81. Dr. Keith Smith: The Free Market Medical Association Brings Entrepreneurship to Medical Services
Dr. Keith Smith, co-founder of The Free Medical Association (FMMA.org), is an entrepreneur and free market warrior who is undaunted by the seeming scale of his innovation task: to bring to healthcare the kind of customer experience only entrepreneurial free markets can deliver (see “Pillars of the Free Market Medical Association” PDF).
He is laser-focused on the problem to solve.
(Full episode transcript available here.)
Key Takeaways and Actionable Insights
The aim is to bring buyers and sellers together.
As Dr. Smith explains, simply stating that there is a need to bring buyers and sellers together is an indication of dysfunction in the market for healthcare. Buyers and sellers talking directly with each other is what makes a market: willing buyer, willing seller, mutually agreed price.
Buyers are patients who care what healthcare costs. Today, they have sticker shock.
Buyers who care about price can be direct-buying individuals, and their proxy buyers, who can include self-funded employer health benefits systems, more and more of which are emerging. Innovations like Health Savings Accounts and high-deductible insurance policies are bringing more direct buying into the market.
Willing sellers should be complete and comprehensive advocates for the patient, across the whole range of their needs, including financial aspects.
The targeted customer experience is for patients to feel confident when they visit a doctor that they have an unapologetic advocate. Today, physicians are medical advocates, but to be a more complete advocate, physicians must think and act like entrepreneurs, bearing some risk in serving their patients. Many say, “I don’t want anything to do with the business side or the money side of medicine.” By doing so, they are abandoning their patients to the financial wolves, many of whom are willing to step in and make a living off the patient. It’s not so much willful neglect of the patient’s interests, as simply caving in to a system that has become extremely difficult to navigate.
A problem in healthcare is the dominant presence of intermediaries between the buyer and the seller.
Dr. Smith described the wide range of intermediaries, cartels and proxies that get in the way of a direct, transparent and mutually beneficial relationship between buyer and seller. Insurance companies are “money handlers and money changers”, keeping healthcare prices high, so they can offer false discounts and skim off the difference. There are brokers and consultants to employers, whom Dr. Smith calls “self-dealing”, who add a layer of costs. There is Big Pharma, the pharmaceutical industry that largely funds the FDA, making it inevitable that the regulator will protect the pharmaceutical companies and their business model and their pricing.
In the end, the “ultimate culprit” is the Federal Government. None of the financial abuse of the patient would be possible “without Uncle Sam riding shotgun for all of this thievery”.
A solution lies in decentralization, disintermediation and the application of Hayekian knowledge theory.
Dr. Smith alluded to F.A. Hayek’s concept of dispersed tacit knowledge in describing the FMMA’s decentralized approach. The Free Market Medical Association establishes local chapters, who follow a small number of “pillars” regarding price and value and mutually beneficial exchange, including equal pricing to all cash buyers of the same service. The chapters are completely free to respond to customer preferences in their own local market. These chapters create new knowledge based on their transactions and experiences in their local market, and can share it with all other chapters.
Austrian principles of decentralization, free exchange without intermediaries, and the recognition of the value-creating dispersed knowledge of patients and entrepreneur-practitioners are Dr. Smith’s starting point.
Free Downloads & Extras From The Episode
Pillars of the Free Market Medical Association: Download PDF
The Free Market Medical Association’s annual conference, “Mission Possible: Healthcare Entrepreneurship as the Antidote to the Broken Healthcare System”: FMMA Annual Conference
“The Austrian Business Model” (video): https://e4epod.com/model
Start Your Own Entrepreneurial Journey
Ready to put Austrian Economics knowledge from the podcast to work for your business? Start your own entrepreneurial journey.