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

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

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

Retrospective, repeated cross-sectional analysis.

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.

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.

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.

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.