Keith Smith 00:00:14 When patients walk through the doors of the Surgery Center of Oklahoma, they often carry stories of frustration, fear, and financial devastation from their encounters with America's health care system. Yet what they find in Oklahoma City is radically different. A transparent, patient centered surgical experience at a fraction of the cost of most hospitals and surgery centers today on physicians taking back medicine. Meet Doctor Keith Smith, the co-founder of the Surgery Center of Oklahoma and a pioneer in the free market medical movement.

Speaker 2 00:00:54 I'm an anesthesiologist fellowship trained in cardiac and pediatric anaesthesia, which recruited Oklahoma City really to help out primarily with cardiac anesthesia. Started my practice in 1990. It wasn't long after I started my practice. The government inflicted the relative value scale sort of pay cuts that hit hospital based physicians particularly hard. And it really made me reevaluate my practice. I decided then to stop dealing with the federal government. They were untrustworthy, not a good partner. Pay you one amount one week and the next week tell you they were going to pay you a different amount and God help you if you build anything different from that.

Speaker 2 00:01:40 And I just I wasn't going to do that anymore. So I started concentrating on my pediatric practice, and that helped my reputation as an anesthesiologist grow enough that in just a few short years, I was able to walk away from the big hospital where I worked with several surgeons that really trusted and guided the service I provided them. And that really is how the surgery center of Oklahoma started.

Keith Smith 00:02:10 So you basically built your reputation, you found these great colleagues, and you decided, let's do something totally innovative. Tell me more about how that happened. Where did this idea come from? And had you seen it happen before? Or were you the innovators in this space?

Speaker 2 00:02:27 We knew that there were outpatient surgery centers that were physician owned and controlled, that were in existence. Our motivation was really in defense of the patients with whose care we were entrusted, not just from a medical standpoint, but also from a financial standpoint. Back in the early 90s, quality care really was dwindling. They began to cutting back on staff and even denying the surgeons.

Speaker 2 00:02:55 I worked with what they needed to perform. Childress the other thing that happened was hospitals became financially brutalizing with patients back in the early to mid 90s. We knew for a fact that patients that had even minor procedures coupled on release tonsillectomy, were being financially brutalized by hospitals. And I'm a big fan of mutually beneficial exchange. And I realized I was party to a crime. I was an accessory. I was aiding and abetting this financial devastation heaped on patients. So there were a lot of things going on, a lot of reasons to walk out. We walked out because we wanted to be in complete control of the medical experience patients had, and we also wanted to be able to treat them financially in a fair way. And as big fans of the free market, we gambled that if we're cheaper and we're better, that it also is an entrepreneur. You know, it was an opportunity for us. It turned out I was right.

Keith Smith 00:04:02 Give our audience the big picture of how the surgery Center of Oklahoma operates in just the overarching theme of cash pricing.

Speaker 2 00:04:11 Yeah. So in consistent with our founding, wanting to treat patients fairly, I was quoting all inclusive cash prices over the phone in 1997 with no concept of how radical that was. We had a patient called within the first week or two, we were open and asked us how much we would charge her for breast biopsy since she was uninsured, and I thought, this is great. You know, this is why we opened, but I didn't know the answer to your question. So I just quickly assembled a price that I thought work. I asked the surgeon how much they wanted as an anesthesiologist. I essentially bill for my time. It's not entirely true, but it's mostly true. And then the surgery center. It was time and materials and I took a wild guess. I told her $1,900 and she said the hospital down the street wanted 19,000. And we saw that ratio continued for years when we would see hospital bills, invariably they were 8 to 10 times what we were charging. And so I would go back with my pencil sharpener and see, you know, did we make ends meet? Did we make money? We were profitable at these one one tenth ratio.

Speaker 2 00:05:27 So we started populating the list. How much for a laparoscopic gallbladder removal? How much for tonsillectomy ACL, you know, whatever it is. And we populated this list and we were attacked mercilessly by the industry, the insurance companies, hospitals, even the state health department was weaponized against us. All of their attacks backfired on them. We were seen as underdogs, as champions of the poor. Which was true because we were Coke prizes over the phone. And if the surgeon told me that patient had a hardship, we might not charge him at all, you know? So he would use such a wonderful setup, a real throwback, really. Nothing innovative. This is the way things were done prior to the government screwing it all up in the late 50s. So in 2009, I decided to post all these prices on our website. I did that so patients with sticker shock, uninsured, high deductible, member of self-funded plan, member cost sharing ministry. I did that so they could better find us. I also wanted to start a price war.

Speaker 2 00:06:35 I wanted these hospitals claiming to not make a profit. That charged ten times what we did to justify what they were charging, and I wanted patients to be able to use our price to leverage a better deal, and also kind of want to understand some of the scams that were at work that kept market discipline out of the industry because I knew we were cheaper and better, but the insurance companies did not want to work with us. They want to get near us. So I posted this website in 2009, these Canadian charts showing up. They were the very first ones. They just don't have access to the care so many of them require. Then uninsured patients started coming from Oklahoma and then outside of Oklahoma. Then the self-funded industry found me. And so now about 40, 45% of our patients come from outside of Oklahoma. So it's a medical tourist destination. During all of this, we decided to build a bigger facility than the one we originally occupied. So we got a 30 500 zero square foot facility with seven operating rooms, 145 surgeons.

Speaker 2 00:07:42 So it's a big operation now. It's multi-specialty, and all of our prices are on the line and they're all inclusive. The interesting thing is because we operate the surgery center not as a profit generator, but is a tool of our practice. I'm able to pay surgeons professional fees way beyond anything that a carrier might pay them. We've inspired others to copy us. We have forced others to come nose to nose with the market and match our prices, or lose to business. There are countless instances of that, so it's been fun to really put our money where your mouth is and claim that we are free. Market capitalists claim that we embrace the market discipline every other industry has to endure and do it. It's really been fun.

Keith Smith 00:08:39 I've used your website. It's very easy to navigate my scenario. I've sent a few patients. One, the hospital quoted him $20,000. He had a decent job, but he didn't have $20,000. He was going to sell his Harley-Davidson to collect the money. I said, let's take a look at Surgery Center of Oklahoma.

Keith Smith 00:08:58 We navigated to the website. You can click the different body parts. We clicked it. We found the surgery. We got the price. It was something around 3 or $4000 for this type of surgery. I sent it right through the website. It was very simple and then gave them my patients information. I was done at that point. Your team took over. They contacted him next time I see him, which is fast forward like a few months. How's it going? Well, I flew to Oklahoma. I had my surgery. I went to the zoo in Oklahoma. It was lovely. I took my family all in the hotel, the zoo, the flight and the surgery under $5,000. And so I told the story to our local news media because they were doing a talk about saving money through direct primary care and asking me, well, how do you handle people who need expensive surgeries? And when they heard that story, they actually did a news segment with this guy talking about his experience. So the model really works.

Keith Smith 00:09:55 And to your point of how much the surgeons make, it's always shocking when I find out from my surgical colleagues that the hospital may have billed $20,000 for, you know, a gallbladder. And the doctor got, I don't know, $500.

Speaker 2 00:10:09 That's right. Yeah. The wildest example or one of the ones I know I can quote, a patient from Georgia was quoted $40,000 for, training to retool resection of his prostate by hospital there. It's 4000 on our website. So he went to see his urologist and said, I'm going to Oklahoma City. And urologist had lost a patient to us about two months before. And he said, no, no, we're going over to the hospital. So they went over to the hospital. He told the administrator, you're killing me. This will be the second patient that's going to Oklahoma City. And the administrator said, what do we need to do? and the patient said match his price and they did so. The patient contacted me when he recovered and he said, I think it's important for everyone to acknowledge that you saved me 36,000 and you didn't perform the surgery.

Speaker 2 00:11:02 So I in hindsight, in in 2009, when I posted the website, that actually was the creation of a marketplace because there were prices to which people could point and say, that is a reference. I know I can get this in Oklahoma City for this amount. The reaction by sun was to copy us. The reaction by others was to match our price only when they had to. But I think that we've received so much attention before this move that the market discipline that governs every other industry in this country that brings prices down and makes quality soar. It is, as we say in Oklahoma, a horse out of the barn. And it's not going back in. And people are going to have to come to grips with this, and physicians are going to have to say, this is what I do, this is what I charge for it. If the physician is in control of the facility, then they can also decide that the facility doesn't necessarily need to be a big profit generator. It can just be a tool of their practice.

Speaker 2 00:12:19 So, you know, our prices are reasonable. Laparoscopic removal of the gallbladder $6,836. All in. And the reason it's that price is not 50,000 is we've eliminated the most greedy profit seeker from the equation. And that's the not for profit loss.

Keith Smith 00:12:38 My big question is, as I talk to other doctors who are so frustrated and you know what they call now? Moral injury. I mean, people are just really broken by this health care system. And then I talk to them about, you know what? If you get out of the system, what if you try something different? And for primary care, usually they can kind of wrap their minds around that. But my surgical colleague friends are just they just don't understand any way that they can get out of the system. You've done it. Why don't you think more surgical doctors are following this model?

Speaker 2 00:13:11 I think it's multifaceted. It's scary, and it's not for everyone. You know, physicians can be entrepreneurial. Many times they're not. I think some people go into medicine because they want to be highly compensated and not necessarily compete.

Speaker 2 00:13:29 This is a situation where you really have to say with confidence, this is what I do. This is how much it is, and I am. I'm as good as anyone you're going to find because people are not going to come see you if you do what I've done, because you're in a network, they're not going to come see you because you are. You're employed by the primary care doctor who is forced to refer to you. You have to actually deliver results. I think about that hilarious scene in Ghostbusters when the university fires Dan Aykroyd and those guys, and they lose their job. Ackroyd says, oh my God, now we have to go into the private sector where they expect results. And it is. It's that situation. I mean, you really have to be really good at what you do, and you have to deliver results and you have to be confident in that, and you have to be willing to put a price on it. I think with some coaching, a lot of that fear and uncertainty can be alleviated.

Speaker 2 00:14:32 And I spent a lot of time doing that. The other part of it that really confuses physicians, I think, is the money side. And I've established a payment clearing house that serves the center of Oklahoma. So whenever your patient came to see us, he paid a company called Atlas Billing Company, which I control. It's a clearinghouse, and I established that so he could write just one check. That check comes into my office, and then I pay the surgery center, the anesthesia group and the surgeon and also pay pathology and whoever else is involved. It is meant to accommodate that patient. Part of what I've been told by physicians in the country is they can't wrap their minds around how do I implement a single payment from a cash buyer or a self-funded company or a cost sharing ministry? So I loan them Atlas Billing Company as training wheels till they can get started. And then if they decide they want to do it on their own, they can kick me to the curb. I've also co-founded the Free Market Medical Association with an industry friend, Jay Kempton, and that has been a resource that has inspired others to copy what we've done.

Speaker 2 00:15:46 And the membership is full of people at all stages of doing what I've done. I think the reason that it hasn't been done is the headwinds are real. There's a lot of inertia. There's reason to be fearful and uncertain launching into a venture like this. The government has not made it any easier. They've intentionally made it harder. They've intentionally thrown stop sticks in front of the market. So there are reasons to be reluctant because it is hard, but it's doable. We've never accepted a diamond money from the government. My friends in Littleton, Colorado, at Smith Direct Surgical Care, they honored me by naming their facility after me. My friends in Indianapolis at Walbridge Surgery Center. They have no insurance contracts and they're not accepting money from the government, so they have actually done it. Just cold turkey like that. Another way to do what I've done is to embrace some kind of a hybrid model where you're still filing insurance claims, and then you give some thought to creating a payment clearinghouse or borrowing Atlas Billing company to do that for you as a hybrid until you get busy enough and you have enough volume that you can tell Blue United Cigna and go to hell where they are going to go anyway.

Keith Smith 00:17:08 You talk about there's fear and there's this inertia, but I think we should also have fear of just doing the same thing and being miserable and slowly dying on the vine and being tortured and hating our jobs, you know, and trying to become a physician coach or, you know, whatever I see doctors trying to do these days. There are women physicians right now on my social media that are professionally doing DoorDash because they are so burned out, and some of them are surgeons. And I just we've got to do something different. And that's why I really wanted to talk with you. I wanted to bring this idea to our physicians. You're already out there. I don't know how you got a personal interview with the Steve Forbes. I saw the article in Forbes, and I said, not only is it in Forbes, it's by Forbes. Like, that was huge, but I think there's still too many doctors that have never heard of this idea. So I wanted to make sure that we're reaching as many people as possible to plant the seed and realize if you're miserable, you don't have to be.

Keith Smith 00:18:08 You could try something innovative, you could start in a hybrid, or you could go for it all the way. What have you got to lose? So for doctors that are thinking, you know, maybe I want to do this, what's their next step to research this idea?

Speaker 2 00:18:23 Well, the next step is it's really hard to do it alone. You can if you're alone. I recommend that you look around for, say, plastic surgeon who's about to retire and who wants to slow down. and you can rent operating room space that's unused from them because so many of them have an operating room in their office. So that's a real small way to start where you don't need really any capital at all. The other thing to think about is, you know, it's so hard for physicians to organize because their egos are so damn big. And surgeons, you know, I have 140, 48 that work at Surgery Center of Oklahoma, and they're all good people, but they're very strong personality. So there has to be there has to be somebody in charge.

Speaker 2 00:19:16 It doesn't you can't have a democracy. You can't have meetings where you vote on every little thing. Someone has to lead. The easiest way to do this, in my opinion, is to have an anesthesiologist lead because they're there every day. The surgeon is not going to be in the operating room with all the employees that have to be hired every day, but it Anesthesiologist can be. So an anesthesiologist led adventure is probably the best way to go. They also need to be at risk as owners so that they have skin in the game. The other thing that this is hard is you might have to think about moving because North Carolina, Wisconsin, Alaska, New Mexico, these places are deserts that there is no one there that you could find. For the most part, it's not entirely true, but most of the people there do not understand anything I just said in the last few minutes the possibility that you could actually take control and deliver better care at a lower price. Nobody even wants that. They don't think it's possible.

Speaker 2 00:20:29 And not only that, they don't even want it. So there are deserts. Alabama is completely, Lately totally controlled by Blue Cross. And so you have these places where the inertia is so outrageous, it's just an impossibility. So somebody actually might have to think about relocating. They want to get out of this mainstream cesspool where they live and and try to do something innovative. There are places that are more friendly to physician entrepreneurial ism than others. I hand it to my friends in Colorado, in Littleton. They get it. That's incredible. The headwinds they face were just astonishing. Same in Indianapolis. They will bridge. What they overcame there was really astonishing, and it was almost painful for me to watch, because it was a reminder of so many things that I tried to forget that I had endured here in Oklahoma. The heavy lift to make this happen. So, you know, if you've got numbers, if you have ten or 12 or 15 surgeons that want to do this, that's going to be easier.

Speaker 2 00:21:41 If you could find an anesthesiologist to lead the effort. That's going to make it easier if you don't have any capital. Banks will loan it to you. If you're afraid of borrowing a ton of money. Find some burnout about to close surgery center and take that over. That's how we started. And then, if even that scares you, then, like I said, there are often in office surgical practices, like plastic surgeons. Find somebody who's aging wants to slow down or retire and just take that over.

Keith Smith 00:22:12 I think that's great advice.

Speaker 2 00:22:14 There was a brief time where we actually were in network with Blue Cross, and it's one of those nightmarish times of my life, and we really weren't sure how we were going to excise the cancer. And then they fired us. It was just a wonderful day. So when we were working with Blue Cross, we got an idea of what all of the other surgery centers have to put up with the threats of nonpayment. There's a lot of risks. You do a cochlear implant, a bilateral cochlear implant on a ten month old, and you have invoices for almost 60,000 for those devices.

Speaker 2 00:22:51 You have pre authorization, pre certification. You perform the surgery. The family and child walk out with the devices. You get your invoices. And BlueCross says yeah, you know you change your mind and we're not going to pay for that.

Keith Smith 00:23:03 You're on the hook for it.

Speaker 2 00:23:04 And so, you know, the vendor still has to have their money and we have to pay them. So there's a lot of risk dealing with those yahoos. They sleep like babies at night treating physicians that way. And it's just easier to walk away. I think that's a waste of time to flow the industry. It's better to just walk away and get as independent as you can, as fast as you can. The first thing I'd walk away from is Medicare payments. It's a very first thing I would do if that's some of the advice that I would give.

Keith Smith 00:23:36 I walked away in 2016 and I tell people, you got to get out. It's you can't fix this system. It's broken beyond repair.

Speaker 2 00:23:44 Physicians have got to come to grips, I think, with some of these basic economic principles and steady value.

Speaker 2 00:23:53 What is the definition of value through the lens of the Austrian school of economics? And it is not anything that most physicians think that it is. Most physicians that I know think they should be paid well, because they work so hard and went to school for so long, and they have all this expertise. That's not how it works. That's the labor theory of value, that what I, what I'm paid is some function of the hard work I put into it. And that is not an accurate representation of what value really is. That's really hard for doctors, I think very, very hard. One of the basic concepts in and economics is to is to understand that value is subjective. Value is through the eyes of the buyer and the beholder. And physicians have, I think, to come to grips with that. It will make make them better doctors. In my humble opinion, I think a dismal message to physicians is this is a good news message. When you walk into Surgery Center of Oklahoma, there's nothing but smiles on the staff's face, on the surgeon's face, in a seizure team.

Speaker 2 00:25:03 This is really a good news message, and I'm not that innovative. It's really a throwback. It's a throwback. It's old school. It's the way things used to be where I have to look a patient in the eye, a farmer from western Oklahoma with a straight face and tell him, this is what I'm going to charge for your child's tonsillectomy and stand by it. But it's a beautiful thing because it's a mutually beneficial exchange. strange. It's liberating. It's just wonderful. There's none of the stuff that burn out and moral injury are made of. There's none of that stuff. So I would highly recommend physicians check out the Free Market Medical Association. They'll run into people like me that are smiling. They just have a wonderful practice. Love what we do look forward to many days, that kind of stuff.

Keith Smith 00:25:54 Thanks so much for listening. I hope you've enjoyed this episode of Physicians Taking Back Medicine, a new podcast sponsored by Medical Economics. I'm your host, Doctor Rebecca Bernard, and I hope to see you on the next episode.