Incident to Billing: Bill at Your Own Risk

June 7, 2013

With continually declining reimbursements and rising expenses, physicians are exploring all options to maximize profitability. One such way is to bill the midlevel providers’ services as “incident to,” which allows the midlevel providers’ services to be reimbursed at the higher physician reimbursement rates.

While many physicians bill services incident to, many are unaware of the requirements that must be satisfied and the potentially costly penalties if the requirements are not satisfied.With the government’s constant focus on health care, physicians who bill services incident to should become well versed in the incident to billing requirements. This article provides a primer, a 101 if you will, on Medicare’s incident to billing requirements and some common pitfalls physicians encounter with incident to billing.

I.  Incident to Billing Requirements

  1. Generally, Medicare pays for services and supplies that are furnished incident to a physician’s professional service to be covered incident to the services of a physician, services and supplies must be:
  2. An integral, although incidental, part of the physician’s professional service;
  3. Commonly rendered without charge or included in the physician’s bill and of a type that are commonly furnished in physician’s offices or clinics; and
  4. Furnished by the physician or by auxiliary personnel under the physician’s direct supervision.

Each of these requirements is discussed below.

A.  Incident to the Physician’s Professional Service

To qualify as an incident to service, the Carriers Manual states that the midlevel provider’s services must be “furnished during a course of treatment where the physician performs an initial service and subsequent services of a frequency which reflect [the physician’s] active participation in and management of the course of treatment.” Therefore, a physician must perform the initial visit and establish the treatment plan for subsequent services provided by a midlevel provider to qualify as incident to. The physician, however, does need to see the patient at each visit, but the physician must see the patient often enough to demonstrate that the physician is actively participating in and managing the patient’s treatment.

B.  Commonly Rendered Without Charge/In Physicians’ Offices

Services and supplies commonly furnished in physicians’ offices are covered under the incident to provision. If supplies are clearly of a type that a physician is not expected to have on hand in a physician’s office or where services are of a type not considered medically appropriate to provide in the office setting, they are not covered under the incident to provision. With extremely limited exception, services and supplies furnished outside of the physician’s office are not covered under the incident to provision.

Supplies usually furnished by the physician in the course of performing the physician’s services, e.g., gauze, ointments, bandages, and oxygen, are covered as long as the charges for such services and supplies are included in the physicians’ bills. To be covered, supplies must be an expense to the physician. For example, where a patient purchases a drug and the physician administers it, the drug is not covered. However, the administration of the drug, regardless of the source, is a service that represents an expense to the physician. Therefore, administration of the drug is payable if the drug would have been covered if the physician purchased it.

C.  Direct Personal Supervision

“Auxiliary Personnel”

Coverage of services and supplies incident to the physician’s professional services is limited to situations in which there is direct physician supervision of “auxiliary personnel” providing the incident to service, including midlevel providers. “Auxiliary personnel” means any individual who is acting under the supervision of a physician, regardless of whether the individual is an employee, leased employee, or independent contractor of the physician, or of the legal entity that employs or contracts with the physician (e.g., the physician’s practice entity).

“Supervising Physician”

The supervising physician also may be an employee, leased employee or independent contractor of the legal entity billing and receiving payment for the services or supplies (e.g., the practice entity). However, the physician supervising the auxiliary personnel furnishing the incident to services or supplies must have a relationship with the legal entity billing and receiving payment for the services or supplies that satisfies the requirements for valid reassignment as identified in the Medicare Carriers Manual.

Services and supplies incident to a physician’s service in a “physician directed clinic” or group practice are generally the same as those described above. A “physician directed clinic” is one where: (i) a physician (or a number of physicians) is present to perform medical (rather than administrative) services at all times the clinic is open; (ii) each patient is under the care of a clinic physician; and (iii) the incident services are under medical supervision.

Carriers Manual contemplates that direct supervision may be the responsibility of several physicians as opposed to an individual treating physician. In this situation, the treating physician need not be the physician supervising the incident to service. However, the supervising physician must also treat patients. In other words, the supervising physician cannot be a moonlighting physician whose only function is to provide direct supervision of incident to services while the practice’s treating physicians are out of the office.


“Direct Supervision”

“Direct supervision” means the supervising physician must be present in the office suite and immediately available to provide assistance and direction throughout the time the auxiliary personnel is performing the incident to service. Direct supervision does not mean the supervising physician must be present in the same room in which the auxiliary personnel is performing the incident to service. Neither the regulations nor the Manuals define what constitutes the “office suite.” However, it clearly does not include anywhere outside of the practice’s premises.

II.  Common Problems Associated with Incident to Billing

New Complaint during Incident to Service

Since a midlevel provider’s services must be “furnished during a course of treatment” to qualify as incident to, the question arises whether a follow up visit with a midlevel provider that is pursuant to the physician’s treatment plan qualifies as incident to the physician’s professional service if the patient has a new complaint that requires a new treatment plan. The answer to this question is unclear. On the one hand, the midlevel provider’s treatment of the new complaint occurred during the course of treatment established by the physician. However, on the other hand, since the midlevel provider, and not the physician, established the treatment plan for the new complaint, arguably the physician is not actively participating in and managing the treatment.

Documentation of Compliance with Incident to Requirements

Even if all of the incident to billing requirements are satisfied, physicians still can run into problems if the records do not document compliance. For example, if a physician was present in the office suite during incident to services, but there is no record to confirm the physician’s direct supervision, the physician would be unable to prove compliance with the direct supervision requirement.

No Provider Number for Midlevel Providers


For some reason, many physicians do not obtain provider numbers for their midlevel providers. This is a recipe for disaster. As identified by this article, not all services provided by midlevel providers satisfy the incident to billing requirements. Consequently, if the government audits the physician’s incident to services and discovers that the services were non-compliant, arguably the entire payment for the services constitutes an overpayment. However, if the midlevel provider had a provider number, the physician could argue that the overpayment is limited to fifteen percent of the payment received, since Medicare should have paid 85% of the actual payment for the midlevel provider’s services.

III.  What Now?

Since the financial consequences for billing incident to services improperly can be devastating, physicians who bill incident to should adopt incident to billing policies and procedures regarding. At a minimum, the policies and procedures should identify the incident to billing requirements; identify how to document compliance with the requirements; require provider numbers for all midlevel providers; and require auditing of a random sample of incident to services for compliance with the requirements. Training regarding the policies and procedures should include all involved in the billing process, including the physicians and midlevel providers.

Reed Tinsley, CPA is a Houston-based CPA, Certified Valuation Analyst, and Certified Healthcare Business Consultant. He works closely with physicians, medical groups, and other healthcare entities with managed care contracting issues, operational and financial management, strategic planning, and growth strategies. His entire practice is concentrated in the health care industry. Please visit

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