Larger Practices Spend More on, Have Higher Readmission Rates for Medicare Beneficiaries

Jaime Rosenberg

Despite spending more on quality improvement, health information technology, and systematic care management processes, larger practices spend more on and have higher readmission rates for Medicare beneficiaries than smaller practices, according to new research.

The research comes at a time of a wide range of changes in the way medical practices are organized in the United States, such as hospital acquisition of physician practices, mergers between independent practices, and increases in the amount of federally qualified community health centers.

As the continuing push toward value-based care has accelereated these changes and placed an emphasis on both quality and cost, questions have been raised about the impact of physician practice size on the quality and cost of healthcare. Delving into these questions, researchers curated data on the structural characteristics and processes used to improve care in practices of all sizes. Using the third National Study of Physician Organizations and Medicare claims data between 2012 and 2013, they identified 1040 practices, 31,888 physicians, and 868,213 Medicare beneficiaries.

Click here to read more on the changing landscape of medical practice.

Of the Medicare beneficiaries, 7% had 2 or more frailties and 10.5% had 3 or more major chronic conditions. These patients were more likely to be dual-eligible or disabled and had significantly higher spending and rates of ambulatory care–sensitive admissions (ASCAs).

Smaller practices—consisting of 1 to 9 physicians—accounted for 74.2% of all practices, despite 62.1% of beneficiaries being linked to practices with more than 100 physicians. These smaller practices cared for higher percentages of dual eligible and disabled beneficiaries compared to practices with 50 to 99 physicians and practices with more than 100 physicians.

The researchers observed a trend of increased spending as practice size increased. Larger practices were linked to significantly higher total Medicare spending, particularly for beneficiaries with the highest needs. Compared to practices with 1 to 2 physicians, mean annual spending among these beneficiaries was approximately $1800 higher per beneficiary per year in practices with more than 50 physicians.

The researchers noted that usage of quality improvement, health information technology, and systematic care management processes also increased with practice size. However, increased spending and utilization of these processes did not translate into higher quality care, according to the researchers.

“Surprisingly, practices that used more quality improvement, health information technology, and systematic care management processes did not have lower spending or higher quality, even for the highest need beneficiaries, who might benefit from them most,” they wrote.

Practices with 1 to 2 physicians also had lower readmission rates than practices of all other sizes, with the biggest differences seen among the highest need patients. Among these patients, the readmission rate for practices with more than 100 physicians was 1.64 times higher than for practices with 1 to 2 physicians.

The researchers made note that it is possible that beneficiaries of larger practices in the study had higher spending and readmissions because they are sicker in ways that they could not measure.

Casalino L, Ramsay P, Baker L, et al. Medical group characteristics and the cost and quality of care for Medicare beneficiaries [published online July 5, 2018]. Health Serv Res. doi: 10.1111/1475-6773.13010.
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