The Nov. 20, 2009 Federal Register extensively addresses physician supervision requirements for provider-based operations. During 2008 and 2009, CMS has gone through a period of restatement and clarification of such requirements for both diagnostic and therapeutic services. Changes in this area include various updates to manuals through transmittals and discussions in the preamble and to several Federal Registers.

Overview and Review

In order to assess just where we are today and where we have been during the past several years, we need to divide time periods into:

2000-2007;
2008 and 2009; and
2010 and beyond.

On April 7, 2000, CMS implemented the Ambulatory Payment Classification (APC) payment system and with this process completely revamped and formalized the Provider-Based Rule (PBR) generally found at 42 CFR §413.65. As a part of this newly formalized rule, CMS indicated that direct physician supervision was a special obligation for off-campus clinics. For on-campus, in-hospital, provider-based situations, physician supervision was assumed because there always would be a physician nearby. With this guidance, hospitals did not worry about on-campus operations that were conducted outside the hospital itself. There was no formal definition made to distinguish in-hospital operations from on-campus but out-of-hospital operations. Basically, there was no special burden on hospitals relative to physician supervision for on-campus or in-hospital operations.

Clarifications Not Changes

Suddenly, starting in 2008, CMS started making changes to various definitions. Of course, CMS claims that these were simply clarifications and not changes. CMS started stating that direct physician supervision was required for on-campus but out-of-hospital provider-based operations. This then required hospitals to make certain that a physician was on the premises of provider-based facilities at all times during which care was being rendered. Additionally, the question arose as to whether mid-level practitioners (e.g., physician assistants, nurse practitioners and clinical nurse specialists) could meet the physician supervision requirement.

CMS performed a careful analysis and determined that mid-level staff did NOT meet the physician supervision requirement. This requires some rather convoluted logic to explain, starting with the Social Security Act (SSA) and then integrating incident-to requirements. Thus, hospitals were faced with the need to have direct physician supervision, and that supervision had to be performed by an MD or DO.  For many hospitals, this raised some very serious concerns.

Let us take an example. A number of hospitals have on-campus but out-of-hospital provider-based operations. Consider an infusion center that is in a building next door to a hospital. You can even add a covered walkway between the hospital and the infusion center. A variety of services are provided here, including chemotherapy, infusions, hydrations, blood transfusions and the like. Specially trained nursing staffers perform these services. While a physician and/or mid-level may be in the infusion center from time to time, generally physicians are not present.

Ostensibly, this provider-based infusion center violates the newly clarified requirements for direct physician supervision, particularly the fact that only physicians can meet the supervisory requirement.  Is it possible that this operation technically is inside the hospital? After all, there is a covered walkway. While we can debate this issue, most likely this operation is defined as being on the campus, but outside the hospital itself. To answer this question definitively, however, we really need a definition of what it means to be "inside the hospital."

The bottom line for this example and many similar instances is that the hospital is out of compliance. Because the supervisory requirement was not met, services rendered here should not have been paid by the Medicare program.
Good news! CMS has addressed all of these issues, but the changes (yes, these are changes) will not take effect until Jan. 1, 2010. This leaves a significant vulnerability for 2008 and 2009. These are two years that are definitely covered by the RACs along with other federal compliance entities. But before we discuss this issue, let us review the changes that CMS is making. While they are certainly welcome, there still will be lingering questions surrounding some issues.

Mid-Level Practitioners Meeting Supervisory Requirements

CMS is proceeding with allowing certain non-physician practitioners to meet the physician supervisory requirement. Clinical Social Workers (CSWs) have been added to the list of appropriate supervisors.

"In summary, for CY 2010, nonphysician practitioners who are specified under §410.27 of the final regulations as clinical psychologists, licensed clinical social workers, physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse midwives, may directly supervise all hospital outpatient therapeutic services that they may perform themselves within their State scope of practice and hospital-granted privileges, provided that they meet all additional requirements, including any collaboration or supervision requirements as specified in §§410.71, 410.73, 410.74, 410.75, 410.76, and 410.77." (Page 995 of CMS-1414-FC)

In-Hospital Definition

While there were some concerns expressed by commenters, CMS basically is adopting the proposed definition for "in-the-hospital":

"...to mean areas in the main building(s) of a hospital or CAH that are under the ownership, financial, and administrative control of the hospital or CAH; that are operated as part of the hospital or CAH; and for which the hospital or CAH bills the services furnished under the hospital's or CAH's CCN."  (Page 995 CMS-1414-FC)