Big Changes to Federal DHS Supervision Rules

By: Jeff Cohen

Proposed changes to the “incident to services” rule in the 2016 Medicare Physician Fee Schedule are set to seriously impact how medical practices provide certain services, bill for them and share income from those services.

Incident to services are services or items that are furnished as an integral part of the professional services of a physicians or other practitioner in the course of diagnosis or treatment.  80 Fed. Reg. at 41785.  They are billed to CMS as though the physician actually provided the service.  One of the rule’s key requirements is that a physician directly supervise the performance of the services, which has meant that a physician who is part of the practice has to be physically present in the office when the services are provided.  If, for instance, a physician in the practice was present when physical therapy or diagnostic imaging was provided to a patient, the services could be billed to CMS as though the physician actually provided the services, even though the service was provided by, for instance, a licensed physical therapist or imaging technician.       Continue reading

Tuomey Court Has A Lot to Say

bcbs lawsuit


By: Jeff Cohen

The Tuomey decision, U.S. Court of Appeals case out of South Carolina, contains important lessons for physicians, especially as it relates to (1) compensation arrangements with hospitals, (2) proper compensation arising in connection with the provision of designated health services (“DHS”), and (3) the advice of counsel defense.

The concept of DHS arises largely in the context of the federal Stark Law, which in pertinent part (1) forbids physicians from owning and referring to providers of DHS (e.g. PT, rehab, diagnostic imaging, home health, DME, clinical laboratory, inpatient and outpatient hospital services), (2) describes how medical practices can provide DHS to their own patients, and (3) forbids even physicians within a practice from allocating DHS profits on the basis of who ordered or referred to them.

The Tuomey case involves a whistleblower action filed against a not for profit hospital system.  The original jury in that case decided that the system didn’t violate the False Claims Act, but the appellate court set aside the verdict using facts and testimony that had be excluded from the jury trial, Tuomey Healthcare System was found to have knowingly submitted over 21,000 false claims to Medicare and the government was awarded over $237 Million (most of it in the form of punitive damages).  The government (which often advances the plaintiff’s—“relator” case in whistleblower cases) filed a motion for a new trial, which the trial court granted and the appellate court affirmed.

The case involves the following: Continue reading

Medicare Patient PT Supervision is Confusing

 Physicians with Florida medical practices that provide physical therapy must feel at times they are playing “Whack a Mole,” given the many changes to the applicable rules and regulations, especially those that pertain to Medicare patients.  Is it ok for a physical therapy assistant (PTA) to provide the services?  Can the practice provide PT to people who are not patients of the practice?  Does a physician have to be on premises when PT is provided?  It’s just complex.

Let’s start with a couple fundamentals:  first, medical practices that comply with the so called “group practice” exceptions (under both state and federal law) are permitted to provide PT to their own patients.  They are more accurately known as the “In Office Ancillary Services Exception,” but most refer to them as described above.  These exceptions dictate, for instance, the form of the practice and how much time each physician has to spend practicing through the group.  For instance, if the practice does not have at least two of the following, it does not meet the group practice requirements:  physician owner; physician W-2 employee.  Second, PT falls under both the state and the federal definitions of “designated health service” (DHS).  DHS are services that are regulated by the Stark Law and also (at the state level) by the Florida Patient Self Referral Act of 1992 (FPSRA).  They are very similar laws, but with some key differences.  Where many physicians go wrong is to ensure compliance with federal laws but not state or vice versa.

Why is it important to know that this discussion is confined to Florida “group practices” providing PT to Medicare patients?  First, because the laws that apply to group practices are different that those that apply to reference PT businesses.  Businesses that only provide PT are not nearly as regulated as medical practices (especially those in Florida) that provide both medical services and PT to their own patients.  For instance, the issue of “outside referrals” does not arise with respect to reference PT businesses.  Second, because when Medicare patients are involved, both state and federal law come into play.  While state law applies to all services provided in Florida, federal law only comes into play when federal or state healthcare program dollars are involved.

Medical practices in Florida that provide DHS (like PT) to their Medicare patients have to comply with both state and federal law.  And those laws are different.  For instance, while federal law allows up to 25% of the time of doctors in a group practice to be spent providing services outside the group, state law is not so clear.  For instance, federal law allows a practice to provide DHS to a certain amount of patients who are not patients of that group practice (“outside patients), but Florida law allows that sort of flexibility only for “diagnostic imaging services” (up to 15%).  If, for instance, a Medicare patient from Dr. Smith down the street comes to your office only to get the PT your practice provides to its patients (i.e. they are not a patient of your practice), that patient will be turned away.  Isn’t it ok for a Florida medical practice to provide just PT to someone else’s Medicare patient?  No, because state law does not allow it.

Similarly, under federal law, a physician complies with certain supervision requirements if he or she is in the building where the medical practice is located while a Medicare patient receives DHS.  In Florida, the physician in a group practice is required to be in the office (not just the building) when a Medicare (and every other) patient receives DHS in order to comply with the stricter “direct supervision” requirement applicable to patients in Florida that receive DHS (all DHS, not just PT) from a group practice.

Once a physician clears those regulatory hurdles, how can a doctor bill for PT?  Essentially, there are two ways:  under the provider number of the physical therapist or under the provider number of the supervising physician.  The situation gets even more complex when a physical therapy assistant (PTA) gets involved.

Can a Florida medical practice bill under the provider number of a supervising MD for PT provided by a PTA to a Medicare patient?  No.  While applicable law requires an MD or DO to be on premises when a Medicare patient receives PT from the group practice, services provided by a PTA are considered by CMS to be included as part of the covered service under Section 220 and 230 of the Medicare Benefit Policy, Chapter 15.  A Florida doctor may not lawfully supervise the services of a PTA, since PTAs (under federal law) that provide services in a medical practice must be directly supervised by an RPT.

There are also state laws that need to be followed, they differ based on physician specialty.  For instance, a PTA employed by a physician other than a board certified orthopedist, physiatrist or chiropractor certified in physiotherapy must be under the onsite supervision of an RPT.  Though inapplicable to Medicare, there is no provision in Florida law that allows a chiropractor to supervise a PTA.

What about if the PT services are provided by a registered physical therapist (RPT)?   Though CMS does not recognize the term RPT, it does allow the services of a “qualified professional,” which includes a licensed physical therapist, to be billed either under the physical therapist’s provider number or “incident to” the services of the supervising MD or DO.   “Incident to” services are services that are so integral to the services provided personally by the physician that they can be billed to Medicare as though the physician provided the service, even when the physician didn’t provide them.  To comply with the rule (and for the doctor to be able to bill for it as though he or she did provide the service), the services must be:

1.         An integral though incidental part of the physician’s service in diagnosing or treating an illness or injury,

2.         Commonly furnished without charge or included in the physician’s bill;

3.         Commonly furnished in a physician’s office or clinic;

4.         Furnished under the physician’s direct supervision (e.g. physical presence in the office);

5.         Furnished by the physician, practitioner with an incident to benefit or auxiliary personnel.

Though the incident to services rule is materially different from the Florida “direct supervision” requirement under the FPSRA, its effect is very similar:  an MD or DO must be physically present on the premises of the office when a patient receives DHS and it is billed under the provider number of the supervising physician.  One might argue that the PT’s services could be billed under the PT when the MD or DO is not on premises, but this conflicts with the direct supervision requirement of the FPSRA.

What’s the Analysis?

To comply with the State and Federal supervision requirements, group practices in Florida that provide PT to their Medicare patients must ask themselves at least the following questions:

1.         Does my practice comply with the state and federal “group practice” requirements? and

2.         Is an MD or DO in the office when the patient receives PT?  If not, the PT may not be provided at all, since all PT in Florida group practices require direct supervision by a physician.

What are the Penalties?

At the very least, doctors who fail to comply with the supervision requirements for DHS risk (1) AHCA licensure actions; (2) having to repay the money received when they did not comply; (3) having to pay stiff fines, and in some instances (4) criminal prosecution.  There have been many reported cases of physicians being investigated and fined for failing to meet the supervision requirements.  And there have been numerous instances of physicians being prosecuted for failing to meet the “incident to services” rule.

            If you provide PT to your patients, you must be clear about (1) the “group practice” exception provisions that allow you to provide DHS to your patients, and (2) the State and federal supervision requirements.  There is simply too much at stake not to.  Additionally, physicians ought to develop clear and easy to use written guidelines for compliance.

Download a Quick Guide to PT Supervision HERE

New Appeals Court Decision Streamlines Stark Challenge

Normally, challenges to healthcare related regulatory changes have to jump through an administrative hoop before they can file suit.  They can’t just run to court.  They have to go through CMS first and allow CMS the opportunity to justify the new regulation.  A recent appellate court ruling changes this.

The Council for Urological Interests (CUI) is a national organization of physician-owned joint ventures.  As many readers know, for instance “under arrangement” lithotripsy services, for instance, are a common joint venture type business for urologists to be engaged in.  The CUI filed suit in response to 2008 changes to the Stark Law, which would have interfered with certain urology-centered joint venture businesses, but the lower court dismissed the suit because the CUI was first required to go through “administrative review” required by the Medicare Act.  The appellate court disagreed and agreed to hear the CUI suit.  The case should make it easier to file legal challenges in response to regulatory changes, like Stark Law developments.

The case is also important because the Stark Law change in 2008 (effective in 2009) made it difficult (impossible in some instances) for physicians to act as service providers to hospitals.  These “under arrangement” transactions were ok because the hospitals billed for the “designated health services,” not the doctors.  The Stark Law change, effective in October, 2009, interfered with such relationships (between physicians and hospitals) by determining that the “under arrangement” providers were actually providing the service (even though the hospital, not the doctor entity, billed for the service).

Though the jury is still out on the substance of the CUI lawsuit (whether the Stark changes are unlawful), the case will pave the way for more legal challenges of this type.