Indirect billing for nurse practitioners (NPs) and PAs is a controversial topic. The pot was recently stirred by a study in Health Affairs showing that eliminating this practice would have saved Medicare more than $194 million in 2018.1 Indirect billing is a somewhat hidden practice as Medicare often does not know when supervising physicians elect to use this payment option. The practice also makes it difficult to assess the number and quality of services delivered by advanced practice providers (APPs), experts say.

Prevalence of Indirect Billing

Medicare pays 85% of the Physician Fee Schedule (PFS) rate for services billed by NPs and PAs but pays the full 100% of that rate when the same services provided by NPs/PAs are billed for by a supervising physician.

The data in the Health Affairs study help quantify the prevalence of indirect billing (also known as incident-to billing). The estimated number of all NP or PA visits in fee-for-service Medicare data billed indirectly was $10.9 million in 2010 and nearly tripled to $30.6 million in 2018; however, the overall rate of indirect billing decreased for both professions between 2010 and 2018, from 50% to 36% of all visits by NPs and from 59% to 42% of all visits by PAs.


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Indirect billing was more common in states with restrictive laws governing NPs’ scope of practice, with a 10% difference in indirect billing rates between states granting NPs full practice authority vs those that do not, coauthor Ateev Mehrotra, MD, MPH, explained in an accompanying podcast.2 Dr Mehrotra is professor of health care policy and medicine at Harvard Medical School.

To find cases of indirect billing, the researchers used Medicare Part D claims data to link prescriptions written by NP and PAs with an accompanying office visit billed under a different name. The discrepancy was assumed to be the result of indirect billing, Dr Mehrotra said.

Is Indirect Billing Outdated?

Commenting on the study, Stephen Ferrara, DNP, FNP-BC, FAAN, FAANP, called indirect billing an outdated model. “Up until this point, few studies have attempted to quantify or measure the prevalence of incident-to or indirect billing for services rendered by NPs and PAs in Medicare,” Dr. Ferrara said.

Stephen Ferrara, DNP, FNP-BC, FAAN, FAANP

“When indirect billing is utilized, the NP’s or PA’s name doesn’t show up on the claim at all,” explained Dr Ferrara, who is president-elect of the American Association of Nurse Practitioners (AANP). While the study findings do help quantify the frequency of indirect billing, the results have limitations, he said. “The authors clearly identify constraints of their approach including the challenges associated with identifying providers using prescribing data; however, it is encouraging to see that final estimates were similar to previously reported data from MedPAC.”

Should Congress Change Its Medicare Policy on Indirect Billing?

The Medicare Payment Advisory Commission (MedPAC), a nonpartisan legislative branch agency that provides Congress with policy advice on the Medicare program, recommended changes to current policy to require advanced practice registered nurses (APRNs) and PAs to bill Medicare directly, thereby eliminating incident-to billing.3  

MedPAC notes that Medicare’s incident-to policy dates back to an era when NPs and PAs could not bill directly for Medicare services and does not reflect the changing rules allowing these clinicians to be paid directly for their services. Requiring direct billing for NP and PA services “could enable Medicare to set payment rates for PFS [physician fee schedule] services more accurately and allow policymakers to evaluate the cost and quality of care delivered by NPs and PAs,” according to MedPAC.

The AANP said that indirect billing practices “undermine the foundation of value-based reimbursement” in a 2017 letter to the Centers for Medicare and Medicaid Services (CMS). The American Academy of PAs expressed “significant concerns” regarding incident-to billing in a 2021 letter to CMS explaining that a substantial percentage of medical services delivered by PAs and APRNs to Medicare beneficiaries may be attributed to physicians.

“When this occurs, it is nearly impossible to accurately identify the type, volume or quality of medical services delivered by PAs and APRNs,” according to the AAPA. “Accurate data collection and appropriate analysis of workforce utilization [are] lost. This lack of transparency has a negative impact on patients, health policy researchers, the Medicare program, and PAs/APRNs.”

This practice also affects Care Compare scores among NPs and PAs, the AAPA noted. Care Compare is a Medicare-sponsored site that lists clinicians’ overall quality of care based on a Medicare computed performance score. In addition to skewing these scores among physicians and NPs and PAs, indirect billing may result in clinicians not being listed on the Care Compare site. These factors may impede patients from making informed decisions when selecting a health care provider, the AAPA wrote.

Additionally, this practice may lead to patient confusion when their explanation of benefits notice lists a different health professional as providing their care. This can “cause patients to question who provided their care and whether they need to correct what appears to be erroneous information regarding their visit,” the AAPA said.

MedPAC’s estimated rates of indirect billing are in line with those reported in Health Affairs. More than 40% of all NP visits and approximately 30% of all PA visits for established patients in the office setting were billed incident to a supervising physician in 2016, according to MedPAC.

Why the 85% Reimbursement Rate for NPs, PAs?

The estimated $194 million savings in Medicare costs that would result from direct billing for APPs assumes that NPs and PAs continue to practice under the model of 85% reimbursement of the physician fee schedule, Dr Mehrota noted.

The 85% reimbursement rate for Medicare services provided by NPs and PAs was established by Congress in the Balanced Budget Act of 1997. Critics say that if the quality of care provided by an APP is equivalent to that of a physician, shouldn’t the level of reimbursement be the same?

The extra 15% in reimbursement afforded by indirect billing in theory could be related to the administrative burden for the physician, Dr Mehrota noted. Incident-to billing under Medicare also comes with a set of rules (Table) and the physician is responsible for the visit from a legal perspective.4,5 Dr Mehrota hopes his study findings will help inform policy discussion and debate on whether the 85% reimbursement rate is equitable.

Table. Medicare Incident-to Billing Requirements4,5

Applies in the office or outpatient clinic setting
Services must be an integral, although incidental, part of the physician’s personal professional services  
The supervising physician must perform the initial service
The service must be provided incident to the physician’s treatment plan
Direct supervision is required:   
• The supervising physician must be in the office suite when the NP/PA renders the service but does not need to be in the same room   
• The availability of the physician by telephone or the presence of the physician elsewhere in the institution does not constitute direct supervision
The supervising physician is responsible for the overall care of the patient and must perform services at a frequency that reflects active and ongoing participation in the management of the course of treatment

The 85% reimbursement rate by Medicare for NP/PA services is a relic of the fee-for-service payment model. “In health care, we talk a lot about shifting from the fee-for-service model to a value-driven payment model,” explained Dr Ferrara. “Unfortunately, currently providers get reimbursed for transactional health care,” said Dr Ferrara, who also is a primary care family nurse practitioner as well as associate dean of clinical affairs and associate professor of nursing at Columbia University School of Nursing.

References

1. Patel SY, Huskamp HA, Frakt AB, et al. Frequency of indirect billing to medicare for nurse practitioner and physician assistant office visits. Health Aff (Millwood). 2022;41(6):805-813. doi:10.1377/hlthaff.2021.01968

2. Podcast: Ateev Mehrotra shines a light on indirect billing. Health Affairs Podcast. June 7, 2022. doi:10.1377/hp20220523.777523

3. Improving Medicare’s payment policies for advanced practice registered nurses and physician assistants. February 19, 2019. Accessed July 11, 2022.  https://www.medpac.gov/improving-medicares-payment-policies-for-advanced-practice-registered-nurses-and-physician-assistants/

4. American Academy of PAs. A primer on PA reimbursement. January 2022. Accessed July 15, 2022. https://www.aapa.org/download/92658/

5. Center for Medicare and Medicaid Services. Medicare Benefit Policy Manual. Chapter 15 – covered medical and other health services. Updated May 20, 2022. Accessed July 20, 2022. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c15.pdf