I am not in the US - our schools use a spread them out and then have groups within the class at least for the early years. It just seems to make so much work with a wide range of skills in the class. Also when there are 24 kids in the class who have had between 4 and 22 months schooling I find it highly improbable that they fall neatly into 4 or 5 reading levels so some kids must be in groups above or below their ideal level.