Is Bigger Better?: A Closer Look at Small Health Systems in the United States

Abstract

Background: Research on US health systems has focused on large systems with at least 50 physicians. Little is known about small systems.

Objectives: Compare the characteristics, quality, and costs of care between small and large health systems.

Research design: Retrospective, repeated cross-sectional analysis.

Subjects: Between 468 and 479 large health systems, and between 608 and 641 small systems serving fee-for-service Medicare beneficiaries, yearly between 2013 and 2017.

Measures: We compared organizational, provider and beneficiary characteristics of large and small systems, and their geographic distribution, using multiple Medicare and Internal Revenue Service administrative data sources. We used mixed-effects regression models to estimate differences between small and large systems in claims-based Healthcare Effectiveness Data and Information Set (HEDIS) quality measures and HealthPartners' Total Cost of Care measure using a 100% sample of Medicare fee-for-service claims. We fit linear spline models to examine the relationship between the number of a system's affiliated physicians and its quality and costs.

Results: The number of both small and large systems increased from 2013 to 2017. Small systems had a larger share of practice sites (43.1% vs. 11.7% for large systems in 2017) and beneficiaries (51.4% vs. 15.5% for large systems in 2017) in rural areas or small towns. Quality performance was lower among small systems than large systems (-0.52 SDs of a composite quality measure) and increased with system size up to ∼75 physicians. There was no difference in total costs of care.

Conclusions: Small systems are a growing source of care for rural Medicare populations, but their quality performance lags behind large systems. Future studies should examine the mechanisms responsible for quality differences.

Figure 1:. Geographic Distribution of Large and Small Systems, 2017

For each hospital referral region (HRR), Figure shows the number of large (left side of figure) and small (right side of figure) health systems located in that HRR in 2017. Each health system’s assigned location was the HRR containing the plurality of its practices; practice location was determined using PECOS and Physician Compare data.

Figure 2:. Relationship Between Total Number of System Physicians and Performance

Figure plots the adjusted quality composite score against the total number of MDs for each system-year observation from 2013 to 2017. Small systems are represented by blue circles, and large systems by red circles. System-year observations were included only if the reliability of the quality composite measure was at least 0.7. For exposition, plot shows systems in the range of 5 to 500 total physicians only (the maximum number of total physicians in a system was over 6,000 but greater than 75 percent of systems had fewer than 1000 physicians). Line represents smoothed lowess curve describing the relationship between the adjusted quality composite score and physician count.