Physician Supervision of Hospital Outpatient Departments: CMS Theory and Provider Reality Continue to Diverge

On Nov. 20, 2009, the Centers for Medicare & Medicaid Services (CMS) will publish the Medicare hospital outpatient prospective payment system for calendar year 2010. The notice will include a discussion of CMS’s expectations for physician supervision of hospital outpatient department therapies. CMS will reiterate its demand that a physician must be “immediately” ready to intervene and to conduct or modify the procedure that is under way. 

Many hospitals may not be able to do what CMS requires and, as a result, will face the potential risk of noncompliance. Hospitals are faced with a Hobson’s choice between convincing  physicians to provide a much greater level of supervision than has been thought necessary until now, or continuing historical practices, which may leave them exposed to the possibility of whistleblower litigation under the False Claims Act.¹

Background

The Medicare statute defines categories of benefits for which payment will be made. Two of the original categories are payments to physicians and to hospitals using identical language: “services incident to physician services.” Over time, the Health Care Financing Administration (HCFA) and CMS devoted more attention to “incident to” services provided in physicians’ offices and less to services provided by hospitals to hospital outpatient departments.² For want of a better category, many of the services that hospitals either provided or initiated were paid under the “incident to” label.

In 2000, HCFA adopted the hospital outpatient prospective payment system. In describing the scope of physician supervision of therapeutic services, HCFA stated what hospitals and physicians had long considered to be the rule: Physician supervision in the hospital outpatient department was “assumed.”

CMS changes its position

CMS published a “restatement and clarification” of its expectations as part of the proposed rule for 2010. CMS was concerned that some were interpreting the “assumption” test to mean that no supervision was required. Drawing upon Part B incident to rules, CMS now states:

“[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 [Outpatient Prospective Payment System] 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 … . [R]egulations [state] that Medicare Part B pays for hospital services and supplies furnished incident to a physician service to outpatients if they are provided “as an integral though incidental part of a physician's services.³

CMS also “played the quality card,” suggesting that hospital outpatient procedures without the “direct supervision” of physicians might be of lower quality. CMS offered no empirical justification that federal action was necessary to improve the quality of care provided in hospital outpatient departments.

The statements caused serious concerns in hospitals, particularly in rural areas. Some said there is no clinical need for a uniform level of supervision for all hospital outpatient therapeutic services. One example cited frequently was outpatient chemotherapy services. Consider the plight of one rural Midwest hospital, as described in a comment submitted to CMS:

• The hospital is a critical care access hospital in a rural setting. Through a relationship with an urban oncology group, the hospital has been providing chemotherapy since 1984.
• The hospital has maintained a Commission on Cancer Certificate of Approval since 1993.
• The hospital provides chemotherapy Monday through Friday from 8 a.m. to 4 p.m.
• The urban oncologists are not at the hospital every day. One visits every fourth week and another visits every week.
• Physician coverage is in the emergency room.
• In an emergency, the oncologists are consulted via their cell phones.
• “Limiting our ability to give chemotherapy only when the med onc [medical oncology] physician is at the location will [exacerbate] an already shortage (sic) in medical oncology physician staff presence in all clinic and hospital settings. Our goal is to serve our community with the hightest (sic) level of health care available and keep their care local.”⁴

In response to comments like these, CMS made a minor concession, but held fast to the most troublesome and unrealistic requirements. The concession involved allowing supervision by physician extenders (within the confines of state law),⁵ but CMS made only a modest and internally inconsistent reform concerning physician supervision. Examining some of the comments and CMS’s responses shows the depth of its misunderstanding.

Provider comment: Why does CMS need a supervision requirement in the outpatient context when there is no inpatient requirement?

CMS response: “Given that hospital inpatients generally have medically complex conditions requiring a high level of acute care, we have not established explicit supervision requirements in regulations because we believe hospitals would have physicians or other qualified practitioners available at all times that complex hospital inpatient services are being furnished.”

Rural provider comment: Critical access hospitals (CAHs) and rural hospitals would be required to hire staff solely to supervise services and that this extra cost would force these hospitals and CAHs to eliminate services. 

CMS response: The supervisor only needs to be there when outpatient therapeutic services and procedures are furnished. The supervisory practitioner can be located anywhere on the hospital campus.

Hospital associations’ comment: They recommended that CMS remove the phrase “immediately available to furnish assistance and direction throughout the performance of the procedure.” 

CMS response: The supervising practitioner may be located anywhere on the same campus of the hospital, as long as he or she is immediately available to furnish assistance and direction throughout the performance of the procedure. The supervisory practitioner is not immediately available, however, while performing another procedure or services that he or she could not interrupt, or so far away that she could not intervene “right away.”
 
Editorial observation: CMS’s response is puzzling. It is unclear how a physician is immediately available to supervise a procedure in one department at the same instant that the physician is physically in another part of the hospital complex, perhaps even in another building some distance away.

Hospital associations’ comment: We have systems in place to ensure the quality of outpatient services. A better rule is to define direct supervision for therapeutic services to mean that the physician may be on or in close proximity to the campus and able to respond in a timely manner according to the hospital’s policies and bylaws. Requiring physical presence in every instance is impractical; instead, the supervising practitioner should be able to supervise services via telephone.

CMS response: We know that hospitals take quality of care seriously and are subject to accreditation requirements. We know that hospitals have leadership, credentialing procedures, bylaws and other policies in place to ensure that services furnished to Medicare beneficiaries are provided by qualified practitioners in accordance with all applicable laws, regulations and coding guidance. But we are not changing our minds.

Comment: Many disagreed with the requirement that the supervising physician should have hospital-granted privileges and the ability to perform the services being supervised. Instead, the supervisor should provide medical consultation and attend to medical emergencies.

CMS response: We believe the practitioner must be prepared to step in and perform or to change procedure.

Editorial comment: It is a rare practitioner who has the privileges or ability to step in and perform or change every outpatient procedure “immediately.” It is extremely rare that a physician will have a broad range of privileges across multiple specialties. The more outpatient therapies a hospital provides, the more physician supervisors it will need.

Comment: This is no “restatement or clarification,” but rather a significant change in policy that may create potential liability due to qui tam litigation.

CMS response: The rule has been that way since 2000, but we will exercise discretion in seeking sanctions for services provided between 2000 and 2008. 

Conclusion

The rule that CMS is imposing may be impossible for many hospitals to follow. Hospitals should consider forming a team of compliance personnel, clinical managers and legal support to assess their outpatient operations in light of CMS’s new position on physician supervision requirements. The options or solutions may vary with the circumstances.

It is possible that some hospitals may conclude that they need to create a new class of physicians dubbed “outpatientalists,” and pay them to respond immediately and only supervise “incident to” procedures. Even then, the variety of outpatient procedures that a hospital may provide throughout the day could make it difficult to ensure that the designated outpatientalist has the appropriate skill, privileges or ability to supervise a given procedure.

Compliance with CMS’s new view on physician supervision may well be costly. In the current economic environment, hospitals may face some very tough choices in how to address the legal risks, particularly given the lack of any quality or other benefit gained by strict compliance with the new rules.

FOOTNOTES

1 For example, a recent court decision, U.S. ex rel. Lockyer v. Hawaii Pacific Health, 490 F.Supp.2d 106, 1079 (D. Hawaii 2007), analyzed the billing of a group medical practice that billed for chemotherapy services using provider numbers of “supervising” physicians who were not physically present.  The court found negligence but not the required evidence that the hospital knew or recklessly disregarded that fact.  Now that CMS has clarified its expectations, hospitals will be much less likely to be able to successfully disclaim knowledge or recklessness.

2 It is beyond the scope of this article to discuss the physician supervision rules in hospital outpatient departments that are located away from the main campus, other than to note that CMS has long been suspicious of those departments and the facility fee that they generate

3 Federal Register Public Inspection Document 2009-26499 [Filed: 10/30/09 at 4:15 p.m.; Publication Date: 11/20/2009] at 933-34.

4 http://www.regulations.gov/search/Regs/home.html#documentDetail?R=0900006480a00d0f

5 It is beyond the scope of this article to address either physician supervision of diagnostic hospital outpatient services or the authority of physician extenders (e.g., physician aids, nurse practitioners and others), to supervise services.