Psychic surgery is not harmless. There's no way anyone who claims to be able to do it aren't fully aware that they are complete frauds, who prey on sick, dying, and very desperate people.
Except that people in developing countries often don't have access to real doctors. I have a friend from Thailand who used to be a monk (in Thailand if you aren't wealthy, then becoming a monk is the only way to get an education). One of the things he did as a monk was help his temple provide medical care to the many poor people of the community. He realizes that modern medicine is better than traditional medicine, but his temple could only offer what they had.
Not that psychic surgery falls into the category of traditional medicine either. It is however common in developing countries, where there is little, if any sort of regulation against things like that, and people rely on traditional medicine.