dabbey120dsStarting in 2008, CMS raised the issue of physician supervision relative to on-campus and in-hospital activities at provider-based departments (PBDs). The physician supervision requirements had been dormant since the provider-based rule (PBR) initially was formalized in the April 2000 Federal Register entry launching APCs (ambulatory payment classifications).  In that entry, CMS seemed to indicate clearly that direct physician supervision only was required for off-campus, provider-based clinics, and that on the hospital’s campus or in the hospital itself there merely would be a physician someplace nearby so that the supervision requirement was met by default.


Through 2008 and 2009 there were significant discussions on this matter, and starting Jan. 1, 2010 there were rule changes. Guidance has been provided through manual updates and now there are additional discussions addressing problems with the newly revised rules relative to rural hospitals and, particularly, critical access hospitals (CAHs). These discussions are referenced in the Aug. 3, 2010 Federal Register, which contains the proposed changes for APCs for 2011.


Compliance personnel should consider two important themes within all of these discussions:


1.   The specific issues at hand and the way in which CMS decides to alter guidance, and


2.   The general philosophies on CMS’s part regarding the underpinning of regulatory guidance.


While the latest Federal Register repeatedly uses the phrase “clarifying and restating” relative to the new guidance offered during the last two years, this entry addresses specific concerns on the part of rural hospitals and CAHs. The main concern is that there are many therapeutic services provided without a physician or qualified practitioner being present. For instance, observation services may be provided with a qualified practitioner simply being on call, while nursing staff actually provide the ongoing observation care.


CAH conditions of participation (CoPs) allow for services to be provided with qualified practitioners immediately reachable via telecommunication and available on-site within 30 minutes. This relaxed CoP requirement does not conform to the PBR supervision requirement of “on the premises/campus and immediately available.”CMS issued a statement on March 15, 2010 indicating that there will be no enforcement of the supervision rule for CAHs for the time being. (1)


CMS’s proposed fix to this situation, which appears to apply to all hospitals, is to define a series of services that are nonsurgical but of extended duration. See Table 37 in the most recent Federal Register. The list includes services such as infusions, observation and injections. The list does not include chemotherapy or blood transfusions.  The basic idea is that there should be direct physician supervision with the initiation of these listed services, but once the patient is stable, general supervision should be the norm.



  • The concept of “stable” is borrowed from EMTALA (the Emergency Medical Treatment and Labor Act), and
  • The concept of “general supervision” is borrowed from the diagnostic supervision levels as delineated in the MPFS (Medical Physician Fee Schedule).

Now let us consider some of the undercurrents involved in these discussions. Understanding these general concepts can help us recognize possible future situations that may become explicit compliance issues and attract the interest of the RACs.


First, what CMS is addressing is a disconnect between the supervision requirements of the PBR (2) and, in this specific case, the CoPs (3) for CAHs. The CoPs have been designed for critical access hospitals to encourage retention of services in rural areas by allowing physician and practitioners to be available within 30 minutes. The PBR is more stringent, requiring direct physician supervision for therapeutic services. CMS’s decision appears to consider the more stringent condition as applying in this case. Depending on what rules represent some sort of disconnect, the more restrictive rule apparently should be used.


Second, the concept of “incident-to” is referenced frequently in these discussions.  There is the general sense that services not only are provided incident-to those of a physician, but that there is a physician actively involved. Certainly, the incident-to payment requirement is used as a justification for requiring physician supervision. Note also that CMS has hinted that perhaps it is the ordering physician who should be providing the supervision.


Third, as the supervision rule is discussed further, it is fairly clear that the burden of proof is on hospitals to document that proper physician supervision is being provided. CMS uses phrases such as “on the premises/campus” and “immediately available.”  However, these specific concepts are not defined formally. From a compliance perspective, including possible future RAC audits, this represents a major challenge. The basic contention is that unless you can establish proper supervisory levels as continuously redefined by CMS, the Medicare program should not be reimbursing you for services.  RAC auditors certainly would contend significant overpayments.


(1) See: www.cms.gov/HospitalOutpatientPPS/01_overview.asp.

(2) See 42 CFR §413.65.

(3) See 42 CFR § 485 for CAHs and 42 CFR §482 for PPS Hospitals.



As a simple example, consider an infusion center at a hospital, located in a campus building but outside the four walls of the hospital itself. Assuming there are appropriately qualified practitioners available, how are you going to document exactly which provider or providers were present for given time periods in order to meet the supervisory requirements?  Even if the physicians and/or practitioners are officed in the infusion center building, so they would be immediately available, how are you going to keep tabs on who is where and when?


Clearly, the saga of physician supervision most likely will be with us for the coming years.  Anticipate further compliance and regulatory burdens in this area along with possible RAC audits in the future. The old adage, “document, document, document” is certainly appropriate.


Here is a listing of the relevant documents that must be perused to fully appreciate the issues and discussions at hand.


1.   Aug. 3, 2010 Federal Register – examination copy was made available July 2 at the CMS APC website. For the examination copy, see pages 402-430.

2.   Transmittal 1980, Publication 100-04, Medicare Claims Processing Manual, June 4, 2010.

3.   Transmittal 128, Publication 100-02, Medicare Benefit Policy Manual, May 28, 2010.

4.   July 18, 2008 Federal Register – Section XII – Page 41518 (73 FR 41518)

5.   Nov. 18, 2008 Federal Register – Section XII – Page 48702 (73 FR 48702)

6.   July 20, 2009 Federal Register – Section XII – Page 35358 (74 FR 35358)

7.   Nov. 20, 2009 Federal Register – Section XII – Page 60564 (74 FR 60564)

8.   April 7, 2000 Federal Register (65 FR 18524)


About the Author

Duane C. Abbey, Ph.D., CFP, is an educator, author and management consultant working in the healthcare field. He is President of Abbey & Abbey Consultants, Inc., which specializes in healthcare consulting and related areas. His firm is based in Ames, Iowa.  Dr. Abbey earned his graduate degrees at the University of Notre Dame and Iowa State University.


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