Be Careful What You Assume: CMS Issues Latest Clarification of Physician Supervision Rules in Hospital Outpatient Departments

August 6, 2008

On July 18, 2008, CMS issued its proposed annual update of the Medicare hospital outpatient prospective payment system (OPPS) and, in one of the many provisions of the proposed rule, issued a "restatement and clarification of the .. longstanding OPPS policy" on physician supervision. According to CMS, the Agency received numerous questions and inquiries related to its physician supervision requirements and the changes to the Medicare Benefit Policy Manual made in February of this year. In addition, CMS noted that intermediaries and carriers were giving varying, and apparently inconsistent, interpretations of existing Medicare policy on this issue.

The confusion that CMS is seeking to clarify largely results from statements contained in the final OPPS rule published in April 2000. In that rule, CMS stated that payment was available for outpatient hospital therapeutic services and supplies furnished "incident to" a physician's service only when "directly supervised" by the physician. In the rule's preamble, CMS then explained that the "directly supervised" requirement applied to services furnished at a provider-based entity located off the campus of a hospital. CMS further stated, however, that for services that are furnished in an outpatient department located on the campus of the hospital, the Agency assumed the physician supervision requirement was met "because staff physicians would always be nearby within the hospital."

In its latest word on the matter — the July 18, 2008 clarification — CMS stated its concern that some providers may believe, because of the Agency's use of the word "assume" in the 2000 preamble, that no supervision is required in on-campus outpatient departments, or that only general supervision is required. CMS then emphasized that such a belief would be incorrect. CMS stated that 42 CFR 410.27(f) — applicable to therapeutic services — requires direct physician supervision for any location designated as a hospital department and that direct supervision, in turn, means that the physician must be present at the location and immediately available to furnish assistance throughout the performance of the procedure. CMS then stated that although it had not further defined the term "immediately available" in this "specific context, the lack of timely physician response to a problem in the HOPD would represent a quality concern . that Hospitals should consider in structuring their provision of services.." CMS then summarized its position as follows:

"While we [at CMS] have emphasized and will continue to emphasize the direct supervision requirement for off-campus provider-based departments, we are reiterating our expectation of direct physician supervision of all hospital outpatient therapeutic services, regardless of their on-campus or off-campus location" Appropriate supervision is a key aspect of the delivery of safe and high quality hospital outpatient services.."(emphases added).

Ober|Kaler's Comments

CMS's most recent statements warrant close attention. The clarification clearly signals an Agency concern that some hospitals are not doing what is necessary to ensure that outpatient therapeutic services are being adequately supervised. At the same time, CMS has added considerable confusion to the mix, introducing as much uncertainty as clarification into its guidance. Of particular concern is what does it mean to be "immediately available" in the context of HOPD services? Will Medicare contractors begin to apply physician/service proximity requirements as they have done in the past in the context of cardiac rehabilitation therapy, where, in the view of some contractors, a physician's presence in the treatment room was required? This seems unlikely, but the subject of physician supervision continues to be murky and in need of further clarification. Hospitals with concerns about CMS's clarification may wish to submit comments to the Agency by September 2, 2008.