Rural-Urban Physician Payment Differences Across the Nation: Methodological Changes

Research center:
Project completed:
September 2006

This project will simulate the effects of changes to the methodologies used to calculate the three geographic practice cost indices (GPCIs) used to adjust physician payment across the 89 Medicare payment areas in the U.S. and territories. Health services researchers are concerned about the methodology used to determine the GPCIs. In particular, concerns have been raised about the timeliness of updates to the indices, the appropriateness of the data used to compute the indices, and the methodology in general.

This project is designed to provide a dispassionate explanation of payment differences as a function of payment area, with illustration of specific differences that result from separate GPCIs, and analyze changes to the payment formula to determine potential impact on payment across areas and revenues for rural physician practices.

The following hypotheses will be tested:

  • Payment to rural primary care physicians would increase if the work GPCI were calibrated using more recent data and a different mix of occupational categories.
  • Payment to rural primary care physicians would increase if the practice expense GPCI was calibrated using different input variables.
  • Overall practice income would increase for rural primary care physicians a significant amount (5% or more) with changes in Medicare payment that closed the gap between the lowest and highest GPCIs (all three components aggregated).

Two policy papers and three policy briefs will be produced.


  • Medicare Physician Payment Policy and the Rural Perspective (Final Report)
    RUPRI Center for Rural Health Policy Analysis
    Date: 11/2008
    The RUPRI Center has examined the effects of Medicare payment changes on rural physician practice revenue. We infer that changes to practice revenue potentially affect physician decisions regarding rural practice. This report presents the results of the center's work and provides a framework for understanding this continuing policy question.
  • Medicare Physician Payment: Impacts of Changes on Rural Physicians
    Policy Brief
    RUPRI Center for Rural Health Policy Analysis
    Date: 09/2006
    This policy brief provides an overview of the effects of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 on physician payment rates in rural areas. The brief discusses the effects of the Medicare incentive payment for providing services in shortage areas and of the bonus for practicing in a physician scarcity area.