Do Larger Physician Practices Provide Better Care at Lower Cost?

Doctors Health Care

The Commonwealth Fund

The Issue

How medical practices are organized and structured keeps changing. But as more practices merge and more physicians sell their practices to hospitals, we don’t have a good understanding of whether, and how, these factors affect the quality and cost of health care.

Using 2012–2013 data from the National Study of Physician Organizations linked with Medicare claims, Commonwealth Fund–supported researchers writing in Health Services Research (July 5, 2018) examined how the size of a practice, along with other characteristics, relate to the total amount spent on a patient’s care and the quality of care provided. Quality was measured by two indicators: 30-day hospital readmissions and admissions for “ambulatory care–sensitive” conditions, which usually don’t require hospitalization when appropriate outpatient care is provided. The study focused on all Medicare beneficiaries with a special focus on those with high health care needs.

Large practices — with 100 or more physicians — spent


more annually per high-need Medicare beneficiary than practices with one to two physicians.

What the Study Found

  • Annual risk-adjusted spending per high-need Medicare beneficiary was $1,870 (12.5%) higher in practices with 100 or more physicians than in practices with just one to two physicians. In practices with 50 to 99 physicians, the spending difference was similar — $1,824 higher.
  • Practices with a higher percentage of primary care physicians had lower total spending compared to practices with a lower percentage.
  • Relationships were similar for hospital readmission rates. Practices with 100 or more physicians had readmission rates 1.64 times higher than small practices with one to two physicians; for practices with 50 to 99 doctors, rates were 1.71 times higher.
  • There were no statistically significant associations between practice characteristics and ambulatory care–sensitive admissions.

The Big Picture

Though larger practices are often thought to provide better care, the results of this study do not support this assumption. Despite spending more per high-need patient and having more quality improvement processes, health information technology systems, and care management programs in place, larger practices in this study did not incur lower spending or achieve higher quality than smaller practices. It is possible that larger practices, which tend to have a higher percentage of specialist physicians, may attract more complex patients that may not be totally accounted for by the severity of illness risk-adjusted measures currently available for analysis. Or it is possible that they provide care that costs more than, but is not superior to, care provided by smaller practices.

The Bottom Line

Large physician practices spend more per person and their patients are readmitted to the hospital at a higher rate than the smallest practices.