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

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.