Purpose: Even though pay-for-performance programs are being rapidly implemented, little is known about how patient complexity affects practice-level performance assessment in rural settings. We sought to determine the association between patient complexity and practice-level performance in the rural United States. Basic procedures: Using baseline data from a trial aimed at improving diabetes care, we determined factors associated with a practice's proportion of patients having controlled diabetes (hemoglobin A1c <7%): patient socioeconomic factors, clinical factors, difficulty with self-testing of blood glucose, and difficulty with keeping appointments. We used linear regression to adjust the practice-level proportion with A1C controlled for these factors. We compared practice rankings using observed and expected performance and classified practices into hypothetical pay-for-performance categories. Main Findings: Rural primary care practices (n = 135) in 11 southeastern states provided information for 1641 patients with diabetes. For practices in the best quartile of observed control, 76.1% of patients had controlled diabetes vs 19.3% of patients in the worst quartile. After controlling for other variables, proportions of diabetes control were 10% lower in those practices whose patients had the greatest difficulty with either self testing or appointment keeping (p < .05 for both). Practice rankings based on observed and expected proportion of A1c control showed only moderate agreement in pay-for-performance categories (κ = 0.47; 95% confidence interval, 0.32-0.56; p< .001). Principal Conclusions: Basing public reporting and resource allocation on quality assessment that does not account for patient characteristics may further harm this vulnerable group of patients and physicians.