A Model for Successful Rural Practice
This community-supported practice meets the needs of both the community and the physicians serving it.
Fam Pract Manag. 2000 Mar;7(3):41-44.
How would you like a charming, rural family practice with a guaranteed good income, no cash investment, complete autonomy, few or no administrative worries and six months' vacation each year?
I have a practice like that — and it's even better than it might sound. It's a full-time family practice with two physicians, year-round emergency services, nursing home care, home health services, hospice care and plenty of house calls. We average 15 patient visits per day, take a nice long hour for annual physicals and see about 20 patients with after-hour emergencies per month. Our schedule is ideal, working a week at a time from Wednesday to Wednesday, then enjoying a solid week off to relish life outside of medicine. After six years, the practice has become bigger and stronger, and our personal satisfaction has followed suit.
You're wondering how this is possible. Government grants? No. National Health Service? No. Working for peanuts? No. Collbran, Colo., our community, owns the health care facility, and my colleague and I work for the community as independent, salaried contractors.
A modest local tax increase allowed the author's rural area to support two local physicians and its own hospital district.
The author and his partner make market-level salaries and share call even though each works only half of the year.
Many of the pitfalls of such an arrangement can be addressed by a carefully written agreement.
An unusual subsidy
Nestled in the Plateau Valley, Collbran is flanked on both sides by wilderness. The only highway to town ends in the surrounding mountains. It's hard to get more isolated in the lower forty-eight. The town's population is 350, but the 1,000-square-mile service area encompasses about 2,000 people. Beginning in the late 1800s, pioneer physicians set up practices here, and in 1923 a local church gave the community a building and land for a hospital. Three years later, one physician, Henry Ziegel, MD, established a private practice in Plateau Valley. For 50 years Doc Ziegel did it all, developing the valley's modern hospital as we know it and ushering in the age of modern medicine.
In 1972, the community needed to expand its hospital building to better meet the needs of the clinic and nursing home it housed. Because Collbran could not afford to finance such an effort, it established a special hospital district, the Plateau Valley Hospital District, to qualify for and collect county funding and some private grant money. A publicly elected board of directors was assembled to oversee operations, and the hospital successfully appealed for a valleywide tax increase to raise capital for construction. Soon the hospital addition, including an entirely new clinic and nursing home wing, was completed. For the next four years the Plateau Valley Hospital District existed mostly to meet its funding requirements, with Doc Ziegel running the show.
After Doc Ziegel's death in 1976, the board took a more active role, hiring physicians and administrative personnel, negotiating physician contracts and making sure everything ran properly. But over the next 20 years, physicians came and went. Their reasons varied — among them, too little income, too much work and too much isolation. By the late 1980s, there was no permanent physician, and most of the residents of the valley were traveling an hour to Grand Junction for health care. The promise of new physicians would bring these residents back to Collbran for their health care only if they could trust that the new physicians would stay. The few residents who remained with Collbran physicians generated very little revenue, causing the clinic and nursing home to operate in the red. The hospital district concluded that the entire operation would close down forever — unless they did something different.
With only 2,000 people in the area, running a full-service outpatient medical practice without some type of subsidy was obviously a losing financial battle. Another approach involved running a clinic with limited services and no emergency or after-hours support. Given the area's isolation, failure to provide on-call services seemed likely to drive the patient base back to Grand Junction. Appealing for government subsidies was another alternative, but thankfully not one this independent community wanted to pursue. Another scenario involved selling the hospital to an outside entity, such as the closest tertiary care hospital, and sacrificing almost 100 years of locally owned health care services.
But the community found a better solution, unanimously approving an increase in the existing mill levy that would provide about $135,000 annually to attract good, permanent physicians who would invest their time in building back the clinic practice. The key to this arrangement is the source of the subsidy — the community. With no outside support and a modest tax initiative, a small rural community managed to secure two happy physicians and year-round, full-service health care.
In 1994 I was recruited to come to Collbran with Erika Woodyard, MD, who went through medical school and residency training with me. We oversee all aspects of the clinic without the immediate financial pressures of ownership. We agree to the basic parameters of the business, such as hours worked and services provided, and manage all the personnel and details of the office's workings. We even have the option of assuming proprietorship of the business without needing to invest a penny in fixed capital, since that would remain the property of the community.
A sound investment
When we moved here, we each earned about $60,000 a year, plus insurance benefits. The hospital district immediately began garnering a tidy profit — $80,000 the first year and $140,000 the next. After two years, we renegotiated for five-year contracts, beginning at $100,000 annually. Insurance benefits raise our total compensation to about $115,000 a year.
While profits dropped to $2,000 the first year of our new contracts, 1999 brought profits back up to $30,000. During our six years here, we have increased our salaries to meet national averages, and the hospital district has made annual profits to fund continued capital improvements and add to long-term reserves, which are approaching $1 million.
We have kept the nursing home full in recent years, and it makes a profit, as does the home health division that was set up before our arrival. Hospital district revenues now total $1.5 million a year, with $335,000 coming from the clinic. As clinic revenues grow, less of the community subsidy will need to be devoted to operating expenses and more can be spent on capital improvements, such as acquiring new equipment for procedures and developing assisted-living quarters and other types of expansion. Thus far, capital improvement allocations have been used to purchase computers, office furniture and EKG/spirometry and X-ray equipment. We're in the process of building a new entry area and upgrading the front lobby as well.
Home on the range
When Scott Rollins, MD, first moved to the rural community of Collbran, Colo., he and his wife had to rethink their desire to live in a new home in the wide-open spaces of western Colorado. “We wanted lots of land, land, land, but we couldn't afford a nice piece of property and a new house,” says Rollins.
While many people would settle for purchasing a home in the town of 350 people, Rollins and his wife had another idea. “We had a nice 18-foot-diameter tepee we used for camping, so my wife suggested we ‘just live in the dang tepee.’ We were suddenly able to consider all kinds of vacant parcels,” he says.
They purchased 37 acres, and they lived in their tepee while Rollins built a small cabin with hand tools. Within four months, by the time the snow was flying, their cozy, 600-square-foot cabin was complete. Well, almost. “After two years of living in the cabin without any electricity or water, I finally added solar electricity and running water,” he says. “When our first son was born, we carpeted the plywood floors, got a gas refrigerator and added Primestar.”
In about two years, they'll have their land paid off and enough cash saved to start building a separate, mortgage-free home. Their new home will sit about 100 yards from their cabin, and their cabin will become their guest house. They plan to build a house of about 3,000 square feet — large enough to include a kitchen that will accommodate output from their 6,000-square-foot garden.
In the meantime, Rollins appreciates the lifestyle. “We just make adjustments,” he says. “My 3-year-old son knows that when it's been cloudy outside, he has to limit his video viewing time because we are low on solar power. It can be primitive, but it's been fun, educational and eye-opening.”
Although things are going well, we are not about to exercise our option to assume ownership of the business. Because we could not directly receive any tax subsidy if we were to separate from the district, we wouldn't consider owning the business until the clinic can support itself. I estimate that the community needs to grow to 3,000 or 4,000 people for us to increase our revenues enough to break even without any subsidy. Obviously, we'll see more patients and have to work harder as this happens, but since we're averaging about 15 patients a day now, there's plenty of room to comfortably see more.
The model we've created has a few potential pitfalls, but advance planning can help avoid them. The most evident is that we are subject to the control of the hospital district board. This leaves the door open to potential conflict between us and the community board members. As it is now, we could theoretically be fired when our contract expires in 2003, but we don't anticipate that happening. Still, since few rural community residents are experienced in operating a medical practice, the physician contract needs to pre-empt as many problems as possible by clearly outlining each party's specific roles and protecting the interests of the physicians.
Here are some examples of what we've stipulated in our contract:
We have complete autonomy in all medical decisions and personnel issues.
The district is responsible for providing adequate medical facilities and maintaining appropriate facility credentials.
If either physician leaves, the other is not required to take on the departing physician's workload.
The board is not allowed to micromanage anything.
Our model probably would not work as a solo practice; 365 days a year on call is not a realistic option today. And more than two physicians would have a hard time generating realistic salaries. For our community's demographics, two physicians is ideal and the minimum needed to cover call.
Certainly many physicians are losing interest in rural practice, especially as rural health becomes increasingly dependent on outside resources, such as hospitals, corporations and governments. Yes, most rural physicians must cover early-morning patient distress calls alone; yes, contact with other physicians is limited; and yes, we're quite isolated and we lack many cultural outlets. But the benefits are that I can be fairly independent and resourceful, my partner and I are great friends, our children are like siblings to one another, we have numerous personal relationships and community endeavors, and we enjoy what the outdoors has to offer.
A community partnership
Most rural areas have limited wealth, and to pool resources for an endeavor such as hiring health care may seem impossible. Yet our model could never have happened without community involvement and support. For now, our clinic could not survive without the subsidy. At the same time, the partnership makes the community much more aware of the costs of operating a clinic, and I think they appreciate the services more since they have worked hard to procure them.
The community that supports a medical practice financially is one that will support it in other ways. Our community understands that we can become burned out, embraces our out-of-the-ordinary schedule, avoids micromanaging our practice, recognizes that we are members of the community and not a service to be abused (the 2 a.m. phone calls are few and far between and are generally true emergencies), and accepts us as human beings who can make mistakes. We welcome their support and return it by doing our best for them. We love working for our community of patients.
An effort like ours needs to be launched from the community. As physicians, we can help implement such a system through community education, statewide rural health associations, town meetings and residency-sponsored or hospital-sponsored outreach programs. Those people who need the health care can take control of their situation at the inception of an arrangement like ours and operate the newly created hospital district at a level best suited to their community.
In this age of managed care and federal involvement at most levels of health care, it is pleasantly ironic that the answers to some of the problems in rural health lie within the rural communities themselves. Our model is based on self-reliance, which serves to educate and empower a community to take a more active role in their health care. In the long run, our model fosters the kind of rural practice that might do Doc Ziegel proud.
This article was adapted with permission from Rural Health FYI, Summer 1999, Vol. 21, No. 3. For more information, contact the National Rural Health Association, One West Armour Blvd., Suite 203, Kansas City, MO 64111, (816) 756-3140.
Copyright © 2000 by the American Academy of Family Physicians.
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