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Physician Autonomy, Ace Hardware and Privia Health

In our weekly posts, we have repeatedly linked the relationship of autonomy and balance with patient well-being. Autonomy, defined as self-governance and acting in accordance with moral duty rather than self-interest, is the hallmark of a balanced medical care environment. When in a balanced medical care environment, autonomous components (doctors, hospitals, payors and universities/vendors) interact transactionally, care becomes more integrated. And integration prioritizes patient well-being. Unfortunately, in the current Medical Care Crisis, autonomy is not always guaranteed. In fact, we commonly see the opposite. It’s a battle over control: hospitals employing doctors, doctors building hospitals, payors employing doctors, hospitals becoming payors and payors becoming hospital: all to gain business advantage. This is the corporatization of medicine, a major feature of the Medical Care Crisis.

Perhaps no other component in the medical care environment has experienced loss of independence more than the practicing doctor.

Declining third-party reimbursement, expensive technology, overwhelming administrative bureaucracy, and alternative payment have eroded the private practice business model to the point where many doctors have closed their door. In many ways, independent doctors are seemingly going the way of independent drug stores, old-time grocery markets, and family-owned hardware stores. Hospital employment is generally the only option for doctors coming out of training today, which equates to an arrangement that limits doctor autonomy and facilitates hospital control. Since loss of autonomy causes care imbalance, restoring doctor autonomy via independent practice is a major opportunity to improve patient well-being.

So, how do we do this?

As it turns out, there is a pathway that has saved many small family-owned hardware stores. A pathway that could be adapted for small physician private practices.

That pathway? Ace Hardware.

Ace Hardware started with the co-op merger of several independent Chicagoland hardware stores in the 1920s. Over time, the company became a retailer owned cooperative, in which independent hardware stores shared a variety of products, processes and business practices, branded as Ace Hardware, all while maintaining local private control of their stores. As a result, family-owned and operated hardware stores maintained their local independent business models, undergirded by the enhanced revenues, superior quality and shared expense base of Ace Hardware. This allowed these small hardware stores to stand toe-to-toe with big-box competitors like Home Depot and Lowe’s. Intentional or not, Ace Hardware rescued the family-owned hardware business model from extinction. Ace Hardware today is a massive cooperative of privately owned hardware stores. It’s a federation with $9 billion in annual operating revenue.

The secret to the Ace Hardware model is its ability to provide its private stores with the resources and economies of scale that allow for successful competition. Once this is achieved, the high-touch customer service that accompanies smaller family owned businesses makes Ace Hardware almost unbeatable. Of course, the Ace Hardware model is unique to the retail home-improvement industry. But its principles are universal and can be applied to other businesses. Even medicine.

Which raises the question: can these principles be applied to the independent practice of medicine? And if so, will they have the same impact as they did with the home improvement industry?

Turns out they can—and they do.

Privia Health, based in Arlington, Virginia, and operating in more than a dozen states, is an affiliated network of independent private practice doctors aligned in a single Tax Identification Number (TIN), at the state level. These doctors comprise a federation of independent practices that function as a single large employed multi-specialty medical group from the perspective of the IRS and payors, but are owner operated and independent from hospitals (and from each other). Each local practice operates as an independent care center. Thus, from the perspective of the practicing doctor, they function as if in independent practice, sharing the same electronic medical record (at a discounted rate) and back-office revenue cycle business functions with other practices in the TIN. These economies optimize revenues and significantly reduce expenses. Otherwise, like Ace Hardware retailers, they are free to operate their care center practices independently in ways that meet the needs of their patients.

As a result, Privia Health relates to independent, doctor-owned private medical practices just as Ace Hardware relates to independent, family-owned hardware stores.

Although Privia Health is a publicly traded company, not a retail cooperative like Ace Hardware, it provides the same advantages for its contracted physician affiliates as Ace does for its retail stores. This allows doctors to stand toe-to-toe with large hospital employed medical groups. Being unattached from the hospital, the Privia Medical practice is nimbler and freer to work with payors, multiple different hospitals and other stakeholders. Payors, who have traditionally kept reimbursement rates lower for independent practitioners, have come to appreciate that while reimbursement rates for multi-specialty medical groups are higher than scattered independent practices, having practices uncoupled from hospitals and hospital contracting is financially advantageous. University affiliations are also less complicated when doctor/faculty are uncoupled from hospital employment obligations (obligations that can provide barriers to teaching and research).

But, the big win, here, is for the medical care environment. Privia Health, the Ace Hardware of independent practice, promises to be an adjunct that enables independent doctor autonomy. And remember, it is autonomy that promotes balance and balance that prioritizes patient well-being; all helping to end the Medical Care Crisis.


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