Small Clinics, Broad-Scope Primary Care, and the Real Measure of Efficiency

Small clinics may look less efficient, but broad-scope primary care can lower avoidable use and total cost when paid and supported properly.

HHTF Staff · 2026-06-04

The usual assumption in health care policy is that large systems are more efficient than small practices. That assumption is plausible on the administrative side. Large systems can centralize billing, compliance, contracting, EHR support, data reporting, and quality documentation in ways that small clinics often cannot.

Clinical efficiency is different. In primary care, the most important question is not whether a clinic looks administratively sophisticated. The question is whether the clinic prevents avoidable downstream care, maintains access, manages complexity, and keeps total cost of care lower without sacrificing patient outcomes.

The evidence does not support a simple claim that small practices are always better. It does support a more important claim: broad-scope, relationship-based primary care can be highly efficient, and small independent practices may perform that function well when they are not financially starved. The central policy error is comparing underfunded independent clinics with subsidized large systems, then treating the independent clinics’ lack of administrative infrastructure as proof that they are inefficient.

Primary care efficiency is not the same as corporate scale

Primary care creates value through first-contact access, continuity, comprehensiveness, coordination, and local knowledge. These functions are not automatically improved by corporate size. In some cases, consolidation may weaken them by replacing physician judgment and community familiarity with centralized rules, narrow workflows, and productivity demands.

Barbara Starfield, Leiyu Shi, and James Macinko’s work remains foundational here. Their review found that strong primary care systems are associated with better population health and more equitable distribution of health outcomes. The benefit comes from the functions of primary care itself, not from the ownership structure of the clinic or the size of the organization that employs the physician. [1]

A small clinic that knows its patients, answers the phone, manages problems early, and provides broad-scope care may prevent an emergency department visit or hospitalization that a larger system later counts as “care coordination.” That prevention is real efficiency. It may not appear on a quality dashboard if the clinic lacks the staff to document every measure, but it appears in total cost of care.

Smaller primary care practices have shown lower preventable admission rates

A Commonwealth Fund summary of a Health Affairs study by Casalino and colleagues found that primary care practices with one to two physicians had 33 percent fewer preventable hospital admissions than practices with 10 to 19 physicians. Practices with three to nine physicians had 27 percent fewer preventable admissions than the larger practices in the study. Physician-owned practices also had significantly lower ambulatory care-sensitive admission rates than hospital-owned practices. [2]

That finding should not be exaggerated. It does not prove that smallness itself caused the lower admission rates, and the authors identified possible unmeasured factors such as easier access, closer relationships among patients and staff, and stronger local knowledge. Those factors are exactly what policymakers should be trying to preserve, not accidentally destroy through consolidation pressure.

The same study found that larger practices had more formal patient-centered medical home processes, including care teams, reminders, and electronic prescribing. Those formal processes were not associated with lower preventable admission rates in that study. That distinction matters because reported process capability is not the same as clinical effectiveness.

Broad scope is part of the efficiency argument

The evidence is stronger when the argument shifts from “small practice” to “comprehensive primary care.” A study of family physicians caring for Medicare beneficiaries found that greater comprehensiveness was associated with lower Medicare Part A and B costs, lower Part B costs, and, by one claims-based measure, lower hospitalization likelihood. The authors concluded that payment and practice policies supporting comprehensive family medicine may help reduce costs. [3]

This is especially relevant in rural and neighbor island settings. A broad-scope family physician does not merely generate office visits. That physician absorbs uncertainty, manages multiple chronic conditions, handles urgent problems, coordinates specialty care when available, and often substitutes for services that are scarce or delayed. A narrow quality metric may miss that work, but total cost of care and avoidable utilization are more likely to capture its value.

For Hawaii, this distinction is critical. If future need is estimated from current utilization, an undercapacity system can be mistaken for an efficient system. Low utilization may mean patients did not get care. It may mean there was no specialist to refer to, no appointment available, no transportation, no local service, or no administrative pathway that worked in time.

Cost of care may be a better test than reported quality metrics alone

Reported quality metrics are useful, but they are not neutral. They depend on documentation, coding, EHR configuration, registry management, outreach staff, data submission, and measure-specific workflows. A small clinic may provide good care and still look weaker on reported metrics because it cannot afford the staff required to prove the work in the required format.

This is not a minor operational complaint. Commonwealth Fund researchers have identified excessive documentation, quality reporting, poor EHR usability, value-based payment reporting, and insurance rules as major sources of administrative burden in primary care. They also note that chronic underinvestment in primary care makes it harder for practices to hire support staff, which worsens the same reporting burden. [7]

That means quality metrics can partly measure clinical quality and partly measure administrative capacity. If a large system can employ teams to close gaps in documentation, chase screenings, optimize coding, and manage reports, it may appear stronger on paper even when total cost of care is higher. Policymakers should not ignore quality metrics, but they should treat cost of care, preventable admissions, emergency department use, referral patterns, patient access, and continuity as central measures of primary care performance.

The most honest evaluation asks whether the system is healthier and more affordable because of the model. If reported quality improves while total cost rises and independent primary care capacity collapses, the model has not proven efficiency. It has proven administrative consolidation.

Independent and primary-care-led models can perform well on cost

The Congressional Budget Office’s 2024 review of Medicare accountable care organizations found that certain types of ACOs are associated with greater savings. These included ACOs led by independent physician groups and ACOs with a larger proportion of primary care providers. [4]

The reason is not mysterious. Independent physician groups can have clearer incentives to reduce avoidable hospital care. Hospital-led organizations may face conflicting incentives because reduced admissions, procedures, and facility-based services can reduce revenue inside the same corporate system.

That incentive problem should be central to any discussion of vertical integration. A hospital-owned primary care model may be capable of excellent care, but ownership changes the financial context. A primary care clinic that prevents hospital utilization creates system value. A hospital system that owns both the clinic and the hospital may also experience that same avoided utilization as lost internal revenue.

Consolidation may raise spending without clearly improving quality

The evidence on consolidation should make policymakers cautious. One study of hospital acquisitions of physician practices found that prices for services provided by acquired physicians increased by an average of 14.1 percent after acquisition, and integration of primary care physicians increased enrollee spending by 4.9 percent. [5]

The Government Accountability Office reviewed recent literature on physician consolidation and reported that hospital-physician consolidation can increase spending and prices, while generally showing no change in quality of care. The GAO also noted that evidence is less clear for some other forms of consolidation, including consolidation involving insurers or other corporate entities. [5]

This is not an argument that all integration is harmful. Some shared infrastructure can help clinicians. The problem is treating ownership consolidation as the only path to infrastructure, then ignoring the price effects and incentive conflicts that may come with it.

The evidence against small practice should also be taken seriously.

Small practices and small systems face real disadvantages. A study comparing small and large health systems serving Medicare beneficiaries found that small systems had lower performance on a composite clinical quality measure, while total cost of care was not statistically different. The same study found that small systems served a much larger share of rural and small-town beneficiaries, which makes them important for access even when they face infrastructure challenges. [6]

This is the strongest counterargument. Large systems may have more capital, better reporting infrastructure, broader specialist availability, more standardized workflows, and more staff to support quality improvement. Those advantages are real.

The policy conclusion should not be that small practices are obsolete. The better conclusion is that small practices need shared infrastructure and fair payment if policymakers expect them to perform the work now assigned to primary care. If a small clinic cannot hire a care manager, social worker, dietitian, or data support staff because payment is inadequate, the failure is not proof that the clinic model is inefficient. It is proof that the payment model is incomplete.

Support services do not require hospital ownership

Social work, nutrition support, care management, community health workers, behavioral health, pharmacy support, and data assistance are valuable. They should not be used as an argument for forcing physicians into large systems. These services can be paid directly, embedded in independent practices, or shared across networks of small clinics.

AHRQ’s EvidenceNOW model was built around this principle. It provides external support to small and medium-sized primary care practices, recognizing that these practices often lack dedicated staff, resources, and infrastructure for ongoing quality improvement. The model includes practice facilitation, health IT support, shared learning collaboratives, expert consultation, data feedback, and benchmarking. [8]

Community health worker evidence also supports the broader point that supportive services can produce value when paid for and organized intentionally. A randomized clinical trial of the IMPaCT community health worker model found improved patient-reported primary care quality and reduced total hospital days among low-income adults with multiple chronic conditions. A related return-on-investment analysis found that every dollar invested in the intervention returned $2.47 to an average Medicaid payer within the fiscal year. [9]

Nutrition care shows a similar lesson. A systematic review found that nutrition care in primary care settings is effective but requires investment. The fact that a service requires investment is not an argument against the service. It is an argument for paying for it transparently rather than expecting a hospital system to subsidize it internally or expecting a small clinic to provide it for free. [9]

Policy implication for Hawaii

Hawaii should be careful not to mistake corporate consolidation for primary care investment. A large system may have administrative scale, but scale alone does not prove better access, lower total cost, better continuity, or more appropriate specialist use. The test should be whether the model increases real primary care capacity and reduces avoidable downstream spending.

Payment policy should directly support broad-scope primary care and the services that make it work. That means adequate primary care payment, shared support services for independent clinics, transparent measurement of total cost of care, and evaluation of whether payment actually reaches frontline primary care teams. It also means measuring underuse and unmet need, not only utilization that already occurred.

The question is not whether small clinics can survive on nostalgia. The question is whether Hawaii wants a primary care system that preserves access, continuity, scope, and local accountability. If policymakers want those things, they should fund them directly rather than assuming they will emerge from consolidation.

Sources

Barbara Starfield, Leiyu Shi, and James Macinko. “Contribution of Primary Care to Health Systems and Health.” The Milbank Quarterly, 2005. https://www.milbank.org/quarterly/articles/contribution-of-primary-care-to-health-systems-and-health/

The Commonwealth Fund. “Small Primary Care Physician Practices Have Low Rates of Preventable Hospital Admissions.” Summary of Casalino et al., Health Affairs, 2014. https://www.commonwealthfund.org/publications/journal-article/2014/aug/small-primary-care-physician-practices-have-low-rates

Robert L. Phillips Jr., Andrew W. Bazemore, et al. “More Comprehensive Care Among Family Physicians Is Associated with Lower Costs and Fewer Hospitalizations.” Annals of Family Medicine, 2015. https://www.theabfm.org/resea