EBRI Issue Brief

Physician Practice in a Dynamic Environment: Implications for the Health Care System

Jun 1, 1995 20  pages


  • Expenditures on physician services amounted to $171 billion in 1993, compared with $13.6 billion in 1970. During this period, the environment in which physicians practice was transformed as a part of the changing health care financing and delivery system. This Issue Brief provides an overview of changes in the health care system that affect the environment in which physicians practice, focusing on what is known and issues needing further analysis.
  • Public and private payers have held down the rate of growth in payments to physicians by restructuring reimbursement. Physician behavior, payment, and practice patterns will be major factors in determining future health care costs and the type and quality of health care individuals receive.
  • In both the private and public sectors, one of the significant changes affecting physician practice patterns has been the movement of insured individuals away from traditional retrospective fee-for-service reimbursement to a prepaid prospective managed care setting. As a result, physicians are more likely to contract with a managed care organization.
  • The way in which physicians are reimbursed for outpatient Medicare services has changed significantly as a result of OBRA '89, which adopted a fee schedule based on a resource based relative value scale coupled with volume performance standards. These changes were designed to eliminate the incentive for physicians to increase service volume.
  • The distribution of physicians across specializations changed significantly between 1970 and 1992. In 1970, 17.3 percent of physicians were practicing family and general medicine, compared with 11 percent in 1992.
  • Recently, a larger proportion of physicians has joined group practices, and the average size of a group practice has increased. In 1975, 23.5 percent of physicians worked in a group practice, compared with 32.6 percent in 1991. Between 1975 and 1991, the average size of a group practice increased from 7.9 physicians to 11.5 physicians.
  • The U.S. physician-to-population ratio has been growing since at least 1970. In 1992, there were 255 physicians per 100,000 Americans, up from 161 in 1970. Among physicians with office-based practices, there were 209 physicians per 100,000 Americans in 1992, compared with 134 in 1970.