Do rural provider bonus payments do more good than harm?

If you live in the rural U.S., you probably face relatively limited access to the wonders of American health care.  There won’t be as many physicians per capita offering you their services.  This paucity of health care professionals will be especially stark for subspecialty care.  There are not many ENT specialists opening up shops in rural Texas when they can find jobs in Houston or San Antonio.

This undersupply of physicians has long caused medical experts to fret that rural patients receive too little medical care.  As a team of researchers pointed out in a recent article in Health Affairs, Medicare has responded by providing a financial incentive to rural health care providers, boosting their payment to encourage physicians to locate in such areas: “In the aggregate, Medicare pays rural providers $3 billion more each year in special payments than those providers would receive under traditional payment rates.”

These researchers are skeptical that such payments are working as intended.  They analyzed health care use across the U.S. to see whether, all else equal, rural patients receive fewer Medicare services than their urban peers.  Their results raise serious questions about the idea that such patients are underserved:

Do rural provider bonus payments do more good than harm?

On average, rural patients received just as much care as urban ones.  This similarity in use could signal that the Medicare payment incentives are working as intended.  But across regions of the country, the researchers found some locations receiving much more medical care than others, and some receiving less.  And the distinction between rural and urban didn’t have any power to predict whether patients received more or less than the average amount of care.  The researchers concluded that: “Medicare should not use rural location as a proxy for low service use or lack of access to care.”

I’m not confident that there is a workable way to fix the problem of getting all Americans equal access to specialty care.  I’m also not convinced that this study proves that current reimbursement schemes are too generous to rural health care providers.  I would like to think that, someday, we will have sophisticated measures of health care quality and appropriateness, measures that will allow us to pay providers handsomely for providing the right care, of the right quality, to the right patients.  In the meantime, we will be forced to make imperfect reimbursement decisions.

My question to you readers: Do you think the current rural provider bonus payments do more good than harm?

Peter Ubel is a physician and behavioral scientist who blogs at his self-titled site, Peter Ubel and can be reached on Twitter @PeterUbel.  He is the author of Critical Decisions: How You and Your Doctor Can Make the Right Medical Choices TogetherThis article originally appeared in Forbes.

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  • Dr. Drake Ramoray

    Neither I, nor any docs with experience practing rural medicine used different Medicare rates as a determining factor, some are even unaware of their existence. A little bump in pay isn’t gonna have someone move to Podunk if they weren’t going to anyway. The absence of city life, sometimes quality schools, shopping etc.

    On the other hand I predict pay for performance will drive many in disadvantaged practice locations to leave or go direct pay, at least this doc anyway.

  • Margalit Gur-Arie

    Any perks we can give physicians in rural areas, is money well spent in my opinion.
    My bigger question is who decides what “the right care, of the right quality, to the right patients” is? Who are the masters of those “sophisticated measures of health care quality and appropriateness” that will decide who gets paid, how much, what is appropriate, and for whom it is appropriate?

    • ninguem


      The Medicare fee schedule is a public document. Here’s
      the fee schedule in Missouri.

      CPT code 99213 – middle level complexity office visit, established patient. About the most common code billed. A typical office visit for someone on Medicare. Let’s use that as a benchmark.

      Missouri Locality 01 Saint Louis City, Saint Louis,
      Jefferson, Saint Charles counties. So, metro St. Louis.
      99213 – $71.76

      Missouri Locality 02 Clay, Jackson, Platte counties. So, metro KC.
      99213 – $71.72

      Missouri Locality 99 Those counties not listed under
      Locality 01 or 02. The rest of the state. Read, rural, and Missouri’s smaller cities.
      99213 – $67.67

      Medicare pays LESS to practice in a rural area. The assumption is supposed to be, the cost of practicing is lower.

      So……can you tell me where I get the rural discount for a stethoscope? Does the printer cut me a break on prescription pads? There’s actually very little that’s cheaper about the cost of practicing medicine in rural areas. I know, having run a rural practice for a decade. At least in my state, rural malpractice insurance rates run the same as urban.

      The rural “bonus” for practicing in a rural area, basically brings the Medicare pay up to where the St. Louis doc would get tor the same service.

      Equal pay for equal work, as a female, what’s your opinion on that?

      Call it a “perk” if you want, but it’s really just bringing rural docs back up to the rates of the urban docs.

      • Margalit Gur-Arie

        Perk wasn’t meant to be derogatory. It was meant to convey futility and insignificance.
        I know how much rural practices are getting paid. Equal pay for equal work is fine, but sometimes businesses get breaks and “perks” to relocate to this or that state. Maybe there should be a tax break, or something, for setting up practice in a shortage/rural area, not necessarily a pay differential.

        • ninguem

          Oregon had a nice break on income tax for rural practice.

          Of course, guaranteed with that, eventually the politicians began to attach strings to it.

          They start to monitor how many Medicare and Medicaid patients you accepted. You had to take a certain percentage of your practice, proportionate to the Medicaid population of the county.

          The microscopic Medicaid payment ate up any benefit from the tax credit.

      • LeoHolmMD

        Well done. There is no way the rural practice of medicne costs less. The only thing that may be less is facility rent. Otherwise retaining good staff, equipment, maintaining a vaccine supply and regulatory costs are all the same. There is a hidden tax, if you are solo, of not being able to cost share at all. Not to mention payer mix issues. So Medicare is way behind on understanding the issues surrounding rural medicine. No surprise. Too busy paying for medical skyscrapers in the large centers.

        • ninguem

          My rural practice real estate is about as expensive as a suburban real estate. It’s an area people like to move to.

          So maybe, at most, marginally cheaper real estate. Maybe marginally cheaper general labor or contractor labor.

          Healthcare labor?

          A rural hospital delivering, say, 200-300 babies a year. Fairly typical for a rural area. Babies are a random event, except for scheduled inductions and scheduled C-sections. Still a significant amount of “randomness”. Four babies born today, maybe none for a week.

          Statistically, at that volume, you stand a good chance of putting someone to work in Labor and Delivery, with no one there.

          But maybe the Emergency Department is busy.

          Or vice versa.

          Rural practice requires staff that can be flexible like that. They depend on temp agencies and other free-lance nurses and techs who have skills that such hospitals need desperately. They pay for that talent. They pay in a paycheck, and in recruitment cost. Whatever you pay that temp nurse, you pay about that much again to the agency. Then you pay to put up that nurse or tech, they have to live somewhere.

          All I’m getting at is, healthcare talent is not necessarily cheaper in a rural area, and may well be more expensive.

          Oh, ordinary goods. You know, pens, paper. Office supplies, paper shredders, copy machines.

          At least in my area, the small town businesses were WAY more expensive than urban, for that sort of thing. A bigger office supply purchase, a printer, a copier, was about 50% more to buy locally.

          I support “buy local” as much as the next person, but that’s a bit much to ask.

          For years, we could have run our Medical Staff meetings at the Costco Warehouse about 100 miles away, on a Sunday afternoon. Half the medical staff could be there shopping, I swear. “Hey Joe, Hi Bob, Mary how’s the kids, what’s up Ninguem” They’re buying for their private office, and home while they’re at it.

          Mrs. Ninguem and I had friends visit from the East Coast. I’m a city boy originally, same with Mrs. Ninguem.

          I remarked that Office Depot was opening a store in our little town. Mrs. Ninguem was excited. Old friends, amazed at us, rolled their eyes, looked at us like we were Okies From Muskogee.

          Damn right we were excited to see an Office Depot. It meant fewer 100 mile trips.

          Point is, not necessarily cheaper to practice rural, in fact can be more expensive. But the pay scale assumes cheaper. The rural bonus payments bring the docs back to par with urban docs……..oh and often with serious strings attached.

  • guest

    Let’s see…total U.S. expenditures for healthcare in 2013 were about $3 trillion. So a payment of $3 billion is equivalent to 0.1% of annual U.S. healthcare spending. Meanwhile, it’s estimated that 20-25% of total U.S. healthcare expenditures go to administrative and billing-related expenses.

    Here’s what I wonder: why are we worrying about $3 billion paid to people who are actually practicing medicine in rural areas, when we are spending $600 billion on administrative and billing costs?

    • Dr. Drake Ramoray

      Because the hospitals and administrators aren’t “represented” by the AMA.

      • guest

        So…followup question: can we find out who is representing the hospitals and administrators and get them to represent us, too?

        • Dr. Drake Ramoray

          The American Hospital Association.

          “The Association represents hospitals, healthcare networks and their patients and communities.”

          Note in their statement or on the website it says absolutely nothing about doctors. Doctors and hospitals are not friends, now more than ever.

          The administrators are represented by the Medical Group Management Association. Most physicians are familiar with the MGMA which provides listings of the mean and median physician income of different specialties. This data is then used by medical administrators (both hospitals and large private groups) as a starting point for negotiations with physicians for employment positions.

          Alas doctors have no hope of being represented by these organizations, quite frankly because we are basically enemies. They want to pay us as little as possible and extract as much profit from us as possible as we are their employee in the corp med setting. Once medicine in the US is consolidated enough into regional corp med groups I predict you will see a large push by these organizations to replace physicians with NPs and PAs as a lower cost of labor.

          • guest

            Okay…revised follow-up question: can we find out what it is that the MGMA and the AHA are doing that is so effective, and get the AMA to start doing that, too?

          • Dr. Drake Ramoray

            Other than the MGMA and AHA represent the interests of its members and the AMA represents less the 1:5 physicians and takes positions against most physicians I don’t know.

            I can tell you the ACP (and Buzz can tell you the AAFP) also work against the best interest of physicians. AACE (the endocrine association) is on my s&@t list at the moment for some recent positions they have taken as well.

            It is my understanding that NPs are happy with the nursing associations.

            It is unclear to me why most doctors are stranded and have nobody who is effectively on their side, but it’s true and we seem to be alone in having crappy representation.

  • Robert Bowman

    Looking through the Medicare Payment Data release, I coded it by counties with 0, 1, 2, 3, 4 – 9, or 10+ hospitals.


    Family docs are 38% of the physician workforce where there are no hospitals in a county and this 8% of the pop has 8.3% of family physicians in 2013. FM is population based at same or greater (1) index for all except the 10+ counties where FM is 0.86. FM is generally 21 – 28% of all workforce where needed across rural, underserved, and lower physician concentration counties – where NP and PA are also lower.

    NP and PA are about 0.6 or 4.8% where 8.3% of the pop is found – tending to avoid zero hospital counties but the family practice positions filled are likely to be similar to FM – so not all are a solution to health access.

    Only the family practice position result from MD, DO, NP, and PA – a result that shrinks by payment, training, and other designs for 30 years and longer. Moves to more specialties with more in each specialty – work for only a relative few locations that already have top concentrations of workforce, health spending, and other spending – by design.

  • Robert Bowman

    Good points – also in the data, rural physicians have fewer of the higher new patient costs (less turnover). As noted, higher forced costs where margin is lower is a huge problem for all smaller practices with less to be able to spread out costs and less capital and inability to take on low cash flow times.

    Looking at NP and PA pay – the reductions are a problem. Rural health clinic studies by Ortiz demonstrate not the expected gains with lower cost of personnel.

    And interestingly shortage areas are not necessarily short of physicians, physician assistants, and nurse practitioners. Seems that 3 failures of attempted reform of shortage area designations allow many to benefit – including counties with higher concentrations of workforce. This demonstrates that the states and institutions that work the system best, do best. While those most outside often fail to understand programs that were designed for them, or those who design fail to understand special programs like RHC, FQHC, Critical Access – resulted from insufficient revenue for rural providers by national designs.

    Kindig noted that rural workforce training efforts would remain in demonstration mode without better payment and support. Over 23 years later, he has been proven correct over and over. Meanwhile Australia and Canada have medical schools that not only address rural needs – but also have better medical education outcomes. This should not be a surprise to those who do front line fill the gaps clinical work as compared to the usual medical education examples.

    • ninguem

      The rural health clinic in particular.

      I’m a physician, solo practice, rural area.

      By geography, I’d qualify.

      But to actually get that designation, I’d have to hire a nurse practitioner.

      Silly me. One would think it quite simple. Medicare rates for a state. Usually runs

      “01 – BIG CITY”
      “02 – The Second City of that state”
      “03 – everywhere else”

      Rates lowering accordingly.

      You would think, how simple. Just pay the whole state at “01″ rate.

      Instead, spend more money to create hoops to jump through. Not OK to pay me if I see the patient, but OK to pay me more if I hire a Nurse Practitioner to see that same patient, and I “supervise”.

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