Tighter imaging supervision requirements threaten hospitals; group contracts may be affected

July 15, 2010

New supervision requirements for diagnostic services provided to hospital outpatients could threaten the ability of many hospitals to meet Medicare requirements for outpatient tests. The rules took effect July 1.

New supervision requirements for diagnostic services provided to hospital outpatients could threaten the ability of many hospitals to meet Medicare requirements for outpatient tests. The rules took effect July 1.

Adopted by CMS under the 2010 Hospital Outpatient Prospective Payment System’s (HOPPS) final rule, the new standards come in a transmittal intended to further explain HOPPS physician supervision requirements. However, the transmittal may place unwarranted burdens on radiologists and ultimately affect Medicare patients’ access to hospital outpatient diagnostic services. If construed literally, many hospitals, particularly small or rural hospitals, may have considerable difficulty meeting the Medicare physician supervision requirements for outpatient tests.

The 2010 HOPPS final rule requires that hospitals performing outpatient diagnostic tests follow the same physician supervision level requirements (personal, direct, general) as physician offices and independent diagnostic testing facilities that are paid under the Medicare Physician Fee Schedule. For those tests that require direct supervision, a physician must be present on the premises and “immediately available” to furnish assistance and direction throughout the procedure.

In the transmittal, CMS defines immediate availability to require the “immediate physical presence of the physician.” CMS cites examples of situations in which a supervisory physician is not immediately available, as including “situations in which the supervisory physician is performing another procedure or service that he or she could not interrupt.” For services furnished on-campus, the supervisory physician may not be so physically far away from where hospital outpatient services are being furnished that he or she “could not intervene right away.” These additional clarifications could be interpreted as making the proximity requirements for supervising physicians more restrictive than the language of the 2010 HOPPS final rule.

CMS also lists additional requirements for the qualifications of the supervising physician. Consistent with the HOPPS rules, the transmittal states that nonphysician practitioners may not serve as “supervisory physicians” for hospital outpatient diagnostic services, even though they may be authorized to order and personally perform those diagnostic tests within the scope of their practice under state laws and hospital privileges.

CMS’s position on the 2010 HOPPS final rule was that physicians supervising diagnostic tests must be “knowledgeable” about the tests they supervise. This could apply to numerous physician specialties. But in the transmittal, CMS goes further by stating that a supervisory physician must also be “clinically appropriate to supervise the service or procedure” and “must have, within his or her state scope of practice and hospital-granted privileges, the knowledge, skills, ability, and privileges to perform the service or procedure.” It is unclear what qualifications a physician must have to meet these requirements.

CMS also states that a supervising physician must be able “to take over performance of a procedure and, as appropriate to the supervisory physician and the patient, to change a procedure or the course of care for a particular patient.” CMS does acknowledge that it does not expect a supervisory physician to act unilaterally without consulting a patient’s treating physician or practitioner. In the preamble language to the 2010 HOPPS final rule, CMS discussed similar requirements for physicians supervising hospital outpatient therapeutic (but not diagnostic) procedures, for which these standards seem more applicable. This attempt on the part of CMS to create uniformity between the therapeutic and diagnostic supervision requirements appears to create significant challenges for hospitals and for the radiologists who practice in those hospitals.

In the transmittal, CMS notes that hospitals are expected to have the credentialing procedures, bylaws, and other policies in place to ensure that hospital outpatient services furnished to Medicare beneficiaries are being provided only by qualified practitioners. As a practical matter, with the current, and significantly more restrictive, qualifications for supervising physicians, hospitals will have difficulty complying with these requirements and may look to contracted radiology groups to provide a heightened level of coverage for supervision.

Prior to issuance of the transmittal, many hospitals-appropriately, in our view-utilized emergency department or other nonradiologist physicians to serve as supervising physicians for outpatient diagnostic services provided on the hospital campus, particularly outside of regular business hours. However, hospitals may feel compelled to interpret the new transmittal language to require that the supervising physician have hospital privileges to perform the diagnostic tests being supervised and that only radiologists may supervise outpatient diagnostic tests.

Most hospitals have exclusive radiology services agreements with radiology groups. Generally, under these contracts, only radiologists who are members of the contracted group may exercise privileges for most diagnostic imaging services at the hospital. Along with exclusivity for radiology services, hospital contracts typically require the contracted radiology group to guarantee 24/7 coverage for radiology services. Many groups provide after-hours coverage by teleradiology or a contracted teleradiology service. Many small or rural hospitals may not have a contracted radiology group to provide night coverage and, even if they have exclusive contracts, there may not be a radiologist regularly onsite, even during daytime hours.

At present, most hospital radiology services agreements do not specifically address direct supervision responsibility. Should the transmittal be construed as requiring radiologists to supervise certain diagnostic tests, such as contrast studies, at all times for Medicare outpatients, many small or rural hospitals may not be able to meet the physician supervision requirement. This would undoubtedly reduce patient access to outpatient diagnostic imaging services in these remote areas.

The HOPPS rules make hospitals responsible for ensuring that their outpatient diagnostic services are supervised by qualified physicians. If these recent far-reaching terms of the transmittal stand, hospitals may focus on physician supervision as part of their compliance efforts and see failure to comply with the supervision requirements as a potential false claims liability.

A recent federal false claims action was brought against a nonhospital imaging provider for submitting claims for studies without the required level of physician supervision. In this case, a federal district court in Tennessee denied the imaging provider’s motion to dismiss and allowed the federal government’s action to proceed. As hospitals begin to implement new compliance policies and procedures to meet the HOPPS physician supervision requirements for diagnostic tests, they may seek to impose additional specific contractual obligations for radiology groups to be responsible for supervision, including direct supervision, of outpatient diagnostic tests at all times.

Time will tell us whether CMS will be forced to revise this latest transmittal, which appears to have gone way too far in imposing burdensome onsite requirements that may be difficult to follow.


Mr. Greeson is a partner in the healthcare group of Reed Smith LLP in Falls Church, VA. He can be reached at 703-641-4242 or tgreeson@reedsmith.com. Ms. Alcantara is an associate in the Life Sciences Health Industry practice group of Reed Smith, residing in the Falls Church, office of the firm.