Physician Incomes in Rural and Urban America

Physician Incomes in Rural and Urban America

Issue Brief No. 92
January 2005
Ha T. Tu, M.P.H.

Findings in Brief

Recruiting physicians to practice in rural areas has long been a concern among policy makers. While physician supply in rural areas has remained largely unchanged over the past decade, the adequacy of physician supply depends on the attractiveness of rural areas to physicians. This Issue Brief uses data from the Community Tracking Study Physician Survey to compare physician incomes and related practice characteristics in rural and urban areas.

Overall, physicians who practiced in rural areas had a median income that was about $25,000 more than their urban counterparts after accounting for differences in the characteristics of rural and urban physicians.

The income advantage for rural physicians held for both primary care and specialty physicians, but for different reasons. Rural primary care physicians appeared to earn more because they worked more—seeing more patients per week than their urban counterparts. In contrast, rural specialists' income advantage over urban specialists appeared to be related to differences in the mix of patients among rural specialists.

Despite higher incomes, about a quarter of rural physicians expressed dissatisfaction with their incomes, about the same level as urban physicians. This suggests that higher incomes may not be enough to overcome other disadvantages of rural practice compared with urban practice.

Physician Supply

An enduring concern among health policy makers has been recruiting and retaining physicians to practice in rural areas. While there has been some progress over the years, a wide gap in physicians per capita remains between rural and urban areas. In 2001, there were 1.2 physicians per thousand people in rural areas—counties outside a metropolitan statistical area (MSA)—compared with 2.8 physicians per thousand in urban areas (see Figure 1).

The growth of osteopathic physicians in rural areas has kept the overall supply from declining. Osteopathic physicians make up a larger share of physicians in rural areas compared with urban areas (11% vs. 4%), and their numbers grew in rural areas by 13 percent between 1995 and 2001. Without this growth, the number of rural physicians per capita would have declined by about 1 percent, instead of growing by 1 percent (see Table 1).

Along with programs that increase the supply of osteopathic physicians, the federal and state governments have used a number of strategies to attract and retain physicians in rural and underserved areas—for example, supporting the National Health Service Corps (NHSC), developing the J-1 visa waiver program and sponsoring state loan-repayment programs. Since the adequacy of physician supply depends in part on the ability of rural areas to attract and retain physicians, it is important to understand the factors that influence physicians' decisions about where to practice. Many factors influence physicians' decisions about practice location, but income is one potentially important consideration.

Differences in Physician Incomes

Physician incomes may differ across rural and urban areas because of differences in the characteristics of physicians—such as specialty or practice type—that affect income. Simply examining median incomes of physicians across areas would not separate the rural/urban income differences that are related to physician characteristics from income differences that are related to other factors, such as the nature of practice in rural and urban areas, living costs, or other factors.

For example, because primary care physicians have lower incomes than specialists, and there are proportionately more primary care physicians in rural areas, simply comparing the incomes of all rural and urban physicians would understate the income advantage in rural areas. Similarly, owner-physicians generally earn more than employee physicians, and there are proportionately more owner-physicians in rural areas.

To address this, we used multivariate analysis to compare physician incomes in rural and urban areas, accounting for the characteristics that are likely to influence physician income (see Data Source). The analysis examines incomes of physicians who were under age 65 and who spent at least 20 hours per week in direct patient care. Patient care income includes income from the practice of medicine; it excludes income from teaching, research or other activities that are not directly related to patient care.

Overall, rural physicians had an income advantage over urban physicians. After accounting for differences in physician and practice characteristics, the median income for rural physicians was about $205,000—roughly $25,000 (or 14%) more than their urban counterparts (see Figure 2).

Rural vs. Urban Incomes: Primary Care and Specialist Physicians

The income advantage of rural practice held for both primary care and specialist physicians. After adjusting for other factors, median income was about $178,000 for rural primary care physicians—about $24,000 (or 16%) higher than that for urban primary care physicians (see Figure 2). And the estimated median income for rural specialists was about $250,000—about $65,000 (or 35%) higher than for urban specialists.

What explains the higher incomes of rural physicians? Of many potential factors that could contribute to the income advantage of rural physicians—such as differences in patient volumes, revenue per patient, overhead costs, payer mix, pricing and other aspects of the local practice environment—we examine two in greater detail: patient volumes and payer mix.

Higher Incomes among Rural Primary Care Physicians Driven by Higher Patient Volume

One factor that contributed to the higher incomes of rural primary care physicians was that they saw more patients per week—about 101 compared with about 84 for urban primary care physicians—after adjusting for physician and practice characteristics. Moreover, when weekly patient volume was included in the model, the income advantage for rural primary care physicians virtually disappeared, suggesting that the higher patient volumes was the primary driver of higher incomes for rural primary care physicians (see Figure 3).

Higher patient volumes may suggest that rural primary care physicians are working harder—or at least working more hours. This is supported by the data: The average number of hours that primary care physicians spent per week providing patient care was higher in rural areas—about 42 hours compared with 39 hours in urban areas. But it is also possible that more patient visits per week may be a reflection of less complex patients in rural areas. The data are limited, however, in the ability to examine this possibility.

Higher Incomes among Rural Specialists Likely Driven by Payer Mix

In contrast to primary care physicians, both the weekly patient volume and the hours per week spent in patient care were about the same for rural and urban specialists. However, rural specialists received a higher percentage of revenue from Medicare—the most generous payer, on average—compared with urban specialists (about 37% from Medicare vs. 29%), and a lower percentage from Medicaid—the least generous payer, on average—(about 8% vs. 11%) (see Figure 4). This is consistent with the higher concentration of elderly people in rural areas.

When the percentages of revenue from different sources—including Medicare, Medicaid, private insurance and other payers—were included in the income model, the rural specialists' income advantage narrowed by more than half—from $65,000 to about $29,000 (see Figure 5). The income advantage declined largely because of the higher percentage of revenue from Medicare in rural areas. This suggests that a more favorable payer mix was the primary explanation for the higher incomes of rural specialists.

Higher Incomes, but Not More Satisfied?

While rural physicians generally earned more, they were about as likely to be dissatisfied with their incomes as urban physicians. About a quarter of rural and urban physicians were dissatisfied with their patient care incomes. One possible explanation for this paradox is that even though the incomes of rural physicians are higher, they may need to be even higher to compensate for the disadvantages of rural practice—such as more limited social, educational and cultural amenities. Alternatively, physicians in rural areas may use their peers in the area as a reference point for what they should earn, rather than comparing themselves to physicians in different areas.

Of course, many factors affect physicians' choice of where to practice, and studies suggest that income is only one of many factors. Despite this, higher incomes in rural areas could be used as a marketing tool to attract physicians by medical practices and communities in rural areas, or in programs designed to increase rural physician supply. Conversely, if the income advantage in rural areas were to narrow, its usefulness as a recruitment tool would be diminished, and the adequacy of physician supply in rural areas could further be jeopardized.

Notes

1 To standardize comparison of incomes, the analysis used median, not mean, incomes. A summary of regression results is available from the author upon request.

2 An alternative explanation is that rural primary care physicians may have more efficient practice styles—including higher use of physician assistants and nurse practitioners—which would also contribute to higher patient volume per week. However, the data show that the percent of rural primary care practices with physician assistants and/or nurse practitioners (33%) did not significantly differ from urban primary care practices (30%).

3 The inclusion of revenue sources other than Medicare in the model did not improve the explanatory power of the model of specialist income. Although the urban-rural differences in Medicaid revenue share was statistically significant, the Medicaid revenue share was not a significant predictor of specialist income, suggesting that the higher Medicare revenue share was the primary driver of the rural specialist income advantage.

Figures and Tables

[Note: The original document includes several figures and tables that are referenced in the text.]

Figure 1: Physicians per Thousand Population in Rural and Urban Areas, 1995 and 2001

Compares physician density in rural (non-MSA) and urban (MSA) areas for 1995 and 2001, showing the persistent gap in physician supply between rural and urban areas.

Table 1: Change in Supply of Non-Federal Patient Care Physicians, 1995-2001

Shows the change in physician supply by type (M.D. and D.O.) in rural and urban areas between 1995 and 2001, highlighting the growth of osteopathic physicians in rural areas.

Figure 2: Adjusted Median Physician Incomes in Rural and Urban Areas, 2000-01

Presents adjusted median incomes for all physicians, primary care physicians and specialists in rural and urban areas, demonstrating the income advantage for rural physicians across all categories.

Figure 3: Effect of Adjusting for Patient Volume on Adjusted Median Incomes of Primary Care Physicians

Illustrates how the income gap between rural and urban primary care physicians narrows when patient volume is factored in, suggesting that higher patient volumes drive the rural income advantage.

Figure 4: Physician Revenue Sources, Rural vs. Urban Areas, 2000-01

Compares the mix of revenue sources (Medicare, Medicaid, private insurance, other) for physicians in rural and urban areas, showing higher Medicare revenue shares in rural areas.

Figure 5: Effect of Adjusting for Payer Mix on Adjusted Median Incomes of Specialist Physicians

Shows how the income gap between rural and urban specialists narrows when revenue sources are accounted for, suggesting that a more favorable payer mix (particularly higher Medicare revenue) drives the rural specialist income advantage.

Table 2: Characteristics of Primary Care and Specialist Physicians in Rural and Urban Areas, 2000-01

Provides detailed statistics on physician characteristics including specialty distribution, practice type, ownership status, demographics, patient volumes, hours worked, and payer mix for rural and urban physicians.

Table 3: Multivariate Analysis Results

Summary of regression model results examining the relationship between physician income and various factors including rural/urban location, physician characteristics, practice characteristics, patient volume and payer mix.

About the Author

Ha T. Tu, M.P.H., is a health researcher at the Center for Studying Health System Change (HSC) in Washington, D.C.

About the Center

The Center for Studying Health System Change (HSC) was a nonpartisan policy research organization that provided objective and timely research and analysis about the U.S. health care system. HSC, funded principally by The Robert Wood Johnson Foundation, was affiliated with Mathematica Policy Research. HSC designed studies and tracked changes in the health care system through site visits to communities, surveys of households and physicians, and other research activities.

Suggested Citation

Tu HT. Physician Incomes in Rural and Urban America. Issue Brief No. 92. Washington, DC: Center for Studying Health System Change; January 2005.

Data Source

This Issue Brief draws on findings from the 2000-01 HSC Community Tracking Study Physician Survey, a nationally representative telephone survey of physicians providing direct patient care for at least 20 hours per week. The survey collected data on income, practice characteristics, patient volumes, revenue sources and other measures. The analysis of income was based on multivariate regression models controlling for physician age, sex, race/ethnicity, foreign medical school graduate status, specialty, board certification, practice type, practice ownership, and MSA status. For this analysis, rural physicians are those practicing in non-MSA areas. Incomes for rural and urban physicians were adjusted to 2001 dollars using the Consumer Price Index for All Urban Consumers. The analysis excluded physicians in the federal government or military and those in residency training.

ISSUE BRIEFS are published by the Center for Studying Health System Change.

Sources and Further Reading

The Bureau of Labor Statistics Occupational Outlook for Physicians and Surgeons provides current national data on physician employment levels, wage estimates, and projected job growth across practice settings and geographic regions.

The American Medical Association publishes physician practice benchmarks that track compensation trends, overhead costs, and practice ownership patterns for doctors in both rural and metropolitan communities.

Medicare reimbursement rates directly influence physician income in underserved areas. The CMS Medicare Physician Fee Schedule details how payment adjustments and geographic practice cost indices shape earnings for providers serving rural Medicare populations.

For broader context on healthcare access disparities, the Kaiser Family Foundation tracks physician supply, distribution, and workforce shortages that contribute to income variation between rural and urban practice environments.

The Robert Wood Johnson Foundation funds research on rural health workforce challenges, including recruitment incentives, loan forgiveness programs, and the financial tradeoffs physicians face when choosing to practice outside major metropolitan areas.