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Value-Based Care Spurs Higher Physician Consolidation Rates

Physician consolidation trends have rapidly increased since 2013 because of value-based care implementation and population-based payment models.

By Jacqueline Belliveau

- More healthcare providers are moving to larger group practices in order to gain access to more resources to effectively implement value-based care and risk-based reimbursement models, according to a recent Datawatch report in Health Affairs.

Physician consolidation rates rapidly, but steadily increased since 2013 in response to new value-based care models

The number of providers in group practices of nine or fewer physicians decreased from 40.1 percent in 2013 to 35.3 percent in 2015, whereas the proportion of providers in large group practices of 100 or more physicians increased from 29.6 percent to 35.1 percent in the same timeframe.

“[T]here are significant financial and technical challenges involved in running a modern medical practice, including the adoption of electronic medical records to comply with meaningful use requirements—a prerequisite to receiving certain Medicare benefits,” the report stated. “This in itself can offer a strong incentive for physicians to move toward larger group practices that have more administrative support than smaller practices can muster.”

Using Medicare Physician Compare public use datasets from June 2013 to December 2015, researchers revealed that the number of unique group practices and the median physician group size significantly decreased.

“In mid-2013 there were 154,726 unique group practice identifying numbers, with a mean group size of 3.8 (standard deviation: 29.0), and the median physician’s group size was 8.0 (that is, the median physician was part of a group practice with eight physicians),” wrote researchers. “At the end of 2015 there were 152,328 unique group practice identifying numbers, with a mean group size of 4.0 (SD: 32.4), and the median physician’s group size was 10.0.”

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While researchers found that a higher proportion of providers in general moved from smaller to larger practices, the changes were more drastic among the smallest and largest group practice sizes.

For example, 22.5 percent of physicians belonged to the smallest group size of one to two physicians in June 2013 and 17.6 percent were in the next smallest group size of three to nine physicians. However, by the end of 2015, the number of physicians in the two smallest group sizes dropped to 19.8 percent and 15.5 percent respectively.

The relative decrease for both group was 12.1 percent and 11.9 percent respectively, researchers added.

In contrast, about 12.6 percent of physicians were in the largest group size of 500 physicians or more in June 2013 and 17 percent were in the next largest group of 100 to 499 physicians. By 2015, the proportion of providers in the largest group sizes jumped to 15.4 percent and 19.7 respectively.

Researchers reported that the relative increase was 22.5 percent and 15.3 percent for the two largest group practice sizes.

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The report also showed that primary care providers were more likely to join a larger group practice than specialists. Between June 2013 and December 2015, the proportion of primary care physicians working in the smallest group size decreased from 24.8 percent to 19.1 percent, while the number of specialists practicing in the smallest group size went from 21 percent to 19.9 percent.

In terms of the largest group sizes, researchers reported that the percentage of primary care physicians increased from 11.4 percent to 15.9 percent in the same time period, whereas the number of specialists only increased from 14 percent to 15.1 percent.

The steady increase in physician consolidation, researchers stated, can be explained by the recent boost in value-based care programs, particularly population health initiatives. Providers seek to join larger group practices with more administrative, financial, and technical resources to effectively manage new reimbursement models.

In addition to additional resources, larger practice groups also maintain higher patient volumes, which are necessary for population-based contracting arrangements, the report added.

Another reason for the rapid, but steady increase in physician consolidation is that “younger physicians tend to prefer working in larger, instead of smaller, group practices, and older physicians in smaller practices are moving out of the workforce into retirement.”

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While the move to larger practices did not come as a surprise to Datawatch researchers, the recent report did find that smaller practices are still a major market force. Practices with ten or fewer physicians still represent one-third of all physicians.

Although providers have moved to larger practices at a rapid pace between 2013 to 2015, researchers noted that physician consolidation trends may slow down as government officials analyze how consolidations affect healthcare costs and quality of care. Some practices may experience more antitrust cases in the near future.

Some studies have found that physician consolidation actually leads to higher healthcare prices because of reduced competition, but other reports show that larger group practices are better at improving patient outcomes and reducing population costs.

Despite the questionable outcomes, researchers stated that larger practice groups “should open the pathway for physicians to enter into more risk-bearing value-based contracts and, ideally, should increase the quality and value of health care delivery.”

Dig Deeper:

Understanding the Value-Based Reimbursement Landscape

Cost Inflation of Hospital Mergers, Physician Acquisitions

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