Division of Labor in Medical Office Practices

This paper examines the staffing, division of labor, and resulting profitability of primary care physician practices. Division of labor is viewed as a mechanism to increase the efficiency of production processes through specialization. At the same time, division of labor also introduces coordination cost as handoffs and communication needs increase. We attempt to empirically assess the net effect in primary care physician offices. We collected data from a sample of these practices and tested two hypotheses: (H1) controlling for staff size, greater delegation through the use of more staff types will decrease the throughput of visits, and (H2) controlling for staff size, income per unit time generated by the practice is decreasing in the number of staff types. We find evidence supporting both hypotheses. We conclude that many physicians are gaining little financial benefit from delegating work to support staff. This suggests that small practices with few staff may be viable alternatives to traditional practice designs.