An analysis of Medicare's Incentive Payment program for physicians in health professional shortage areas.

CONTEXT: Medicare's Incentive Payment (MIP) program provides a 10% bonus payment to providers who treat Medicare patients in rural and urban areas where there is a shortage of generalist physicians.

PURPOSE: To examine the experience of Alaska, Idaho, North Carolina, South Carolina, and Washington with the MIP program. We determined the program's utilization and which types of physicians received payments.

METHODS: Retrospective cohort design, utilizing complete 1998 Medicare Part B data. Physician specialty was determined through American Medical Association data. Rural status was determined by linking the physician business ZIP code to its Rural-Urban Commuting Area code (RUCA).

FINDINGS: There were 2,220,275 patients and 39,749 providers in the cohort, including 9,769 (24.6%) generalists, 21,331 (53.7%) specialists, and 8,649 (21.8%) nonphysician providers. Over $4 million in bonus payments (median payment = $173) were made to providers in HPSAs. Specialists and urban providers received 58% and 14% of the bonus reimbursements, respectively. Two million dollars in payments were not distributed because the providers did not claim them. Over $2.8 million in bonus claims were distributed to providers who likely did not work in approved HPSA sites.

CONCLUSIONS: The MIP bonus payments given to providers are small. Many providers who should have claimed the bonus did not, and many providers who likely did not qualify for the bonus claimed and received it. Consideration should be given to focusing and enlarging the bonus payments to specific providers, rather than rewarding all providers equally. Policy makers should also consider a system that prospectively determines provider eligibility.