Is bigger always better? The optimal size of a group practice.
The past decade saw several attempts to consolidate physician practices, but this sector remains one of the last cottage industries in the United States. This article develops a framework for analyzing the optimal size of a physician practice. The framework addresses technological factors (e.g., economies of scale and scope), behavioral factors (e.g., changing physician goals, costs of organizing and operating a practice), and market-driven factors (e.g., managed care contracting). Existing empirical research suggests three "optimal" sizes of practices: 5-10 physicians, based on economies of scale and decision-making; 20-30 physicians, based on economies of scope and initial development of a corporate structure; and 80+ (multi-specialty) physicians, which can create an system of referrals and utilization. The article concludes with observations about the challenges to physician practices as they grow.
Business Medical Programs, School of Professional Studies in Business and Education, Johns Hopkins University, 6740 Alexander Bell Drive, Suite 180, Columbia, MD 21046, USA. Douglas.Hough@jhu.edu
Douglas E
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D017598:Efficiency, Organizational; D006123:Group Practice / Q000191:economics / Q000458:organization & administration*; D006276:Health Facility Size; D017059:Models, Econometric; D009937:Organizational Objectives; D014481:United States