Compensating Physicians for NPP Supervision

While non-physician providers already play a large role in providing health care in the U.S., it is expected that in the near future NPPs will begin to take on a larger role because more individuals will have access to health insurance and there is an existing shortage of physicians. Most state laws require some level of physician supervision over the services of NPPs—specifically physician assistants and nurse practitioners which are the two types of NPPs that are commonly employed in the physician practice setting and are more generally associated with broad patient care services.

Compensating physicians for supervising NPPs normally involves two types of supervision and two compensation structures, however each case must be analyzed as the amount of supervision varies and the resulting compensation must conform to the fair market value of the services performed. 

Types of Supervision 

The first type of supervision relates to NPPs providing services in a location with no physician on site. In these cases the NPP is generally required by state law to designate a “supervising” physician to oversee their work on a periodic basis. The second type—and probably the one which physician supervision is most often associated—relates to NPPs working inside a physician practice with established patients and, in particular, “incident-to” billing.

Incident-to Billing 

Medicare billing rules—which many other payers follow—allow NPP services to be billed "incident-to" and at 100 percent of the physician rate when the patient is an established patient with a physician-initiated plan of care, and the physician is on site and immediately available to assist the NPP if necessary while the service was being performed. In such a case, the NPP is considered the “rendering” provider and the on-site physician providing supervision is the “billing” provider.

If the NPP is providing services to a new patient, or the supervising physician is not on site while services are being provided, then the NPP is considered the rendering provider and directly bills the services as the billing provider. In this case, Medicare reimburses 85 percent of the physician rate.

NPPs as Extenders vs. Providers

It also helps to understand the two roles NPPs often play in a physician practice: extender or provider. In an extender role, NPPs act to leverage physician productivity and do not generate independent patient services. In a provider role, NPPs do act as providers—the rendering provider—and do generate independent patient services. As such, incident-to billing only occurs with NPPs in a provider role, not in an extender role.

Paying Physicians for NPP Supervision

While there are many mechanisms for paying physicians for supervision, there are really two structures for paying physicians for NPP supervision. The first focuses on paying for supervision based strictly on the identified time and effort of the physician in direct supervision duties. This method seeks to identify the physician’s efforts which are measured in the form of an hourly rate, WRVUs, encounters or some other predetermined measure, and compensate the physician directly for those efforts. The second is more of an entrepreneurial model in that the physician is compensated for supervision based on the net profits of the NPP. In this model the physician has down-side risk if the NPP is not productive and upside potential should the NPP be highly productive.

Several foundational questions can be asked to ensure a sound compensation structure is developed for NPP supervision:

• Is supervision necessary/required?
• Is supervision being provided?
• How do we measure supervision?
• How are NPPs being utilized?
• Does supervision warrant additional compensation? 

As in any case, an analysis of the resulting compensation from either approach should be analyzed to determine if it conforms to fair market value for the services performed.

As more PAs and NPs are employed to fill in the provider gap, determining supervision and compensation structures can become complex. It is important to note that in any physician compensation situation, it is vital to examine the specific case facts and circumstances as each will likely be different. Consider physician compensation against the specific duties the physician is providing with particular attention to duplicating payment for services to avoid compliance issue and ensure compensation is at fair market value.