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Study: Physicians Moving to Midsize, Single-Specialty Practices

By Joanna Anderson, CQ Staff

August 16, 2007 – Physicians in the United States are moving increasingly to midsize, single-specialty practices instead of large, multispecialty practices, according to a study released Thursday by the Center for Studying Health System Change (HSC).

The study, which examined how the organization of physician practices impacts patient care and the general practice of medicine, found that many experts and policy makers envision large multispecialty practices as the best setting for high quality care. Proponents of this model argue that multispecialty practices provide enhanced care coordination and larger groups provide better financial and administrative resources and more structured physician leadership.

However, the study found that "despite these advantages, the vision of a growth in large, multispecialty practices so far is at odds with the actual trends." The proportion of physicians in multispecialty practices fell from 30.9 percent to 27.5 percent between 1998–99 and 2004–05. Between 1996–97 and 2004–05, the proportion in solo and two-physician practices fell by 8.2 percent, and those in three- to five-physician practices fell by 2.4 percent. Meanwhile, the share of doctors practicing in groups of six to 50, meanwhile, increased from 13.1 percent to 17.6 percent.

The study attributed changes in practice settings to shifts in physician financial incentives. The rise of tightly managed care in the 1990s was expected to fuel the creation of large, multispecialty groups to gain leverage with health plans and manage risk-sharing arrangements and specialty referrals. Managed care, however, did not grow as expected and was in "full retreat" by the early years of this decade. Multispecialty group creation ceased. Many large physician practices faced financial trouble in the form of downward pressure on income with expenses growing faster than reimbursement rates. Such pressures prompted physicians to move to midsize, single-specialty practices to distribute fixed costs, such as equipment and facilities, over a larger number of physicians.

In a single-specialty environment, "specialists could reap the advantages of a group practice without having to redistribute income to primary care physicians—traditionally the procedure in multispecialty groups." Such a setting also presented "opportunities to gain negotiating leverage with health plans while the referral advantage provided by multispecialty groups waned as health plans eased referral restrictions," the study found.

The study detailed a number of policy concerns raised by current trends. In some markets, the movement toward single-specialty practices creates the potential that certain specialties can drive up prices in negotiation with health plans. In addition, larger practices give doctors more chance to legally provide referrals under exceptions to self-referral laws, which could lead to an overuse of certain services, and consequently, higher costs for care.

The opportunity to lower practice expenses and, especially for specialists, to enhance revenues from profitable services could more strongly influence physician organization than potential opportunities to improve the quality of care, the study found.

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