NCD 70.3: Physician's Office within an Institution Coverage of Services and Supplies Incident to a Physician's Services

Coverage of Services and Supplies Incident to a Physician's Services

Where a physician establishes an office within a nursing home or other institution, coverage of services and supplies furnished in the office must be determined in accordance with the "incident to a physician's professional service" provision, as in any physician's office. A physician's office within an institution must be confined to a separately identified part of the facility which is used solely as the physician's office and cannot be construed to extend throughout the entire institution. Thus, services performed outside the "office" area would be subject to the coverage rules applicable to services furnished outside the office setting.

In order to accurately apply the criteria in the Medicare Benefit Policy Manual , Chapters 6, §20.4.1, or Chapter 15, “Covered Medical and Other Health Services,” §60.1, the Medicare Administrative Contractor (MAC) gives consideration to the physical proximity of the institution and physician’s office. When his office is located within a facility, a physician may not be reimbursed for services, supplies, and use of equipment which fall outside the scope of services “commonly furnished” in physician’s offices generally, even though such services may be furnished in his institutional office. Additionally, make a distinction between the physician’s office practice and the institution, especially when the physician is administrator or owner of the facility. Thus, for their services to be covered under the criteria in the Medicare Benefit Policy Manual , Chapter 6, §20.4.1, or the Medicare Benefit Policy Manual , Chapter 15, “Covered Medical and Other Health Services,” §60.1, the auxiliary medical personnel must be members of the office staff rather than of the institution’s staff, and the cost of supplies must represent an expense to the physician’s office practice. Finally, services performed by the employees of the physician outside the “office” area must be directly supervised by the physician; his presence in the facility as a whole would not suffice to meet this requirement. (In any setting, of course, supervision of auxiliary personnel in and of itself is not considered a “physician’s professional service” to which the services of the auxiliary personnel could be an incidental part, i.e., in addition to supervision, the physician must perform or have performed a personal professional service to the patient to which the services of the auxiliary personnel could be considered an incidental part.) Denials for failure to meet any of these requirements would be based on §1861(s)(2)(A) of the Social Security Act.

Establishment of an office within an institution would not modify rules otherwise applicable for determining coverage of the physician’s personal professional services within the institution. However, in view of the opportunity afforded to a physician who maintains such an office for rendering services to a sizable number of patients in a short period of time or for performing frequent services for the same patient, claims for physicians’ services rendered under such circumstances would require careful evaluation by the MAC to assure that payment is made only for services that are reasonable and necessary.

5/1989 - Added statutory authority citation. Effective date NA. (TN 36)