Services provided by a physician’s auxiliary staff that are “incident to” the physician’s services are paid under the physician fee schedule at a higher rate, as though the physician had personally furnished the services. However, Medicare rules governing physician supervision of “incident to” services continue to present challenges for hospitals and physicians who seek to bill for the services of such personnel acting under physician supervision. 

Medicare Part B reimburses services and supplies that are provided under a physician’s supervision either as hospital outpatient services or as by a physician office or clinic. The term “incident to” is defined in the Medicare regulations and manuals, but different requirements apply to “incident to” services in each setting.

This article addresses only Medicare requirements and policies applicable to physician supervision for “incident to” services.  Different requirements and policies regarding physician supervision may apply to other government programs such as Medicaid and to private insurance plans.

Hospital Outpatient Services

For hospital outpatient services, “incident to” services are those therapeutic services furnished by a hospital or critical access hospital (or those under arrangement with a hospital) on an outpatient basis by auxiliary personnel, pursuant to the order and supervision of a physician or non-physician practitioner. The term “non-physician practitioner” for this purpose means a clinical psychologist, licensed clinical social worker, physician assistant, nurse practitioner, clinical nurse specialist, or certified nurse-midwife. 

To be reimbursed under Medicare Part B as “incident to” a physician’s or other practitioner’s personal services, hospital outpatient services and supplies must meet all the following requirements:

• Services and supplies must be therapeutic (not merely for diagnostic purposes) and furnished to outpatients incident to the services of physicians or non-physician practitioners, as defined. These may include drugs and biologicals that are not usually self-administered, if furnished “incident to” a physician’s or practitioner’s services. 

• Services must be furnished by the hospital or under arrangement with a hospital. These may include clinic services, emergency room services, and observation services.
  Services must be furnished as integral, though incidental, parts of the physician or non-physician practitioner’s professional service in the course of treating an illness or injury.

• Services must be furnished in the hospital or a department of the hospital that has a provider-based status.

• Services must be furnished under the direct supervision of a physician or non-physician practitioner, or under such other appropriate level of supervision as is designated by CMS, and in accordance with state law and all additional requirements (see further discussion below).

Levels of Physician Supervision for Services Delivered to Hospital Outpatients

Although CMS requires direct supervision by an appropriate physician or non-physician practitioner for the provision of all therapeutic services to hospital outpatients, CMS may assign certain hospital outpatient therapeutic services as requiring either general supervision or personal supervision. Non-physician practitioners (as defined above) may provide the required supervision of services in accordance with state law and any other requirements. The physician or practitioner must have the knowledge, skills, ability, and privileges to actually perform the clinical service or procedure.  In addition:

• If direct supervision is required for services furnished in the hospital, this term means the physician or other practitioner must be “immediately available” to furnish assistance and direction, but need not be present in the room when the procedure is performed. Although CMS has not defined “immediate availability” in this context, it would not include a supervisory physician or practitioner who is performing another procedure or service that he or she could not interrupt.  However, a supervising physician or practitioner may furnish direct supervision from a physician office or other location that is not on the hospital campus where the services are being furnished, as long as the physician or practitioner remains immediately available.

• Pulmonary rehabilitation, cardiac rehabilitation and intensive cardiac rehabilitation must be directly supervised by a doctor of medicine or doctor of osteopathy.

• For non-surgical extended duration therapeutic services (NSEDTS), which can last a significant period of time and have a substantial monitoring component typically performed by auxiliary personnel Medicare requires at least direct supervision by a physician or appropriate non-physician practitioner during the initiation of the service. When the patient is stable, this may be followed by general supervision at the discretion of the supervising physician or practitioner.

• “General supervision” means the services are furnished under the physician’s overall direction and control, but the physician’s presence is not required during the performance of the service or procedure.

• A table listing services that may be furnished under general supervision and those defined as non-surgical extended duration therapeutic services (NSEDTS) is available on the OPPS website.

• “Personal supervision” means the physician must be in attendance in the room during the performance of the service or procedure. 

Physician Office or Physician-Directed Clinic Services

For all settings other than a hospital or skilled nursing facility, including services provided by a physician office or physician-directed clinic, Medicare Part B pays for services and supplies that are considered to be “incident to” the services of a physician or non-physician practitioner if they are rendered at that location without charge or are included in the physician’s bill. In those settings, the services and supplies must meet all the following requirements:

• The services or supplies are integral, though incidental, to the physician’s or practitioner’s professional service covered by Medicare Part B. Each service provided by auxiliary personnel does not need to be accompanied by a personal professional service of the physician, but the physician must perform an initial service and then provide subsequent services that reflect the physician’s active participation and management of the course of treatment.

• The services and supplies are furnished incident to the physician’s or other practitioner’s services, are commonly furnished by the physician in the course of providing services and are included in the physician or practitioner’s bills,  and represent an expense to (i.e., are purchased by) the physician or billing entity. Services may not be “incident to” if payment can be made under a separate benefit category listed in 42 USC § 1395x(s) (§ 1861(s) of the Social Security Act), such as diagnostic tests and certain vaccines.

• Unlike the supervision required for outpatient services discussed above, the services and supplies provided by auxiliary personnel in a private practice setting must be furnished under the direct supervision of a physician. “Direct supervision” in the office setting means the physician must be present in the office suite and immediately available to furnish assistance and direction throughout the performance of the procedure, but the physician does not need to be present in the room when the procedure is performed.

• The supervising physician may be either an employee, leased employee or independent contractor of the legal entity that bills and receives payment for the services or supplies, but the physician must have a legal relationship with the entity that satisfies the requirements for a valid reassignment. 

• In some medically underserved areas, the direct physician supervision requirement does not apply to certain discrete individual or intermittent services when provided to homebound patients by auxiliary personnel who meet all applicable state requirements. The service must be an integral part of the physician’s service but may be performed under general physician supervision by personnel who are employed by the physician or physician-directed clinic. Such services include, among others, injections, EKGs, therapeutic exercises, the insertion and changing of catheters, and certain educational services. “General supervision” means the service must be performed under the physician’s overall supervision and control, but the physician need not be physically present at the patient’s residence. All other “incident to” requirements must be met. If, however, the service is covered as a home health service, the patient is eligible for home health benefits, and the service could be provided on a timely basis by an available agency, then it should be provided by the home health agency, and postpayment review will ensure that physicians and clinics do not perform a substantial number of these services. 

Shared/Split E/M Services

When an evaluation and management (E/M) service in an office or clinic setting is a “shared/split encounter” between a physician and a non-physician practitioner, the service may be considered and billed as “incident to” if it meets all the “incident to” requirements. If those requirements are not met, the service must be billed under the non-physician practitioner’s billing number, with payment from the physician fee schedule at the appropriate level. 

In contrast, an E/M encounter shared by a physician and non-physician practitioner in a hospital inpatient, outpatient or emergency department setting may be billed under the physician’s billing number only if there was a face-to-face encounter between the physician and the patient. “Incident to” rules do not apply to shared

E/M encounters in those settings. CMS Manual System, Pub. 100-04, Medicare Claims Processing, Transmittal 178, Change Request 2321 (May 14, 2004); Medicare Carriers Manual, Part 3, Claims Process, Transmittal 1776, Change Request 2321 § 15501 (Oct. 25, 2002).

General Rules Applicable to “Incident to” Services Provided in Either Setting

Auxiliary Personnel

The term “auxiliary personnel” has been interpreted for purposes of “incident to” services as including not only the typical medical office personnel such as RNs, LPNs, medical assistants, technicians, and therapists, but also medical professionals such as mid-levels, RNs, LPNs, medical assistants, and even other physicians (see discussion below). Mid-levels are separately covered and can be paid by Medicare for services performed personally without direct physician supervision.  In order for their services to be covered as “incident to,” at least in the office setting, they must be directly supervised by the physician as an integral part of the physician’s personal service. Pub 100-02, Chapter 15, § 60.2. All auxiliary personnel must meet state licensing requirements, and services and supplies must be furnished in accordance with state law.

Another Physician Providing “Incident to” Services

Some may not realize that a physician, as opposed to other auxiliary personnel, may also bill as “incident to” another physician’s services, if those services meet the requirements of the Medicare “incident to” regulations. This may be helpful if a new physician needs to provide Medicare-reimbursed services before the effective date of his or her enrollment with Medicare. The new physician may bill using the supervising physician’s NPI, and the new physician would not be identified on the claim for services. Of course, the supervising physician would be held liable for all services, and it is recommended that the supervising physician sign off on all services notes and reports for the new physician.

Hospitals would be well advised to pay close attention to these rules, and the varying requirements according to practice setting, when they utilize “incident to” billing to maximize practice revenues.