Physician Practice

Small physician practices still the norm

Physician Practice Insider, October 6, 2015

Despite a nearly unprecedented run of consolidation among health systems and physician groups in recent years, a new study found that small physician practices are still the norm in the United States.

The study, released by the AMA, found that nearly two-thirds (60.7%) of physicians in 2014 were in small practices with 10 or fewer physicians and that the percentage of physicians operating in small practices has changed very little since 2012 when healthcare reform kicked into gear.

“These data show that the majority of physicians were in small practices of 10 or fewer physicians and that practice size changed very little between 2012 and 2014 in the face of profound structural reforms to healthcare delivery,” says AMA president-elect Andrew W. Gurman, MD.

The study found that 16% of physicians were in practices with 16 to 25 physicians, followed by 12.2% of physicians in practices with more than 50 physicians and 7.1% in practices with 24 to 49 physicians.
Even though small practices are still the norm, it’s not likely to stay that way for long. Analysts say other statistics in the report reflect an industry in transition, with older physicians choosing to stay with smaller practices while younger colleagues gravitate toward larger firms with an eye to the future and job security.

“I think you still have a large percentage of physicians in small practices because there’s a large number of baby boomer physicians out there nearing retirement,” says Steve Valentine, president of healthcare management consulting firm The Camden Group, which has offices in California, Illinois, New York, and Massachusetts. “So while younger physicians are looking to join large groups like a Kaiser Permanente, physicians in their 50s and 60s are going to stay where they are until it’s time to retire.”

Ownership of practices is telling
The shift toward corporate medicine is reflected in the dwindling number of physicians with an ownership stake in a practice. The study found that 56.8% of physicians work in a practice wholly owned by physicians, down from 60.1% in 2012 and 75.8% in a similar study conducted in 1983.

Older physicians were more likely to have an ownership stake than their younger peers. The study found that 60% of physicians aged 55 and older were a full or partial owner of their practice, compared to 43.3% of physicians under the age of 40.

Ownership also varied based on the type of practice, ranging from a low of 37.3% among pediatricians to a high of 71.9% among some surgical sub-specialists. Anesthesiologists were second at 68.7%, followed by radiologists. The study also found that 46% of physicians in internal medicine had an ownership stake, followed by 39.8% of family practice physicians.

On the flip side, the study found that 32.8% of physicians work directly for a hospital or in a practice with some hospital ownership. In 2012, that number was 29%. The percentage of physicians who work in a practice with some hospital or health system ownership also increased from 23.4% in 2012 to 25.6% in 2014. The percentage of physicians working directly for a hospital or health system increased from 5.6% to 7.2% in those two years.

Many physicians still single-specialty
Based on physician surveys, the most common type of practice in 2014 was a single-specialty practice, which was cited by 45.5% of physicians. Women were less likely to work in a single-specialty practice than men—39.7% of women compared to 48% of men. The study suggested the difference was largely due the fact that 52.7% of women work in primary care versus 22.3% of men.

More than one-third (39%) of physicians in single-specialty groups had four or fewer physicians in their practice, while only 4.3% had more than 50 physicians. In contrast, 35.5% of physicians in multispecialty groups reported that their practice had 50 or more physicians.

A big shift is coming
Though the percentage of physicians in small practices has remained relatively unchanged over the past few years, analysts say that won’t be the case during the next five or 10 years as physicians and physician groups react to mega-mergers like the recent affiliations between Aetna and Humana and between Anthem Blue Cross and Cigna.

“The big guys out there [insurance companies] are getting bigger, and everyone has to react to that,” says

Rural areas, however, are expected to be an exception to the rule. “In rural areas where the demand for care is relatively low, small practices will continue to thrive because they’re what the community needs,” Valentine says. “And on the other side, with the move to managed care and other changes, you’re going to see consolidation continue to increase in urban areas.”

With that in mind, Valentine says, the percentage of physicians operating in small practices will probably change significantly over the next few years. “If we talk about the results of a similar report a decade from now, we’ll be discussing percentages that are much different.”

This article is excerpted from the October issue of HCPro’s The Doctor’s Office.

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