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ABA Health eSource
January 2010 Volume 6 Number 5

Revisions to Supervision Requirements for Hospital Outpatient Therapeutic Incident to Services and Diagnostic Services

by Thomas E. Dowdell, Fulbright & Jaworski L.L.P., Washington, DC

Author

The Centers for Medicare and Medicaid Services (“CMS”) revised the supervision requirements for hospital outpatient therapeutic incident to services and diagnostic services in the 2010 hospital outpatient prospective payment system (“OPPS”) final rule effective for outpatient services furnished on and after January 1, 2010. 1 This article will review the supervision requirements for hospital outpatient therapeutic incident to services and diagnostic services effective through 2009 and describe the modifications to these supervision requirements effective for services performed January 1, 2010 and thereafter.

I. Outpatient Therapeutic Incident To Services and Diagnostic Services

Therapeutic services and supplies that hospitals provide on an outpatient basis are those services and supplies (including the use of hospital facilities) that are incident to the services of physicians (and effective January 1, 2010 certain other practitioners) in the treatment of patients. Hospital outpatient therapeutic services must be performed in the hospital or in hospital provider-based departments 2 to be covered for Medicare payment purposes. 3 A hospital outpatient diagnostic service is an examination or procedure to which a patient is subjected, or that is performed on materials derived from a hospital outpatient, in order to obtain information to aid in the assessment of a medical condition or the identification of a disease. Hospital outpatient diagnostic services must be furnished within the hospital or in provider-based departments, or provided by another entity in a non-hospital facility and billed by the hospital under arrangements. 4 Hospital outpatient services excluded from the general outpatient coverage requirements are physical therapy, occupational therapy, speech-language pathology, and end stage renal disease services. 5

II. Hospital Outpatient Supervision Requirements Effective 2000 Through 2009

A. Outpatient Therapeutic Incident To Services

In the 2000 OPPS final rule, 6 the Health Care Financing Administration (“HCFA”, the predecessor to CMS) beginning August 1, 2000 required for coverage purposes physician direct supervision of outpatient therapeutic incident to services furnished in hospital off-campus outpatient departments. 7 “‘Direct supervision’ means the physician must be present and on the premises of the location and immediately available to furnish assistance and direction throughout the performance of the procedure. It does not mean that the physician must be present in the room when the procedure is performed.” 8 HCFA declared that the physician direct supervision requirement does not apply to therapeutic services furnished in hospital main buildings or in hospital on-campus departments; the agency assumed that the physician direct supervision requirement was met because staff physicians would always be nearby within the hospital. 9

In the preambles to the 2009 OPPS proposed and final rules, 10 however, CMS included a purported “restatement and clarification” of the physician direct supervision requirement for outpatient therapeutic incident to services performed in hospital main buildings and on-campus departments. In the 2009 OPPS proposed rule preamble CMS pronounced:

Based on questions received recently, we are concerned that some stakeholders may have misunderstood our use of the term “assume” in the April 7, 2000 OPPS final rule with comment period, believing that our statement meant that we do not require any supervision in the hospital or in an on-campus provider-based department for therapeutic OPPS services, or that we only require general supervision for those services. This is not the case. It is our expectation that hospital outpatient therapeutic services are provided under the direct supervision of physicians in the hospital and in all provider-based departments of the hospital, specifically both on-campus and off-campus departments of the hospital. 11

Thereafter, CMS published Change Request 6320, 12 which revised the Medicare Benefit Policy Manual (formerly the Intermediary Manual), Chapter 6, § 20.5.1 to delete the statement, “The physician supervision requirement is generally assumed to be met where the services are performed on hospital premises.”

In the 2010 OPPS proposed rule preamble, CMS again pronounced:

We continue to believe that the CY 2009 restatement and clarification made no change to longstanding hospital outpatient physician supervision policies as incorporated in prior statements of policy, including the codified Federal regulations. . . . We note that the physician supervision policies for hospital outpatient diagnostic and therapeutic services as described in the CY 2009 OPPS/ASC final rule . . . continue to be in effect for CY 2009. We have not instructed contractors to delay initiation of enforcement actions or to discontinue pursuing pending enforcement actions regarding the physician supervision of hospital outpatient services. 13

In the preamble to the 2010 OPPS final rule, CMS further explained its enforcement policy for the physician direct supervision requirement for outpatient therapeutic incident to services performed in hospital main buildings and in on-campus provider-based departments:

We believe that the usual enforcement practices of Medicare contractors are appropriate for services furnished in CY 2009. . . . In regard to hospital outpatient therapeutic services provided in CY 2000 through CY 2008, in CY 2009 we recognized the need for clarification of the direct supervision policy. . . . In the case of hospital outpatient therapeutic services furnished on the hospital’s campus in 2000 through 2008, we plan to exercise our discretion and decline to enforce in situations involving claims where the hospital’s noncompliance with the direct physician supervision policy resulted from error or mistake. 14

B. Outpatient Diagnostic Services

In the 2000 OPPS final rule, HCFA described that all hospital outpatient diagnostic services, whether provided in a hospital’s main buildings, on-campus departments or off-campus departments, must be furnished under the appropriate level of physician supervision (general, direct, or personal), as included in the Medicare Physician Fee Schedule Relative Value File (“MPFS RVF”). 15 For services requiring physician general supervision, the procedure is furnished under a physician’s overall direct and control, but the physician’s presence is not mandated during the performance of a procedure. A physician must be present and immediately available to furnish assistance and direction throughout the performance of a procedure requiring direct supervision. For those services that require physician personal supervision, a physician must be in attendance in the room when the procedure is performed.

III. Hospital Outpatient Supervision Requirements Effective January 1, 2010

A. Outpatient Therapeutic Incident To Services

In the 2010 OPPS final rule, CMS reiterates the principle that outpatient therapeutic services must be furnished in the hospital to be covered for Medicare payment purposes but also defines “in the hospital” as areas in the main buildings of the hospital that are under the ownership, financial, and administrative control of the hospital; that are operated as part of the hospital; and for which the hospital bills the services under the hospital’s CMS certification number. CMS also amends the physician supervision requirement such that a physician and certain non-physician practitioners (specifically clinical psychologists, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse-midwives and licensed clinical social workers, hereinafter “Designated NPPs”), may properly supervise outpatient therapeutic incident to services. The only exceptions to this general rule are cardiac rehabilitation services, intensive cardiac rehabilitation services, and pulmonary rehabilitation services, all of which require physician (M.D. or D.O.) supervision. A supervisory physician or Designated NPP may only properly supervise those therapeutic services that are within the physician’s/Designated NPP’s licensure, scope of knowledge, practice, and skills, and hospital-granted privileges. Further, the supervisory physician/Designated NPP must be immediately available to furnish assistance and direction throughout the performance of the procedure. Specifically, the supervisory physician/Designated NPP cannot be performing another procedure or service that he or she could not interrupt to supervise the outpatient therapeutic incident to service and cannot be so physically far away from where the outpatient therapeutic incident to service is being performed that he or she could not intervene right away.

CMS changes the direct supervision requirement for outpatient therapeutic incident to services performed in a hospital’s main buildings and on-campus departments to provide that the supervisory physician or Designated NPP must simply be on the same hospital campus during the performance of the procedure. Accordingly, the supervisory physician/Designated NPP can be in the hospital’s main buildings, in any on-campus department, or even in on-campus non-hospital space ( e.g., a physician’s office, skilled nursing facility, or rural health clinic) while the therapeutic incident to service is being performed, although the supervisory physician/Designated NPP also must be “immediately available to furnish assistance and direction throughout the performance of the procedure.” 16 For outpatient therapeutic incident to therapeutic services provided in a hospital’s off-campus department, the supervisory physician/Designated NPP must be present in that provider-based department during the performance of the procedure and immediately available to furnish assistance and direction.

B. Outpatient Diagnostic Services

CMS explains that the hospital outpatient diagnostic services supervision requirements apply to all outpatient diagnostic tests provided directly by the hospital or by another entity under arrangements, whether furnished in a hospital’s main buildings, on-campus provider-based departments, off-campus provider-based departments, or in non-hospital facilities under arrangements. The level of physician supervision (general, direct, or personal) for specific diagnostic tests continues to depend on the supervision levels listed in the MPFS RVF. CMS now specifically mandates that all hospital outpatient diagnostic services provided under arrangements in non-hospital locations, such as independent diagnostic testing facilities and physician offices, require direct supervision. CMS also describes that unlike outpatient therapeutic incident to services, Designated NPPs cannot properly supervise outpatient diagnostic tests; physicians (M.D. or D.O.) must supervise these tests.

IV. Conclusion

On December 11, 2009, CMS published Change Request 6751, 17 which revises Medicare Benefit Policy Manual, Chapter 6, §§ 20.4 and 20.5, to clarify the agency’s new supervision requirements for hospital outpatient therapeutic incident to services and diagnostic services. Potential consequences for non-compliance with the direct supervision requirements, with enforcement perhaps most likely for outpatient therapeutic incident to services provided in 2009 and thereafter in hospital on-campus departments, could include recoupment of overpayments, alleged violation of the Governing Body Condition of Participation for Hospitals, 18 and even implication of the federal False Claims Act (whether the action is initiated by a whistleblower or the federal government). Hospitals may consider reviewing their: (i) provider-based departments by location (the hospital’s main buildings, on-campus provider-based departments, and off-campus provider-based departments) and by services (therapeutic and diagnostic); (ii) medical director/supervisory physician and other practitioner contractual arrangements; (iii) bylaws regarding what practitioners are qualified to supervise specific outpatient services; and (iv) policies and procedures regarding the supervisory physician’s/Designated NPP’s responsibilities and the process staff members are to follow to contact supervisory physicians/Designated NPPs.
1 74 Fed. Reg. 60316 (Nov. 20, 2009).
2 The Medicare provider-based status requirements are codified at 42 C.F.R. § 413.65.
3 42 C.F.R. § 410.27(a)(1)(iii), effective January 1, 2010.
4 42 C.F.R. § 410.28.
5 Medicare Benefit Policy Manual, Chapter 6, § 20.
6 65 Fed. Reg. 18434 (Apr. 7, 2000).
7 Hospital off-campus outpatient departments are located more than 250 yards from a hospital’s main buildings. See 42 C.F.R. § 413.65(a)(2).
8 42 C.F.R. § 410.27(f), effective August 1, 2000.
9 65 Fed. Reg. at 18525. Intermediary Manual § 3112.4(A) also clarified that “[t]he physician supervision requirement is generally assumed to be met where the services are performed on hospital premises.”
10 73 Fed. Reg. 41416 (July 18, 2008) and 73 Fed. Reg. 68502 (Nov. 18, 2008) respectively.
11 73 Fed. Reg. at 41519.
12 Transmittal 101 (Jan. 16, 2009).
13 74 Fed. Reg. 35232, 35365 (July 20, 2009).
14 74 Fed Reg. 60316, 60587 (Nov. 20, 2009).
15 Codified at 42 C.F.R. § 410.28(e), effective August 1, 2000.
16 42 C.F.R. § 410.27(a)(1)(iv)(A).
17 Transmittal 116 (Dec. 11, 2009).
18 42 C.F.R. § 482.12.

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