EP440: What Is the Optimal Size for a Medical Practice? With David Muhlestein, PhD, JD

David Muhlestein, PhD, JD, has a specific number in mind for the optimal size of a physician practice: 10 to 20 docs, plus supporting team. Big enough to afford the back-office functions and technology that come with scale, small enough that the practice stays collegial, local, and able to act on its own values rather than corporate policy. He joins Stacey Richter to dig into what happens once organizations grow well past that size — and into the "diversification discount" that quietly punishes big health systems trying to be fiduciarily responsible for both primary care and specialty care at once. WHAT YOU'LL LEARN ✅ Why 10 to 20 doctors is David's answer for the optimal practice size — large enough for economies of scale, small enough to preserve autonomy and shared values ✅ What the "crisis of autonomy" is, and how practices move through the phase David calls delegation as they grow ✅ What the Diversification Discount is on Wall Street, and why it applies with even more force to health systems that fund primary care by taking money away from specialty care ✅ Three concrete options for organizations wrestling with this tension: splitting into aligned business units, decentralizing to restore practice-level autonomy, or having the board directly confront what its actual values are ✅ Why boards — especially nonprofit boards often dominated by finance backgrounds rather than medicine or public health — need to ask whether their organization's value comes from market power or from improving community health WHY THIS MATTERS There's a paradox sitting at the center of most large, consolidated health systems: good primary care reduces the need for (and revenue from) specialty care, yet many systems fund primary care precisely by redirecting specialty care revenue. That's not a sustainable alignment of incentives, and pretending otherwise doesn't make the diversification discount go away. Whether the fix is organizational bifurcation, genuine delegation of autonomy back to practice-level teams, or a hard look from the board about what the organization is actually for, the underlying question is the same: is this organization's value coming from market and political power, or from an actual ability to improve patient and community health? MENTIONED IN THIS EPISODE EP412 with Robert Pearl, MD: Apple Podcasts | Spotify | Other Apps EP438 with John Lee, MD: Apple Podcasts | Spotify | Other Apps EP437 with Brian Klepper, PhD: Apple Podcasts | Spotify | Other Apps EP432 with Kate Wolin, ScD: Apple Podcasts | Spotify | Other Apps EP421 with Jodilyn Owen: Apple Podcasts | Spotify | Other Apps === LINKS === 🔗 Show Notes with all mentioned links: Episode Page ✉️ Enjoy this podcast? Subscribe to the free weekly newsletter 🫙 Support the podcast with a small donation to the Tip Jar 🎤 Listen on Apple Podcasts 🎤 Listen on Spotify 📺 Subscribe to our YouTube channel === CONNECT WITH THE RHV TEAM === ✭ LinkedIn ✭ Threads ✭ Bluesky ✭ X 00:00 Introduction. 08:12 From a business and patient/better outcomes standpoint, what does an optimal provider practice look like? 11:48 EP412 with Robert Pearl, MD. 13:06 Why isn't the current landscape what David considers optimal? 14:53 What leads to the "crisis of autonomy"? 15:13 How do medical practices get to the phase of delegation? 17:39 EP438 with John Lee, MD. 18:55 EP437 with Brian Klepper, PhD. 20:53 EP432 with Kate Wolin, ScD. 20:55 EP421 with Jodilyn Owen. 24:45 What metrics should boards of directors also be held accountable for? 28:48 Why is an efficiency-focused business not necessarily the best at managing population care? 31:13 What is the "diversification discount"? 35:53 What can primary care doctors do to optimize their practices? 36:48 Why do we need to shift the mindset from "bigger" and "more"?