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Are you collecting illegal dollars for "incident to" services?


Many doctors consistently break Medicare's mushy rules about billing for NPs and PAs, risking harsh penalties.


Are you collecting illegal dollars for "incident to" services?

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Choose article section... A rundown of Medicare's rules on billing for midlevel colleagues Should you drop incident-to billing? Despite the foggy regs, the Feds clamp down on "violators" Private insurers' different billing rules muddle the picture Don't lose money on NPs and PAs by undercoding Are you breaking Medicare's "incident to" rules? Take this test

Many doctors consistently break Medicare's mushy rules about billing for NPs and PAs, risking harsh penalties.

By Robert Lowes
Midwest Editor

A midsized medical group in southern Florida appears to be breaking a law it doesn't understand.

When a new Medicare patient visits the practice, he's often seen by one of the group's nurse practitioners. Nothing illegal about that. The problem is how the doctors bill for those visits.

Medicare requires that the bill be submitted under the NP's provider number, after which Medicare will pay a percentage of the usual physician reimbursement. To get full reimbursement, the doctor is supposed to have seen the patient first, before the NP performs any incidental or follow-up services. By billing Medicare under a doctor's provider number, the Florida physicians step over the line.

Numerous practices commit such infractions when they bill for services performed by NPs, PAs, and other so-called midlevel providers. Some doctors are scofflaws seeking to milk Medicare. But others, like those in Florida, are merely confused about how to submit midlevel claims correctly.

That's not surprising. Tedious Medicare regulations aren't always clear. Then there's the problem of local Medicare carriers, who not only process claims but interpret Medicare rules for doctors. What doctors are told frequently varies from carrier to carrier, says Michael Powe, director of health systems and reimbursement policy at the American Academy of Physician Assistants. "They're not always on the same page."

Philadelphia health care attorney Alice Gosfield wishes it were otherwise. "Medicare is a national program," she says. "The rules should be the same whether you're in Oregon or Georgia. Instead, Medicare allows the carriers to interpret the rules as long as they don't contradict them. We see inconsistency."

Doctors who employ midlevels and treat Medicare patients, therefore, need to be alert for reimbursement land mines, especially since this issue has attracted the attention of federal auditors. The coding experts we interviewed will help you watch your step.

A rundown of Medicare's rules on billing for midlevel colleagues

There are two ways to bill Medicare for the services of nurse practitioners, physician assistants, and nurse midwives in your employ. You can bill the program directly under that employee's Medicare provider number and receive the lion's share of your normal fee schedule—85 percent for NPs and PAs, 65 percent for nurse midwives. Or you can bill these services as "incident to" your own, and under your own number—if certain conditions are met. Obviously, you'll be paid better if you use incident-to billing.

HCFA spells out its rules for incident-to billing and how they pertain to NPs and PAs in its carriers' manual (published on the Web at www.hcfa.gov/pubforms/14_car/b00.htm; click on Part III, then on Chapters 2 and 16). They boil down to a few guiding principles:

The doctor initiates treatment. Here, coding experts say HCFA is explicit—the physician must see the patient first. For a service to qualify for incident-to, "there must have been a . . . service furnished by the physician to initiate the course of treatment," according to the carriers' manual.

Still, some doctors interpret that rule creatively to justify incident-to billing even when their NPs start treatment. "She does the history, gets the lab work, and creates a tentative treatment plan," says one Missouri FP. "Then I come in and have a look. If I agree with her, we have a treatment plan. There's no plan until I bless it." As Michael Powe puts it, "In the past, some carriers have loosely interpreted the need for the physician to see the patient for the first time."

The first-visit rule is black and white when it comes to new patients, but established patients fall into a gray zone. What do you do, for example, if a PA sees a woman on a follow-up basis for her asthma and she complains of a pain in her knee? Can the PA treat the new problem and bill that visit as incident-to? Or should he bring the doctor into the exam room to take over?

HCFA says it's up to Medicare carriers. Be warned, though: "The carriers are wildly variable on this," says attorney Gosfield.

The doctor supervises on-site. Physicians who want Medicare to pay for NP and PA services on an incident-to basis must oversee these professionals in person when the work's performed. The manual's dictum—"be physically present in the same office suite"—indicates that doctors needn't be in the exam room with the patient and the other provider, but you can't submit incident-to claims for an NP who's in a satellite office, or a PA who's seeing patients while you're on hospital rounds. And no, supervision by telephone won't cut the Medicare mustard.

Nevertheless, absentee supervision is the most common incident-to transgression, according to William Mazzocco Jr., president of Medical Administrative Support Services in Altoona, PA. It's not illegal for a midlevel colleague to see patients without you hovering nearby, he explains. You just can't submit an incident-to claim to Medicare. You're free, however, to submit a claim under the provider's number and settle for 85 percent of your fee. To secure this number, complete HCFA form 855 found at the agency's Web site (www.hcfa.gov/medicare/enrollment/forms/855-gen.pdf).

HCFA cuts some slack to group practices on the issue of oversight. If you're out of the office, a partner can fill in as supervisor. However, this provision harbors a vexing ambiguity. Which doctor is the nonphysician's service billed under—the doctor who initiated treatment or the substitute supervisor? Strict interpretation of HCFA regulations requires billing under the supervising doctor. Some practices do it the other way, so the first doctor can pocket the money.

The ambiguities don't stop here. What's the definition of an office suite? Could a doctor claim that he was supervising a PA even though they were on different floors of a two-story building? Again, HCFA punts to the carriers and the carriers disagree.

"Some carriers define office suite as the same floor, others as the same building," says Larry Tate, a reimbursement analyst for the 150-physician Springfield [IL] Clinic. "Our carrier for Medicare is stricter. They view a suite as a medical department such as family practice, even though it occupies just part of a floor."

The doctor continues to see the patient. Let's say you see a new Medicare patient, diagnose hypertension, and delegate follow-up visits to a PA. You're in the office during these visits. Is that all you have to do to qualify for incident-to billing?

No. The Medicare carriers' manual says the physician must render subsequent services "of a frequency that reflects his or her continuing active participation." HCFA doesn't bother to define "frequency," but carriers do, so ask your local Medicare carrier for its criteria. Unfortunately, you may not like what you hear. "One carrier says the doctor must see the patient every third visit in order to bill incident-to," says Alice Gosfield. "That's idiotic. There's no medical validity to that kind of schedule."

The nonphysician works in the right setting. You can bill a service as incident-to if it's performed outside a hospital, whether the location is your office, the patient's home, or a nursing home. Incident-to billing is not allowed for inpatient services, however. That means you can't take a midlevel colleague along on your hospital rounds and bill his work as incident-to. Nor can you hire an NP or PA to work with you in the ER and expect incident-to reimbursement.

The nonphysician is an employee. For incident-to billing to kick in, your staffers—medical assistants and regular RNs as well as NPs and PAs—must be either your employees or employees of your group. They can even be leased employees, receiving W-2s from an outside company but answering to you as if they were directly employed.

This rule doesn't normally trip up doctors, but it comes into play now and then, says Omaha CPA and health care consultant Dennis Grindle. "If you're out playing golf, you shouldn't ask a physician who's an independent contractor in your practice to step in and supervise."

Should you drop incident-to billing?

Some doctors have an easier time than others operating within the rules. "Many specialty practices lend themselves to incident-to billing because everybody's services are more defined," says Myra Wiles, a Medicare coding expert with Management Consultants in Oklahoma City. "A nephrologist orders dialysis for a patient with kidney disease, and a PA or NP assesses the patient's condition on a follow-up basis. It's unlikely that a midlevel would either initiate this treatment or deal with new medical problems. Ditto for an oncologist and a midlevel who administers chemotherapy."

Primary care is where incident-to billing becomes knotty. NPs and PAs aren't supposed to see new patients (and call the service incident-to), even though they're licensed to diagnose and treat most of what walks through the door. Confining them to follow-up visits becomes a theoretical enterprise. "It's rare that a follow-up patient doesn't complain of a new problem," says NP Jan Towers, director of health policy for the American Academy of Nurse Practitioners. New problems, of course, raise the question of whether a physician needs to intervene.

All these issues, plus the nagging necessity of physician supervision, have prompted some groups to shy away from incident-to billing. "Usually we bill Medicare under the midlevel's provider number," says Larry Tate at the Springfield Clinic. "We make less money than with incident-to, but it's simpler. For one thing, it's easier to schedule our doctors and midlevels."

The 120-physician Austin [TX] Regional Clinic is evaluating whether to do the same. "The question is, Do we accept a lower level of reimbursement under direct billing or bear the administrative burden imposed by incident-to?" says Jack Foster, the clinic's chief financial officer.

A switch to direct billing may even put a practice financially ahead, say coding experts. Relieved of regulation-driven supervision, doctors can use their time more productively. The same goes for the NPs and PAs.

"They can see new patients, which usually translates into higher-paying CPT codes because evaluation and management is more complex," says Myra Wiles. "Even at 85 percent of the fee, you still collect more than a lower code at 100 percent. For example, a 99213 office visit pays $46.20 in Oklahoma. Eighty-five percent of that is $39.27. That tops a 99212 visit worth $32.83."

Doctors who employ NPs and PAs ultimately may have to bill Medicare for the 85 percent. During the Clinton administration, HCFA wanted to severely curtail incident-to billing. The agency reasoned that if a claim bears a CPT code reflecting any level of physician work (as calculated in the resource-based relative value scale), a physician should perform the work. The plan would have banned incident-to claims for a medical assistant who, say, reads ECGs and X-rays. The proposal made a major exception, though—HCFA recognized that NPs, PAs, nurse midwives, and several other categories of providers can legitimately perform some physician-level work, but stipulated that the work be billed under their own provider numbers.

Congress never okayed the proposal, which is now up in the air as the Bush administration settles in. But Dennis Grindle predicts a congressional thumbs-up. "Get used to billing under a PA's or NP's number, because incident-to will disappear," he says.

Despite the foggy regs, the Feds clamp down on "violators"

The confusion over incident-to billing is one manifestation of how reimbursement customs lag behind the phenomenal evolution of NPs and PAs. State after state has broadened these professionals' scope of practice to the extent that midlevel providers can treat non-Medicare patients—including new ones—without a physician on the premises. But this autonomy, a big selling point of NPs and PAs, runs smack-dab against Medicare incident-to restrictions. "Those rules were designed for a health care system that doesn't exist anymore," says NP Jan Towers.

But while misunderstandings and inconsistent rule interpretations account for the vast majority of infractions, a few physicians blithely bill Medicare for incident-to services, knowing they haven't met the rules. "They don't want to give up that last 15 percent," says Dennis Grindle. It's tempting to try to sneak a false claim through the system—after all, to Medicare it looks as if the doctor did the work.

Concerned about fraud, and hoping to trim costs, the Office of Inspector General in the US Department of Health and Human Services has made catching incident-to violators a high priority. The irony is rich, considering how Medicare and its carriers have failed to clearly distinguish legal from illegal. Nevertheless, auditors are busy sniffing out bogus claims. HCFA and the OIG aren't so much interested in an occasional slipup as a consistent pattern of flouting the rules. Doctors found guilty of fraudulent billing face severe penalties under the federal False Claims Act, says Pittsburgh health care attorney William Maruca.

"Let's say the claim was for $100," says Maruca. "You'd have to pay it back plus triple that amount in damages, or $400. They can also fine you up to $11,000 per claim and kick you out of Medicare and Medicaid. If they think you're a real bad apple, they'll press criminal charges."

Maruca notes that the False Claims Act generously rewards whistle-blowing employees or ex-employees—up to 30 percent of what the Feds collect. Your own PA or NP could turn you in.

"I'm not saying never to bill incident-to," he says, "but if you bill directly, under your PA's or NP's number, you're clearly taking less risk."

Private insurers' different billing rules muddle the picture

When it comes to billing for the services of nurse practitioners and physician assistants, complying with Medicare rules is sufficiently perplexing. Private insurers, however, use another set of rules. It's enough to make your head spin, although payers are slowly moving toward uniform policies.

Plans that pay doctors a capitated rate avoid NP and PA reimbursement hassles, because there's no billing per se. And these plans usually don't mind if the provider mix includes NPs and PAs.

But fee-for-service health plans are a different story. Most of them give you only one option for billing for NP or PA services. You have to submit the claim under a supervising doctor's provider number. Loosely speaking, that's like Medicare's incident-to billing. These insurers may borrow some of Medicare's rules, such as a doctor's being needed to initiate treatment, but skip others. Very few private health plans give you the option—available under Medicare—of billing the service directly under the NP's or PA's provider number.

Complicating matters, more insurers are beginning to recognize NPs and PAs in their own right. Blue Cross and Blue Shield of Massachusetts, for example, expects to issue provider numbers to these professionals later this year. The insurer will pay 85 percent of the physician fee schedule for their services, even when there's no physician supervising onsite, says internist James Fanale, senior vice president of health care services. Reimbursement climbs to 100 percent when a doctor's on the scene. These percentages mirror those of Medicare.

Hastening this trend among insurers are new state insurance laws, pressure from NP and PA societies, and Medicare's increasingly liberal approach to midlevel providers. Thanks to the Balanced Budget Act of 1997, physicians can directly bill Medicare for the services of an NP or PA regardless of the setting. Before that law, the option of billing under the midlevel's number depended on a hodgepodge of rules. A practice in a rural area deemed by the federal government to be medically underserved could directly bill Medicare for an office visit handled by a PA; a medical practice in the big city couldn't. Now the rules are the same everywhere.

Commercial health plans are merely playing catch-up with Medicare, says NP Jan Towers, director of health policy for the American Academy of Nurse Practitioners. "It will take a while for everyone to get on track."

Don't lose money on NPs and PAs by undercoding

To maximize revenue, many doctors break Medicare's rules on billing for the services of nurse practitioners and physician assistants. Others, however, leave thousands of dollars on the table because their NPs and PAs undercode.

NPs and PAs generally can use the same CPT evaluation and management codes that a physician would select if he or she were doing the work. It doesn't matter whether the service is billed under the midlevel's provider number or under the doctor's number on an incident-to basis.

Some NPs and PAs consistently undercode because they suffer from an inferiority complex, says Medicare coding expert Myra Wiles. "They think, 'I'm not a doctor, so I shouldn't code like one.'" Case in point: An NP sees a new patient, diagnoses a sinus infection, and prescribes an antibiotic. This kind of office visit usually justifies a CPT code of 99213, says Wiles. But some NPs choose the lower-paying 99212. They might even bump down to 99211, which doesn't reflect any degree of physician-level work.

It's not just modesty that motivates NPs and PAs to undercode. It's also fear. Several Medicare carriers have challenged claims with high-level CPT codes for services rendered by these professionals. However, HCFA has told the carriers to accept such claims as long as NPs and PAs were operating within the scope of their licenses, according to Omaha CPA Dennis Grindle.

No matter why it occurs, undercoding is costly. "Every time an NP or PA undercodes by one level, the practice loses $12 on average," says Myra Wiles. "If an NP sees 25 patients a day and undercodes each visit, the practice loses $300 a day, $1,500 a week."

Are you breaking Medicare's "incident to" rules? Take this test

Exercise caution when you bill for midlevel services under Medicare's incident-to rules. They're widely misunderstood, often ignored, and likely to be enforced with greater zeal soon. The following scenarios, developed with the help of Omaha CPA and health care consultant Dennis Grindle, will test your incident-to knowledge—and perhaps help you avoid an incident with a Medicare auditor.

Mrs. Jones, a new patient, calls and asks for a same-day appointment because of pain that she experiences when urinating. Your schedule is full, but your NP has a time slot open, so she handles the visit. Can you bill her work as incident-to?

No. You haven't satisfied the incident-to requirement that a physician initiate the course of treatment. Medicare wants you to see the patient first. Then you're free to delegate incidental services to a staffer and bill them as incident-to.

So in the case of Mrs. Jones, submit the claim under the NP's provider number.

Two weeks ago, you diagnosed Mr. Smith with eczema, and today he's in the office with your PA, who's determining whether the medication you prescribed is working. Meanwhile, you're walking a golf course with a cell phone on your belt. You instructed the PA to ring you if he has any questions. Can you bill Mr. Smith's visit with the PA as incident-to?

Nope. Better bill this one under the PA's Medicare number.

At least you qualify for incident-to on one count—the PA is following up on your initial visit with the patient. But you must be on hand to supervise the PA. You needn't be in the exam room with him. But you must be somewhere in the office, immediately available for consultation. Being reachable by telephone doesn't count, even though that may satisfy state requirements for supervision.

Once again, your PA is seeing Mr. Smith for his eczema. You're rounding on patients at the hospital, which is connected to your building by walkways. Is it okay to bill incident-to now?

It's not. Even though the hospital is connected to your office building, it's still not your office. Medicare states that "the doctor must be physically present in the same office suite" before incident-to applies. Use the PA's number to bill.

You're rounding on hospital patients, and this time you brought along your PA. He conducts physical exams on several patients, and later you pop your head into their rooms and review the results. Can you bill the exams under incident-to?

Sorry, no. Maybe you satisfy the supervision rule this time. But Medicare doesn't permit incident-to billing for inpatient services. Your only alternative is billing the exams under the PA's provider number.

Three months ago, you diagnosed Mr. Hillary with high cholesterol and put him on a regimen of medication, exercise, and diet. Today, your NP is assessing his progress. You're out of town attending a medical convention, but one of your partners is in the office. Is the visit with the NP eligible for incident-to billing?

Yes. Medicare states that the doctor who initiates the course of treatment doesn't need to be the same physician who oversees a staffer performing an incidental service. So your partner can do the supervising. Most coding experts recommend, though, that you bill this work under the supervising doctor's Medicare number.

Mr. Hillary calls the office and gets an appointment with your NP to deal with a new medical problem—itchy eyes and a runny nose. The NP diagnoses allergic rhinitis and prescribes a medication. You're in the office during this visit. Incident-to?

Probably not, although some Medicare carriers do allow it. The Medicare manual for carriers says incident-to services are furnished "as part of a physician's personal professional services in the course of diagnosis or treatment of an injury or illness." Like other coding experts, Dennis Grindle interprets this bundle of regulations conservatively. Every new problem, he says, requires an initial visit with the physician before incident-to services can be billed.

In this scenario, says Grindle, bill the visit under the NP's number even though you'll receive 15 percent less. "Take the hit," he advises, "and play it safe."


Robert Lowes. Are you collecting illegal dollars for "incident to" services?. Medical Economics 2001;8:89.

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