Medical Practice Management
May 07

Difference between direct and incident-to billing

This is where many practices have become confused.  Medicare has offered two different options for the non-physician providers that we are focusing on today, NPs, PAs and CNS.  Medicare has said that those providers can bill one of two ways.  Those methods are known as direct billing and incident-to billing.  The direct methodology is fairly straightforward.  Under this scenario the providers would go through the credentialing process with Medicare in the same way the physicians in the practice would. They would receive a provider number and as a result they would be able to submit bills to Medicare directly for their services.  If you actually looked at a printed copy of that claim form it would have the non-physician providers name and provider number at the bottom of the claim.  When practices choose to bill under this methodology there are a number of requirements.

The first requirement, and it is an obvious one, is that the provider be credentialed.  Beyond that they should know that there is a payment differential when billing using the direct methodology.  Medicare has indicated that when billing direct they will reimburse practices 85% of the physician allowable.  So there is a reduction in payment.  On the flip side, what practices gain by using this methodology is a little more flexibility and freedom relative to the regulations.  When billing direct there is no requirement from Medicare that the physician be in the office physically supervising that non-physician provider and the work that they are doing.  So, if the physician were at the hospital, making rounds or operating, it would be acceptable for the NP to be in the office seeing patients and billing for that work if they were billing direct.  The other issue that becomes important for practices to think about is how to schedule the various physician and non-physician providers.  When you bill direct Medicare has indicated that you have flexibility in the types of patients you see.  You can see new patients, you can see new patients with a collection of problems, you can see established patients, you can even see established patients who are coming to you with a new problem.  So Medicare gives you some flexibility in the kinds of patients that these non-physician providers are allowed to see and bill for when they bill direct.

The other option that Medicare has granted to this class of providers is what we call incident-to billing.  Under this scenario the non-physician provider wouldn’t have to go through the credentialing process.  They would simply bill for their work under the name and number of their supervising physician.  So if I printed a claim form that was going to be sent to Medicare in this instance at the bottom of the claim form it would list the physicians name and number and not the non-physician provider even if that was the person who performed the service.  Obviously to use this methodology a physician must be present in the office at the time the service was rendered by the non-physician provider and in fact it has to be that physicians name and number that is included on the claim form. 

In billing this way, practices do lose a little flexibility in terms of how they schedule their various physicians and non-physician providers.  The other issue that is sometimes problematic is that Medicare restricts when you use the incident-to billing methodology.  They indicate that that would only be acceptable for established patients who are returning to be seen with an established problem because by definition they would describe incident-to as a non-physician provider who is an extension of the physician completing ongoing care.  So, by default this methodology isn’t used for new patients or established patients who present with a new problem.  That can create some scheduling challenges for practices and practice executives may be thinking that with the increased supervision, what is the benefit of billing incident-to?  If you don’t have a credentialing provider number for the non-physician provider, incident to billing is your only option. But more importantly, what some practices are looking towards is the fact that when you bill incident-to, the practices are paid 100% of the physician allowable.  This makes sense because the physician’s name on the claim.  So some practices trade increased reimbursement for more restrictions in flexibility and scheduling needs.

About Reed Tinsley, CPA

As a top advisor to physicians, I help increase practice profits by delivering hands-on, expert medical accounting/tax support, practice counsel, and revenue-building strategies. Read more →