Size Matters: The Impact of Physician Practice Size on Productivity

Physician practices in the US are largely small-scale, independently-run enterprises, despite their potential critical role in creating a more integrated health care system. Using an approach that builds on – and extends – prior research, we estimate physician practice production functions for different types of practices (multispecialty, single-specialty, and six subspecialties within single-specialty practices). We find that these practices have distinct production functions, and that size has different implications for each. In particular, we find that the median size physician practice is well below the size suggested by the estimated production function and marginal products of physicians, for almost all practice types. These results have interesting implications for health policy.