The effect of physician practice organization on efficient utilization of hospital resources

This study examines variations in the efficient use of hospital resources across individual physicians.

The study is conducted over a two-year period (1989-1990) in all short-term general hospitals with 50 or more beds in Arizona. We examine hospital discharge data for 43,625 women undergoing cesarean sections and vaginal deliveries without complications. These data include physician identifiers that permit us to link patient information with information on physicians provided by the state medical association.

The study first measures the contribution of physician characteristics to the explanatory power of regression models that predict resource use. It then tests hypothesized effects on resource utilization exerted by two sets of physician level factors: physician background and physician practice organization. The latter includes effects of hospital practice volume, concentration of hospital practice, percent managed care patients in one's hospital practice, and diversity of patients treated. Efficiency (inefficiency) is measured as the degree of variation in patient charges and length of stay below (above) the average of treating all patients with the same condition in the same hospital in the same year with the same severity of illness, controlling for discharge status and the presence of complications.

After controlling for patient factors, physician characteristics explain a significant amount of the variability in hospital charges and length of stay in the two maternity conditions. Results also support hypotheses that efficiency is influenced by practice organization factors such as patient volume and managed care load. Physicians with larger practices and a higher share of managed care patients appear to be more efficient.

The results suggest that health care reform efforts to develop physician-hospital networks and managed competition may promote greater parsimony in physicians' practice behavior.