In the preamble to the 2009 Proposed Outpatient Prospective Payment System regulation and the 2009 Final Outpatient Prospective Payment System (OPPS) regulation, the Centers for Medicare and Medicaid Services (CMS) has clarified its supervision requirements for services provided in both on- and off-campus hospital outpatient departments. Specifically, CMS now requires "direct supervision" of "incident to" services provided in a hospital outpatient department, regardless of whether it is on the hospital’s main campus.

CMS defines "direct supervision" as not requiring that a physician be present in the room when a procedure is performed, but rather that a physician be (1) "present on the premises of the location," and (2) "immediately available to furnish assistance and direction throughout the performance of the procedure." 42 C.F.R. § 410.27(f). When an "incident to" service is rendered in a provider-based department, CMS interprets "present on the premises" to require a physician to be "present on the premises of the entity accorded status as a department of the hospital." 73 Fed. Reg. 68704 (Nov. 18, 2008). CMS further states that the OPPS "present on the premises" requirement parallels the Medicare Physician Fee Schedule’s "direct supervision" requirement for "incident to" services provided in physician offices, which specifically requires that the supervising physician be present in the same office suite where the services are being provided. Id.

While CMS indicated that its position was really a clarification, the clarification has created significant confusion for hospitals, especially those with off-campus, providerbased sites. Its clarification really evidences a disconnect between CMS policy and actual hospital operations that, if not changed or again clarified, should cause hospitals to closely examine the delivery of outpatient hospital services to ensure supervision requirements are met.