The Centers for Medicare and Medicaid Services (CMS) (formerly the Health Care Financing Administration) recently issued Program Memorandum B 01-28 establishing, by CPT code, the level of physician supervision required for coverage of diagnostic tests with a technical component and payable under the Medicare Physician Fee Schedule. Effective for dates of service on and after July 1, 2001, the new supervision requirements have important implications for providers of diagnostic tests. The program memorandum liberalizes supervision requirements for many diagnostic ultrasound and nuclear medicine tests, but it also imposes more stringent requirements for certain other tests.
Coverage Rules for Diagnostic Tests
Medicare covers diagnostic tests pursuant to § 1861(s)(3) of the Social Security Act and implementing regulations issued by CMS. With certain exceptions set forth in the regulations, Medicare coverage of a diagnostic test has four general requirements: the Medicare beneficiary’s treating physician orders the test; the test is medically necessary; the test is performed by a physician, a group practice of physicians, an independent diagnostic testing facility (IDTF) or certain non-physician providers; and the diagnostic test is performed under the appropriate level of physician supervision.
There are three levels of physician supervision for diagnostic tests in ascending level of supervision by the supervising physician: "general supervision;" "direct supervision;" and "personal supervision." With certain exceptions, diagnostic tests payable under the Medicare Physician Fee Schedule require at least the general supervision level.
General supervision means the test is furnished under the physician's overall direction and control, but the physician's presence is not required during the performance of the procedure. While the physician does not even need to be in the building during the performance of the test, the training of the non-physician technician who actually performs the test and the maintenance of the necessary equipment and supplies are the continuing responsibility of the supervising physician.
Direct supervision means the physician must be present in the office suite and immediately available to furnish assistance and direction throughout the performance of the procedure. It does not mean that the physician must be present in the room when the procedure is performed.
The highest level of supervision is personal supervision, which requires a physician to be in the same room where the test is performed.
Scope of Physician Supervision Requirements
The supervision requirement for diagnostic tests applies to most diagnostic tests payable under the Medicare Physician Fee Schedule, including tests in many specialized areas of physician practice such as radiology, ultrasound, nuclear medicine, cardiography, echocardiography, cardiac catherization, pulmonary, allergy, neurology and sleep disorders.
However, the supervision requirement does not apply to all Medicare-covered diagnostic testing. All clinical laboratory tests are excluded from the supervision requirements because the Clinical Laboratories Improvement Act regulates the quality and supervision of laboratory services payable under the Medicare Clinical Diagnostic Laboratory Fee Schedule. In addition, the Public Health Service Act and implementing regulations issued by the Food and Drug Administration regulate diagnostic mammography and provide for the conditions under which mammograms are covered under Medicare. Finally, Medicare permits certain diagnostic tests to be performed by specified non-physician health care professionals such as psychologists, audiologists, physical therapists and nurse practitioners without physician supervision.
Provisions included in the hospital outpatient prospective payment system regulations require a hospital outpatient department, which CMS designates as having provider-based status, to comply with the supervision requirements in order to obtain coverage of diagnostic tests. Accordingly, for tests performed in an outpatient department, hospitals may not rely on the presumption of direct supervision under the "incident to" rules. Further, the supervision requirements do not apply to diagnostic tests furnished to hospital inpatients.
Finally, CMS is still studying and has deferred its determination as to the appropriate level of supervision for certain diagnostic tests (e.g., Positron Emission Tomographic imaging tests). In these cases, Local Medical Review Policies (LMRPs) and other carrier guidance continue to guide coverage determinations after July 1, 2001.
Supervision Levels Under the Program Memorandum
With the issuance of the program memorandum, the carriers are to apply uniform supervision requirements when making coverage determinations involving diagnostic tests furnished on or after July 1, 2001 (and within the scope of the program memorandum). The program memorandum assigns one of the three levels of physician supervision to each diagnostic test by CPT code. For instance, ultrasound, nuclear medicine testing and MR and CT studies without contrast require only general supervision. MR and CT studies with contrast require direct supervision. Interventional radiology procedures, cardiac catherization and certain other diagnostic cardiology testing require personal supervision by a physician.
The program memorandum revises the levels of supervision originally required for certain tests as part of the preamble to the 1998 Medicare Physician Fee Schedule and then suspended by CMS in January of 1998. The program memorandum reduces the level of supervision for nuclear medicine tests from direct supervision to general supervision. In addition, the program memorandum lowers the level of supervision required for most diagnostic ultrasound procedures and echocardiography and cerebrovascular arterial studies, to general supervision. However, the program memorandum also requires higher levels of supervision for certain diagnostic ultrasound procedures involving a patient’s head and neck region.
Implications for Providers of Diagnostic Tests
The supervision levels under the program memorandum have important implications for providers of diagnostic tests and for organizations with financial arrangements with such providers.
The supervision levels affect the operation of physician offices, IDTFs, certain hospital outpatient departments and other providers of diagnostic tests by establishing the amount of time and attention that physicians must devote to supervision of technicians and other non-physician personnel who perform the technical component of diagnostic tests. In the case of providers submitting claims for tests that currently require a greater level of physician supervision of non-physician personnel for coverage than required under the program memorandum, the providers may reduce the level of supervision beginning on July 1, 2001. For tests that the program memorandum requires greater supervision than currently necessary, providers must increase their level of supervision in order to submit a proper claim for payment.
As a result of the hospital outpatient department prospective payment system regulations, certain departments may need to change their physician staffing practices in order to obtain coverage of diagnostic tests requiring physical presence at the department location (i.e., direct or personal supervision). Under the regulations, any outpatient department that CMS designates as having provider-based status must now comply with the supervision requirements in the program memorandum to obtain coverage of diagnostic tests payable under the Medicare Physician Fee Schedule. The program memorandum does not affect hospital outpatient departments that are not required to obtain provider-based status designation. (For more information about hospital outpatient departments that must seek a provider-based status determination, refer to the April 14, 2000 and December 21, 2000 Health Law Updates.)
The supervision requirements may also cause some providers to change their medical record charting practice for diagnostic tests. For instance, a physician may want to document his or her presence during the performance of a diagnostic test when the program memorandum requires personal supervision.
The supervision requirements will, in certain cases, make it easier to comply with the Stark Law. The in-office ancillary service exception to the self-referral prohibition under the Stark Law requires, in part, that the physician "directly supervise" non-physician personnel performing any one of the Stark Law’s designated health services. In the final Stark II rule effective January 4, 2002, CMS no longer interprets the Stark Law exception to always require direct supervision, i.e., a physician is physically present and immediately available to provide assistance and direction throughout the time that the ancillary service is being performed. Rather, for example, when Medicare coverage only requires general supervision, general supervision will satisfy the requirement of the Stark Law’s in-office services exception. CMS interprets direct supervision to mean the level of supervision required under applicable Medicare and Medicaid coverage rules. This change in the program memorandum should be particularly helpful to physician group practices with remote site diagnostic facilities. (For more information about the final Stark II rule, refer to the January 26, 2001 Health Law Update.)