Multispecialty practices cut costs among Medicare patients with chronic conditions

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Many primary-care physicians continue to join multispecialty group practices, such as the Palo Alto Medical Foundation and Stanford Health Care, instead of working in their own solo practices or in practices with only other primary care doctors.

Physicians in practices of nine or fewer dropped from 40% in 2013 to 35% in 2015; the rate of those in practices of 100 or more increased from 30% to 35% during the same period.

But is this growing trend having a positive impact on health-care use and spending?

Stanford Health Policy’s Loren Baker and Kate Bundorf set out to find a few answers.

In their new working paper published by the National Bureau of Economic Research, they focused on Medicare beneficiaries who changed their primary care physician when they moved from one area to another. They focused on people who switched from a doctor in a primary-care-only practice to one in a multispecialty practice, and those who made the opposite switch.

They then compared changes in health-care use and spending before and after the move — and among patients who switch practice types and those who do not.

“We wanted to look at people who experienced an abrupt change in their primary care physician for reasons other than an explicit choice to change their physician,” Bundorf said.

“A weakness of this approach is that they may differ from people who don’t move,” said Bundorf, an associate professor of health research and policy at Stanford Medicine and a senior fellow at the Stanford Institute for Economic Policy Research (SIEPR). “But our descriptive statistics suggest that we capture a broad cross-section of types of people.”

They identified 119,272 patients who moved from one area to another and used data from Medicare claims from 1999 to 2010.

The results were striking

The results of the analysis show that multispecialty practice decreased annual medical spending by $1,600 per Medicare beneficiary — a 35% reduction in spending.

“The size of the result is very intriguing,” said Baker, a professor of health research and policy at Stanford Medicine and also a SIEPR senior fellow. “We are often happy when a change in health-care delivery can help achieve savings of even a few percentage points, but our results suggest the potential here is much larger than that.”

With their co-author Anne B. Royalty of Indiana University-Purdue University Indianapolis, they found the results were driven primarily by changes in hospital expenditures and are concentrated among patients with two or more chronic condition. This suggests multispecialty practices improve care delivery by reducing hospitalizations among relatively sick patients.

“The results imply that, while research has shown the potential for physician consolidation to increase prices in some settings, large multispecialty groups also have the potential to lower costs,” the authors wrote.

Baker said when they set out to do this research, they were not sure what they would find. 

“The results suggest that the way care is organized can be important for health-care delivery and that there may be organizational changes that could help us better manage spending.”

Larger practices don’t always lead to better health outcomes

While the pervasive view underlying the move toward consolidated practices is that larger, more integrated organizations provide care more efficiently through greater coordination of care, the literature on physician integration largely does not support this view. 

The authors point to a study that looked at data from the 1970s to 2013, which found little evidence that these larger practices improve the quality and lower the cost of health care. 

“The hope of many policymakers was that the larger, multispecialty organizations could organize care more efficiently,” Bundorf said. “Yet there is little evidence to date that larger practices have generated these types of benefits for patients. Since the literature has not taken a hard look at the single or multispecialty side of things, we wanted to investigate that here.”

While the trend is toward these big multispecialty practices, many physicians choose to remain in smaller or solo ones.

The Kaiser Family Foundation estimates that there are some 139,000 primary care physicians in the United States. Despite the transition to multispecialty practices, some 40% of physicians continue to work in solo practice or a small group of two-to-nine physicians.

It’s important, they said, to continue examining the health-care spending of all practice sizes.

“We are very curious to continue work on ways to learn more about how organizations achieve savings,” Baker said. “We are also excited to continue thinking about opportunities for policies that would encourage the formation of effective practices, for example through payment policy reforms.