By John W. Jones, Esq
On November 1, 2001, the Department of Health and Human Services finalized amendments (Final Rule) to regulations governing “incident to” reimbursement under Medicare. The Final Rule codifies the incident to billing policies under Section 2050 of the Medicare Carrier’s Manual (MCM), clarifies certain incident to billing requirements and recognizes that auxiliary personnel providing an incident to benefit may be an employee, leased employee, or independent contractor and may provide services incident to the services of physicians who employ or contract with them or who are employees or independent contractors of the same entity.
Coverage of “Incident to” Services and Supplies
Generally, Medicare Part B pays for services and supplies incident to a physician’s professional services. “Incident to” services include not only services typically performed by the physician’s office staff, but also those performed by the physician himself such as minor surgery, reading x-rays, setting casts or simple fractures and other activities that involve evaluation or treatment of a patient’s condition. Because incident to services are so integral to the physician’s services, they can be submitted to Medicare as if the physician personally performed the service and the claim will be paid at 100 percent of the Medicare physician fee schedule even though the services were in fact furnished by auxiliary personnel.
The Final Rule codifies the incident to billing policies under Section 2050 of the MCM. Accordingly, under the Final Rule, services and supplies are covered as incident to services if they are: (1) furnished in a noninstitutional setting to noninstitutional patients; (2) an integral, though incidental, part of the service of a physician in the course of diagnosis or treatment of an injury or illness; (3) commonly furnished without charge or included in the bill of a physician; (4) of a type that are commonly furnished in the office or clinic of a physician; (5) furnished under the direct supervision of the physician; and (6) furnished by the physician, practitioner with an incident to benefit, or auxiliary personnel.
Significantly, the Final Rule disregards the employment relationship of the supervising physician and auxiliary personnel and recognizes that, for purposes of the provision of incident to services, the supervising physician and auxiliary personnel may be either an employee or independent contractor.
Non-institutional Setting and Non-institutional Patients
The Final Rule clarifies that incident to services and supplies are reimbursable only if furnished to patients in settings other than hospitals or skilled nursing facilities. Medicare does not permit a physician to bill for the incident to services of auxiliary personnel in these settings, since there is separate payment for these services.
Integral Part of Physician’s Service
The incident to services must be furnished as an integral, though incidental, part of a physician’s service in the course of diagnosis or treatment of the patient. The MCM policy adopted by the Final Rule explains that this does not mean that, to be considered incident to a physician’s services, each occasion of service by the auxiliary personnel needs also always be the occasion of the actual rendering of a service by the physician. On the contrary, there simply must have been an initial service furnished by the physician of which the service being performed by the auxiliary personnel is an incidental part, and subsequent services by the physician in a frequency that reflects his continuing active participation in, and management of, the course of treatment.
Physicians should be aware that some Medicare carriers, including the carrier for this region, have interpreted this provision to require the physician to see the patient every third visit.
Commonly Furnished Without Charge/In Physician’s Office
The Final Rule requires that the incident to services and supplies be commonly furnished without charge or included in the physician’s bill. As clarified by MCM policy, this means that the incident to services and supplies must essentially represent an expense to the practice. The incident to services and supplies must also be of a type that are commonly furnished in the physician’s office or clinic. As such, they must be considered medically appropriate to provide in such settings.
Direct Supervision of Physician
Consistent with the requirements of Section 2050 of the MCM, the Final Rule requires that the incident to services and supplies be furnished under the direct supervision of the physician. Direct supervision means that the physician must be present in the office suite and immediately available to furnish assistance and direction throughout the performance of the procedure. As was clear under preexisting Medicare policy, this does not mean that the physician has to be present in the room when the procedure is performed.
Importantly, the Final Rule clarifies that the physician providing the direct supervision need not be the same physician upon whose professional service the incident to service is based. In fact, any physician in the group who treats patients can provide the requisite supervision. The commentary to the Final Rule cautions, however, that when a claim for an incident to service is submitted to Medicare, it must be submitted under the billing number of the physician who actually supervises the rendering of the service, even if this is not the physician who ordered the service.
Furnished by Physician, Practitioner or Auxiliary Personnel
The Final Rule specifies that, in order to be covered as an incident to benefit under Medicare Part B, the incident to service must be furnished by a physician, practitioner with an incident to benefit, such as a nurse practitioner or auxiliary personnel. Although Medicare does not require auxiliary personnel to meet certain qualifications to be eligible to provide incident to services, physicians should keep in mind that state laws, such as Pennsylvania’s, may require licensure or certification of such personnel.
Under prior MCM policy, the supervising physician could have been either the employer of the auxiliary personnel or an employee of the same entity that employs the auxiliary personnel. The Final Rule significantly changes this policy. Under the Final Rule, auxiliary personnel may provide services incident to the services of physicians who employ or contract with them or who are W-2 employees or 1099 independent contractors of the same entity.
In adopting this change, HCFA indicated that it could point to no clinical reason to exclude independent contractor physicians from the class of physicians who can receive Medicare payment for services incident to their own services based solely on their status as independent contractors. HCFA reasoned that the nature of the employment relationship was not critical for purposes of payment for services incident to the services of physicians, so long as the auxiliary personnel reports to a physician under the required level of supervision.
Additionally, the Final Rule acknowledges that auxiliary personnel providing the incidental services may also be employees or independent contractors. Accordingly, auxiliary personnel providing the incidental service may be employees, leased employees or independent contractors and, therefore, may provide services incident to the services of physicians who employ or contract with them or who are employees or independent contractors of the same entity, provided that the other requirements for payment for incident to services are satisfied. HHS notes, however, that if physician groups contract with physicians or auxiliary personnel in connection with the provision of incident to services, rather than employing them directly, they will also need to consider the contractual relationship under Medicare’s prohibition on reassignment of benefits.
Although much of the Final Rule simply codifies preexisting Medicare policy, the relaxation of the rules governing the “employment” relationship of the supervising physician and the auxiliary personnel providing the incidental services should provide physician groups greater flexibility in achieving the highest and best use of such personnel. Likewise, since Medicare typically accounts for a significant part of many physician groups’ revenues, such a change could provide physician groups with an opportunity to increase their revenues in a cost-effective manner.
John W. Jones, Esq., is a member of the Health Care Services Group at Pepper Hamilton LLP in Philadelphia.