Medicare Compliance & Reimbursement

But is CMS' geographic adjustment hurting more than it helps?

Taking into account geographic variation in the cost of living, rural physicians make more than their urban counterparts, and physicians in the most remote rural areas make the most money of all.

This counterintuitive finding comes courtesy of the Center for Studying Health System Change. According to HSC's 2000-01 Community Tracking Survey Physician Study, the average annual real income for rural physicians exceeds the average for urban physicians by about 13 percent. After inflating the numbers to 2003 levels, as HSC researchers James Reschovsky and Andrea Staiti do in a Jan. 26 issue brief, that translates into $225,000 per year for rural doctors versus $199,000 for urban practitioners.

In nominal, unadjusted dollars, urban physicians come out ahead, making $218,000 per year versus $204,000 for rural physicians. But adjusting for cost-of-living differences not only reverses that relationship, it also puts the most rural physicians ahead of everyone. In real terms, physicians in rural areas that are not adjacent to an urban area make $242,000, compared to $217,000 for physicians in rural areas that are next to an urban area, and $199,000 for urban physicians, HSC reports.

"The study should dispel the myth that lower income potential is a major obstacle to recruiting physicians to most rural areas," says HSC president Paul Ginsburg. "Nonetheless, the higher purchasing power of rural physician incomes may be needed to compensate physicians for other disadvantages of rural practice, including less control over work hours, professional isolation, and a lack of amenities associated with urban areas."

Reschovsky and Staiti question the need for a provision of the Medicare Modernization Act that temporarily "increased Medicare payment to virtually all rural physicians by establishing a floor for the geographic adjustment to the work component of the Medicare physician fee schedule." In addition to their purchasing-power findings, the HSC authors cite other research suggesting that, "with the exception of mental health care, rural areas overall have an adequate number of physicians to provide access to care roughly equivalent, and perhaps superior, to urban areas." Moreover, they add, "rural physicians already are more likely to accept new Medicare patients than urban physicians."

Reschovsky and Staiti praise another MMA provision that they say is more targeted and less expensive than the geographic-adjustment floor: a temporary enhancement to the Medicare Incentive Program, "which provides bonus payments to physicians that practice in designated, mostly rural, physician-scarcity areas."