Commentary: New Rules Help Clarify Medicare's 'Physical Presence' Issue
for Teaching Physicians
By Brent L. Saunders
Corporate Compliance Officer · Office of University Counsel
While they may not yet offer a complete solution, three new
rules issued by the Federal government should go far toward clearing much
of the ambiguity that surrounds the Medicare physician billing issue of
"physical presence." T
he rules take effect July 1, 1996, and every member of our medical and residency
staffs should become familiar with them. Understanding these new rules will
help to avoid costly mistakes with Medicare billing such as those so widely
reported in the press in recent months.
One issue has been the ambiguity surrounding the government's definition
of a teaching physician's "physical presence" during services
provided to a Medicare patient by a resident physician. Recently, the government
has taken the position that a teaching physician actually commits fraud
if the doctor submits a bill to Medicare for services a resident provides
when the teaching physician was not "physically present" while
the medical service was being given.
The problem has been, however, that the otherwise detailed statutory and
regulatory requirements regarding Medicare billing have never spelled out
a clear and understandable rule precisely defining "physical presence."
Through the years, Congress and the Health Care Financing Agency (HCFA)
have made many attempts to clarify these requirements. Historically, the
definition of "physical presence" has been misunderstood and inconsistently
applied by the carriers.
Now, finally, "help is on the way." And the help is in the form
of new rules published by the HCFA that clarify the physical presence requirement
as it applies to three specific areas of service.
As of July 1, the general rule will be that if a resident or fellow participates
in a service furnished in a teaching setting, reimbursement to the teaching
physician will be allowed only if that physician is present during the "key
portion" of a service or procedure.
The key phrase is "key portion." The new rules make clear what's
meant by "key portion" in each of three services:
(1) Surgical Procedures. According to the new regulations, the "key
portion" for surgical or other complex procedures requires physician
attendance during all critical portions of the procedure. In effect, this
means that the doctor must be at the resident's elbow during the entire
procedure, except the opening and closing when the physician still must
be immediately available (i.e., scrubbed and in the operating suite).
(2) Minor Procedures. Where a procedure is performed "through
an endoscope" the physician must be physically present during the entire
(3) Evaluation and Management Services. For these hospital and office
visits, as well as consultative services provided to patients, the physician
must be present during the portion of the service that determines the level
of the service being billed.
A narrow exception is permitted for certain E&M services provided by
residents in a primary care center. To be eligible for the exception, the
service must be furnished in a center located in the outpatient department
of a hospital, the resident must have completed at least six months of an
approved residency program and the physician may not supervise more than
four residents at any given time. The supervising physician must also be
immediately available to the resident and patient, have no other responsibilities
while supervising, review with each resident and assume management responsibility
for the patient.
In effect, these new rules require that after July 1, a physician only bill
for services that he or she performs or directly supervises. These new rules
should help avoid instances such as the severe damages incurred by the Clinical
Practices of the University of Pennsylvania (CPUP), which paid $30 million
to the Federal government to settle claims of false Medicare billings, and
by Montgomery Hospital of Norristown and three physicians who agreed to
pay $1.2 million. That the Federal government would pursue this issue so
zealously against two such dissimilar institutions indicates the seriousness
and comprehensiveness of the government's scrutiny.
Given the past inconsistency regarding the application of these rules, it
would seem logical to litigate these issues in court rather than settle.
Unfortunately, given the possibility of a court applying the Federal False
Claims Act, hospitals should be cautious about proceeding to litigation.
Under the False Claims Act an institution would face a fine of $10,000 per
occurrence and triple damages, thus raising the potential dollar amount
of damages exponentially. Fines of $30 million could become hundreds of
millions, thus chilling the potential to litigate.
Just as crucial to actually performing the work under the new rules is that
it be well documented in the medical record. To comply with these new rules,
it is imperative that the physician's involvement in the care of the patient
be recorded in the chart. The patient's chart will become the roadmap for
the government during any Medicare investigation. It should accurately reflect
the physician's active participation in the patient's care and the level
During the oncoming months, training and educational meetings will be held
throughout Jefferson concerning these new requirements so that we all may
become well versed in the government's changing requirements.