The Centers for Medicare and Medicaid Services (CMS) issued Hospital Outpatient Prospective Payment System rules for CY 2011 (CY 2011 Rules) on November 2, 2010, and changed the requirements for supervision of outpatient therapeutic and diagnostic services. The CY 2011 Rules are available here. An official version of these rules was published in the Federal Register on November 24, 2010. The following is a description of the changes that affect hospitals.

A. Supervision of Hospital Outpatient Therapeutic Services

There are two significant changes under the CY 2011 Rules as they relate to the supervision of hospital outpatient therapeutic services: (1) a revised definition of "direct supervision;" and (2) a two-tiered approach to supervision for a few specified hospital outpatient therapeutic services referred to as "nonsurgical extended duration therapeutic services."  

First, for most therapeutic services furnished in an outpatient department of the hospital, the physician or non-physician practitioner (i.e., clinical psychologist, licensed clinical social worker, physician assistant, nurse practitioner, clinical nurse specialist or certified nurse midwife) must provide direct supervision throughout the entire provision of service. Under the CY 2011 Rules, the definition of "direct supervision" has been revised by removing all references to the physical location of the supervising professional. Specifically, the new definition of "direct supervision" removes references to "on the same campus" and "in the off-campus provider-based department of the hospital."  

Commencing January 1, 2011, the definition of "direct supervision" is revised simply to require immediate availability, meaning physically present, interruptible and able to furnish assistance and direction through the performance of the procedure, but without reference to any particular physical boundary. This new definition will now apply equally in the hospital or in on-campus or off-campus provider-based departments. In the commentary to the CY 2011 Rules, CMS states that it wishes to allow flexibility in providing for direct supervision from a location other than the hospital campus or provider-based department that still allows the physician to be immediately available to furnish direction and assistance. For example, this new policy would allow supervision from any location within an off-campus building that ho uses multiple provider-based departments of a hospital, as long as the supervising practitioner is immediately available, rather than requiring a supervising practitioner to be located within each provider-based department in that building.  

Although the CY 2011 Rules change the definition of "direct supervision," CMS emphasizes that it is not relaxing the requirement; that is, CMS continues to expect the supervising practitioner to be physically present for the services he or she is supervising. CMS believes that removing specific boundaries provides reasonable flexibility but also holds the practitioner accountable for determining, in individual circumstances, how to be physically and immediately available when supervising therapeutic services provided "incident to" a physician's service in the outpatient setting.  

Secondly, for a few specified hospital outpatient therapeutic services referred to as "nonsurgical extended duration therapeutic services," the CY 2011 Rules require direct supervision (per the new definition described above) for the initiation of these services. "Initiation" means the beginning portion of the nonsurgical extended duration therapeutic service, which ends when the patient is stable and the supervising practitioner believes the remainder of the service can be delivered safely under general supervision. CMS adopts the same definition of "general supervision" currently used for certain outpatient diagnostic services under the Medicare Physician Fee Schedule (MPFS) Relative Value Unit File (i.e., service is furnished under the overall direction and control of the physician, but his or her physical presence i s not required during the performance of the procedure). CMS chose not to further define the term "initiation" or set time limits on this portion of service because it believes that the determination that a patient is sufficiently stable to transfer from direct supervision to general supervision, and the timing of that decision, are clinical judgments that are best to leave to the discretion of the supervising practitioner.  

There are currently 16 "nonsurgical extended duration therapeutic services." CMS chose these services to include on the list because they have a significant monitoring component that can extend for a sizable period of time and is typically performed by auxiliary personnel, they are not primarily surgical in nature, and they typically have a low risk of complication after assessment at the beginning of the service.  

In response to comments from numerous providers regarding the expansion of this list, CMS will propose in next year's rules an independent review process that will allow for the assessment of the appropriate supervision levels for individual outpatient therapeutic services.  

B. Supervision of Hospital Outpatient Diagnostic Services

There have been no significant changes to the supervision requirement for hospital outpatient diagnostic services except that, under the CY 2011 Rules, CMS adopts the same change in the definition of "direct supervision" as it made for outpatient therapeutic services described above. Therefore, direct supervision will now mean immediately available, without reference to any physical boundary. The level of supervision for outpatient diagnostic services will continue to be in accordance with the levels assigned for the individual test as listed in the MPFS Relative Value Unit File.

C. Non-Enforcement of Direct Supervision Policy Through CY 2011

Under the CY 2011 Rules, CMS extends its decision not to enforce the direct supervision policy for therapeutic services provided in critical access hospitals (CAH) through calendar year 2011. Further, CMS is expanding this non-enforcement policy to include small and rural hospitals with 100 or fewer beds. A hospital will be considered "rural" if it is either geographically located in a rural area, or paid through the outpatient PPS with a wage index for a rural area.