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CMS Proposes Changes to the Physician Supervision Requirement for Outpatient Hospital Services

Health Law Update Sarah E. Coyne

On July 20, 2009, the Centers for Medicare & Medicaid Services ("CMS") published its proposed changes to the controversial Medicare requirement related to supervision of outpatient hospital services. These proposed changes will give some hospitals added flexibility but will not eliminate compliance challenges for others. The proposed changes, which are part of the 2010 Outpatient Prospective Payment System ("OPPS") rule, are scheduled to take effect January 1, 2010. CMS is accepting comments on the changes through August 31.


Under the Medicare program, physician supervision has long been required for hospital outpatient services provided "incident to" a physician's professional services. For years many observers believed hospitals could easily meet the supervision requirements for on-campus services as long as one or more physician was present on campus. However, in the 2009 OPPS rule CMS provided a "clarification" to the supervision requirements that would require a physician to be physically present in each provider-based department ("PBD") when "incident to" services are provided - a significant deviation from past practice, which was to have a physician present on the hospital's campus but not necessarily in the specific PBD. On the heels of the 2009 OPPS rule, CMS received many comments and concerns, leading to CMS's current proposal to relax certain aspects of the supervision requirements.

CMS proposed three major changes to the supervision requirements:

1. Allowing Non-physician Practitioners to Supervise Most "Incident-To" Therapeutic Services

First, CMS proposed that non-physician practitioners ("NPPs") - specifically physician assistants, nurse practitioners, clinical nurse specialists and certified nurse-midwives - may directly supervise nearly all hospital outpatient therapeutic services that they may perform themselves in accordance with their state law, scope of practice and hospital-granted privileges. In keeping with a CY 2010 Medicare Physician Fee Schedule ("MPFS") proposed rule, NPPs may not provide direct supervision of cardiac rehabilitation, intensive cardiac rehabilitation and pulmonary rehabilitation services. Supervision of those services must be by a physician and, in the case of cardiac rehabilitation and intensive cardiac rehabilitation, the physician must have expertise in the management of cardiac pathophysiology.

Currently, only physicians may directly supervise outpatient therapeutic services. CMS reiterated this position as recently as the CY 2009 OPPS final rule, stating that an NPP may not provide the physician supervision in a PBD, even if a nurse practitioner's or a physician assistant's professional service was being billed as a nurse practitioner or a physician assistant service and not a physician service. Explaining its about-face, CMS said that "allowing certain [NPPs] to provide direct supervision of certain hospital outpatient therapeutic services is appropriate because, even though these practitioners are not physicians, they are recognized in statute and regulation as providing services that are analogous to physicians' services."

2. Refining the Definition of Direct Supervision for Services

Additionally, for services furnished on a hospital's main campus, CMS proposed that the direct supervision requirement will be met if the supervising physician or NPP is present "in the hospital" or on-campus PDB of the hospital and immediately available to furnish assistance and direction throughout the performance of the procedure.

CMS further proposed to define "in the hospital" as meaning 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. The proposed definition is more flexible than an earlier interpretation, which was that a supervising physician must be "in the department" for all hospital outpatient services requiring direct supervision.

This may pose special problems for hospitals with multiple locations on their campuses that, while in close physical proximity, are not operated as part of the hospital. The supervising physician or NPP may not be located in any other entity, such as a physician's office, independent diagnostic testing facility, co-located hospital, or hospital-operated provider or supplier such as a skilled nursing facility, end stage renal disease facility, or home health agency, or any other non-hospital space that may be co-located on the hospital's campus.

For off-campus PBDs, CMS clarified that the supervising physician or NPP must be present in the PBD, rather than "present and on the premises of the location." CMS considers this a technical change rather than a shift in policy.

In discussing these definitional changes, CMS also commented on when it considers a supervising physician or NPP to be "immediately available." The current rule is clear that "immediately available" does not mean the physician must be present in the room when the procedure is performed. Beyond this, CMS stated that "immediate" means "without interval of time," noting that the supervising physician or NPP could not be performing another service that he or she could not interrupt or be so physically far away that he or she could not intervene "right away." CMS further commented that the supervising physician or NPP must be prepared to step in and perform the service, not just to respond to an emergency. This includes the ability to take over a procedure and, as appropriate to both the supervising physician or NPP and the patient, to change a procedure or the course of treatment. Although CMS previously stated that the supervisor does not necessarily need to be of the same specialty as the procedure or service being performed, CMS has now advised that "in order to furnish appropriate assistance and direction for any given service or procedure, . . . the supervisory physician or [NPP] must have, within his or her state scope of practice and hospital-granted privileges, the ability to perform the service or procedure." Rural providers with few specialists could have a difficult time complying with this advice, especially when compounded by the heightened supervision requirements for supervision of cardiac rehabilitation, intensive cardiac rehabilitation and pulmonary rehabilitation services, as set forth in the CY 2010 MPFS proposed rule.

3. Linking Supervision Requirements for Outpatient Diagnostic Services to the Medicare Physician Fee Schedule

Finally, CMS 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, follow the physician supervision requirements for individual tests as listed in the MPFS Relative Value File. The MPFS contains three possible levels of supervision: general, direct and personal. When the MPFS requires direct supervision, the definition of "direct supervision" will be the same as for outpatient therapeutic services, as described above.

CMS did not propose that NPPs be allowed to supervise hospital outpatient diagnostic services. Generally only physicians may provide supervision, although the law contains a narrow exception for clinical psychologists to supervise psychological diagnostic tests.

If you have any questions regarding the provisions of the proposed rule or any other issues related to the Medicare program, please feel free to contact Sarah Coyne at (608) 283-2435 / [email protected] or your Quarles & Brady attorney.

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