Surgery Center of Oklahoma Blog

You are a banker.  You loan money to people and charge them interest.  If they don’t pay you back you have collateral but still are probably going to lose money.  You figure out that it doesn’t matter anymore whether the borrowers can or will pay you back.  If they can’t pay you back the taxpayers will pay you back.  Are you now more likely to make risky loans?

You want to build a house on the beach on the coast of North Carolina.  No insurance company will cover you for your losses due to hurricanes.  The risk is simply too great.  You figure out that the taxpayers (FEMA) will compensate you for your losses should you sustain damage from a hurricane.  Are you now more likely to build a home at risk?

This socialization of risk is also referred to as moral hazard.  Basically a situation whereby your decisions affect other folks money.  The socialization of risk prevents individuals from responding rationally to actual danger or loss to their property or even their lives.  How many lives have been lost when hurricanes struck homes that would never have been built in the first place, had the individual had to assume all of this property risk himself?  How many bankruptcies or even suicides have happened because people were incentivized and hustled to take out loans they could never repay?

Socializing the risk of disease is a much greater problem.  Don’t we have the welfare medical machine (Medicare/Medicaid) to blame for people continuing to smoke?  Haven’t we “taught” folks that even if they don’t have anything they will receive the state of the art treatment for conditions that are a result of risky behavior?  How much more careful would people be if they knew that the cost of their actions and behavior with regard to their health was on their shoulders alone?  Might there be less reckless driving and venereal disease?  Might people take better care of themselves and eat less and exercise more?

Inevitably, the institutions that embrace this socialization of risk go belly up.  Banks, FEMA, Medicare/Medicaid.  The demand for freebies simply overwhelms the supply.  I suggest that we all get as healthy as we can as soon as we can so we have little or no reliance on the health care system that the thugs in D.C. will try to impose on us, as this socialization of risk will inevitably dictate the rationing of what little, crappy care is available.

G. Keith Smith, M.D.

This is one of my favorite socialist expressions.  Usually it takes the form of “..giving back to the community.”  What the collectivists really mean is “give it back.”  This would be more honest, as socialists believe “it” was never the worker’s/individual’s property/money to begin with.  Socialists believe that it is O.K. for individuals to possess property for short periods of time as long as we realize that this possession doesn’t imply ownership.  We, as individuals, are allowed to keep a portion of our earnings, only to encounter the do-gooder who demands that we should be “giving back.”  This demand is usually reserved for businesses and entrepreneurs that are creating jobs, and through their desire to earn a profit vitalize entire cities or even states.  Yet there is an attitude that they need to “give back” something to the community which, of course, wouldn’t even exist without the efforts of the entrepreneurs victimized by this socialist guilt hustle.

Adam Smith, the Scottish economist, made clear in his treatise, “An Inquiry Into the Cause and Nature of the Wealth of Nations,” that individuals acting in their self interest, engaging in unfettered and mutually beneficial exchange actually increase the wealth and standard of living for everyone in a community.  Businessmen and entrepreneurs that take risks and employ capital in search of a profit or return succeed only if they offer something that people want at an acceptable price.  This willingness to take the initial risk with their private property is the most generous gift a community can receive.  The notion that this same individual should somehow need to assuage the guilt of success by “giving back” is preposterous.

Most big hospitals overdo this “giving back.”  They drop a lot of dough advertising what big “give it backers” they are.  They bring in high-priced celebrities to give tear-jerking talks.  They sponsor all manner of civic and “wellness” efforts.  They buy sponsorships to almost everything.  They purchase loads of advertising from local media.  They build practice facilities for sports franchises.  And all of this while “not making a profit!”

People complain about the high cost of health care but can’t seem to connect the dots here.  Isn’t is obvious that while masquerading as “good corporate citizens,” even “public servants”, these giant hospitals in an attempt  to purchase this image of generosity have revealed the extent to which they have ripped off the community with their overcharging and cost-shifting schemes?  With their “not-for-profit cover,” they don’t even pay taxes!

Having said that, now to the point.  Which business provides more benefit to a community?  One like The Surgery Center of Oklahoma, established with privately risked funds that posts prices online (unlike any other health care business anywhere), or a business that brings in speakers and sponsors sports teams with the loot they’ve grabbed after charging 6-8 times what the Surgery Center of Oklahoma does, for the same service?  Maybe there is a feeling at the big hospitals that having taken so much from communities (much of it through back room deals that shut out competitors) they need to do a lot of “giving back.”

G. Keith Smith, M.D.

Remember Bastiat’s concept of “what is not seen?”  When something gets broken or destroyed, some in the community see this as a stimulus for the economy putting people to work fixing the damage.  Bastiat rightly pointed out that all of this effort and money and time only serves to get back to where you started.  No improvement.  No net gain.  He pointed out that “what was not seen” was what might have been done to improve the overall lot with the money that was spent, had the damage not been done in the first place.  Otherwise burning down an entire city would make sense…just think of the jobs that would create rebuilding it!!  Obviously this is insanity.

Now,   check out this article.  Basically, St. Louis based Sisters of Mercy plans to spend 192 million dollars in Ft. Smith on a hospital.  They plan to spend about 400 million in Arkansas alone.  In a four state area they plan to spend 4.8 billion. Billion! What?  Where did this money come from?  I’ll tell you where it came from.  It is the unholy spawn of the $40 box of Kleenex and $100 aspirin at their hospitals.  I thought they were not-for-profit.  Consider that this outfit has worked extremely hard to destroy the private practice of physicians everywhere they go by aggressive and hostile purchases of private physician practices, most of the time accompanied by legitimate threats of “cutting the doctor out of their network.”   Consider that this outfit has worked hard to insure that they had no competition through political and other means.  Consider that they have arranged reimbursement rates from insurers that are 4 to 6 times that of nearby surgery centers and specialty hospitals they have worked hard to crush with behind the scenes tactics.  Consider that had this outfit been subject to normal competition that every other business must endure, this extraction of billions out of the communities they purportedly serve would never have happened in the first place.

Back to Bastiat.  Someone in the Ft. Smith area must be thinking, “wow…I sure am glad that this hospital system is investing all of this money in health care here.”  ”Look at all of these wonderful buildings!”  ”Look how great all of this investment is for the community!”

I am thinking that this is like a successful bank robber stopping off at a convenience store on the way out of town to buy a coke and some smokes with the loot he has stolen, all the while proclaiming that his purchase was good for the economy.  What might have been done with all of the money paid to this outfit had folks not been fleeced in the first place with this overpriced care?

The billions that these not-for-profit (don’t pay tax) hospitals have acquired over the years, have come from charging exorbitant rates and breaking the backs of hardworking people every day.  When cheaper and better care raised its head, these Mercy-less goons have worked every angle to hamstring competitors, insuring that their racket could continue.  I hope the people in Ft. Smith and other areas where this outfit operates will remember all of the marble and mahogany in these palaces when they see their hospital bill.

Don’t get me wrong.  We need hospitals.  We need for them to be profitable.  For all the community service they claim to do though, they would do a better service to cease extracting billions from the sick.  When the Sisters of Mercy has a bankroll like this it should surprise no one why health care is so expensive in the U.S.:  it has to be in order to support these Mercy-naries.

G. Keith Smith, M.D.

Why does Oklahoma need a health insurance exchange?  Because the feds say so?  I keep reading that our state government officials want no part of a federally designed health insurance exchange, but plan to do one at the state level.  I must be missing something.  This is like a pouting child telling his parent that he is going to take his medicine because he wants to, not because the parent has demanded it.  The result is the same.

Is this the best Oklahoma can do?  Are our state leaders afraid to be more bold with Uncle Sam?  How about,”we not only refuse your money to set up this exchange, but we refuse to set one up.”  ”Go ahead and try to impose one and see what happens.”

The federal government is out of control, led by a pharaoh-like executive.  I think it is time for the states to really push back against these bullies….not just by  joining other states in lawsuits to declare this health care plan unconstitutional (although this is probably warranted).  What is plan B?  What do our state leaders plan to do when the federal courts declare that this federal law has to be obeyed (seriously…they work for the federal government)?  Check out this great article by Walter Williams on whether laws should be obeyed.

The time to lead, not follow, has arrived.  Are our state leaders up to the task?  We’ll see.

G. Keith Smith, M.D.

Public schools’ standardized test data and scores are deleted/changed for no apparent reason.  Schools that were targeted by this data and subsequently punished in some way are now off the hook.  Algebra scores were completely deleted or not included in the report.

New parking meters destined to adorn the streets of downtown Oklahoma City are found out to be notoriously unreliable.  The biggest problem with them is that they exhibit “expired” before they are supposed to.

Does anyone smell a rat?  Could money have changed hands in either of the above situations?  Of course it could have.  What?  You don’t think that someone in local government would do this?

A scooter company faces fraud charges for not delivering scooters that the government paid for or for delivering lesser/cheaper models than those that were paid for.

What is the common denominator?  Government.  Government contracts and deals whether at the federal or the local level are unavoidably political deals.  Government contracts and deals don’t just allow for the institutionalization of fraud and corruption….it is inevitable.

Free markets are the only solution to the defrauding of the consumer.  Are there charlatans in the free market selling snake oil?  Absolutely.  They defraud one individual at a time and these lessons are usually learned the hard way…one individual at a time.  Government corruption occurs on a mass scale, however.  People that have the power to award contracts to meter makers or testing centers can easily profit from back room off-the-books deals and many times do, with multitudes affected by the scam, not individuals.  Word of mouth ruins the reputation of the charlatan after having harmed a few individuals.  Recipients of government contracts can harm thousands after having made off with the millions.  The government official receiving the bribe usually gets away with their heist and wastes no time designing their next conquest.

Is their fraud and abuse in medicine?  Absolutely!  My point is that free markets minimize this activity.  It is the very presence of government involvement in medicine that allows for the wide-scale fraud and corruption to occur.  Do we want more government involvement in the practice of medicine?

G. Keith Smith, M.D.

The Oklahoma State Chamber of Commerce is reconsidering their long policy of supporting the local cartel of liquor wholesalers here in the state.  This group has been incredibly successful in keeping the sale of wine and “high point” beer and spirits from being sold in grocery stores.  A friend of mine who is involved with a large chain of grocery stores in Ohio (he doesn’t do business in Oklahoma because of the prohibition on grocery store liquor sales) has told me that the sale of the wine/liquor in grocery stores is what provides them with the necessary margin to provide more goods and choices in other parts of the store.

As the facts become clear, there is simply no reason to limit these sales to liquor retailers.  Everyone of the scare tactics raised by those who have benefited from this cartelization of liquor sales have been debunked, one by one.  Now our State Chamber has decided that an end to the cartel makes sense.  Why?  To bring Costco and more Whole Food like grocers to the state…to create jobs.  Ending this arrangement will be devastating for the liquor retailers.  Repealing the laws in Oklahoma which are a throwback to prohibition days will drastically reduce the profits of the modern-day bootleggers, the liquor wholesalers.  Ending this cartel will benefit the consumer, not the producer/distributor.

This type of thinking is a dangerous and slippery slope for the folks in the Chamber.  Business and tax policy with the consumer in mind?  Repealing laws that basically provide protection for certain businesses?  This change in thinking could have serious consequences.

Ending the cartels in health care would result in gigantic savings for local companies if they are offering health care as a benefit of employment.  What would Texas do if Oklahoma led the way with innovative health care cartel -busting policy.  What if many of the legal obstacles put up by the insurance commission and insurance-led legislation were to be repealed, opening the way for the consumers of health care, not the providers of the care  (and certainly not the middle men selling the PPO snake oil) to drive the market in the direction it needs to go?

As a physician, I am called and paid to serve patients.  As the medical director of our large surgery center I am called and paid to serve the patients that come to our facility and to provide unparalleled service to the surgeons that work here.  Any laws that “protect” me or my facility from competitors only serve to increase the likelihood that the patients receive care of lessor quality than if I am exposed to competition from other facilities.  Cartels and monopolies exist only because the government at all levels embraces protectionism and writes these laws for a price.

I applaud the Chamber for their efforts to remove the liquor cartel from Oklahoma.  I hope that this economic 180 will extend to other businesses in the community that profit from their “protection” at the expense of those they are supposed to serve.

G. Keith Smith, M.D.

I got to see Tom Coburn in action at yesterday’s Town Hall meeting at Oklahoma City Community College.  One of his “questioners” was a recently retired air force officer who displayed a sense of entitlement that I haven’t seen since I was a resident working in the obstetrics unit at an indigent hospital.  Dr. Coburn was straightforward with him.  Then he was firm.  Then he made an example of him.  This was all very interesting to watch as Dr. Coburn is very articulate and listens well, but also hears what you mean when you speak not just what you say. 

What he heard from this man was, “someone other than me should pay for the health care needs of my whole family and myself for the rest of our lives.”  What Dr. Coburn told him was that the country is bankrupt and the military like everyone else is going to have to give up some of their goodies or our country and children and grandchildren are doomed.  This guy didn’t care.  First he disputed Dr. Coburn’s facts.  This was amusing as the cuts that were being disputed were devised by….Dr. Coburn…the retired soldier (looked like he was about 40 years old) was out of his league.   Second, he played the patriotism card.  Big mistake.  Coburn took him apart.

Here is what I found most interesting, though.  This man was expressing an extreme feeling of entitlement.  What was it he didn’t want to give up?  He pays $250/year for his family’s care.  That’s it.  Dr. Coburn’s plan would have him pay $750/year.  Do you know what that buys for him?  A government policy that pays so poorly that no one in the private practice of medicine will see him.  Worse than Medicare.  Seriously.  That’s what this guy was so adamant about.  That’s like fighting someone to the death over a 1972 Ford Pinto. 

Ignorant.  Entitled.  Arrogant.  Military retirees are writing letters to the editor of our local newspaper consistent with this idiot’s thinking. 

Dr. Coburn has his work cut out for him.

G. Keith Smith, M.D.

Times are hard.  Everyone is cutting back.  Well, not everyone.  I see government spending money like never before.  Police with fancy new race cars, surveillance cameras at every intersection, new or renovated offices for federal employees..you get the idea.  The other sector that appears to be thriving is the hospital sector.  New hospitals, new rehab units, new facilities and acquisitions show up every time I open the paper.  New chic outlying emergency rooms with attached physician offices, breast imaging and MRI units…wow..these guys sure act like they are making a profit!  Maybe they have to spend all of this money to make it look like they are not making a profit.  Maybe the big hospitals have overdone the cost shifting thing a bit.  Maybe.

Our prices for the identical surgical procedure at a big not for profit facility are often times 20% of their charge.  Not 20% less….20% of their charge.  And our charges include the facility/surgeon/anesthesia charges.  Incredible, no?  And we are making money!  Your insurance company in all likelihood wants you to go to these more expensive facilities and punishes you with out of network penalties if you don’t.

There are many things about health care financing that don’t make sense.  We decided to put our prices online in an effort to expose this insanity.  Cartels have prevented the market from working.  I think the cartels are at the end of their game, though.  Self-insured companies are tired of propping up the massive profits of the big hospitals and the insurance companies are having an increasingly difficult time giving this scam the cover it needs.  Transparent pricing is an indispensable component of the free market.  The days of the old bait and switch of “well..we’ll need to wait until your operation is over to tell you what you owe us” are about at their end.  The big hospitals and their cartel buddies have extracted untold wealth from this country and although will probably never be held accountable might very well go the way of the dodo if the market is allowed to work.

G. Keith Smith, M.D.

Not the Arby’s dessert, silly!  Turnovers in the operating room.  This is the time it takes a surgeon to get back into the same operating room for his subsequent surgery.  My partner, Dr. Steve Lantier, came up with a great idea years ago:  ”let’s not have any turnovers.”  What?  This was one of the critical decisions made early on at our surgery center that has set us apart.  This decision/goal has changed the way that operating rooms in Oklahoma City work.  The pressure to emulate our model has been simply too much to bear for our competitors and hence their feeble attempts to match us come as no surprise, really.

Normally a surgeon finishes a surgery case then waits for the anesthesiologist to wake their patient up, the operating room to be cleaned, the instruments to be washed, the staff to take a break and for the anesthesiologist to anesthetize his next patient….and then for that patient to be “prepped,” or prepared for their procedure.  Dr. Lantier said, “wait!” “Why not give the surgeon two operating rooms, two surgical crews and two anesthesiologists?  Then the surgeon can go from room to room without waiting.”  Keep in mind that the typical “turnover time” in a big hospital is about an hour.  If a surgeon does five surgeries, there are four hours of turnover involved.  When the surgeon does that same five cases at our facility, they just saved four hours.  It is not uncommon for a surgeon to complete in 2 hours at our facility the same surgical caseload that would take 6-7 hours to complete at one of the big facilities.

“But wait a minute!”  ”Didn’t you have to hire more people than you would have needed and don’t you have more expensive anesthesia staff on board to make this happen?”  Yes and yes.  We have committed to provide the best and most efficient service to the patients and surgeons even though it probably costs us money.  Although, completing 7 hours of surgery in 2 hours frees the schedule up for more cases to be done, so maybe we are guilty of having spent capital to increase volume/profits.  Probably.  This “flipping” of the surgeons from room to room is, however, one of the early decisions that has made us the favorite of both patients (not having to wait until late in the day to have their procedure) and surgeons (who can go about their business without having their time wasted….surgeons value their time).

Hats off to a great idea that has resulted in efficiency improvements even in our competitors facilities in an attempt to try to keep up.

G. Keith Smith, M.D.

Why am I such a fan of free markets?  Why are most people in the health care business not big fans?  Why are most people in any business not free marketeers?  I think the answer is complicated and simple all at the same time.  I mean by this that there are many reasons, each of which is fairly easy to explain.  Many businessmen start off as free marketeers only to succumb to the help that the “government” can provide.  Why is this?

Fear

Any organization or institution or business has one goal after it comes into being:  staying in business….survival.  When competition rears its unforgiving head, two paths present themselves:  the desire to improve and compete or alternatively the fearful path, one where  the business’s shortcomings will be found irremediable leading to the pursuit of “protection” from this competition.  Enter the politician/legislator.  He/she is all too willing to “sell” protection to this business by bestowing some advantage on the already established yet threatened business, or by hamstringing the upstart such that the threat if not completely eliminated is rendered a manageable threat at best.  I choose to reject fear of competition.  I choose to reject offers of protection from competitors, a devil’s bargain.  Competition makes us better than we would be on our own and forces us to examine how we value our services in terms of time and price.  If as physicians we take our oaths seriously and consider our patients’ welfare and wellbeing to be  paramount, there is no better check on our hubris and no better quality taskmaster than the free  market and we should welcome the  oversight the market mechanism provides.

Principle

Every man’s concept of justice is different.  In some men’s minds the economic mindset of conquest seems just.  In this view, taking property/goods/services by force with no compensation to the victim is justified by the notion that in the hands of the ordained/brilliant/enlightened this property or these goods/services are better distributed.  For those who value property rights and peace, the philosophy of non-aggression and mutually beneficial exchange dictates our actions.  This transition from a civilization of conquest to one of mutually beneficial exchange is equivalent to the transition from barbarism to modernity.  Fans of free markets embrace this notion of non-aggression and leaving other folks alone and to their own devices, and make their living by providing goods and services which people value enough to engage in voluntary exchange:  their goods/services/wealth/money for another’s…a fair trade, the determination of which is made between the parties involved.  If this seems like common sense, I apologize, for the very notion of non-aggression and mutually beneficial exchange and the subjective determination of value remains an elusive group of economic ideas for many, particularly those with lots of formal education.

Time Preference

Short sighted actors (those with a high time preference) are wanting to “cash in now!”  ”Get it while the getting is good.”  ”Damn the future…take what you can however you can get it.”  Those who accept government money, those who depend on this funding, those who lobby for even more….they have a high time preference.  People who start businesses, the revenue for which comes from a robbed taxpayer, have every reason to lobby for the continual robbery of taxpayers and embrace a very unstable business model, for once the taxpayer resists this robbery either by refusing to pay or refusing to work, the revenue stream is cut off for the beneficiary of this theft.  Those with a low time preference have a more stable business as the budget fights in D.C. and the impending bankruptcy of government at all levels does not represent the threat that it does for the businessman depending on this loot.  I maintain that a low time preference is a pragmatic and stable business philosophy, not unlike the tortoise and the hare.

Envy

“I want what you have” is jealousy.  ”I want what you have but know that I can never have it so I want to destroy it so you can’t have it either” is envy.  Ludwig von Mises wrote a little book entitled “The Anti-Capitalist Mentality.”  I highly recommend it.  He describes how academicians, for instance, become envious of the “haves.”  They figure that they are smarter and have more education than that “stupid car salesman” therefore should make more money.  The concert pianist cannot abide by the riches sent the rock star’s way.  People vote with their dollars.  Rock stars get more “votes” than concert bassoonists, even though the skill, practice and talent necessary to play a bassoon well dwarfs that necessary to perform even the most demanding guitar lick.  Mises says basically, “if you want to make a lot of money, don’t be a bassoonist or harpsochordist.”  The envy that results from this situation leads many to reject rather than embrace the free market.  This is a common thought process amongst those in academia and in the arts, in particular.

If I choose to embrace the free market and the discipline it provides, does that make me better (ethically or morally)  than the guy who is lobbying for more and more theft of your wages?  Yes, I think so.  The thief wants your wages without having earned it.  I want to earn your wages and want you to part with your hard-earned money at my surgery center voluntarily.  I also embrace the market out of self interest as I believe it to be more stable long term.  Health related businesses that rely for instance on Medicare funds are inherently unstable as this source of funding is constantly under threat of cuts/bankruptcy.

Let me know what you think about these thoughts.

G. Keith Smith, M.D.