Economic viability of a model rural family practice

A model rural clinic was established by the Quincy Family Practice Residency Program with the financial support of sponsoring local hospitals. The purpose of the study was 1) to determine the financial viability of such a model practice and 2) to determine the practice's financial effect on the sponsoring hospitals.

The rural practice was established in a medically underserved area 30 miles from the sponsoring hospitals. A cost analysis of months 7-18 of operation was performed, including an analysis of charges generated at the sponsoring hospitals. Theoretical models of practice to enhance economic viability were explored.

The 3,051 office visits fell short of expectations. These visits generated a net practice income of $18,596. Had the practice sought full payment for these visits instead of accepting Medicare assignments, the net income potential would have been $39,182. Growth of the practice until it reached the average size of a typical rural family practice (6,000 annual visits) would produce a net income of $67,113 with Medicare assignments and $103,578 if Medicare assignments were not accepted. Had the practice been a federally designated rural health clinic, a mid-level practitioner with physician supervision could have generated a net practice income of $53,640 for 3,051 visits or $138,863 for 6,000 visits. Referrals from the model clinic for laboratory work, radiology, and hospital admissions generated $9.17 in charges for the sponsoring hospitals for each dollar charged by the clinic.

The financial viability of rural practices is adversely affected by the Medicare reimbursement system. Our model clinic had a positive economic effect on the sponsoring hospitals, suggesting that innovative collaborative sponsorship of such clinics may be mutually beneficial.