Incident to: Old wine in modern bottles

By Alice G. Gosfield, Esq., March 1, 2021

Every month, DermWorld covers legal issues in “Legally Speaking.” This month’s author, Alice G. Gosfield, Esq., is a health care attorney at Alice G. Gosfield and Associates, P.C.

"Return with me now to the thrilling days of yesteryear” when Medicare was enacted in 1966 among full-throated cries from organized medicine of the advent of socialized medicine. Think of what the typical physician practice looked like then: A solo practicing physician, usually a man, in an office with one support person, uniformly referred to in those days as “the girl.” This person might have been an on-the-job trained medical assistant, a laboratory technician who had graduated from a vocational training school program, a registered nurse (in very fancy practices), and often the physician’s wife. That person performed virtually all support functions in the practice: taking vital signs, doing reception, transcription, billing, and performing venipunctures and EKGs. If the laws had said Medicare would pay only for those services rendered personally by the physician, no one would have participated. So, from the earliest days of its promulgation, as established in statute and regulation, Medicare pays for those services which are “integral although incidental” to the physician’s personal, professional service to the patient.

When services and or supplies are billed “incident to” the physician’s services, they are invisible on the claim form — they are billed as if the physician performed or delivered them. This recognition permits physicians to expand their capacity to provide care to their patients. If they get it wrong, however, they are subject to false claims liability. The fact that nurse practitioners (NPs) and physician assistants (PAs), billed on their own numbers, get paid at 85% of what the physician does, is also relevant. Additionally, the concept of “incident to” applies only in Medicare and only in the physician office. This article describes the conditions to bill “incident to,” considers how they might apply in a dermatology practice, and then explores their broader application for compensation purposes within a physician group.

What qualifies?

The first requirement is that there must be a physician service to the patient to which the additional incident to services relate. It is also possible for services to be incident to a nurse practitioner (NP) or a physician assistant (PA), but all the same requirements apply as if they were physicians, for this purpose. A visit by the patient with the physician to establish a course of treatment is sufficient for the services in fulfillment of that treatment plan to be considered incident to.

The most critical determinant of qualifying services, however, is that there must be a physician in the group on premises within the office suite — not across the street at the hospital even if connected by a bridge; not on a different floor of the office building, unless that space is part of the primary lease establishing what space qualifies as the office suite. After the initial physician service, a medical assistant, if permitted by state law, an NP, a PA, an RN, or an LPN can provide services that fulfill the plan, including the administration of drugs.

The supervising physician need not be the physician whose treatment plan the incident to services fulfill, but a physician in the same group must be on premises in the office suite and immediately available to assist at all times the ancillary personnel are providing incident to services. This is the definition of direct supervision: The physician and other personnel need not be in the same room with the patient, but a physician must be in the office suite. If this standard cannot be met, NP or PA services must be billed on their own number, and services of others who cannot bill on their own numbers become non-billable.

Because there have never been modern, clarifying regulations addressing incident to itself (although several attempts failed), there is occasionally some dispute over what happens if the patient presents with a new symptom. Years ago, at least one carrier had a rule for a while that the physician had to see the patient every third visit. That was eliminated as arbitrary and inconsistent with the law. Another carrier asserted that any new symptom, no matter how minor, required the initiation of a new plan of care with a new visit by the physician. This is not addressed explicitly in manual provisions. Occasionally the MACs publish their interpretations of these rules, so it is always a good idea to check the Local Coverage Determinations for your jurisdiction, to be safe.

Compensation implications

Under the Stark statute, which is applicable only to Medicare and Medicaid and only to physician referrals for designated health services (DHS), the law defines how internal group practice compensation must be conducted to meet the definition of a group practice. Meeting that definition is a prerequisite to be able to bill for in-office ancillary services, for example. Generally, no compensation is permitted that rewards a physician for the volume or value of the DHS, a specified list, that they order within the group. This includes outpatient prescription drugs, clinical laboratory services, and imaging, among others. That said, the compensation provisions specifically permit a physician to be compensated for what they do personally and for those services which are incident to their services. These are referred to as productivity bonuses for Stark purposes.

Against that background, there are a host of services which are not DHS for which the ordering physician may be given dollar-for-dollar credit. These include services of ancillary personnel performing E/M services, or giving injections including the drugs themselves. One of the conundrums in the history of Stark, however, is that in 2007 — turning their back on then 40 years of the Medicare program — the regulators announced that diagnostic testing (all of it and not just DHS) could never be “incident to” a physician. For Stark purposes, this means that no clinical laboratory services, no anatomic pathology, no imaging of any kind, may be provided incident to a physician. The further significance is that any services not directly rendered personally by the physician, that are Stark diagnostic testing services, can only be allocated to physicians in a profit-sharing formula.

Stark profit sharing

There is no requirement that any group engage in profit sharing among its physicians. Similarly, there is no obligation that physicians be given direct credit for their incident to services. These are opportunities that the law makes available; but if a group chooses to do either, they have to do so consistent with the law and regulations.

On Dec. 2, 2020, the Stark regulators published changes to the group practice rules regarding compensation that will take effect Jan. 1, 2022. All of the other issues they addressed in a 191-page publication in the Federal Register took effect Jan. 1, 2021, but the group practice compensation provisions have been delayed for a year. Profits — monies remaining after the expenses associated with the services have been paid — are permitted to be shared among any subset of five physicians as long as the profits encompass all the DHS profits in aggregate. This is a clarification of something that had been interpreted to permit modality-specific profit sharing (e.g., profits from imaging shared with one subset, profits from infusions with another set of physicians, profits from clinical laboratory with yet a third set, or even with overlapping sharing). Profit-sharing programs with such characteristics can continue until Jan. 1, 2022, but thereafter the group will no longer qualify as one if the profit sharing is not compliant.

The new regulations allow subsets of at least five physicians in a group to share profits as they always have. However, they have clarified that each subset can be paid using a different methodology. They offer two examples in their discussion of the regulations but ran out of ideas for an approach for the third option. One subset of physicians could be paid on a per capita basis, a second subgroup based on personal productivity, which includes incident to services, and yet a third group who might be paid differently; although they did not offer a suggestion, it could be based on number of patient encounters. If a group includes fewer than five physicians, the same methodology must be used for all the physicians.

Conclusion

Ancient in regulatory terms, the incident to rules are today a vital aspect to both compliant claims submission as well as compensation within physician groups. It took the government more than 22 years after the law’s enactment to impose the first settlement for improper internal compensation for diagnostic testing as incident to when that approach had been rendered non-compliant by the change in the rules. The “incident to” requirements have confounded both physicians and attorneys for years. My earliest published article on the subject that I can remember was in 1984, and I have been explaining the rules ever since. I cannot overemphasize the need to get these rules right in your practice.

This article is provided for informational and educational purposes and is not intended to provide legal advice and should not be relied upon as such. Readers should consult with their personal attorneys for legal advice regarding the subject matter of this article.

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