Relieving the Debt

New Loan Program Could Lure More Physicians to Rural Texas

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Medical Education Feature - September 2009  


Tex Med . 2009;105(9):21-23.  

By  Ken Ortolon
Senior Editor  

It's not easy to get new physicians to practice in rural areas. High debt coming out of medical school, a poor payer mix, lifestyle issues, and a host of other factors make practicing primary care in small towns less appealing than a big city practice or a more lucrative specialty. Approximately 14 percent of Texans live in rural areas, but only slightly more than 7 percent of the physicians involved in direct patient care practice there.

As of March, 118 entire Texas counties and parts of 46 others were designated as health professional shortage areas.

But beginning this month, young primary care physicians have an added incentive to set up practice in rural areas, thanks to legislation passed this year that will greatly expand the state Physician Education Loan Repayment Program. The state will repay up to $160,000 of the medical school debt of physicians who agree to practice in rural and underserved areas for up to four years.

Texas Medical Association officials who were instrumental in getting the increased funding for the program say the new payment levels are substantial enough that they should attract a considerable number of physicians to underserved areas.

"That $160,000 over four years will probably meet the current loan obligations of many young physicians who are finishing their residencies and are ready to go into practice," said Hurst pulmonologist Woody Kageler, MD, immediate past chair of TMA's Committee on Physician Distribution and Health Care Access. Dr. Kageler also chaired a TMA work group that recommended that the legislature expand the loan repayment program.

"It is a significant response by our state legislature to encourage new physicians to practice in rural and underserved communities," he said. 

Where's the Interest?  

The loan repayment program started in 1985 but interest in it waned because the payment amounts did not keep up with the rising level of medical students' debt. Before 2008, a physician who agreed to practice in an underserved area could receive only $9,000 per year in debt repayment over five years, for a maximum of $45,000.

In 2008, the Texas Higher Education Coordinating Board increased the total to $81,000 over five years, but physicians say that amount is still well short of current medical school debt levels. According to the Association of American Medical Colleges, the average medical school debt in 2008 was nearly $142,000.

Amarillo family physician Rodney Young, MD, a member of TMA's physician distribution committee and the work group that recommended the increase, says the Texas program simply did not compete with other states that granted greater debt relief.

"That was one of the most fundamental flaws in our system. We spend all this money educating medical students up front, then spend substantial resources on graduate medical education, only to lose fully trained physicians ready for independent practice to other states with better loan repayment," said Dr. Young, associate professor and regional chair of the Department of Family and Community Medicine at Texas Tech University Health Sciences Center in Amarillo. "It was really fiscally irresponsible."

Both Dr. Young and Dr. Kageler think the new program amounts will have a dramatic impact.

House Bill 2154, sponsored by Rep. Al Edwards (D-Houston) and Sen. Juan Hinojosa (D-McAllen), not only increases the total education loan repayment amount to $160,000, but also decreases the service time required to get the full amount from five years to four year.

The $160,000 total is actually $10,000 more than the TMA work group recommended and is higher than the $140,000 in loan repayment funds that physicians can receive from a new Texas Health and Human Services Commission program that encourages doctors to care for certain levels of Medicaid patients. 

A Graduated Scale  

The Coordinating Board and the Texas Department of State Health Services (DSHS) will administer the new program under a memorandum of understanding that was still in development at press time. DSHS will review and rank applications, notify selected applicants, and promote awareness of the program. The Coordinating Board will verify all loan information and disburse the funds directly to the holders of the loans.

To be eligible for the loan repayment funds, a physician must practice in a health professional shortage area designated by DSHS and care for patients in either the Medicaid or Children's Health Insurance Program. For those who meet the requirements, the program offers $25,000 in loan repayments for the first year of service, $35,000 for the second, $45,000 for the third, and $55,000 for the fourth.

A Coordinating Board spokesperson says the board issued draft rules to govern the loan repayment program in July and expects to adopt them at its October meeting. The first payments under the new program will begin in July 2011. Physicians must complete one year of service before any funds will be disbursed to their lenders. Subsequent payments will be made after the completion of each additional year of service.

The board expects to add 225 physicians to the program each year. That compares to only 65 doctors who participated under the old program in fiscal year 2009.

While additional details of the new program will not be available until adoption of the final rules, information about the current loan repayment program is on the Coordinating Board's  Web site

Establishing Roots  

Dr. Kageler is optimistic there will be substantial demand for the new loan repayment funds from young physicians who are ready to start their own practices. "We did some survey work and tried to assess the medical students' and residents' perspectives on a loan repayment program and whether it would stimulate interest in going into rural practice," he said. "And the response was very positive."

Dr. Young says he has spoken with both students and residents in his family medicine program at Tech who are interested in participating in the expanded loan repayment program.

"I've got one resident who will finish next year who plans to practice in Spearman. He'll now be eligible to seek this loan repayment," Dr. Young said. "He probably would have gone anyway and found a way to pay, but this makes it a lot easier for him to make that decision, and makes it very likely he'll stay put."

While neither Dr. Kageler nor Dr. Young expects 100 percent of the physicians who participate in the program to remain in rural or underserved areas their entire career, they do believe a significant number of them will decide to remain in rural communities once their service obligation has ended.

"A four-year period gives a physician and a physician's family time to get to know the community and put some roots down," Dr. Kageler said. "And, if those relationships are favorable, there's a probability the physicians will stay long term and have their practice stay in the community."

Dr. Young says the gradual increase in the repayment amounts over each year of the program also was designed to encourage physicians to remain in their communities for the full four years and, hopefully, longer.

"When you get settled into a practice and establish patients and patterns of practice, it's much more difficult to just walk away from it," he said. "There will be people who will go out and practice for four years and then leave. But if we can get people who make it three or four years into the program before their loan is paid, by that point there's a much better likelihood that they've settled into the community, that they've established some roots in the community, and, in particular, that they have settled into their practice environment."

However, Dr. Young says loan repayments alone will not solve Texas' physician shortage and maldistribution problems.

"The new loan repayment law will not, in and of itself, fix our problems with access to care in rural areas, but it is a definite step in the right direction," he said. "Without it, Texas would have continued to lose doctors with an interest in rural practice to other states that already had more favorable loan repayment programs.

"Measures that narrow the disparity in physician compensation by specialty would be an important step in improving the current specialty maldistribution problem," he added. "And medical school admissions policies that target qualified candidates from underserved areas, when coupled with these other strategies, also would increase the likelihood that those physicians would return home to provide care."

Dr. Kageler says Congress seems to recognize that realigning compensation between primary care and specialty care needs to be part of health system reform.

"And that will make it easier for physicians to stay in a rural practice if they don't have as much concern about cash flow," he said.

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by e-mail at  Ken Ortolon .   

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