The proportion of physicians in solo and two-physician practices decreased significantly from 40.7 percent in 1996-97 to 32.5 percent in 2004-05, according to a new national study released by the Center for Studying Health System Change (HSC).

Changes in physician practice setting and organization have important implications for the practice of medicine and the care patients receive. Some experts believe that large, multispecialty practices, which combine primary care physicians and a range of specialists in the same practice, are the organizational structure with the greatest potential to provide consistently high-quality care.

Despite the shift away from the smallest practices, physicians are not moving to multispecialty practices, the study found. The proportion of physicians in multispecialty practices decreased from 30.9 percent to 27.5 percent between 1998-99 and 2004-05.

While growth of multispecialty practices stalled, other significant changes in physician practice settings and organization took place over the last decade-more physicians moved to larger practices and more physicians gave up an ownership stake in their practices. Physicians increasingly are practicing in mid-sized, single-specialty groups of six to 50 physicians (17.6 percent of physicians in 2004-05 vs. 13.1 percent in 1996-97). At the same time, the proportion of physicians with an ownership stake in their practice declined from 61.6 percent in 1996-97 to 54.4 percent in 2004-05.

"Trends in physician practice setting and ownership likely reflect changes in physician financial incentives over the past decade," said Paul B. Ginsburg, president of HSC, a nonpartisan policy research organization funded principally by the Robert Wood Johnson Foundation.

"Physicians appear to be organizing in larger, single-specialty practices that present enhanced opportunities to offer more profitable ancillary services rather than organizing in ways that support coordination of care," Ginsburg said

In the mid-1990s, the rise of tightly managed care was expected to fuel development of large, multispecialty groups, including primary care specialties, to manage risk-sharing arrangements and specialty referrals. Physician practice acquisition by hospitals and physician practice management companies also accelerated. However, by the late-1990s, tightly managed care was not growing as expected, and many large physician practices were in financial trouble. By 2000-01, tightly managed care was in full retreat, but physicians faced continuing downward pressure on incomes with practice expenses growing more rapidly than payment rates.

"How physicians organize their practices ripples through the health care system," said HSC Research Analyst Allison Liebhaber, coauthor of the study with HSC Senior Researcher Joy Grossman, PhD. "For example, physicians in smaller practices with an ownership stake are much more likely to provide charity care than physicians in larger practices or non-owners, so it's not surprising that we're seeing a decline in charity care as physicians form larger practices and forgo an ownership stake."

Based on HSC's nationally representative Community Tracking Study Physician Survey, the study's findings are detailed in a new HSC Tracking Report-Physicians Moving to Mid-Sized, Single-Specialty Practices-available online at hschange. The 1996-97, 1998-99 and 2000-01 surveys contain information on about 12,000 physicians, and the 2004-05 survey includes responses from more than 6,600 physicians. Response rates for the surveys range from 52 percent to 65 percent. Other key study findings include:

-- Between 1996-97 and 2004-05, the proportion of medical specialists in solo or two-physician practices declined 12 percentage points from 38.1 percent to 26.1 percent, while the proportion of surgical specialists in solo or two-physician practices declined 10.3 percentage points from 47.8 percent to 37.5 percent. In contrast, the proportion of primary care physicians in solo or two-physician practices remained stable at about 36 percent between1996-97 and 2004-05.

-- While younger physicians were more likely than older physicians to practice in larger groups and to be non-owners, the gap narrowed between 1996-97 and 2004-05. Physicians 51 and older saw a 12.7 percentage point decrease in solo or two-physician practices between 1996-97 and 2004-05, from 51.5 percent to 38.8 percent. Physicians 40 and younger experienced a 3.5 percentage point decrease from 28.3 percent to 24.8 percent, perhaps because there were so few in solo or two-physician practices at the start of the period (data not shown). The ownership trends mirrored the trends in practice type for each age group.

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation's changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by the Robert Wood Johnson Foundation and affiliated with Mathematica Policy Research, Inc.

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