QUESTION:        Our physician practice is a separate entity that employs both physicians and non-physician practitioners (“NPPs”).  Many of the physicians bill the NPPs’ services as “incident-to” services.  Our compliance officer wants to audit the “incident-to” billing and wants to know if there is a simple, straightforward way to conduct such an audit.

ANSWER:            Unfortunately, the answer is no.

Medicare does not require that a physician use any type of identifier or modifier in order to identify “incident-to” services.  This became an issue for the OIG in its report entitled “Prevalence and Qualifications of Non-Physicians Who Performed Medicare Physician Services,” OEI-09-06-00430 (August 2009).

The OIG began this report by conceding that “little is known about Medicare services that are performed ‘incident-to’ the professional services of a physician.”  The OIG noted in several places that it has no simple means to determine what services NPPs are providing to Medicare beneficiaries or the qualifications of those NPPs when the services are billed under the “incident-to” rule.

The OIG also recognized that there are a number of limitations to its study and cautioned against extrapolating the conclusions reached in this Report to the Medicare program as a whole.  Nonetheless, it is clear that the Report’s description of what NPPs do, their credentials and how they provide services is instructive to both the OIG and to practices that utilize NPPs.

But before we discuss the OIG Report, let us examine the Medicare “incident-to” rule.  This rule permits a physician to bill Medicare Part B at the full physician fee schedule amount for the services that are performed by an NPP, if the services are:   (i) furnished to beneficiaries who are not inpatients of a hospital or SNF; (ii) commonly provided in a physician’s office; (iii) an integral though incidental part of the services provided by the physician; (iv) included in a treatment plan for an injury or illness where the physician performs an initial service and is involved actively in the course of treatment; (v) commonly furnished without charge or included in the physician’s bill; and (vi) provided under the “direct supervision” of the physician (i.e., the physician must be present in the office suite while the services are being provided and immediately available to provide assistance).

In this report, the OIG wanted to audit exactly what Medicare was paying for when the program reimbursed claims for services that were billed under the Medicare “incident-to” rules.  However, because “incident-to” claims cannot be identified on the face of the claim, the OIG had no simple or direct means to identify “incident-to” claims.

As a result, the OIG had to formulate a means to identify “incident-to” billing.  In order to do so, the OIG looked at all the physician claims submitted to the program during the first quarter of 2007 and converted the E and M codes billed to a period of time using the Medicare Fee Schedule average time associated with each service.  The OIG then identified physicians who billed more than 24 hours in a single day, reasoning that the only ways to do so were either fraud or using NPPs.

Using this methodology, the OIG identified over 200 physicians who had billed more than 24 hours of services in a single day.  The OIG excluded a few physicians who were being investigated for billing fraud.  However, the OIG then determined that billing more than 24 hours in a day was not a concern to the OIG so long as the physicians complied with the “incident-to” rule.

The OIG then sent an audit request to the physicians who were part of the study, requesting that they identify the services that were being provided by the non-physician practitioners and the qualifications of those non-physician practitioners.

While the OIG found that most services billed using the “incident-to” rules were appropriate and most non-physicians involved in the care of those services were authorized to provide the service under state law, the OIG expressed the concern that a significant percentage of “incident-to” services may be performed by unqualified non-physician practitioners, concluding:

Unqualified non-physicians performed 21 percent of the services that physicians did not perform personally.  In the first 3 months of 2007, Medicare allowed $12.6 million for approximately 210,000 services performed by unqualified non-physicians.  These non-physicians did not possess the necessary licenses or certifications, had no verifiable credentials, or lacked the training to perform the services.  Non-physicians with inappropriate qualifications performed 7 percent of the invasive services that physicians did not perform.

The OIG study shows that “incident-to” billing is an area that your compliance program should review.  However, the study also shows the difficulty involved in conducting such an audit.

While you could use the OIG’s methodology, it is probably easier to visit each practice to observe whether the physicians who bill under the “incident-to” rules are following the requirements of the rules and to make sure that the services provided by the NPPs are within the scope of their state license.