Rural America Waits Impatiently for Primary Care Payment Reform

Some Regions Reap Early Payment Reform Benefits

September 21, 2012 08:20 pm Sheri Porter

Even as public and private payment incentives -- created around health delivery reform initiatives -- sweep the United States, many of America's rural family physicians feel overlooked and left out. With fewer internal and external resources; less revenue; and an overabundance of older, low-income patients, FPs practicing in small-town America are hurting.

Jerad Widman, M.D., provides the high-level care that a patient-centered medical home practice demands, but so far, his solo practice has not seen enhanced payment to cover the cost of providing that care.

Jerad Widman, M.D., a solo FP in Spring Hill, Kan., a town of about 5,400 people south of the Kansas City metro area tells AAFP News Now that his practice faces financial uncertainty.

"I wish I could say the reimbursement issues have improved, but I'm still waiting for those improvements," says Widman. "There is little opportunity in this area that allows me to take advantage of the reimbursement changes that have happened in other locales."

Widman is involved in the second year of a pilot project with a major private payer in the area that encourages practices like his to become patient-centered medical homes (PCMHs). "I can point to many objective markers that show we're providing great care with good levels of patient satisfaction and good outcomes," he says.

He's also produced six-figure savings for the insurer by keeping patients healthier and out of the hospital, but so far, all Widman has received in return for his efforts is "a nominal per-member, per-month payment that fails to cover the added cost of providing PCMH-style care." Widman notes that a shared savings feature is being finalized, but "early editions of this component have failed to yield any returns for me despite the savings I've produced."

story highlights

  • Many family physicians that practice in rural America are engaged in delivery system reform but still are waiting for payment reform to come to their communities.
  • Medicare's Advance Payment ACO Model was created with rural primary care physicians in mind but currently is limited to select regions of the country.
  • Even if they are not yet seeing enhanced payment, rural practices engaged in practice transformation are well-positioned for future payment reform initiatives.

"I started out on my own because I wanted the freedom to pursue the things I knew could make the biggest difference in patient care," says Widman. "But seven years is a long time in practice to not be rewarded for the level of care I am providing."

A year ago, Widman joined together with other practices to form an accountable care organization (ACO); the result of that partnership, the Kansas City Metropolitan Physician Organization (KCMPA), is now 150 physicians strong. The ACO wanted to participate in CMS' Comprehensive Primary Care (CPC) initiative, but the Kansas City area was not chosen as one of seven regions that will test the multipayer project.

KCMPA now has its eye on -- and an application in -- for round two of Medicare's Advance Payment ACO Model(, a project designed for physician-based and rural providers. Practices receive upfront funding to help defray the costs of providing coordinated high-quality care with an understanding that the money will be repaid later through accrued shared savings.

Unfortunately, regional gaps limit this pivotal pilot. According to a CMS map, the one pilot program most likely to be helpful to rural physicians currently is available almost exclusively in the East Coast, mid-Atlantic and Southern markets; California is the sole outlier.

If the ACO's application for participation is rejected, a frustrated Widman worries that he'll have to shift gears and pursue "the volume-based approach of medicine that I've avoided since day one of opening."

[Donald Klitgaard, M.D., talking with elderly patients]

Donald Klitgaard, M.D., knows that patients like these who are cared for in one of the five rural clinics for which he serves as medical director are getting good care; he's still waiting for more opportunity on the payment end.

Primary Care Well Positioned

As senior vice president of the Kansas City, Mo.-based National Rural Health Association(, Brock Slabach, M.P.H., understands the challenges rural physicians face.

Slabach points out that when CMS first announced a pilot project called the Medicare Shared Savings program(, rural areas were hard pressed to meet a basic CMS requirement for participation.

"You could turn a little rural community upside down and shake it and not come up with the 5,000 lives that are necessary for ACO participation," says Slabach.

After an avalanche of criticism, CMS came up with alternative ACO models, including the Advance Payment Model ACO on which Widman has pinned his hopes.

Slabach reassures rural physicians that they are well-positioned in the payment reform debate. "Rural physicians now hold the cards for these models because they are bringing their patients and that 'book of business' to the ACO," says Slabach. "And that's a very valuable commodity."

Donald Klitgaard, M.D., of Harlan, Iowa, is medical director of the five rural clinics that are affiliated with the Myrtue Medical Center in Harlan. The clinics have been engaged in delivery system change since 2007. Klitgaard acknowledges that there's been far less opportunity on the payment end, but he senses momentum.

"There are tons of moving parts at the national level, and ACOs likely will be the game changer, especially for rural primary care practices," says Klitgaard. "Practices need to have the fortitude to take that on and not be scared and not be turned off, but rather, to say 'This is the way our practice is taking control of something that the insurance companies don't do very well.'"

Family physicians need to "take the reins, do this right, and when we save the insurance companies money, tell them we expect money to flow back to the physicians and the practices that made that happen," says Klitgaard.

Hospital-based ACOs Need Primary Care

According to National Rural Health Association Senior Vice President Brock Slabach, M.P.H., accountable care organizations (ACOs) need primary care physicians to succeed. "Tertiary systems will be reaching out to rural communities to expand the coverage of their primary care base, and rural practices will have to make a decision about whether they want to participate," says Slabach.

"Primary care is becoming the currency of the realm," he adds.

When faced with the decision of who to align with, Slabach advises rural physicians to

  • avoid signing on with the first ACO that comes calling,
  • ponder if the partnership is feasible geographically,
  • collaborate with the local hospital,
  • consider if the practice already is in a referral situation with the organization making the offer, and
  • decide up front on the proration of potential global shared savings.

Remember, physicians are not selling their practices to the ACO; rather, the affiliation means that Medicare will assign a designated number of the physicians' Medicare patients to the ACO. "Medicare will share with the physicians any savings derived from the care of those patients in the ACO," says Slabach.

Payment Reform Missing in Minnesota

Terence Cahill, M.D., of Blue Earth, Minn., practices family medicine in a town of about 3,300 people that has seen a population decline of more than 7 percent since 2000. In 2009, the median average household income was about $34,000.

This past president of the Minnesota AFP defines his practice as a provider-based clinic operating out of an independent, publically owned, critical-access hospital. The clinic supports three full-time FPs, a general surgeon and five mid-level providers.

"There is a gross misunderstanding of what we (rural FPs) have to deal with," says Cahill, citing health information technology (IT) as a perfect example. When a pilot program demands a certain level of health IT proficiency by participants, large organizations with deep pockets and a robust IT team dig in to meet those requirements.

"Our health IT department is two people locked in the basement here in Blue Earth," says Cahill.

"Public and private payers expect small rural practices to make big investments in EHRs (electronic health records) and practice improvements upfront," says Cahill. "Then if I can prove the outcomes, they might pay me."

Cahill's message to all payers is simple: "Reward me for working in a small town with people who are sick and poor, and start accepting the risk for patients whose outcomes likely are not going to be good.

"I know what my community needs, and I know what my patients need. I know where they work, where they shop, and I know how to make them well," says Cahill.

Despite his disappointment with the slow progress of payment reform, Cahill knows the practice changes he's made are worthwhile. "We invested in the health care home (Minnesota's version of the patient-centered medical home) and even though our experience has not been profitable, it has been educational, and it has made us a better clinic in the process," says Cahill.

Successful Collaboration in New York

The same system that currently is failing to deliver higher payment to many rural physicians has been a boon to Eugene Heslin, M.D., of Saugerties, N.Y., who practices family medicine in this town of about 22,000 people located at the foot of New York's Catskill Mountains.

Together, the five family physicians at Bridgestreet Family Medicine take care of more than half of the town's population. "Our youngest patient is six days old and the oldest is 107 -- and just happens to be my grandma," says Heslin.

Heslin says he was fortunate to be practicing medicine in a region with the collective resources and willpower to promote the medical home several years ago just as the reform movement was gaining steam.

Specifically, support from the Hudson Valley Initiative, the Taconic Independent Practice Association (IPA), the Taconic Health Information Network and Community, along with technical expert MedAllies, helped the practice gain level three recognition from the National Committee for Quality Assurance in 2009 and, as Heslin puts it, "achieve reimbursement through achievement."

Additional money began to flow into the practice when a combination of private payers, Medicaid and corporate giant IBM agreed to pay practices like Heslin's an additional per-member, per-month fee in addition to fee-for-service payments to take care of a group of patients.

As a result, every employee in the clinic was rewarded in 2010 and again in 2011 with a bonus equal to one month's salary.

But it's not all about the money. The practice sees fewer patients per day, which has enhanced the quality of care. "And with all of our work around the patient-centered medical home, we've seen our quality indicators go up," says Heslin.

Furthermore, New York's Capital District-Hudson Valley Region was chosen for CMS' CPC initiative, and Heslin's practice is one of 75 primary care practices that will test the blended payment model while providing health care to more than 40,000 Medicare patients.

"We have six insurance companies in our area participating in the initiative, plus Medicare and Medicaid. How powerful is that?" says Heslin.

He stresses the power of collaboration and describes the IPA's ability to bring together large practices and "single-shingle" physicians to create strength of diversity and foster innovative thinking.

"Insurance companies will continue to recognize that they can increase payments to primary care physicians and decrease their overall costs through better utilization of primary care," he adds.

Heslin knows that many of his rural colleagues still are waiting for similar payment opportunities to come their way. "They are on the edge of what can be," says Heslin. "To all my brethren out there, I say 'Stick with it; better times are coming.'"