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Letter on PATH Initiative from Harriet S. Rabb

July 11, 1997

Jordan J. Cohen, M.D.
President
Association of American Medical Colleges
2450 N Street, N.W.
Washington, DC 20037-1127

P. John Seward, J.D.
Executive Vice President
The American Medical Association
515 North State Street
Chicago, Illinois 60610

Dear Drs. Cohen and Seward:

The Secretary directed me to explore the concerns raised by the Association of American MedicalColleges, The American Medical Association and others regarding the Office of Inspector General's (OIG's) Physicians at Teaching Hospitals (PATH) initiative. Doing a thorough review has taken more time than I would have hoped. However, I am now able to offer a considered and informed judgment on this matter.

At the outset, I would like to thank you for the information and materials your organizations provided to me and my colleagues regarding PATH. Your efforts were quite helpful in broadening our understanding of this matter. In addition, we reviewed our own documentary history and engaged in extensive discussions with senior officials in the Health Care Financing Administration (HCFA) and OIG. I appreciate that the Inspector General and her colleagues undertook considerable work with my Office to explain their practice and perspective on this matter.

In review of the level of interest in and concern over this matter, it may be useful for me to lay out my thinking on the legal basis for audits of teaching physician claims under PATH. One factor critical to my thinking has been the need to distinguish Part B from Part A reimbursement for physicians in hospitals.¹ As you know, supervision of interns and residents by teaching physicians is reimbursed under Medicare Part A through graduate medical education (GME) payments. By this mechanism, teaching physicians are paid for taking responsibility for the hospital's oversight of its doctors in training. It would be absurd to assert that physicians could receive the significant remuneration that characterizes Part B reimbursement for supplying the same level of services that qualifies and was paid for as Part A services. The physical presence of a physician with the treating intern or resident at the time of treatment is one clear indication of a more patient-specific level of responsibility for the physician entitling her or him to Part B, rather than Part A, reimbursement. That view is consistent with both common sense and the history of this subject as recounted below.

Over the past months, my colleagues and I have reviewed hundreds and hundreds of pages of documents related to the issue of physician presence as an element of Part B reimbursement. Over decades, there have been numerous policy issuances describing the circumstances in which Medicare Part B payments would be made to teaching physicians. The sample that follows offers a sense of their pattern and content.

HCFA's statements on this subject are contained in various forms and appear in diverse iterations. The standard for making Part B teaching physician payments is variously expressed as requiring "personal and identifiable direction" to interns or residents or, in the case of major surgical procedures or other complex and dangerous situations, as requiring "personal and identifiable direction . . . includ[ing] supervision in person."² Elsewhere, the touchstone is "either perform[ing] the physician's services . . . or supervis[ing] the treatment . . . by interns, residents or others . . ." or, in the case of major, complex or dangerous situations, "be[ing] present and ready to perform any service."³

A central office memorandum⁴ sent to all Part B carriers instructed that services would be covered where the record shows "the presence of the physician, with sufficient frequency, on occasions of services rendered . . . ."⁵ Another central office memorandum states that attending physicians may bill for Part B services "where entries in the medical record indicate that the physician was, at a minimum, present when the service was rendered."⁶

In 1976, the Medicare Carriers Manual was amplified by instructions that Part B payment was to be made when the physician provided "personal and identifiable direction to interns or residents . . . ." For major surgical procedures and other complex and dangerous procedures or situation, "such personal direction must include supervision in person . . . ."⁷

A 1980 statutory amendment provided that teaching physician services would be payable under Part B only if "the physician renders sufficient personal and identifiable physicians' services to the patient to exercise full, personal control over the management portion of the case for which the payment is sought . . .."⁸

In 1995, HCFA recognized that its issuances were "vague, perhaps necessarily, on the matter of the presence of the physician . . ."⁹ This acknowledgment by the agency was consistent with one that appeared in a proposed but not finalized rule published in 1989, where HCFA recognized the wide differences among teaching hospitals in the levels of physician involvement as well as a need for HCFA to specify the level of involvement necessary to justify Part B payment to teaching physicians.¹⁰ Much of the complication may have been attributable to the twin concerns of physician presence and meeting the attending physician standard. In order to reduce the complexity of making those determinations, HCFA said in the preamble to its 1995 regulation: "We believe that the most important consideration should be the presence of the teaching physician during the key portion of the service . . . and that requiring both an attending physician relationship and the presence of that same physician during every billable service is no longer warranted."¹¹ Consequently, HCFA dropped the attending physician standard and focused exclusively on physician presence as touchstone for Part B billing. ¹²

As this recitation of official policy in a scattering of issuances makes evident, the standards for paying teaching physicians under Part B of Medicare have not been consistently and clearly articulated by HCFA over a period of decades. When HCFA policy is not unambiguously clear, carrier clarification is warranted and appropriate. Thus, where a carrier informed a teaching institution that physicians must either personally furnish a service or be present when it is furnished by an intern or resident in order to be reimbursed under Part B, that guidance would be controlling.

And, indeed, carriers across the country, did provide very clear guidance on this subject over years to teaching physicians and institutions. Again, out of hundreds of pages of documentation, a sample of such guidance reflects that fact. One carrier issued instructions that Part B payments contingent on satisfying the "attending physician criteria and the physicians's presence at the time the service was provided by the house staff."¹³ Another carrier instructed that documentation supporting Part B bills must show whether "each service billed . . .[was] actually rendered by the physician or rendered in his presence."¹⁴

Another instructed that attending physicians "must be personally present at the time of the service" in order to bill for Part B compensation. ¹⁵ In describing the documentation necessary to support a Part B bill, another carrier stated that "[w]e cannot accept notes written by the resident when there is no indication of the teaching physician's presence . . ." since "[t]his type of documentation does not clearly show the physician's presence, much less his participation in the patient's care."¹⁶

The foregoing established the frame of reference for conversation with the OIG in which that Office informed me that PATH I and II audits will be conducted pursuant to the following guidelines.¹⁷

First, the OIG will undertake PATH audits only where carriers, before December 30, 1992, issued clear explanations of the rules regarding reimbursement for the services of teaching physicians. ¹⁸ Thus, claims for services of teaching physicians will be considered for a PATH I or II audit only where a carrier provided written guidance stating that Part B reimbursement for teaching physician services would be limited to one of two situations: when the teaching physicians either personally furnished services to Medicare beneficiaries or were physically present when the services were furnished by interns or residents.

Second, OIG will not approach a hospital to open PATH discussions unless and until OIG has obtained carrier materials showing that clear instructions on the need for teaching physicians to be physically present were given to the institutions or physicians served by that carrier.

Third, a hospital approached by OIG will have the opportunity to show, as a matter of fact, that it or the teaching physicians at the institution received guidance from the carrier which the hospital views as contradictory to the standard referenced above. Until that opportunity has been provided and any submission reviewed, no additional information will be requested by OIG from the hospital nor will a PATH audit be conducted.

The decision whether clear guidance was given by carriers to teaching hospitals and physicians will be made by OIG. That determination is, necessarily, a fact bound one and will have to be made particularly and in each instance.

Fourth, I want to address the issue of auditing for upcoding of services. When HCFA adopted new evaluation and management codes in 1992, the agency began a collaborative process with institutions and physicians to train persons who would be using the codes and to review the experience under the new regime. In so doing, HCFA made a commitment not to audit claims using the new codes until August 1995. At the same time, HCFA instructed its Regional Administrators that, during the period of training prior to August 1995, action could be taken at any time to deal with egregious cases of abuse or fraud. ¹⁹ Thus, where OIG finds egregious cases of upcoding abuse or fraud as it audits pre-August 1995 records, such matters are appropriate for attention and resolution.

Fifth, in an exercise of enforcement discretion, if OIG determines not to engage in a PATH I or II audit on the physical presence requirement, OIG will not pursue a PATH audit for upcoding of physician services. The decision not to pursue a PATH upcoding audit will not preclude a non-PATH based upcoding audit of services at a teaching hospital. Occasions for an upcoding audit might include receipt of information from a whistle blower or the filing of a qui tam compliant. In those and other circumstances, OIG places no limit on its intention to pursue such an audit.

Finally, in a related matter, during any continuing or new PATH I or II audits, OIG will continue to credit a hospital's submitted undercoded claims against upcoded claims, thereby reducing the amount of any Medicare overpayment.

It has taken time to bring this matter to this point because of the importance we place on ensuring consideration of the positions of all concerned. I hope that you find the principles outlined above a fair and clear statement regarding the PATH initiative. Thank you for your assistance and cooperation.

Sincerely,

Harriet S. Rabb

1--- See, e.g., 42 U.S.C. section 1395xx(a) (1). [Copies of this and other materials referenced herein are attached to this letter.]

2---20 C.F.R. section 405.521 (1967)

3---Intermediary Letter (IL) 372, sections A.1.d and A.1.e., April 1969

4---The memorandum was sent by the Bureau of Health Insurance of the Social Security Administration, the predecessor agency to HCFA.

5---Memorandum to All Part B Carriers from Bureau of Health Insurance, September 3, 1969.

6---Memorandum from Deputy Director, Program Policy, BHI to Regional Representative, HI, Boston, August 21, 1972.

7---Medicare Carriers Manual section 8201.

8---42 U.S.C. section 1395u(b) (7) (A) (i) (I). See also 42 C.F.R. section 405.521 (1991), 48 Fed. Reg. At 59,507 (1991), and Medicare Carriers Manual section 15106.

9---60 Fed. Reg. At 63,138 (1995).

10--- 54 Fed. Reg. At 5948 (1989)

11---60 Fed. Reg. At 63,139 (1995).

12---the concept of the attending physician had been introduced through Intermediary Letter 372 in April 1969. The notion contemplated that only one doctor at a time could be the attending physician and that only the attending physician could bill under Part B for services performed by an intern or resident. See, e.g., Part A Intermediary Letter No. 70-7 and Part B Intermediary Letter No. 70-2, "Questions and answers relating to implementation of Intermediary Letter No. 372," January, 1970, Questions 5 and 12. HCFA guidance assumed that successive doctors could be attending physicians, each for a portion of the hospital stay, but tracking who was the attending at any given moment became excessively costly and administratively cumbersome. Because there was no reason to do that tracking to determine which of a team of doctors caring for a patient was the attending --so long as each doctor on the team provided more than Part A services --HCFA allowed the attending physician rule to slip into desuetude. The formal abandonment of the rule in 1995 followed decades of disuse.

13---Medicare B-Teaching Physicians Manual prepared by Wisconsin Physician Services in conjunction with HCFA at 4 (1983).

14---Manual for Teaching Physicians prepared by Equicor Medicare Administration at 3 (1991).

15---Letter from The Travelers to the University of Virginia, April 17, 1992.

16---Letter from Transamerica Occidental Life Insurance Company to Family Practice Center, September 16, 1985.

17---The Department of Justice is engaged, under its own authorities, in cases concerning Part B billing by physicians in teaching hospitals. Nothing in this letter purports to or could constrain actions of the Department of Justice in pursuit of its own matters. The OIG may by requested to assist the Department of Justice in some of these matters. The OIG's responses to such requests will be grounded in the commitments made by the OIG and reflected in this letter.

18---A flurry of HCFA statements, starting with one on December 30, 1992, and continuing prior to implementation of the new physician presence standard on July 1, 1996, unnecessarily unsettled matters.

19---See, e.g., Memorandum of October 4, 1994 from Director, Office of Medicare Benefits Administration, BPO to All Associate Regional Administrators for Medicare.