The Effects of Multispecialty Group Practice on Health Care Spending and Use

U.S. physicians are increasingly joining multispecialty group practices. In this paper, we analyze how a primary care physician's practice type – single (SSP) versus multispecialty practice (MSP) – affects health care spending and use. Focusing on Medicare beneficiaries who change their primary care physician due to a geographic move, we compare changes in practice patterns before and after the move between patients who switch practice types and those who do not. We use instrumental variables to address potential selection by patients into practice types after the move. We find that changing from a single to a multi-specialty primary care group practice decreases annual Medicare-financed per capita expenditures by about $1,600 - a 28% reduction. The effect is driven primarily by changes in hospital expenditures and is concentrated among patients with two or more chronic conditions, suggesting that MSP improves care delivery by reducing hospitalizations among relatively sick patients. The results imply that, while research has shown the potential for physician consolidation to increase prices in some settings, large multispecialty groups also have the potential to lower costs.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at "http://www.nber.org/papers/w25915"