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Horizontal and Vertical Integration of Physicians: A Tale of Two Tails

Abstract

Purpose

Researchers recommend a reorganization of the medical profession into larger groups with a multispecialty mix. We analyze whether there is evidence for the superiority of these models and if this organizational transformation is underway.

Design/Methodology Approach

We summarize the evidence on scale and scope economies in physician group practice, and then review the trends in physician group size and specialty mix to conduct survivorship tests of the most efficient models.

Findings

The distribution of physician groups exhibits two interesting tails. In the lower tail, a large percentage of physicians continue to practice in small, physician-owned practices. In the upper tail, there is a small but rapidly growing percentage of large groups that have been organized primarily by non-physician owners.

Research Limitations

While our analysis includes no original data, it does collate all known surveys of physician practice characteristics and group practice formation to provide a consistent picture of physician organization.

Research Implications

Our review suggests that scale and scope economies in physician practice are limited. This may explain why most physicians have retained their small practices.

Practical Implications

Larger, multispecialty groups have been primarily organized by non-physician owners in vertically integrated arrangements. There is little evidence supporting the efficiencies of such models and some concern they may pose anticompetitive threats.

Originality/Value

This is the first comprehensive review of the scale and scope economies of physician practice in nearly two decades. The research results do not appear to have changed much; nor has much changed in physician practice organization.

Keywords

Acknowledgements

Acknowledgments

The authors thank Mark Pauly, Stephen Shortell, and John Kralewski for their comments on this chapter. They also thank Peter Kralovec at Health Forum, David Gans at the Medical Group Management Association, and Esther Hing at the Centers for Disease Control and Prevention for making available much of the data reported here.

Citation

Burns, L.R., Goldsmith, J.C. and Sen, A. (2014), "Horizontal and Vertical Integration of Physicians: A Tale of Two Tails", Annual Review of Health Care Management: Revisiting The Evolution of Health Systems Organization (Advances in Health Care Management, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 39-117. https://doi.org/10.1108/S1474-8231(2013)0000015009

Publisher

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Emerald Group Publishing Limited

Copyright © 2013 by Emerald Group Publishing Limited