Can Small Physician Practices Survive?: Sharing Services as a Path to Viability.

In a health care environment moving toward accountable care organizations (ACOs) and population health management, what is the role of small physician practices? Can they compete? Does it matter if they cannot? The number of small practices has been declining for decades. Between 1983 and 2014, the percentage of physicians in practices of 10 or fewer declined from 80% to 61% and those in solo practice, from 44% to 19%. 1 In 2015, 34% of physicians were in practices of 100 or more.2 This trend has likely been accelerated by recent policy changes, such as quality and outcomes reporting, health information technology (IT) requirements, and the scale requirements needed to participate in ACOs and other valuebased purchasing programs. Physicians in large practices or employed by hospitals also are often relieved from the businesssideofmedicineandsecurehigherpaymentrates that large organizations can negotiate with health insurers, and such consolidation may lead to increased profits.3 It is possible that this is a positive development. An often unstated assumption of delivery system reform efforts is that larger organizations can reduce care fragmentation, scale ancillary services, and improve chronic disease management through better collaboration across specialties. Large medical groups and hospitals have the capital to invest in skilled quality improvement leaders, nurse care managers, population health management programs, and sophisticated electronic health records and data analytics teams. Small practices, by contrast, generally do not care for enough patients to support such investments. However it is not clear that large medical groups or hospital-employed physicians provide better care than small practices. Data comparing practices by ownership are limited, but a recent review of hospital employment of physicians concluded that “vertical integration generates higher prices, higher spending, and ambiguous changes in quality. ”4 Even less data are available on performance by practice size. For example, 1 study found that practices with 1 to 2 physicians (n = 570 practices) had a risk-adjusted preventable hospital admission rate 33% lower (4.31 vs 6.47 per 100 beneficiaries per year) than practices with 10 to 19 physicians (n = 53 practices), and that practices with 3 to 9 physicians (n = 422 practices), had a 27% lower (4.73 VS 6.47 per 100 beneficiaries per year) admission rate than larger practices.5 Another study analyzed practices with 5 to 750 physicians and found that smaller practices (each additional full-time equivalent physician is associated with $22.60 increase in annual per capita costs) had fewer preventable hospital admissions and lower costs of care for patients with diabetes.6 The optimal practice size is not known and likely depends on the specialty being studied and the question being asked: Optimal for improving quality? Lower costs? Negotiating prices? Promoting physician well-being? New policies aimed at improving care may drive physicians into large groups or hospital employment. It is complex and expensive for small practices to participate in federal and commercial ACO programs and medical home initiatives. The Medicare Access and CHIP Reauthorization Act (MACRA) may be particularly burdensome for small practices. Indeed,recognizingthatsmallpracticesarelikely to be penalized under the law, the Centers for Medicare & MedicaidServices(CMS)hasexemptedpracticesthattreat fewer than 200 unique Medicare patients or those with less than $90 000 in annual Medicare revenue from reporting requirements and has made $100 million available in technical support for those participating.7 How can small practices survive in the current environment? Some small practices are experimenting with ways to pool resources across groups, while maintaining their independence and intimacy. These practices are forming “pods,” or networks of practices, that contract with “shared service providers” to pool and manage resources. These linkages take several forms—those organized by local hospitals, independent practice associations, payers, or private companies—and may allow small practices to compete in value-based contracts and a policy atmosphere favoring consolidation (Table). In an effort sponsored by the New York City PopulationHealthImprovementProgram(PHIP),theUnitedHospital Fund conducted a series of surveys, interviews, and focus groups with clinicians in small practices (generally withfewerthan5physicians). 8 Fifty-sixpracticesweresurveyed, followed by 5 focus groups with a total 83 participants,amongwhomthree-fourthswerephysiciansandthe remainder were nurses, nurse practitioners, and practice managers. Clinicians in small practices identified several priorities for services with which they need assistance, including care management support, data analytics teams, quality reporting infrastructure, and electronic health record maintenance and optimization. A variety of organizations have begun offering these services, enabling small practices to gain access to shared personnel like care managers, pharmacists, social workers, and behavioral health specialists in ways that make sense for a given pod. Behavioral health specialists, for instance, can be shared through telemedicine, from a centralized site, or by being embedded in multiple practices. These shared service organizations often provide data analytics support, which is consistently identified as a top priority by small practices. Over the past decade some hospital systems have developed service sharing infrastructures that support both hospital-employed and independent practices. In the Adirondack Medical Home Demonstration, for example, a local hospital, Champlain Valley Physicians’ Hospital (CVPH) in upstate New York, offers a range of shared services to a group of primary care practices, enabling VIEWPOINT