New Medicare bonus payments kick in for rural doctors

Washington -- If you're a physician working in a part of the country with relatively few other doctors, you may soon notice a boost in your Medicare payments.

January brought the launch of a new 5% bonus payment from the federal government for doctors practicing in newly designated Physician Scarcity Areas. In some cases, the money will be on top of an existing 10% add-on that applies to less prevalent regions known as Health Professional Shortage Areas.

Congress approved the new bonus as part of Medicare reform legislation in 2003. Rural lawmakers said the provision was necessary to retain doctors in areas with the highest patient-to-physician ratios and to encourage more practitioners to begin working there.

In most cases, doctors won't need to do anything special to receive the extra dollars. For those practicing in the ZIP codes that make the Centers for Medicare & Medicaid Services ratio cutoff, the 5% bonus will automatically show up on a quarterly basis.

But some eligible doctors will need to be vigilant if they want to see the money. The Health Resources & Services Administration issued a warning through its rural health policy office last October stating that some ZIP codes that are technically within a shortage area are not set up for automatic payment because of differences between Medicare and U.S. Census Bureau data.

Doctors in these areas will need to add a special modifier to their Medicare claims to get the bonus. Physicians can consult the CMS Web site to determine whether they are eligible for the bonus, and, if so, whether they need to use the modifier.

Taking a gamble

Some physician practices, such as the Marshfield Clinic, are still deciding whether the bonus is significant enough to move more of its doctors into the scarcity areas.

Marshfield treats Medicare beneficiaries in facilities spread throughout Wisconsin. But despite the state's significant rural population, fewer than 40 of the practice's roughly 750 doctors are set to receive the 5% boost, said Brent Miller, federal government relations director for the group.

The decision to distribute more physician care to underserved areas involves several economic considerations. Doctors can keep their primary practice location but claim the bonus by, for example, treating seniors in shortage areas through a special clinic once a week. Whether such a tactic is financially worthwhile, however, is not so clear.

"It's basically an opportunity cost issue," Miller said. "The real money is not in providing Medicare services but in providing services to the commercial population. So if there's not much of a commercial population in a scarcity area but there's a super-abundance of Medicare beneficiaries, the math gets a little tougher."

Doctors who gravitate toward scarcity areas to capture the extra money could find themselves taking a bigger hit on the private insurance side, he explained.

After accounting for such a public/private caseload tradeoff, any potential benefit likely will be relatively small, Miller said.

Meanwhile, primary care physicians and specialists face different sets of circumstances when it comes to the bonus. CMS has designated separate primary care scarcity areas, estimated to contain roughly 18,000 primary care physicians, and specialty areas, which have about 13,000 specialists treating Medicare patients.

For the Marshfield Clinic, that statistic settles part of the dilemma of how to react to the new payments. The practice has committed as many of its primary care physicians as it can to underserved areas and is in the midst of a hiring freeze, Miller said. Any movement to take greater advantage of the Medicare bonus will need to come on the specialty side, where the potential for a profit is higher.

The organization plans to see how well the bonus works for doctors in existing scarcity areas before it commits more care to underserved populations or recruits additional specialty physicians to practice in the designated regions.

Seeing green

Rural health advocates hope the bonus payment ends up being just one of several effective retention and recruiting tools brought about by the flow of new federal health dollars to more remote areas of the United States.

At the prompting of lawmakers such as Senate Finance Committee Chair Charles Grassley (R, Iowa) and House Budget Committee Chair Jim Nussle (R, Iowa), Medicare reform writers included the bonus in a package of more than $20 billion over 10 years in added Medicare funding to physicians and other rural program participants.

"There are so many factors that go into the current work force shortage, and you just are not going to find a silver bullet to fix the problem," said Alan Morgan, vice president of government affairs for the National Rural Health Assn.

Morgan noted that problems arise when doctors leave medical school and look for work that will help them pay off their student loans. The fact that the federal government pays lower Medicare rates to rural physicians discourages the graduates from going to underserved areas, he said.

Although the bonus and the other extra funding in the reform bill is a very promising start, the problem of high patient-to-doctor ratios will get only worse unless lawmakers boost rural physician pay further, according to the association.

"The data from the latest U.S. census show that there is a move in the American population toward rural areas," Morgan said. "Maldistribution of physicians is a serious problem now, and with population shifts, it's going to be an increased concern."