Discussion in the preamble to 2009 Outpatient Prospective Payment System Final Rule (the "2008 Final Rule") calls into question whether the Centers for Medicare and Medicaid Services ("CMS") is changing its policy regarding direct physician supervision required for the provision of therapeutic services in a hospital on-campus outpatient department or is it merely clarifying its existing policy.
Pursuant to Section 42 C.F.R. Section 410.27 (the "Outpatient Therapeutic Services Regulation"), therapeutic services which hospitals provide on an outpatient basis are those services and supplies (including the use of hospital facilities) which are incident to the services of physicians in the treatment of outpatients. This regulation requires that services furnished at a department of a hospital, that has Medicare provider-based status, must be under the direct supervision of a physician. "Direct supervision" means the physician must be present and on the premises of the location and immediately available to furnish assistance and direction throughout the performance of the procedure. It does not mean that the physician must be present in the room when the procedure is performed.
CMS stated its position regarding the applicability of the direct physician supervision requirement to outpatient services incident to a physician's services in the April 7, 2000 OPPS Final Rule (the "2000 Final Rule"):
We emphasize that our proposed amendment of [the Outpatient Therapeutic Services Regulation] to require direct supervision of hospital services furnished incident to a physician service to outpatients applies to services furnished at an entity that is located off the campus of a hospital that we designate as having provider-based status as a department of a hospital in accordance with [the provider-based status rules]. Our proposed amendment of [the Outpatient Therapeutic Services Regulation] to require direct supervision of hospital services furnished incident to a physician service to outpatients does not apply to services furnished in a department of a hospital that is located on the campus of that hospital. For hospital services furnished incident to a physician service to outpatients in a department of a hospital that is located on the campus of the hospital, we assume the direct supervision requirement to be met. We assume the physician supervision requirement is met on hospital premises because staff physicians would always be nearby within the hospital. (emphasis added).
The foregoing preamble commentary was interpreted by many to mean that when therapeutic services are provided to a hospital outpatient in a department of the hospital that is located on the hospital's campus (but not necessarily within the walls of the hospital), appropriate physician supervision of such services is presumed and the "direct supervision" requirement specified in the Outpatient Therapeutic Services Regulation does not apply. That is to say, due to the close proximity of the department to the hospital's main buildings, many understood CMS' position to be that it presumes that a physician will always be present and on the premises of the location at which the "incident to" services are provided and be immediately available to furnish assistance and direction throughout the performance of the services. As a result, some hospitals adopted a policy that it is not necessary to impose a specific direct supervision requirement with respect to such services.
In the 2008 Final Rule, CMS provided a "restatement and clarification" of the requirements for physician supervision of therapeutic services provided in a hospital setting. Specifically, CMS expressed its concern that the use of the term "assume" in the 2000 Final Rule may have been misunderstood. According to CMS:
As we explained in the CY 2009 OPPS/ASC proposed rule (73 FR 41519), we restated the existing policy because we were concerned that some stakeholders may have misunderstood our use of the term "assume" in the April 7, 2000 OPPS final rule with comment period, believing that our statement meant that we do not require any supervision in the hospital or in an on-campus provider-based department for therapeutic OPPS services, or that we only require general supervision for those services. This is not the case. It has been our expectation that hospital outpatient therapeutic services are provided under the direct supervision of physicians in the hospital and in all provider-based departments of the hospital, specifically both on-campus and off-campus departments of the hospital. The expectation that a physician would always be nearby predates the OPPS and is related to the statutory authority for payment of hospital outpatient services--that Medicare makes payment for hospital outpatient services 'incident to' the services of physicians in the treatment of patients as described in Section 1861(s)(2)(B) of the Act.
Some in the legal community question whether CMS is, in fact, simply clarifying its policy or rather whether it is changing its policy regarding physician supervision requirements for hospital provider-based on-campus facilities. Regardless of how CMS' discussion in the 2008 Final Rule is best characterized, hospital providers are now taking steps to ensure that their provider-based outpatient locations—both on-campus and off-campus—provide therapeutic services under direct physician supervision.
The 2008 Final Rule was published on November 18, 2008 on CMS' website. The relevant discussion is set forth at 73 FR 68702-68704.
