Health Care Alert
July 23, 2009
Authors:
Mary Beth F. Johnston
marybeth.johnston@klgates.com
+1.919.466.1181
Kelly D. Furr
kelly.furr@klgates.com
+1.919.466.1240
Katharine L. Schaeffer
kathy.schaeffer@klgates.com
+1.919.466.1114
K&L Gates is a global law firm with
lawyers in 33 offices located in North
America, Europe, Asia and the Middle
East, and represents numerous GLOBAL
500, FORTUNE 100, and FTSE 100
corporations, in addition to growth and
middle market companies,
entrepreneurs, capital market
participants and public sector entities.
For more information, visit
www.klgates.com.
Proposed Rules Seek to Offer Hospitals
Clarity and Flexibility
On July 1, 2009, the Centers for Medicare and Medicaid Services ( CMS ) issued
proposed revisions to policies and payments to be made to hospital outpatient
departments under the Outpatient Prospective Payment System (the 2010 Proposed
Rule ).1 These proposals, if finalized, would take effect on January 1, 2010. Of
particular note to hospitals are changes that CMS is proposing in response to industry
claims that guidance is currently unclear with regard to the location of physicians
providing direct supervision required for payment of certain outpatient services
performed in hospital on-campus departments. The revised regulations as proposed
by CMS expand (i) the locations where physicians may provide supervision of
outpatient services and (ii) the category of professionals that may provide
supervision under certain circumstances. Both changes would offer hospitals
additional flexibility in meeting supervision requirements.
Hospitals will also find instructive CMS discussion of billing requirements in Type
A and Type B emergency departments ( EDs ) in the 2010 Proposed Rule. CMS did
not propose any significant policy changes with regard to the ED categorizations
which went into effect January 1, 2009, but CMS does propose the creation of a new
level 5 payment specific to Type B EDs. This modification in the 2010 Proposed
Rule, however, serves as a reminder with the introduction of this new payment
scheme that ED billing may be subject to stricter scrutiny.
Physician Supervision of Outpatient Services
Background
The Medicare program requires that hospitals providing therapeutic or diagnostic
outpatient department services to program beneficiaries meet supervision
requirements as a condition of payment. Currently, the direct supervision
requirement for hospital outpatient services provides that a physician must be present
on the premises and immediately available to assist in and direct the procedure,
though the physician is not required to be physically present in the room where the
procedure is performed.2 For a hospital comprised of a single building, meeting this
requirement has been straightforward, but determining where a physician may
adequately provide supervision of outpatient services provided at a hospital spanning
a large campus and consisting of several buildings and provider-based departments
has been more difficult.
Historically, CMS had suggested that it assumed that the supervision requirement for
services furnished in an on-campus department would be met because physicians
would be nearby within the hospital.3
1
The 2010 Proposed Rule was published in the Federal Register on July 20, 2009. 74 Fed. Reg.
35,232 (July 20, 2009).
2
42 C.F.R. § 410.27.
3
65 Fed. Reg. 18,434, 18,525 (Apr. 7, 2000).
Health Care Alert
In 2008, however, CMS expressed concern that the
industry may have misconstrued this guidance to
mean either that supervision in a hospital or in an
on-campus provider-based department was not
required, or that only general supervision was
necessary.4 CMS stated, 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 oncampus and off-campus departments of the
hospital, and required that the physician must be
present in the provider-based department.5 Many
providers saw this commentary as a change in
position by CMS with which they could not readily
comply. For example, could a physician in one
department no longer supervise an outpatient service
provided in another department within the same
physical hospital facility?
2010 Proposed Rule
In the 2010 Proposed Rule, CMS responds to
questions and concerns raised by the 2008 guidance
by proposing to change the direct physician
supervision required for outpatient therapeutic
services furnished in a hospital6 or in an on-campus
provider-based department. If finalized as proposed,
the direct supervision requirement for outpatient
therapeutic services that are billed under the
hospital s CMS certification number and provided
on the hospital s main campus, whether in the
hospital or an on-campus provider-based
department, could be met by a physician who is
present either in the hospital or in an on-campus
provider-based department of the hospital, provided
that such physician is immediately available to
furnish assistance and direction throughout the
procedure. CMS proposes to define in the hospital
as locations in the main hospital building(s) (i) that
are under the ownership, financial, and
administrative control of the hospital, (ii) that are
operated as part of the hospital, and (iii) for which
the services furnished are billed under the hospital s
CMS certification number. In commentary, CMS
clarifies that an individual providing direct
supervision may not be located in co-located, nonhospital space, such as, for example, a physician s
office, independent diagnostic testing facility or
skilled nursing facility. Thus, a supervising
physician could not meet the requirement by being
present in a separately certified facility (i.e., with a
different Medicare number), even if that facility is
owned by the hospital and located on the hospital s
campus. With regard to off-campus provider-based
departments, consistent with its position in 2008,
CMS reiterates that physicians must be present in
the off-campus provider-based department to
comply with the direct supervision requirements.
In commentary, CMS also notes that immediately
available generally means without interval of
time. Accordingly, a supervising physician could
not be engaged in another procedure that could not
be interrupted, and should be available right away to
provide direction or even perform the procedure if
necessary. Further, CMS notes that the physician
must have the adequate privileges and scope of
practice to be able to furnish appropriate assistance.
In other words, while the physician does not have to
be a member of the same department as the
physician ordering the services, he or she should be
privileged by the hospital to provide assistance in
the specialty that he or she is supervising.
In another step to offer hospitals more flexibility in
meeting supervision requirements for outpatient
therapeutic services, CMS proposes that nonphysician practitioners may directly supervise all
such services that they can perform under state law
and in accordance with their hospital privileges.
CMS proposes to define a non-physician
practitioner as a physician assistant, nurse
practitioner, clinical nurse specialist, certified nurse
midwife, and clinical psychologist. This extension
of the scope of professionals that may provide
supervision would not apply to cardiac, intensive
cardiac and pulmonary rehabilitation programs or
outpatient diagnostic services. Furthermore, this
proposed change does not alter general Medicare
requirements related to physician collaboration with
or supervision of non-physician practitioners.
4
73 Fed. Reg. 68,502, 68,702-03 (Nov. 18, 2008).
See id. at 68,702-04.
6
CMS clarified that these rules also apply to critical access
hospitals.
5
With regard to outpatient diagnostic services, CMS
proposes that the required level of physician
supervision for all such services, whether furnished
directly or under arrangements in a provider-based
July 23, 2009
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Health Care Alert
department, the main buildings of a hospital, or a
non-hospital location, would be governed by (i) the
Medicare Physician Fee Schedule Relative Value
File, or (ii) if such services are not listed in the file,
the supervision requirements set forth by Medicare
contractors. Previously, the regulatory text had only
addressed diagnostic services performed in providerbased departments of hospitals. Where direct
supervision is required for services provided (a) in
the hospital or an on-campus provider-based
department or (b) in an off-campus provider-based
department, CMS is proposing conforming changes
to the applicable regulatory text, so that the same
definitions of direct supervision as apply to
outpatient therapeutic services would apply to all
such outpatient diagnostic services.
Background
Prior to 2007, hospitals reported three different
types of visits for reimbursement: clinic visits, ED
visits, and critical care services. Reimbursement for
ED visits was only available for services provided
in an ED, which the Current Procedural
Terminology ( CPT ) defined as an organized
hospital-based facility for the provision of
unscheduled episodic services to patients who
present for immediate medical attention. The
facility must be available 24 hours a day. If a
facility provided emergency services, but was open
for less than twenty-four hours a day, providers
could not use the ED codes and were required to bill
the services as clinic visits, resulting in lower
reimbursement rates.
If finalized in their current form, the physician
supervision provisions would give hospitals more
clarity and flexibility in complying with supervision
requirements for on-campus outpatient services.
Nonetheless, limitations on this flexibility remain-physicians supervising outpatient services performed
on-campus must be immediately available and
located in the hospital or an on-campus providerbased department of the hospital under the hospital s
ownership, administrative and financial control, and
billed under the hospital s CMS certification
number. This requirement would preclude a
physician from providing direct supervision when in
a co-located facility on the hospital s campus, such
as a home health agency, skilled nursing facility, or
independent diagnostic testing facility.
Regardless of the hours of operation, however, all
Medicare-participating hospitals with EDs must
comply with the Emergency Medical Treatment and
Labor Act ( EMTALA ), and provide certain
services to any individual that comes to a dedicated
emergency department. The definition of a
dedicated emergency department under EMTALA
is broader than the CPT definition for an ED set
forth above and includes facilities that are not open
twenty-four hours a day, seven days a week. The
practical result was that a subset of hospital EDs
was required to comply with EMTALA, but could
only be reimbursed at the lower clinic visit rates
because the facility was not open twenty-four hours
per day, seven days per week.
Emergency Department Billing
The 2010 Proposed Rule also includes a discussion
of appropriate billing for services provided in EDs.
In its Hospital Outpatient Prospective Payment
System final rule ( 2009 OPPS Final Rule )7 which
became effective January 1, 2009, CMS indicates
that it will carefully monitor billing practices to
ensure that hospitals properly distinguish between
Type A and Type B EDs and that failure to do so
could result in further compliance review.
7
73 Fed. Reg. at 68,680-86.
In response to these concerns, CMS distinguished
between Type A and Type B EDs in the 2007
Outpatient Prospective Payment System final rule
(the 2007 OPPS Final Rule ).8 Type A EDs were
defined as those that: (i) are available to provide
services twenty-four hours per day, seven days per
week; and (ii) are either licensed by the state in
which they are located as an emergency room or ED
or held out to the public as a location providing care
for emergency medical conditions on an urgent
basis without requiring an appointment. The 2007
OPPS Final Rule defined Type B EDs as those
dedicated emergency departments that incurred
EMTALA obligations but did not meet the Type A
definition.
8
71 Fed. Reg. 68,124, 68,145 (Nov. 24, 2006).
July 23, 2009
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Health Care Alert
Subsequently, CMS has fielded a number of
questions regarding how to distinguish between
Type A and Type B EDs in commentary and on the
Frequently Asked Questions ( FAQs ) section of the
CMS website.9 In this guidance, CMS has clarified
that the distinction between Type A and Type B EDs
applies to: (1) off-site provider-based satellite EDs;
(2) on-campus provider-based EDs; and (3) Fast
Track 10 areas in a hospital. Each must be evaluated
individually and a specific decision regarding each
area of the hospital, on or off-site, must be made to
determine whether Type A or Type B codes are
appropriate for services provided at that particular
location. CMS has emphasized that the main
distinguishing feature between Type A and B EDs is
the full-time versus part-time availability of staffed
areas for emergency medical care, not the process of
care or the site of care (on the hospital s main
campus or offsite). 11
Specifically, CMS stated that an area of a hospital
that provides emergency outpatient visits and closes
at 10 P.M. each evening is a Type B ED and should
be carved out from the rest of the ED and bill
Type B ED codes. The other parts of the ED that are
available twenty-four hours per day should continue
to bill Type A ED codes. A Fast Track area that
typically closes at 10 P.M., but remains available for
use after hours when occasional overcrowding
occurs in the larger ED, is also considered a Type B
ED. However, CMS distinguished the situation in
which a Fast Track area is closed at 10 P.M., but
is available, fully staffed and integrated into the
9
See CMS s Frequently Asked Questions, FAQ IDs 8310,
8304, 8305, 8306, 8308, 8309, 8302, 8303, available at
https://questions.cms.hhs.gov/cgibin/cmshhs.cfg/php/enduser/std_alp.php?p_sid=Zx9NzpDj.
10
Fast Track areas are usually designed to reduce the
volume at the main ED by caring for less severe patients that
could have been treated in an urgent-care or physician-office
setting. They are typically separate areas of an ED that are
only available during specific times of the day.
11
One commentator specifically requested that CMS consider
a fast track area of an emergency department located within
the same building as a Type A emergency department, [as]
Type A, regardless of its hours of operation, if it provides
unscheduled emergency services and shares a common
patient registration system with the Type A emergency
department. 73 Fed. Reg. at 68,683. CMS declined to do so.
Since the facility was not regularly and customarily fully staffed
24/7, CMS considered it a Type B ED.
larger ED after 10 P.M. In this case, CMS would
classify the area as a Type A ED because it is fully
integrated into the larger ED and continues to
remain available and fully staffed twenty-four hours
per day, seven days per week.
Thus, as of January 1, 2007, hospitals were
authorized to report four different types of visits for
reimbursement: clinic visits, Type A ED visits,
Type B ED visits, and critical care services.
Payments to hospitals for Type B visits continued to
be based on the clinic payment rates, but CMS
created a reporting mechanism to gather data on the
costs associated with Type B visits for future
modification to the outpatient prospective payment
system for these services.
In response, the 2009 OPPS Final Rule created a
new payment methodology to account for the
differences in costs associated with Type A and B
ED visits. Visits to a Type B ED are now assigned
their own Health Care Procedure Coding System
G Code and Ambulatory Payment Classifications
( APC ), as well as five visit levels (1 through 5)
based on the severity and intensity of the services
provided. Level five visits to a Type B ED are
assigned the same APC as a level five Type A visit,
because CMS determined that Level 5 visits should
be reimbursed at essentially the same rate regardless
of whether the services were provided at a Type A
or Type B ED.
2010 Proposed Rule
In the 2010 Proposed Rule, CMS offers one notable
change to the current ED payment mechanism.
CMS proposes a new level 5 payment specific to
Type B EDs, which, as noted above, is currently
assigned the same APC as the level 5 Type A ED
service. CMS suggests that further data has
identified lower costs associated with these level 5
Type B ED services; therefore, CMS is proposing to
use a new APC for level 5 Type B ED visits, which
will significantly reduce reimbursement for these
services. In the end, this continued focus by CMS
on ED visit billing should remind hospitals to
ensure that they appropriately identify whether
existing services are provided in a Type A ED or
Type B ED and properly classify by type their
services as they expand into new locations.
July 23, 2009
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Health Care Alert
Conclusion
Interested parties may submit comments with regard
to CMS proposals in the 2010 Proposed Rule by
August 31, 2009. Providers should stay tuned for
more guidance later this year, as CMS expects to
release the final regulations by November 1, 2009.
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July 23, 2009
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