The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 ended the Sustainable Growth Rate formula that for years had resulted in an eleventh-hour intervention by Congress to avoid drastic reductions in Medicare physician payments. MACRA also established incentives for clinician payments to become increasingly based on value with the intent of rewarding clinicians who produce better outcomes at lower costs. Efforts are underway to establish the outcomes and quality measures that will be included in the new payment systems.
Yet, paying for value assumes that billing data used by Medicare correctly identify the physician’s services. In this post, we argue that because other health professionals can bill under a physician’s national provider number (NPI)—a practice known as “incident to billing”—the link between what physicians are doing and how they appear to Medicare based on their claims data is tenuous indeed. Until the practice of incident to billing is properly coded in claims data, the goals of MACRA will be undermined.
Incident To Billing
There are an estimated 234,000 nurse practitioners (NPs) in the United States. Currently, Medicare reimburses NPs at 85 percent of the prevailing rate that a physician would receive when providing the same services. Under incident to billing, a physician, under certain circumstances, is permitted to bill Medicare using their NPI number for services that were actually provided by a NP (or a physician assistant [PA]). This billing rule was originally designed to offset operating costs for physicians working with NPs and PAs to care for Medicare beneficiaries. Although there are many more NPs billing directly using their own NPI, the rule continues to allow for billing of NP visits at the higher physician rate instead of at the lower NP rate.
Because current coding procedures do not identify care provided under “incident to billing,” the frequency of this practice is unknown. However, findings from a 2012 national survey of primary care NPs and physicians suggest that its frequency is common. Results showed that while the vast majority of NPs had their own NPI, 81 percent reported having a practice arrangement with a primary care physician. The survey also found that 29 percent of primary care NPs and 17 percent of primary care physicians reported all services provided by NPs in their practice as being billed to Medicare under a physician’s NPI. Twenty-four percent of primary care NPs and 8 percent of primary care physicians reported that some of NP services are billed to Medicare using a physician’s NPI. Additionally, incident to billing practices also involve an unknown number of NPs providing specialty care.
Inaccurate Measurement Of Quality And Costs
Incident to billing affects the validity of claims-based assessment in terms of the quality of care provided by a clinician—whether it is by a physician, NP, or PA. The services, procedures, and tests provided to patients must be attributed to the clinician who provided them to accurately assess quality. If a physician submitted a claim using his or her NPI for care provided by a NP or PA under incident to billing, then the quality and outcome measures based on the claim would be incorrectly attributed to the physician instead of the NP or PA, biasing all metrics. Other claims-based metrics—such as quantities of care, costs of care, or the number of clinician work hours—would also be flawed. The attribution problem is particularly vexing with Medicare claims data because beneficiaries typically see many different physicians and other clinicians over the course of their care.
Implications For Medicare Spending
In light of the current and projected shortages (of up to 106,000 primary care and specialty physicians by 2030), the increasing numbers of Medicare beneficiaries (54 million today increasing to 67 million in 2030), and the rapidly growing numbers of NPs, the practice of incident to billing raises implications for transparency in Medicare spending, private policy making for NPs, and state-level workforce policy.
With regard to Medicare spending, the unknown frequency of incident to billing in both primary and specialty care makes it impossible to estimate the amount Medicare could save nationally for NP-provided services. Because NPs billing Medicare under their own NPI are paid at 85 percent of the physician rate, Medicare could save 15 percent on each service that a physician billed under incident to billing.
Implications For Nurse Practitioners
Incident to billing hides the contributions of many NPs owing to the physician billing for their services. Thus, it prevents NP leaders—as well as public and private payers—from having complete data when policy making and negotiating with payers and employers. Furthermore, to be eligible for bonus payments under MACRA, an NP must submit claims for at least 100 beneficiaries and at least $30,000; if a physician bills for the services provided by the NP, then some NPs could be excluded from the bonus payments.
From the perspective of many NPs, studies show that they produce outcomes equivalent to, and in some cases better than, primary care physicians at lower costs. To provide high quality of care at lower costs than physicians, yet have physicians bill for this care as if they provided it and get paid at a higher rate, causes consternation among many NPs. If the practice of incident to billing was eliminated, or at least easily identified, it would enable a more complete account of the quality and the cost of services provided by NPs. This information would help both the NP leaders and the payers better formulate policies concerned with NP payment and other policy goals.
Implications for Physicians
Beyond affecting the accuracy of measuring the quality of care provided by physicians, incident to billing can potentially inflict reputational costs and hinder workforce planning. Because incident to billing can inflate the quantity of services provided, physicians run the risk of facing questions about “excessive billing” for services, as exemplified by media inquiries that can paint an unfavorable image of some physicians. Additionally, given projections of large physician shortages, it will become increasingly important for workforce planners and care delivery systems to have accurate measures of physician supply, which is determined in part by the number of physicians and by the number of hours physicians work. While the trend of decreasing work hours among existing physicians has been documented, a recent studyreported a small but not insignificant number of physicians billing for more than 80 hours per week. These hours were calculated by estimating the number of hours that would have been required to bill for the number of Medicare claims submitted, which raises the possibility that incident to billing may have been involved.
An Empirical Test Of The Importance Of Incident To Billing Practices
How important is incident to billing, and to what extent might it be related to the number of services provided by physicians and hours worked? To assess this question, we conducted a simple analysis examining the patterns of physician billing in states that allow NPs to practice independently versus the patterns of physician billing in states that restrict NP practices by requiring some form of physician supervision. If NPs are practicing independently from physicians, they would not bill under a physician’s NPI; thus, we hypothesize that the prevalence of incident to billing would be less in such states. State laws allowing NPs to practice independently do not prohibit incident to billing, but as long as some NPs choose to practice without physician oversight, the prevalence of incident to billing should decrease.
We compared the number of distinct Medicare beneficiaries treated by physicians, the number of distinct Healthcare Common Procedure Coding System (HCPCS) codes submitted by physicians, the total number of services provided by physicians, the total Medicare payment received by physicians, and the number of physicians who spend more than 80 hours per week treating Medicare patients among states with independent practice provisions and those without. We obtained this information from the Medicare Provider Utilization and Payment Data for the years 2012–15 and relied on the coding of this data (developed by Hanming Fang and Qing Gong) to extract the necessary information to test our hypothesis.
Exhibit 1 reports information on the mean number of distinct Medicare beneficiaries, the mean number of distinct HCPCS codes, the mean number of services, the mean Medicare payment received, and the proportion of physicians who spent more than 80 hours per week treating Medicare beneficiaries, respectively. It reports this information separately for physicians who practiced in states allowing NPs to practice independently and for the states requiring physician supervision of NPs. Physicians in the latter type of states should appear to be more involved in the Medicare program because they are better able to bill for the services of NPs under their supervision based on the incident to billing rules. Exhibit 1 reports information on all billing codes submitted by physicians.
Across all five measures of Medicare billing behavior, physicians practicing in states that require supervision of NPs appear to be more involved in the Medicare program. They appear to treat more distinct beneficiaries, bill for a greater number of distinct HCPCS codes, bill for more services, and receive a greater total payment from Medicare. They also appear to be more likely to spend more than 80 hours each week treating Medicare patients. We say “appear” because it is possible that physicians in these restrictive practice states are not actually more involved with the Medicare program but are simply better able to exploit the incident to billing rules given the legal supervision requirements. While these estimates may not indicate causality, they are at least consistent with NPs providing some of the care attributed to physicians under the current billing rules. Because some NPs in states that allow independent practice nonetheless choose to practice with physician oversight, these estimates understate the overall prevalence of incident to billing. Thus, our results are particularly suggestive of the role that incident to billing plays in Medicare since, even in independent practice states, physicians may still bill for the care provided by NPs.
What Can Medicare Do?
MACRA requires measuring the quality and outcomes of services provided to patients and accounting for the costs of resources used to produce them. With incident to billing, accurate measurement of both quality and costs are not possible. The problem could be remedied if Medicare adjusted its billing procedures so that claims submitted for payment must identify the NPI of the clinician who actually provided the service. There is precedence for the Centers for Medicare and Medicaid Services (CMS) changing its coding procedures to aid the accurate measurement of the quality of care received by beneficiaries. In the 2000s, studies of the association of inpatient nurse staffing and quality were unable to distinguish whether a patient’s complication occurred in the hospital or was community acquired because discharge codes did not identify whether the complication was community or hospital acquired. As a result, complicated algorithms were needed to make this distinction so that hospital staffing was not inappropriately linked to infections or pneumonia that the patient had acquired in the community. CMS subsequently changed its coding procedures to make this distinction, which has resulted in more accurate measurement of inpatient quality. Similarly, CMS could modify billing procedures so that claims submitted for payment must identify the clinician who provided the service.
The goal of paying providers according to the value produced is at the heart of physician value-based payment under MACRA. CMS has expended tremendous time and dollars to overcome many challenges to develop measurement and incentives needed to move payment away from the utilization incentives under fee-for-service to more efficient value-based payments. Unless incident to billing is addressed, these efforts are likely to fall short, and the successful implementation of MACRA will be undermined.