Rural Health Policy: Physician Assistants and Nurse Practitioners: Rural-Urban Settings and Reimbursement for Services

Evidence based on productivity measures, salaries and costs of medical education indicates that physician assistants and nurse practitioners are cost-effective. Managed care suggests that health maintenance organizations (HMOs) would seek to utilize these professionals. Moreover, underserved rural areas would utilize physician assistants and nurse practitioners to provide access. This study examined the role of payment sources in the utilization of physician assistants and nurse practitioners using the 1994 National Hospital Ambulatory Medical Care Survey (NHAMCS) conducted by the National Center for Health Statistics, U.S. Centers for Disease Control and Prevention. Rural vs. urban results were compared. The study found that significant rural-urban differences exist in the relationships between payment sources and the utilization of physician assistants and nurse practitioners. The study also found that payment source affects varied for physicians, physician assistants and nurse practitioners who saw outpatients in hospital settings. Surprisingly, prepaid and HMO types of reimbursements are shown to have no relationship with physician assistant and nurse practitioner utilization, and this finding is the same for both rural and urban patient visits. After controlling for other influences, the study shows that physicians, physician assistants and nurse practitioners are each as likely as the other to be present at a rural managed care visit. However, physicians are much more likely than physician assistants and nurse practitioners to be present at an urban managed care visit.     

HMOs and Managed Care: Implications for Rural Physician Manpower Planning*

American health care is changing dramatically. Health maintenance organizations (HMOs) and other managed care plans are central to this change. Today, the majority of Americans living in metropolitan areas receive their care from these types of plans. The goal of this article is two-fold. First, it will discuss the potential implications of HMOs and managed care for physician needs and supply in rural regions. Second, it will derive insight into alternative approaches for meeting rural health manpower needs by analyzing HMO staffing patterns. As HMOs and other managed care plans expand, rural physicians, their practices, and their patients will almost certainly be affected. As described in this paper, most of these effects are likely to be positive. The staffing patterns used by HMOs provide an interesting point of comparison for those responsible for rural health manpower planning and resource development. HMOs appear to meet the needs of their enrollees with significantly fewer providers than are available nationally or suggested by the federal standards. Moreover, HMOs make greater use of nonphysician providers such as nurse practitioners and physician assistants.     

HMOs and Managed Care: Implications for Rural Physician Manpower Planning*

ABSTRACT: American health care is changing dramatically. Health maintenance organizations (HMOs) and other managed care plans are central to this change. Today, the majority of Americans living in metropolitan areas receive their care from these types of plans. The goal of this article is two-fold. First, it will discuss the potential implications of HMOs and managed care for physician needs and supply in rural regions. Second, it will derive insight into alternative approaches for meeting rural health manpower needs by analyzing HMO staffing patterns. As HMOs and other managed care plans expand, rural physicians, their practices, and their patients will almost certainly be affected. As described in this paper, most of these effects are likely to be positive. The staffing patterns used by HMOs provide an interesting point of comparison for those responsible for rural health manpower planning and resource development. HMOs appear to meet the needs of their enrollees with significantly fewer providers than are available nationally or suggested by the federal standards. Moreover, HMOs make greater use of nonphysician providers such as nurse practitioners and physician assistants.     

Rocky Mountain HMO

Rocky Mountain HMOs two-decade history of success on the western slope of Colorado is due not only to the conscious decisions of its managers but also to the geography and demography of its primary market area. The managers of Rocky Mountain HMO sought to build a managed care plan that was physician friendly and that had a local face, explicitly recognizing that their success hinged on the ability to satisfy the needs of both providers and purchasers. Isolated by the Rocky Mountains from major population centers of the state and located beyond the pull of the Salt Lake City, Utah, market to the west, Rocky Mountain HMO had no real managed care competitors on the western slope during its formative years. This lack of competition, combined with the ability to defuse physician resistance to managed care and to provide a satisfactory array of benefits at a reasonably low price, gave Rocky Mountain HMO an impressive share of the western slope health insurance market. Rocky Mountain HMOs expansion plans, in part, are a reaction to real and anticipated increases in managed care competition along the western slope. To maintain competitive premium rates, Rocky Mountain HMO executives perceive the need to spread the fixed costs of its infrastructure by increasing enrollment. As Rocky Mountain HMO expands its market to include all areas of the state, three issues relative to rural areas emerge. First, will Rocky Mountain HMO be able to import its successful rural HMO development strategies to other rural areas of the state at the same time it attempts to develop urban markets, or will rural expansion areas be treated in the same manner as urban expansion areas? Second, what are the consequences of the HMO's change in strategic focus for Rocky Mountain HMO providers and consumers on the western slope? Third, how will increased competition on the western slope affect Rocky Mountain HMO's relationship with its providers and consumers?     

Missouri Advantage

Missouri Advantage HMO is a newly developed, small HMO based in a rural area. Strongly committed to local control, Missouri Advantage has a highly decentralized organizational structure. Its four rural hospital owners have built Missouri Advantage's initial enrollment base with hospital employees, capitalizing on their positions as the largest employers in their communities. The HMOs future plans include recruitment of additional rural hospitals and physician organizations as new equity owners of the HMO, and development of new products, including a Medicare risk product.     

Assessing the need for multicompetent allied health care professionals in the HMO setting

In the past decade, changes in health care reimbursement and emphasis on cost containment have changed patterns of health care delivery. Among these changes are the rapid decline of the hospital as the center of care, and an emphasis on managed systems of health care delivery. Health maintenance organizations (HMOs) have grown rapidly, and now control a significant portion of the health care marketplace. As such, HMOs provide nontraditional employment settings for allied health professionals. To date, little is known regarding the status of allied health professionals in the HMO setting. The purpose of this study was to describe the perceived need for nontraditional multicompetent allied health professionals in the HMO setting. Results indicate that group and staff model HMOs have a high number of traditionally prepared allied health professionals. In addition, a large number of these sites employ multicompetent professionals, most of whom receive "in-house" training. Further research regarding the role expectations for such professionals is indicated.     

Has the use of physician gatekeepers declined among HMOs? Evidence from the United States

Since the mid-1980s, health maintenance organizations (HMOs) have grown rapidly in the United States. But despite initial successes in constraining health care costs, they have come under increasing criticism for their restrictive practices. This suggests that, to remain viable, HMOs must change their behavior. Yet few studies offer empirical evidence on the matter. The present study investigates one cost-containment mechanism often associated with HMOs: the assignment of primary care physicians as gatekeepers (who, among other things, monitor patients’ use of specialist physicians). In particular, we estimate the effect of physician-HMO involvement on the percentage of HMO patients for whom physicians serve as gatekeepers. We examine this relationship over two time periods: 2000–2001 and 2004–2005. Because physicians can choose whether and to what extent they participate in HMOs, we employ instrumental variables (IV) estimation to correct for the endogeneity of the HMO measure. Although the single-equation estimates suggest that HMO assignment of physician gatekeepers diminished modestly over time, the endogeneity-corrected estimates show no change between the two time periods. Thus, one major tool used by HMOs to constrain health care costs—the physician gatekeeper—has not declined even in a period of backlash against managed care.      

State HMO Accreditation and External Quality Review Requirements: Implications for HMOs Serving Rural Areas

The purpose of this article is to analyze state regulations regarding health maintenance organization (HMO) accreditation and external quality review; to briefly describe states' experiences implementing these regulations; and to discuss the implications of these regulations for HMOs serving rural areas. The incorporation of HMO accreditation and external quality review requirements into state HMO licensure processes and state employee contracting raises many policy issues, including several that are especially relevant to HMOs serving rural populations. A key issue is whether the linkage of accreditation and external quality review requirements to HMO licensure will be an additional deterrent to the development of new HMOs or the expansion of existing HMOs into rural areas. Other issues relate to the costs and benefits of accreditation for HMOs serving rural populations, and the potential impact of HMO accreditation requirements on efforts to expand managed care enrollment of rural Medicaid and Medicare beneficiaries and rural state employees. Nine states were identified that have regulations requiring HMOs to seek accreditation or to undergo an external quality review as a condition of licensure. Four states were identified as implementing requirements that an HMO be accredited in order to serve state employees. Many of these requirements are still in the early stages of implementation. Several states with the requirements have significant rural populations and will provide opportunities to evaluate their impact on HMOs serving rural areas, rural providers and rural consumers.     

Trends in health care financing: opportunities for family planning agencies

In response to spiraling health care costs in the US, several alternative health care delivery systems have evolved. The delivery of subsidized family planning services in particular is being affected by declining levels of government support. The most rapidly growing of alternative delivery systems is the health maintenance organization (HMO). HMOs provide a voluntarily enrolled population a guaranteed, specific range of physician and hospital services in return for a fixed periodic payment. There are 3 types of HMO: the group model, in which doctors are members of a partnership or service corporation that contracts with employers or individuals to provide medical services; the taff model, in which physicians are direct employees of the HMO; and the independent practice association (IPA) model, a physicians' group that enters into a contract with an HMO and receives reimbursement for every patient seen. In 1986, over 21 million Americans were enrolled in approximately 262 HMOs around the country. HMOs are unequaled in their success at reducing hospital utilization; they have achieved savings of hospital costs of 20-40%. Another system for delivering and financing health care is the preferred provider organization (PPO) under which patients are assigned to a designated panel of health care providers who offer services according to a discounted fee schedule. New hybrid systems that combine many of the features of both systems are emerging. Most of the newly organized health care delivery systems described focus on utilization control and keeping costs down. A common way of ensuring coordinated health care delivery is through primary care case management. To initiate or establish relationships with HMOs or other health care delivery systems, family planning agencies should consider such activities as: undertaking surveys to study the market; training new employees on developments in health care financing; and recruiting board members with HMO experience.     

United Health Care of North Carolina

Physicians. While many of the rural physicians interviewed in North Carolina would prefer not to deal with HMOs at all, they are generally positive about their relationships with United Healthcare of North Carolina. These physicians chose to contract with the HMO to obtain new patients and to retain existing patients. They are satisfied that their participation has accomplished these goals. Their reimbursement arrangements are easy to understand, and most view the payment amounts as satisfactory. The physicians regard the size of the HMOs provider network and the open-access structure of the HMO as positive features that allow them to make referrals without the restrictions imposed by some other HMOs. To date, participation in United Healthcare of North Carolina has imposed few burdens on rural physicians. They are reimbursed on a fee-for-service basis, and their financial risk has been limited. They do not perceive that the HMO has had a significant impact on the way they practice medicine. This situation may change in the future if enrollees from United Healthcare of North Carolina and other HMOs constitute a greater proportion of their practices and if these HMOs move toward capitated reimbursement. The attitudes of rural physicians toward United Healthcare of North Carolina also may change if the HMO attempts to more actively manage the care provided to its enrollees. United Healthcare of North Carolina plans to eliminate physician risk sharing (in the form of withholds) and replace it with bonus payments. As one HMO executive said, the plan wants to “put incentives where they belong.” If rewarding good performance instead of punishing poor performance yields intended consequences, it may provide United Healthcare of North Carolina with a competitive advantage in rural areas. First, because such a change offers an opportunity to augment a physician's income instead of diminishing it, physicians might prefer to contract with the HMO rather than with other HMOs. Second, because bonus payments depend on performance, United Healthcare of North Carolina providers may produce outcomes that allow reductions in premium prices or expansions of benefits compared with the HMOs competitors. Hospitals. Rural hospitals cited similar motivations (attracting and retaining business) for participating in United Healthcare of North Carolina and similar levels of satisfaction with their relationships. In their experiences, the HMO has been fair in its negotiations and reimbursement. Although they contract with multiple HMOs, these rural hospitals do not perceive that HMO participation has had a significant impact on hospital operations. Because these hospitals, like many rural hospitals, rely heavily on Medicare (and, to a lesser degree, on Medicaid) as revenue sources, the future impact of managed care on their operations will depend in large part on the extent to which significant proportions of their Medicare and Medicaid patients enroll in HMOs.     

Medical Associates HMO

Medical Associates HMO is based on a multi specialty group practice located in a small metropolitan area. That group practice regards the HMO as an important strategy for maintaining and increasing patient referrals. A substantial portion of the HMOs service area is rural; therefore, the HMOs relationships with rural providers are important because they affect its ability to attract enrollees from rural areas and, potentially, non-HMO referrals as well. During the past few years, the competition for patients and for HMO enrollees has intensified in the HMOs market area. A major challenge facing this HMO is how to protect and enhance its market share while maintaining constructive, cordial relationships with providers in surrounding rural areas.     

North Med HMO

NorthMed HMO is viewed by its owners as an important vehicle for integrating rural providers in northern Michigan. Through the HMO, rural providers hope to be able to contract with government programs, while retaining private-sector patients through employer contracts. For most rural providers, NorthMed HMO does not yet represent a major source of revenues. However, the HMO is about to embark on an expansion that, if successful, will increase its importance to providers and its visibility within the service area. This planned expansion is likely to place severe demands on the financial and managerial resources of the organization. Physicians. NorthMed HMO offers a model of a rural-based HMO in which physicians play a dominant role. Rural physicians in northern Michigan own Northern Physician Organization, a physician organization which, in turn, is the major stockholder in NorthMed HMO. The geographic expansion of the HMO is tied, in large part, to the geographic expansion of the membership of Northern Physician Organization. NorthMed HMO enters new communities when a significant number of physicians in those communities joins Northern Physician Organization. When physicians purchase ownership shares in the physician organization, they indirectly become part owners of the HMO. Participation in NorthMed HMOs network has offered limited benefits to rural physicians at a minimal cost. By being a participating provider in NorthMed HMO, physicians can remain available to their patients who choose the HMO as a health insurance option. NorthMed HMO has not been aggressive in attempts to influence physician practices, and physicians bear no financial risk as a result of their participation. Participating physicians are paid under a fee-for-service arrangement with no risk sharing related to hospital use. Indirectly, through Northern Physician Organization's ownership role in the HMO, physicians have the potential to gain financially from NorthMed HMOs growth if the HMO were to be sold, but this diffuse incentive is unlikely to have an impact on physicians' day-to-day behavior. The relationship between NorthMed HMO and its physicians is likely to change soon. The number of HMO patients seen by physicians will increase if the HMO succeeds in securing Medicare and Medicaid contracts, and if its new point-of-service option attracts additional private-sector enrollees. NorthMed HMO plans to contract with Northern Physician Organization on a capitated basis to serve the HMOs enrollees, an arrangement that would place financial responsibility for managing care delivery more directly on participating physicians. This is likely to result in more aggressive utilization review and quality assurance measures. In effect, rural physicians will be faced with a difficult trade-off that they have, to this point, largely avoided: They will be asked to accept financial risk and oversight of their practices in return for the assurance that their HMO can successfully compete for local patients (and their insurance dollars) against health plans that are owned and managed by entities located outside of their rural area.     

The Southern California HMO marketplace: growth, innovation, and integration

The 1980s have been a period of rapid growth in the Southern California HMO industry. Much of this growth is related to the emergence of network-model HMOs and, more recently, IPA-model HMOs, as a major competitive force that provides an alternative to the massive and rapidly growing Kaiser plans. The growth of the industry has been made possible by and, at the same time, has facilitated the development and growth of multispecialty medical groups and hospital-based IPAs throughout Southern California. This development has brought the HMO industry and the practice of prepaid medicine into the mainstream of health care and had led to the extensive involvement of community hospitals and independent physicians and physician groups in prepaid medicine. The coming decade will be marked by further growth and by continued integration of physician practices, hospitals, and HMOs into more efficient, high quality, vertically integrated systems of health care.     

Legal issues in contracting with HMOs. 1

The Health Maintenance Organization Act of 1973 established a 5-year $325 million program of federal assistance to aid in the planning and organization of HMOs. The Act also required employers to offer their employees the alternative of an HMO membership to existing health benefits plans. Health Maintenance Organizations are defined by the following characteristics: 1) they are total health care delivery systems; 2) they consist of a voluntarily enrolled population; 3) agreed-upon services are provided by a prearranged and prepaid fee; and 4) the organizations bear the risk of providing the services for the prearranged fee. HMOs differ from existing health care delivery systems in that the system is closed, i.e., physicians and referral services are limited to those participating in the organization. HMOs must have a 1/3 consumer membership on their policy-making boards. Most also have physician representation on the boards. There exists a financial incentive to reducing the use of hospital services. HMOs are required to provide all services, including abortion and sterilization, but a hospital which takes care in negotiating its contract with the HMO will be exempt from having to do so.     

Implications of HMOs for Rural Providers and Consumers

The impact of the six HMOs studied on rural providers has, to this point, been relatively small. To expand their provider networks in rural areas, the HMOs have been responsive to provider concerns, implementing payment arrangements and utilization management approaches that are acceptable to most rural providers. However, at some sites, changes in HMO and provider relations appear to be on the horizon. These changes include the acceptance of greater financial risk by rural providers and the more aggressive management of costs by the HMOs.
With respect to employers, the impact of HMOs have been largely positive. The presence of HMOs in the rural study areas has provided rural employers with new options for structuring health benefits programs. According to some rural employers, health insurance costs have been reduced, or at least constrained, as a result. Rural employers have dealt with employee concerns about access limitations by demanding that HMOs offer broad provider networks and products that permit the use of non-network providers subject to co-payments and deductibles.
The impact on rural employees, as evidenced by their responses as well as the views of their employers, has been mixed. Rural employees generally appreciate the broader benefit coverage offered by HMOs as well as reduced paperwork and, sometimes, lower required out-of-pocket contributions toward premiums.
However, as with their urban counterparts, rural employees are concerned about restrictions on access to providers of their choice and financial incentives in physician payment arrangements that may discourage the provision of services or the arrangement of referrals.     

Contractual arrangements between residency programs and HMOs.

BACKGROUND. Although one out of seven health maintenance organizations (HMOs) is directly involved in graduate medical education (GME), either as an accredited sponsoring organization or through a contractual agreement with an academic medical center or teaching hospital to serve as an ambulatory rotation site, relatively little is known about the extent to which HMOs have provider contracts with faculty or residents of GME programs. Such provider contracts are not agreements to collaborate on the education of residents, but rather contractual arrangements under which individual physicians or groups (who happen to be residents or faculty) agree to provide services to HMO enrollees in return for some form of compensation. METHODS. In 1990, the Group Health Association of America conducted a survey of a sample of residency training programs in family medicine, internal medicine, and pediatrics to ascertain the extent to which (1) residents and faculty of residency training programs are participating physicians in HMOs; and (2) HMO enrollees are serving as the patient base for GME in ambulatory settings. RESULTS. Overall, 42% of the residency program respondents indicated that they contract with HMOs to provide services to enrollees. Nearly two thirds (64%) of family practice programs have provider contracts as compared with 28% of pediatrics programs and 24% of internal medicine programs. Provider contracts with independent practice associations are by far the most common, followed by group, network, and staff model contracts, in that order. CONCLUSIONS. It is apparent that provider contractual arrangements between HMOs and primary care residency programs are quite common, especially in the area of family practice. These contractual arrangements have probably resulted in a more predictable and stable patient revenue base for residency programs. The long-term effects on provider practice styles and the financing of graduate medical education are less clear.     

Mandatory HMO enrollment in Medicaid: the issue of freedom of choice

In areas where HMOs have enrolled a small proportion of the general population, physician participation is less in mandatory HMO programs for Medicaid beneficiaries than in fee-for-service Medicaid. But where HMOs have enrolled over one-quarter of the general population, participation rates are indistinguishable under the two systems. In those areas, mandatory enrollment restricts freedom of choice of provider. A plausible reason for this is that individual practice associations, which contract with large numbers of physicians with both fee-for-service and HMO patients, are becoming the lead form of HMO.     

Patterns of health maintenance organization service areas in rural counties

This study analyzes the 1993 National Directory of HMOs to determine the extent to which rural counties are included in health maintenance organization (HMO) service areas. Two specific questions are addressed: (1) How do the patterns of service areas differ across HMO model types? (2) What are the characteristics that distinguish rural counties served by HMOs from those that are not? Although a majority of rural counties are in HMO service areas, substantially fewer are served by non-individual practice association (non-IPA) models. Access to HMO services is found to decrease with county population density, and adjacency to metropolitan areas is an important predictor of inclusion in service areas.     

Gaining strategic advantages through partnerships with public health departments

Public health officials have advocated in public health and public policy journals for collaboration with private sector health care organizations for nearly a decade. There has been little written in the management literature on this topic, however. There are several important areas in which public health departments have expertise that could be valuable to private sector health care organizations, including health maintenance organizations (HMOs). These include the delivery of services in some geographic areas and to some special populations, provision of preventive and health promotion services to HMO members, performance of epidemiology services, assistance in accreditation, and repair of the damaged image of HMOs. HMOs and local health departments in many parts of the country are already entering into contracts for these purposes. Such partnerships between HMOs and local health departments can improve the health of the members of HMO plans and contribute to improving the health of the community.