24:28]
B
Yeah, yeah. Like you're saying, even on its own terms. Like, it's not fair for various reasons. But even if it were true, that would be like someone saying, oh, a grocery store shouldn't be able to open because people can just go to a steakhouse if they're hungry.
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C
Right, right.
- [24:40]
B
Like, why would. That doesn't make any sense. But then when you learn, too, oh, and the steakhouse vastly overcharges, even given, you know, a particular cut of meat. And sometimes they give steak to people who say, oh, I want vegetarian. Then you really would say, whoa, whoa, whoa, let's have a grocery store where people can go there if they don't want to go to that steakhouse.
- [24:56]
C
Yeah. Or like, like, an oil change shop should not open because the car dealership is not going to be able to survive without all of those little base hits. And.
- [25:05]
B
Right, right.
- [25:05]
C
It's just. It just didn't make sense.
- [25:08]
B
And the, the oil change thing also feeds into. So, folks, I've written a lot, like, on the economics of health care and health insurance and stuff. So that was one of the things to try to get people to realize, like. Like, what is so screwed up with the medical system and health insurance. Whereas, you know, people don't really have that big a problem with car insurance. And part of it is because, yeah, when you go to get your oil change or to fill up your gas tank or to get new tires, you don't submit a claim to your auto insurance company. It's not just a given that, oh, yeah, the auto insurance company picks up, you know, 50% of your oil change above a certain threshold. Like, no, that's just not how it is. And that's partly why it's relatively. It's there in case you get into an accident that's what you have it for. And likewise here that, yeah, you should not be. I mean, just the other day I took my kid to the pediatrician and there was a, you know, there's a copay, but then they cover, blah, blah, blah. So it's as we now, it's this sort of vicious circle where because everything gets so expensive, you need your insurance to come in and help you with every little transaction. But that just feeds the problem.
- [26:08]
C
And you know, keep in mind, the prices for a lot of the procedures that we perform at our facility are less than many patients deductible. So there are a lot of patients who have and pay for traditional insurance who patronize our facility because they're going to have a better financial experience for sure here paying cash than they would try to meet their deductible. Right.
- [26:40]
B
Yeah, that was a shock even for me, as much as I knew about the economics of health care and whatnot when Obamacare first went into effect, because I had had, you know, what would be called a catastrophic plan in place prior to that. And so, and I, you know, my premiums, I think they doubled and I at least consoled myself, oh, well, at least my deductible will come down. Right. And no, it went up.
- [27:02]
C
Right. Well, how's it.
- [27:04]
B
And it was partly because now, like if I got pregnant, I was covered. So that was good to know.
- [27:08]
C
So, you know, yeah, we got busier after the Unaffordable Care act was passed just strictly because of the deductible provision. And our most rapidly growing demographic now are patients who have traditional insurance who've been denied or delayed. So they basically are turning the government has turned traditional insurance into Canadian healthcare. When I launched the website In 2009, the first patients that arrived to take advantage of that were Canadians. You know, they have insurance, whatever that means. They just don't have access to the care many of them require. We see a lot of them here in Oklahoma City and more now than ever. But a lot of people that are paying premiums now to any of these big insurance carriers are finding when they need knee surgery or shoulder surgery or tonsillectomy or hysterectomy, they just get denied or delayed and they come here and pay cash.
- [28:11]
B
Yeah, I mean, I don't have the figures off the top of my head at this point, but, you know, back when I was writing on this stuff, the, the official statistics, you know, from Canada in terms of the wait, wait times for, you know, getting things where somebody could be in a lot of pain, like they need a knee replacement. And it would just be more than a year. Like, yeah, just suck it up for a year. And then, and they realize that, yeah, I'm gonna just cross the board. And for some of them, I think they felt guilty, like they were doing something naughty by, like, I could just give someone money and then they'll take care of my health problem. They felt that was naughty or something.
- [28:41]
C
But yeah, and it's worse than ever. Since the COVID fiasco, they have not recovered from. Their system is already totally dysfunctional and it really was tested and they've not recovered. So three to five year wait times now for a woman that needs a hysterectomy is really common. We used to hear one to two years, now it's three to five. And you know, these are, these are women that are getting transfusions intermittently because their symptoms are so severe. And they come here and for about $9,000 all in can end their nightmare. But we're really starting to see that bleed over into the carriers now. That blue United, Cigna, Aetna, you know, they're trying to figure out a way to not pay claims or deny delay to what they do. And people just, they discover our website or the website pricing of those that have copied us, and they can end their nightmare.
- [29:44]
B
Well, that was going to be. My next question is, you know, given what you're doing and this seems, you know, so well, actually, why don't I pause. How is it that, you know, you're able to deliver such amazing, you know, cost reductions and yet, you know, the, the people that come out of your clinic are not, you know, their, their success rates are comparable. The other places like, so what, what, what's the success? How are you able to do that? How is this possible?
- [30:12]
C
Well, the, the price that anyone would see on our website is, is all inclusive. And it is the, it is the price. It's the, it's the cost for us that we believe is required to actually render the care. The reason that prices are multiples of what we charge elsewhere is that they are in the business of doing other things than taking care of patients. So we don't have an administrator at our facility. You're looking at him. So there's no multimillion dollar CEO at Surgery center of Oklahoma. We don't sponsor professional sports franchises. We don't seek naming rights on big arenas, we don't buy billboards, we don't advertise on television during the Super Bowl. These are all things that big hospital systems regularly do. And where do they get all that money and still claim to not have made a profit? And of course not for profit. Everyone really needs to understand, doesn't mean they don't make a profit. It means they don't pay tax. So, funny story. Years ago, Tom Coburn, the late Senator Tom Coburn, came by our facility to visit and we had a long conversation and he was a big admirer of what we were doing. And from my office, he went out to see the CEO of one of the big hospital systems here in Oklahoma City. And he told him he had just come from here. And the CEO, the hospital said, well, that's just not a good comparison. It's not a level playing field. And Coburn said, you're right, they pay tax. And yeah, so we actually pay tax. And so it's not a level playing field. If I didn't have to pay tax, I would drop all of our prices by 50% because ultimately that's the bracket where we, we live in. So we, we are able to price procedures in a way that covers our costs at the surgery center and the people, the professionals rendering the care actually paid fairly. The real question is not why are we so reasonably priced, it's really why are all the others charging multiples of what we do?
- [32:40]
B
I think, okay, so given that, then people will say, okay, so how come there's not a surgery center of LA and Boston and like, how come every city doesn't have one of these things there?
- [32:55]
C
There are a lot of things that have to come together for a facility like this to exist. We happen to live in a state that, although the government is more heavy handed with regulations than I would like, has been relatively speaking, friendly to physician based entrepreneurial activity. The federal government years ago inflicted upon every state in response to lobbying by the big industry certificate of need laws. So just to break that down, if you want to open a surgery center in Georgia or North Carolina, you have to go before a star chamber of hospital CEOs and beg them to open up a competitor. And they say no, like every time, because they don't want any competition. And their argument is, well, if you're going to cherry pick all of this easy business and leave us holding the bag with all these patients that don't pay us, then that's a disaster for the community. And of course, all of that is very well rehearsed, but none of it is true. So we don't have oppressive certificate of need laws in the state of Oklahoma. So that's one thing. The other thing is you have to have surgical talent that is not hospital employed and that is becoming increasingly difficult to come by in the United States. So you have to have surgeons who really know what they're doing and are independent and can either perform cases at a place like mine even though they are an employee, or not be employed. The other thing you have to have is really a bunch of employers because the people that buy from me are people who have sticker shock. They're individuals, cost sharing ministries and self funded health plans. So self funded employers. So the employers have to be willing to step aside and know that when they're at the country club and they see the hospital CEO or the president of Blue Cross, United, Cigna, Aetna, it's not going to be very friendly if they step outside of the line and start buying from me. We happen to have a bunch of very independent, defiant employers in Oklahoma and surrounding states that do buy from us. We now have contracts with employers in 49 states and they fly their employees to Oklahoma City to have their surgery and to the copycats that have popped up. So there are a lot of things that have to come together in order for this to happen. This has been difficult to, to start this facility, it's been difficult to maintain it. Probably the most rewarding thing I've ever done. But there's nothing simple about this. And then of course you have to have a mission and you have to stick by it. And I think you have to really have some deep respect for mutually beneficial exchange property rights, those kind of things that Austrian economics gifted to me, certainly.
- [36:27]
B
Okay, so I appreciate that. Oh yeah, there had to be stars, had to be aligned in a certain way for you to be able to do what you did there. But you have alluded a few times this conversation to copycats. So can you give us a sense of like. Like what? How many are we talking about? I know you don't know necessarily the exact number, but can you give us an idea of the scope of this?
- [36:46]
C
So it's on the spectrum. There are many facilities now that will quote prices over the phone if they are asked, but they won't display those prices on a website for fear that they will endanger the relationship with the big insurance carrier. They also have a contract with many of the insurance contracts prohibit a facility like ours from offering a better deal to anyone. So you know, here's the deal, but you can't give anybody else a better deal than that. So there's some ways around that. But it's creepy because the insurance carrier can just terminate a contract and not even give a reason. So. So there are those who will quote prices over the phone if asked. And there are some that are advertising their prices on the website of intermediaries that sort of cloak them. So on a scale of 1 to 10, they're kind of a 5. The quote over the phone is a 1. And then if you're like me and you don't really accept any insurance money at all and you have all your prices online, that's a little more unicornish. But there are some like me. Now there's one in Indianapolis, a great facility called Wellbridge. There's one in Austin, Texas called Texas Free Market. There's one in Moscow, Idaho called Veritas. I'm going to leave somebody out here and it's terrible. There are several that are popping up like that. And then there's one in Littleton, Colorado called Smith Direct Surgical Care. They honored me by naming their facility after me. I have no financial interest in it at all. But it's a carbon copy really of our business plan. And so they're beginning to pop up. But what I think is remarkable is even price gouging facilities, notorious price gougers, are emulating what we have done here on a case by case basis in order not to lose patience and to lose business. So that's really what I wanted. I didn't do this to get rich. I did this to inflict market discipline on the industry. I knew it would bring prices down and paradoxically simultaneously make quality improve. And I would argue that's happened.
- [39:25]
B
Okay, well that's great. Yeah, I'm glad that those copycats are popping up and I think it's very appropriate that they named that one after you. You also have been involved with the Free Market Medical Association. Can you tell people what that is?
- [39:41]
C
Yes. So I co founded the Free Market Medical association with my friend Jake Kempton. Jay Kempton has a firm, the Kempton Group, which manages the health plans for self funded companies. After I posted the website In 2009, I met Jay. Jay asked, can you provide these services for my clients at your advertised price? And I said, yeah, my price is same for everybody. And there were cell phoned companies that were using different administrators who left or threatened to leave and joined Jay Kempton because Jay was buying for me. Jay started directing patients to me that were already scheduled for surgery somewhere else. And so I started to get hate mail from facilities and physicians that were losing business because I had these prices listed online. So Jay was getting pressured by his side of the industry and I Was too. And Jay is like minded. He did not jump into this with me because he wanted to get rich. I mean, we really just wanted to kind of shake things up and make it better and make it affordable, more affordable. And so, true to form, Jay Kempton taught all of his competitors how to deal with me. Maverick. And I taught all of my competitors how to conjure up pricing and how to send an invoice to someone like Jake Hempton. And so this group of people under this tent began to grow. And one day Jay said, I think we might be onto something. What do you think about starting an association and see who shows up? And that's exactly what we did. And it has been a wild success. It is now in 37 state chapters. Bob, you've spoken at one of the annual meetings. It's a very Austrian approach. We do not allow politicians to speak. The only exception, I would say, is Ron Paul, but he was out of Congress by then and he's a friend and a huge admirer of ours here. So it is an apolitical. It's an apolitical group, the Free Market Medical association and is growing every year. It's been very exciting, very exciting to see that entity grow. And it's an industry entity. It's not just a bunch of doctors or a bunch of surgery centers. It's think tanks. There are economists there, there are stop loss carriers there, they're pharmacy benefit managers there. It is an industry wide organization with the idea that the current cesspool cannot be cleansed. There is no way to reform or fix the current system. And I love. Jeff Dice called it, he called out, why do we call it a system? We don't have a shoe system. I mean, we call this thing a system. It's kind of Soviet. But our idea is to re. Is to create an alternative and on with the faith that the buyer will make a different choice. And I think that's happening.
- [43:29]
B
Yeah. Just to underscore what you said there. So I spoke once at the Free Market Medical Association. It was a great experience. And what struck me, Keith, at the time was seeing that like you say all the different. It wasn't just people like you who were, you know, medical professionals who were sick of working in the main system, wanted to open up a practice or something. But it was also people who were there on behalf of their companies, you know, like their HR department would send some like, go check this out. Does this make sense? And it. And so like every like stakeholder, if you'll forgive me for using that silly term in this whole nexus, people from various groups were all there and then there were some that had been doing it for a while, and then others were just kind of like dipping their toe in the water. And you can see like a lot of were just worried that what, you know, this makes a lot of sense. But, man, just to jump right in and just say, we're not, not only are we not using government reimbursement, we're not even doing health insurance. Like, we're just going to go in again. It's kind of scary. But yet there were people there and they could say, here, we've been doing this for 18 months and here's our results, look how much we saved, and blah, blah, blah. So anyway, yeah, it was great to see that.
- [44:35]
C
And I, I left that out. There are a bunch of employers there or their representatives. And this year we declared to be the year of the Buyer. So the focus this year is going to be on the victimized buyers of care. And that'll be the recurrent theme for the Free Market Medical association this year.
- [45:01]
B
Okay, well, fascinating stuff. And so for people listening, if you're an employer or what, you might have just thought, oh, this is good stuff. But I mean, this is directly relevant and this might be something you could use in your, you know, your business. Definitely check out the Free Market Medical Association. We'll put links at the Show Notes page. So guess my folks, Folks, my guest has been Dr. Keith Smith. Again, February 21st is the Mises Circle event that's going to feature Dr. Smith as long as Caitlin Long and some Mises Institute regulars. Go to mises.org okcha for Oklahoma City Human Action to get more details there and to get your tickets. Keith, thanks again for the conversation and for everything you've been doing.
- [45:41]
C
You bet, Bob, thanks. Thanks so much. Honored to be with you.
- [45:45]
B
Thank you folks for tuning in. We'll see you next time.
- [45:50]
A
Check back next week for a new episode of the Human Action Podcast. In the meantime, you can find more content like this on Mises.org
- [46:01]
C
Sam.