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Home > Free-Market Toolkit > Doug Smith Interview
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AFCM Interviews Smart Hospital Chairman Doug Smith

June 2006

Responding to one of AFCM Executive Director Richard Ralston's published letters in the Wall Street Journal, businessman Doug Smith wrote to AFCM, expressing that his company, The Smart Hospital, embraces AFCM's free market philosophy in medicine. An interview was arranged to explore this new, small, doctor-based hospital enterprise.

With a career spanning over 30 years, during which he co-founded Quorum Health Group, served as president of HCA Management Company, and held administrative positions at Duke University Hospital and Humana, Inc., Doug Smith sought to understand the business of delivering quality health care. He received his Doctor of Philosophy of Administration/Health Services.

The Smart Hospital was founded in 2001 with a goal to integrate technology and hospital procedures to improve treatment. Knowing today's bureaucratic hospitals pose daunting problems for the patient, the company's principals understood that the doctor faces these enormous challenges first.

As Chairman Doug Smith points out, The Smart Hospital designed a model for the doctor to walk in and have patient information available without having to find a nurse to locate a chart—an institution where the doctor can make rounds and access the labs and radiology data and spend time with patients, then move on to other vital business. Clients include the Monroe Surgical Hospital, a general acute care facility in Louisiana, Presbyterian Hospital Huntersville, a 50-bed, not-for-profit community hospital in North Carolina, and facilities in St. Louis and Indianapolis.

AFCM: Why are you a health care businessman?

Doug Smith: I went into health care initially to combine my background in general business with the human side of caring for people. Serendipitously, I got a call about running a small hospital in California's Sierra Nevada Mountains—it was just being built near Mammoth Lakes—and I was hired. I improved the accounting system, the pharmaceutical system, I hired the staff and I made a lot of mistakes. I found that I needed additional training and I began looking around for Master's level training. That's how I ended up at Duke University to get my Master's degree in health care management in 1966, when there were around 20 accredited programs. Duke's was the first or second program in the country. I became interested in the cost/benefit side of decision-making and customer satisfaction—and I always liked the hospital environment but I always wanted to be in business. The idea that someone paying for health care is provided with efficient care appealed to me. If you improve the quality of a service or product, you increase the delivery, the cost, and the volume and that ultimately results in more money. In other words, improve the process and you make more money. That excited me the most. Today, I'm an investor in the Smart Hospital because it is based on that concept.

AFCM: Which principle defines The Smart Hospital?

Doug Smith: I would not want to say it's the technology that makes it possible because, while it is vitally important, it's not enough. More important is the mindset of improving what we're doing and having physicians as investors and partners. Also, continuous quality, efficiency and cost-effectiveness and customer satisfaction. Patients are met at the door by someone who takes them to their rooms. Doctors are trained to be scientists and the whole approach is based on measurement, so you have goal-oriented action. Measured systems of quality are superior to managed care's rationed approach because the profit motive is a factor and making a difference also motivates many people.

AFCM: Can you give an example of a hospital regulation that is a disadvantage in doing business?

Doug Smith: We wanted to build a hospital in Brentwood, Tennessee. It's the only city of its size, with 100,000 people, without a hospital. We were going to have 60 beds and the [government's] Certificate of Need blew us away because none of the other hospitals wanted this small, acute care hospital. Had we been able to demonstrate the high patient utilization—because everyone would have loved it—that would have caused the other hospitals to address that as a standard and foster competition. That Certificate of Need process used to be something that for-profit hospitals were against. Now, they want it to protect their franchise. If only we could allow more openness to capitalism.

AFCM: Who are your customers?

Doug Smith: We've built three facilities in places like Monroe, Louisiana, and near Charlotte, North Carolina, in Huntersville, where we built a hospital owned by Novant. We are building a hospital near Tulsa in Oklahoma and we will be managing and investing in that.

AFCM: How do you make money?

Doug Smith: We make money by consulting in the Smart Hospitals. The revenue model is from having significant ownership possibilities in the hospitals. Physicians want to practice medicine. They went to medical school and, though they can make administrators, typically, they're not interested in that part of the process. We provide them with an opportunity to become investors [in each hospital] and we provide ongoing clinical and business information. For example, an outcome is quantified in terms of impact on the hospital. The morale is different when they know their opinions are important. It really attracts physicians who are interested in success and it encourages group practice visibility. An investor group works much better.

AFCM: What challenges do you face?

Doug Smith: One problem has been that you cannot integrate computer systems. Also, because each hospital is a smaller unit with 50 or 60 beds, it is not viewed as a significant part of an overall health policy solution. While the generalized ability to improve health care may be limited, we believe the model can be applied on a broader scale. We outsource business office tasks so that 90 percent of our facilities' spaces are for clinical use.

AFCM: Have you turned any hospital prospects down?

Doug Smith: I have counseled some communities with too many family practitioners that the Smart Hospital might not be right for them. We do a lot of pulmonary-cardiological surgery and most family practitioners don't use the ancillary services as often. More of their practice is outpatient.

AFCM: Why should one use The Smart Hospital?

Doug Smith: For the doctor, more personal time for your own practice and making money as an investor. For patients, better health care. Typically, a patient, after trying to find parking, goes through five steps of filling out forms and navigating a hospital's bureaucracy. At the Smart Hospital, there's no chart hanging for everyone to see because it's all automated. Everyone in the family is given a Personal Digital Assistant (PDA), so they can take a stroll and be beeped when they need to be there by the patient's side. The care is much better.


Scott Holleran, Editorial Director


Copyright © 2006 Americans for Free Choice in Medicine. All rights reserved.
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