CMS’ Initial “Clarification” of Current Rule. In November 2008, the Centers for Medicare & Medicaid Services (CMS) “clarified” the physician supervision standard for hospital outpatient therapeutic services provided incident to a physician’s services. In that “clarification,” CMS stated that it has long been its expectation that hospital outpatient therapeutic services are provided under the direct supervision of physicians in the hospital. For in-hospital and on-campus locations, CMS has assumed physician supervision was provided because physicians are generally nearby. What CMS clarified in November, however, was that this assumption does not mean that actual physician supervision need not be provided (although many hospitals had assumed that Medicare did not require actual direct physician supervision for services provided in the hospital or on its main campus because physicians were generally in the hospital and available).

For the rest of 2009, the physician supervision rule is as follows: hospital outpatient therapeutic services provided in the hospital or on its campus, or in an off-campus provider-based department, require direct physician supervision. This requires that the physician must be i) present on the premises of the location; and ii) immediately available to furnish assistance and direction throughout the performance of the procedure. 42 C.F.R. § 410.27. However, it does not require the physician to be present in the room when the procedure is performed. As discussed further below, however, this current rule will change in January 2010, if the proposed rule is finalized.  

CMS’ Further Clarifications of Current Rule. In the Proposed FY 2010 Outpatient Prospective Payment System (OPPS) regulations CMS issued on July 1, CMS further “clarified” that “immediately available” has always meant that the physician may need to provide medical consultation and deal with emergencies and should be available in a timely manner. In addition, CMS’ comments suggest that the physician providing the supervision must be qualified to actually perform the service because that physician may be expected to step in and take over performance of the procedure and even change the procedure or course of treatment if necessary. This means that although the physician need not necessarily be the same specialty or in the same department as the supervised service, the physician must have privileges at the hospital to perform that service. This change may significantly impact arrangements hospitals currently have in place.

In addition, CMS commented that although they have not expressly defined “immediately available,” they view it to mean “without interval of time,” thereby excluding physicians who are “performing another procedure or service that he or she could not interrupt” or who are “far away” from the location where the outpatient services are furnished. Accordingly, physicians who are busy doing other procedures, working in an ER, or located at some distance from the procedure to be supervised may not be eligible to serve as supervising physicians. CMS reiterated that problems with care where the direct supervision requirement is not met would be considered a “quality concern” and that these standards must be met “for the delivery of safe and high quality hospital outpatient services that are paid under Medicare.” In light of the government’s position that medical care of substandard quality can form the basis of federal False Claims Act liability, providers should bear in mind that failure to meet these supervision standards could result in fraud allegations.

Regarding off-campus provider-based departments (PBDs), CMS clarified that it requires a physician to be located in each off-campus PBD, and an entity would not be compliant if it had just one physician serving as the supervising physician for an entire off-campus PBD location (assuming that more than one type of service is provided there).

CMS Proposed Changes for 2010. In the proposed OPPS regulations, CMS also proposed the following additional changes to the physician supervision requirements, which if finalized would become effective on January 1, 2010:

  • Allowing non-physician practitioners (clinical psychologists, physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse-midwives) to directly supervise all hospital outpatient therapeutic services to the extent they could personally furnish them under their state scope of practice and hospital-granted privileges (although they must still meet applicable collaboration or supervision requirements required by Medicare and/or state law);
  • Revising Medicare regulations to make clear that Medicare Part B payment may be made for hospital outpatient services and supplies furnished incident to the services of a physician, clinical psychologist, nurse practitioner, physician assistant, clinical nurse specialist, or certified nurse-midwife;
  • Refining the definition of direct supervision of hospital outpatient therapeutic services for services furnished in a hospital and in on-campus PBDs of the hospital to say that direct supervision means that the supervising physician or non-physician practitioner must be present on the same campus, in the hospital, or in the on-campus PBD and be immediately available to furnish assistance and direction throughout the performance of the procedure. CMS is also planning to define “in the hospital” to mean in “areas in the main building(s) of a 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 furnished under the hospital’s [CMS Certification Number]” (i.e., physically present in the on-campus areas where services are furnished and not in any other entity, such as a physician’s office, IDTF, co-located hospital, or hospital-operated provider or supplier, such as a SNF, ESRD, or HHA, or any other non-hospital space that may be co-located on the hospital’s campus); and
  • Clarifying that the definition of direct supervision of cardiac rehab, intensive cardiac rehab, and pulmonary rehab must be furnished by a doctor of medicine or osteopathy, due to other Medicare regulations; refining the definition of direct supervision of these services provided in the hospital and an on-campus PBD to require that a physician must be present on the same campus or PBD and immediately available to furnish assistance. (CMS has not proposed any changes for direct supervision of these services when furnished in off-campus PBD. As a result, direct supervision in off-campus PBDs would still require the physician to be in the off-campus PBD and immediately available to furnish assistance and direction throughout the procedure).

Particularly with respect to the proposed changes allowing non-physician practitioners to directly supervise hospital outpatient services, CMS’ proposals are beneficial to providers. CMS indicated that it is appropriate to allow certain non-physician practitioners to provide direct supervision because these practitioners are recognized in statutes and regulations as providing services analogous to physician services. For example, Medicare Part B covers their professional services when the services would be covered as physicians’ services if furnished by a physician, and Medicare also pays for services provided incident to the services of these non-physician practitioners.

Proposed Changes Affecting Outpatient Diagnostic Tests. In the FY 2010 OPPS regulation, CMS also proposed a number of changes to the supervision rules for outpatient diagnostic tests. In particular, CMS proposed changes with respect to requirements for direct supervision of diagnostic tests, many of which mirror the proposed changes described above for outpatient therapeutic services. Specifically, CMS has proposed that:

All hospital outpatient diagnostic services that are provided directly or under arrangement, whether provided in the main buildings of the hospital, in a PBD, or at a non-hospital location, must follow the physician supervision requirements for individual tests as listed in the Medical Physician Fee Schedule Relative Value File in order to determine the level of supervision required for the particular diagnostic test.

For diagnostic services furnished directly by the hospital or under arrangement in the main hospital buildings or in an on-campus PBD, the definition of direct supervision is the same as the proposed definition for therapeutic services provided on-campus discussed above: the physician must be present on the same campus, in the hospital or the on-campus PBD, and immediately available to furnish assistance and direction throughout the performance of the procedure. In addition, the same proposed definition of “in the hospital” would apply. This means that the supervisory physician may not be located in any entity such as a physician’s office, IDTF, co-located hospital, or hospital-operated provider or supplier, such as a SNF, ESRD facility, or HHA, or any other non-hospital space that may be co-located on the hospital’s campus.

For diagnostic services furnished directly or under arrangement in an off-campus PBD, the definition of direct supervision is the same as the current definition for therapeutic services provided in an off-campus PBD: the physician must be present in the off-campus PBD and immediately available to furnish assistance and direction throughout the performance of the procedure.

For diagnostic services provided to hospital outpatients under arrangement in non-hospital locations such as physician offices and IDTFs, whether those entities are located on the main campus of the hospital or elsewhere, the supervising physician must be present in the office suite and immediately available to furnish assistance and direction throughout the performance of the diagnostic test.

CMS is accepting comments on the proposed rule until August 31, 2009 and expects to issue the final rule by November 1, 2009.