100-02 Medicare Benefit Policy Manual: Chapter 6 - Hospital Services Covered Under Part B

Medicare Benefit Policy Manual
Chapter 6 - Hospital Services Covered Under Part B
Table of Contents
(Rev. 12421; Issued; 12-21-23)
(Rev. 12425; Issued; 12-21-23)
Transmittals for Chapter 6
10 - Medical and Other Health Services Furnished to Inpatients of Participating Hospitals
10.1 - Reasonable and Necessary Part A Hospital Inpatient Claim Denials
10.2 – Other Circumstances in Which Payment Cannot Be Made Under Part A
10.3 – Hospital Inpatient Services Paid Only Under Part B
20 - Outpatient Hospital Services
20.1 - Limitation on Coverage of Certain Services Furnished to Hospital
Outpatients
20.1.1 - General Rule
20.1.2 - Exception to Limitation
20.2 - Outpatient Defined
20.3 - Encounter Defined
20.4 - Outpatient Diagnostic Services
20.4.1 - Diagnostic Services Defined
20.4.2 - Reserved
20.4.3 - Coverage of Outpatient Diagnostic Services Furnished on or
Before December 31, 2009
20.4.4 - Coverage of Outpatient Diagnostic Services Furnished on or After
January 1, 2010
20.4.5 - Outpatient Diagnostic Services Under Arrangements
20.5 – Outpatient Therapeutic Services
20.5.1 - Coverage of Outpatient Therapeutic Services Incident to a
Physician's Services Furnished on or After August 1, 2000 and Before
January 1, 2010
20.5.2 - Coverage of Outpatient Therapeutic Services Incident to a
Physician's Services Furnished on January 1, 2010 through December 31,
2019
20.5.3 - Coverage of Outpatient Therapeutic Services Incident to a

Physician’s Service Furnished on or After January 1, 2020 - Changes to
Supervision Requirements
20.5.4 Coverage of Outpatient Therapeutic Services Incident to a
Physician’s 	Service Furnished on or After January 1, 2024 – Changes to
Direct Supervision Requirements for Pulmonary, Cardiac and Intensitv
Cardiac 	Rehabilitation
20.6 - Outpatient Observation Services
30 - Drugs and Biologicals
40 - Other Covered Services and Items
50 - Sleep Disorder Clinics
60 - Intermittent Peritoneal Dialysis Services
70 - Outpatient Hospital Psychiatric Services
70.1 - General
70.2 - Coverage Criteria for Outpatient Hospital Psychiatric Services
70.3 - Partial Hospitalization Services
70.4 - Intensive Outpatient Services
70.5 - Laboratory Services Furnished to Nonhospital Patients by Hospital
Laboratory
80 - Rental and Purchase of Durable Medical Equipment
90 - Services of Interns And Residents

10 - Medical and Other Health Services Furnished to Inpatients of
Participating Hospitals
(Rev. 182, Issued: 03-21-14, Effective: 10-01-13, Implementation: 04-21-14)
Payment may be made under Part B for physician services and for the nonphysician
medical and other health services as provided in this section when furnished by a
participating hospital (either directly or under arrangements) to an inpatient of the
hospital, but only if payment for these services cannot be made under Part A. This policy
applies to all hospitals and critical access hospitals (CAHs) participating in Medicare,
including those paid under a prospective payment system or alternative payment
methodology such as State cost control systems, and to emergency hospital services
furnished by nonparticipating hospitals. In this section, the term “hospital” includes all
hospitals and CAHs, regardless of payment methodology, unless otherwise specified.
For services to be covered under Part A or Part B, a hospital must furnish nonphysician
services to its inpatients directly or under arrangements (see chapter 16, §170 of this
manual, “Inpatient Hospital or SNF Services Not Delivered Directly or Under
Arrangement by the Provider”). A nonphysician service is one which does not meet the
criteria defining physicians’ services specifically provided for in regulation at 42 CFR
415.102. Services "incident to" physicians’ services (except for the services of nurse
anesthetists employed by anesthesiologists) are nonphysician services for purposes of this
provision.
10.1 - Reasonable and Necessary Part A Hospital Inpatient Claim
Denials
(Rev. 182, Issued: 03-21-14, Effective: 10-01-13, Implementation: 04-21-14)
If a Medicare Part A claim for inpatient hospital services is denied because the inpatient
admission was not reasonable and necessary, or if a hospital determines under 42 CFR
§482.30(d) or §485.641 after a beneficiary is discharged that the beneficiary’s inpatient
admission was not reasonable and necessary, and if waiver of liability payment is not
made, the hospital may be paid for the following Part B inpatient services that would
have been reasonable and necessary if the beneficiary had been treated as a hospital
outpatient rather than admitted as an inpatient, provided the beneficiary is enrolled in
Medicare Part B:
1) 	Part B services paid under the outpatient prospective payment system (OPPS),
excluding observation services and hospital outpatient visits that require an
outpatient status. Hospitals that are excluded from payment under the OPPS are
instead paid under their alternative payment methodology (e.g., reasonable cost, all
inclusive rate, or Maryland waiver) for the services that are otherwise payable
under the OPPS.
2) 	The following services excluded from OPPS payment, that are instead paid under
the respective Part B fee schedules or prospectively determined rates for which
payment is made for these services when provided to hospital outpatients:

a. 	Physical therapy services, speech-language pathology services, and
occupational therapy services (see chapter 15, §§220 and 230 of this
manual, “Covered Medical and Other Health Services,”).
b. 	Ambulance services.
c. 	Prosthetic devices, prosthetic supplies, and orthotic devices paid under the
DMEPOS fee schedule (excludes implantable prosthetic devices (other
than dental) which replace all or part of an internal body organ (including
colostomy bags and supplies directly related to colostomy care) and
replacement of such devices).
d. 	Durable medical equipment supplied by the hospital for the patient to take
home, except durable medical equipment that is implantable.
e. 	Certain clinical diagnostic laboratory services.
f. 	Screening and diagnostic mammography services.
g. 	Annual wellness visit providing personalized prevention plan services.
Hospitals may also be paid under Part B for services included in the payment window
prior to the point of inpatient admission for outpatient services treated as inpatient
services (see Pub. 100-04, Medicare Claims Processing Manual, Chapter 4, §10.12,
“Payment Window for Outpatient Services Treated as Inpatient Services”), including
services requiring an outpatient status. The hospital can only bill for services that it
provided directly or under arrangement in accordance with Part B payment rules.
Outpatient therapeutic services furnished at an entity that is wholly owned or wholly
operated by the hospital and is not part of the hospital (such as a physician’s office), may
not be billed by the hospital to Part B. Reference labs may be billed only if the referring
laboratory does not bill for the laboratory test (see Pub. 100-04, Medicare Claims
Processing Manual, Chapter 16, §40.1, “Laboratories Billing for Referred Tests”).
The services billed to Part B must be reasonable and necessary and must meet all
applicable Part B coverage and payment conditions. Claims for Part B services submitted
following a reasonable and necessary Part A claim denial or hospital utilization review
determination must be filed no later than the close of the period ending 12 months or 1
calendar year after the date of service (see Pub. 100-04, Medicare Claims Processing
Manual, Chapter 1, §70 “Time Limitations for Filing Part A and Part B Claims”). See
Pub. 100-04, Medicare Claims Processing Manual, chapter 4, §240 for required bill
types.
10.2 - Other Circumstances in Which Payment Cannot Be Made Under
Part A
(Rev. 182, Issued: 03-21-14, Effective: 10-01-13, Implementation: 04-21-14)

Part B payment could be made to a hospital for the medical and other health services
listed in this section for inpatients enrolled in Part B if:
• 	No Part A prospective payment is made at all for the hospital stay because of
patient exhaustion of benefit days before or during the admission; or
• 	The patient was not otherwise eligible for or entitled to coverage under Part A
(see chapter 16, §180 of this manual for services received as a result of non-
covered services).
Beginning in 2014, for hospitals paid under the OPPS these Part B inpatient services are
separately payable under Part B, and are excluded from OPPS packaging if the primary
service with which the service would otherwise be bundled is not a payable Part B
inpatient service.
The following inpatient services are payable under the OPPS:
• 	Diagnostic x-ray tests, diagnostic laboratory tests, and other diagnostic tests;
• 	X-ray, radium, and radioactive isotope therapy, including materials and services
of technicians;
• 	Acute dialysis of a hospital inpatient with or without end stage renal disease
(ESRD). The charge for hemodialysis is a charge for the use of a prosthetic
device, billed in accordance with Pub. 100-04, Medicare Claims Processing
Manual, Chapter 4, §200.2, “Hospital Dialysis Services for Patients With and
Without End Stage Renal Disease (ESRD).”
• 	Screening pap smears;
• 	Influenza, pneumococcal pneumonia, and hepatitis B vaccines;
• 	Colorectal screening;
• 	Bone mass measurements;
• 	Prostate screening;
• 	Hemophilia clotting factors for hemophilia patients competent to use these factors
without supervision;
• 	Immunosuppressive drugs;
• 	Oral anti-cancer drugs;

• 	Oral drug prescribed for use as an acute anti-emetic used as part of an anti-cancer
chemotherapeutic regimen; and
• 	Epoetin Alfa (EPO) that is not covered under the ESRD benefit.
The following inpatient services are payable under the non-OPPS Part B fee schedules or
prospectively determined rates listed:
• 	Surgical dressings, and splints, casts, and other devices used for reduction of
fractures and dislocations (DMEPOS fee schedule);
• 	Prosthetic devices (other than dental) which replace all or part of an internal body
organ (including colostomy bags and supplies directly related to colostomy care),
including replacement of such devices and including one pair of conventional
eyeglasses or contact lenses furnished subsequent to each cataract surgery with
insertion of intraocular lens (DMEPOS fee schedule, except for implantable
prosthetic devices paid at the applicable rate under Pub. 100-04, Medicare Claims
Processing Manual, Chapter 4, §240.3, “Inpatient Part B Hospital Services -
Implantable Prosthetic Devices”);
• 	Leg, arm, back, and neck braces, trusses, and artificial legs, arms, and eyes
including replacements if required because of a change in the patient’s physical
condition (DMEPOS fee schedule);
• 	Physical therapy services, speech-language pathology services, and occupational
therapy services (see Chapter 15, §§220 and 230 of this manual, “Covered
Medical and Other Health Services”) (applicable rate based on the Medicare
Physician Fee Schedule);
• 	Ambulance services (ambulance fee schedule); and
• 	Screening mammography services (Medicare Physician Fee Schedule).
Hospitals may also be paid under Part B for services included in the payment window
prior to the point of inpatient admission for outpatient services treated as inpatient
services (see Pub. 100-04, Medicare Claims Processing Manual, Chapter 4, §10.12,
“Payment Window for Outpatient Services Treated as Inpatient Services”), including
services requiring an outpatient status. The hospital can only bill for services that it
provided directly or under arrangement in accordance with Part B payment rules.
Outpatient therapeutic services furnished at an entity that is wholly owned or wholly
operated by the hospital and is not part of the hospital (such as a physician’s office), may
not be billed by the hospital to Part B. Reference labs may be billed only if the referring
laboratory does not bill for the laboratory test (see Pub. 100-04, Medicare Claims
Processing Manual, Chapter 16, §40.1, “Laboratories Billing for Referred Tests”).

The services billed to Part B must be reasonable and necessary and must meet all
applicable Part B coverage and payment conditions. Claims for these services must be
filed no later than the close of the period ending 12 months or 1 calendar year after the
date of service (see Pub. 100-04, Medicare Claims Processing Manual, Chapter 1, §70,
“Time Limitations for Filing Part A and Part B Claims”). See Pub. 100-04, Medicare
Claims Processing Manual, chapter 4, §240 for required bill types.
10.3 - Hospital Inpatient Services Paid Only Under Part B
(Rev. 182, Issued: 03-21-14, Effective: 10-01-13, Implementation: 04-21-14)
The services listed in Chapter 15, §250 of this manual, “Medical and Other Health
Services Furnished to Inpatients of Hospitals and Skilled Nursing Facilities,” when
provided to a hospital inpatient, may be covered under Part B, even though the patient
has Part A coverage for the hospital stay. This is because these services are covered
under Part B and are not covered under Part A.
In all hospitals, all other services provided to a hospital inpatient must be treated as an
inpatient hospital service to be paid for under Part A, if Part A coverage is available and
the beneficiary is entitled to Part A. This is because every hospital must provide directly
or arrange for any nonphysician service rendered to its inpatients, and a hospital can be
paid under Part B for a service provided in this manner only if Part A coverage does not
exist.
However, note that in order to have any Medicare coverage at all (Part A or Part B), any
nonphysician service rendered to a hospital inpatient must be provided directly or
arranged for by the hospital.
20 - Outpatient Hospital Services
(Rev. 12425; Issued: 12-21-23: Effective: 01-01-24; Implementation: 01-02-24)
Hospitals provide two distinct types of services to outpatients: services that are diagnostic
in nature, and other services that aid the physician in the treatment of the patient. Part B
covers both the diagnostic and the therapeutic services furnished by hospitals to
outpatients. The rules in this section pertaining to the coverage of outpatient hospital
services are not applicable to the following services.
• 	Physical therapy, speech-language pathology or occupational therapy
services when they are furnished “as therapy” meaning under a therapy plan
of care. See chapter 15, sections 220 and 230 of this manual, for coverage and
payment rules for these services, which are paid at the applicable amount
under the physician fee schedule.
• 	Services that are covered and paid under the End Stage Renal Disease
Prospective Payment System. See Chapter 11, “End Stage Renal Disease
(ESRD)” of this manual, for rules on the coverage of these services.

For policies in addition to this section that apply to partial hospitalization services,
see chapter 6, section 70.3 of this manual, and Pub. 100-04, Medicare Claims
Processing Manual, chapter 4, section 260. For policies in addition to this section
that apply to intensive outpatient services, see chapter 6, section 70.4 of this manual,
and Pub. 100-04, Medicare Claims Processing Manual, chapter 4, section 261.
For rules on the coverage of services and supplies furnished incident to a physician’s
professional services in an office or physician-directed clinic setting, refer to Chapter
15, “Covered Medical and Other Health Services,” section 60 of this manual.
20.1 - Limitations on Coverage of Certain Services Furnished to
Hospital Outpatients
(Rev. 82; Issued: 02-08-08; Effective: 01-01-08; Implementation: 03-10-08)
Sources: 42 CFR 410.42(a) and 64 FR 18536, April 7, 2000
20.1.1 - General Rule
(Rev. 82; Issued: 02-08-08; Effective: 01-01-08; Implementation: 03-10-08)
Except as provided in section 20.1.2 of this chapter, Medicare Part B does not pay for any
item or service that is furnished to a hospital outpatient, as defined in section 20.2, during
an encounter, as defined in section 20.3, by an entity other than the hospital unless the
hospital has arrangements with that entity to furnish that particular service to its patients.
The arrangements must provide that Medicare payment made to the hospital that arranged
for the services discharges the liability of the beneficiary or any other person to pay for
those services. See the Medicare General Information, Eligibility, and Entitlement
Manual, Pub.100-01, chapter 5, section 10.3 for the definition of “arrangements.” For the
purposes of this section, the term “hospital” includes a Critical Access Hospital (CAH).
20.1.2 - Exception to Limitation
(Rev. 82; Issued: 02-08-08; Effective: 01-01-08; Implementation: 03-10-08)
The limitation stated in section 20.1.1 does not apply to the following services:
• 	Physicians’ professional services that meet the following conditions:
o 	The services are personally furnished for an individual beneficiary by a
physician;
o 	The services contribute directly to the diagnosis or treatment of an
individual beneficiary;
o 	The services ordinarily require performance by a physician;
o 	In the case of radiology or laboratory services, additional requirements in
42 CFR §415.120 and §415.130, respectively of the Code of Federal
Regulations are met.

• 	Physician assistant services, as defined in section 1861(s)(2)(K)(i) of the Social
Security Act (the Act);
• 	Nurse practitioner and clinical nurse specialist services, as defined in section
1861(s)(2)(K)(ii) of the Act;
• 	Qualified psychologist services, as defined in section 1861(ii) of the Act;
• 	Services of an anesthetist, as defined in regulations in 42 CFR 410.69;
• 	Services furnished to SNF residents as defined in regulations in 42 CFR
411.15(p).
20.2 - Outpatient Defined
(Rev. 82; Issued: 02-08-08; Effective: 01-01-08; Implementation: 03-10-08)
A hospital outpatient is a person who has not been admitted by the hospital as an
inpatient but is registered on the hospital records as an outpatient and receives services
(rather than supplies alone) from the hospital or CAH. Where a tissue sample, blood
sample, or specimen is taken by personnel that are neither employed nor arranged for by
the hospital and is sent to the hospital for performance of tests, the tests are not outpatient
hospital services since the patient does not directly receive services from the hospital.
See section 70.5 for coverage of laboratory services furnished to nonhospital patients by a
hospital laboratory unless the patient is also a registered hospital outpatient receiving
outpatient services from the hospital on the same day and the hospital is not a CAH or
Maryland waiver hospital. Similarly, supplies provided by a hospital supply room for use
by physicians in the treatment of private patients are not covered as an outpatient service
since the patients receiving the supplies are not outpatients of the hospital. (See the
Medicare Benefit Policy Manual, Pub. 100-02, Chapter 1,“Inpatient Hospital Services,”
section 10, for the definition of “inpatient.”)
Where the hospital uses the category "day patient," i.e., an individual who receives
hospital services during the day and is not expected to be lodged in the hospital at
midnight, the individual is considered an outpatient. For information on outpatient
observation status, refer to section 20.6 of this chapter and to the Medicare Claims
Processing Manual, Pub.100-04, chapter 4, section 290, “Outpatient Observation
Services.” For information on conditions when an inpatient admission may be changed
to outpatient status, refer to the Medicare Claims Processing Manual, Pub.100-04,
Chapter 1, “General Billing Requirements,” section 50.3.
The inpatient of a SNF may be considered the outpatient of a participating hospital.
However, the inpatient of a participating hospital cannot be considered an outpatient of
that or any other hospital.

Outpatient hospital services furnished in the emergency room to a patient classified as
“dead on arrival” are covered until pronouncement of death, if the hospital considers such
patients as outpatients for record-keeping purposes and follows its usual outpatient billing
practice for such services to all patients, both Medicare and non-Medicare. This
coverage does not apply if the patient was pronounced dead prior to arrival at the
hospital.
20.3 - Encounter Defined
(Rev. 101, Issued: 01-16-09, Effective: 01-01-09, Implementation: 01-05-09)
Source: 42 CFR 410.2 and 482.12
A hospital outpatient “encounter” is a direct personal contact between a patient and a
physician, or other person who is authorized by State licensure law and, if applicable, by
hospital or CAH staff bylaws, to order or furnish hospital services for diagnosis or
treatment of the patient.
The conditions of participation for hospitals under 42 CFR 482.12(c)(1)(i) through
(c)(1)(vi) require that every Medicare patient is under the care of a doctor of medicine or
osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine,
a doctor of optometry, a chiropractor, or a clinical psychologist; each practicing within
the extent of the Act, the Code of Federal Regulations, and State law. Further, 42 CFR
482.12(c)(4) requires that a doctor of medicine or osteopathy must be responsible for the
care of each Medicare patient with respect to any medical or psychiatric condition that is
present on admission or develops during hospitalization and is not specifically within the
scope of practice of one of the other practitioners listed in 42 CFR 482.12(c)(1)(i)
through (c)(1)(vi).
20.4 - Outpatient Diagnostic Services
(Rev. 82; Issued: 02-08-08; Effective: 01-01-08; Implementation: 03-10-08)
20.4.1 - Diagnostic Services Defined
(Rev. 82; Issued: 02-08-08; Effective: 01-01-08; Implementation: 03-10-08)
A service is “diagnostic” if it is an examination or procedure to which the patient is
subjected, or which is performed on materials derived from a hospital outpatient, to
obtain information to aid in the assessment of a medical condition or the identification of
a disease. Among these examinations and tests are diagnostic laboratory services such as
hematology and chemistry, diagnostic x-rays, isotope studies, EKGs, pulmonary function
studies, thyroid function tests, psychological tests, and other tests given to determine the
nature and severity of an ailment or injury.
20.4.2 - Reserved
20.4.3 - Coverage of Outpatient Diagnostic Services Furnished on or
Before December 31, 2009

(Rev. 128, Issued: 05-28-10, Effective: 07-01-10, Implementation: 07-06-10)
Covered diagnostic services to outpatients include the services of nurses, psychologists,
technicians, drugs and biologicals necessary for diagnostic study, and the use of supplies
and equipment. When a hospital sends hospital personnel and hospital equipment to a
patient’s home to furnish a diagnostic service, Medicare covers the service as if the
patient had received the service in the hospital outpatient department.
For services furnished before August 1, 2000, hospital personnel may provide diagnostic
services outside the hospital premises without the direct personal supervision of a
physician. For example, if a hospital laboratory technician is sent by the hospital to a
patient’s home to obtain a blood sample for testing in the hospital’s laboratory, the
technician’s services are a covered hospital service even though a physician was not with
the technician.
For services furnished on or after August 1, 2000, and before January 1, 2010, Medicare
Part B makes payment for hospital or CAH diagnostic services furnished to outpatients,
including drugs and biologicals required in the performance of the services (even if those
drugs or biologicals are self-administered), if those services meet the following
conditions:
1. 	They are furnished by the hospital or under arrangements made by the hospital or
CAH with another entity (see section 20.1 of this chapter);
2. 	They are ordinarily furnished by, or under arrangements made by the hospital or
CAH to its outpatients for the purpose of diagnostic study;
3. 	They would be covered as inpatient hospital services if furnished to an inpatient;
and
4. 	Payment is allowed under the hospital outpatient prospective payment system for
diagnostic services furnished at a facility that is designated as provider-based only
when those services are furnished under the appropriate level of supervision
specified in accordance with the definitions at 42 CFR 410.32(b)(3)(i), (b)(3)(ii),
and (b)(3)(iii), and as described in Chapter 15 of this manual, Section 80
“Requirements for Diagnostic X-ray, Diagnostic Laboratory, and Other
Diagnostic Tests,” as though they are being furnished in a physician’s office or
clinic setting. With respect to individual diagnostic tests, the supervision levels
listed in the quarterly updated Medicare Physician Fee Schedule (MPFS) Relative
Value File apply. For diagnostic services not listed in the MPFS, Medicare
contractors, in consultation with their medical directors, define appropriate
supervision levels in order to determine whether claims for these services are
reasonable and necessary.
Future updates to the MPFS relative value files will be issued in future Recurring Update
Notifications.

As specified at 42 CFR 410.28(f), for services furnished on or after February 21, 2002,
the provisions of paragraphs (a) and (d)(2) through (d)(4), inclusive, of 42 CFR 410.32
apply to all diagnostic laboratory tests furnished by hospitals and CAHs to outpatients.
Physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse
midwives who operate within the scope of practice under State law may order and
perform diagnostic tests, as discussed in 42 CFR 410.32(a)(2) and corresponding
guidance in chapter 15, section 80 of this manual. However, this manual guidance and
the long established regulation at 42 CFR 410.32(b)(1) also state that diagnostic x-ray
and other diagnostic tests must be furnished under the appropriate level of supervision by
a physician as defined in section 1861(r) of the Act. Some of these non-physician
practitioners may perform diagnostic tests without supervision, see the regulation at
410.32(b)(2) and 42 CFR 410.32(b)(3). Thus, while physician assistants, nurse
practitioners, clinical nurse specialists, and certified nurse midwives only require
physician supervision included in any collaboration or supervision requirements
particular to that type of practitioner when they personally perform a diagnostic test,
these practitioners are not permitted to function as supervisory “physicians” for the
purposes of other hospital staff performing diagnostic tests.
20.4.4 - Coverage of Outpatient Diagnostic Services Furnished on or
After January 1, 2010
(Rev. 152, Issued: 12-29-11, Effective: 01-01-12, Implementation: 01-03-12)
Covered diagnostic services to outpatients include the services of nurses, psychologists,
technicians, drugs and biologicals necessary for diagnostic study, and the use of supplies
and equipment. When a hospital sends hospital personnel and hospital equipment to a
patient’s home to furnish a diagnostic service, Medicare covers the service as if the
patient had received the service in the hospital outpatient department.
As specified at 42 CFR 410.28(a), for services furnished on or after January 1, 2010,
Medicare Part B makes payment for hospital or CAH diagnostic services furnished to
outpatients, including drugs and biologicals required in the performance of the services
(even if those drugs or biologicals are self-administered), if those services meet the
following conditions:
1. They are furnished by the hospital or under arrangements made by the hospital or CAH
with another entity (see section 20.1 of this chapter);
2. They are ordinarily furnished by, or under arrangements made by the hospital or CAH
to its outpatients for the purpose of diagnostic study; and
3. They would be covered as inpatient hospital services if furnished to an inpatient.
As specified at 42 CFR 410.28(e), payment is allowed under the hospital outpatient
prospective payment system for diagnostic services only when those services are

furnished under the appropriate level of supervision specified in accordance with the
definitions in this manual and at 42 CFR 410.32(b)(3)(i), (b)(3)(ii), and (b)(3)(iii) of
general, direct and personal supervision.
Physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse
midwives who operate within their scope of practice under State law may order and
perform diagnostic tests, as discussed in 42 CFR 410.32(a)(2) and corresponding
guidance in chapter 15, section 80 of this manual. However, this guidance and the long
established regulation at 42 CFR 410.32(b)(1) also state that diagnostic x-ray and other
diagnostic tests must be furnished under the appropriate level of supervision by a
physician as defined in section 1861(r) of the Act and may not be supervised by
nonphysician practitioners. Sections 410.32(b)(2) and (3) provide certain exceptions that
allow some diagnostic tests furnished by certain non-physician practitioners to be
furnished without physician supervision. While these nonphysician practitioners
including physician assistants, nurse practitioners, clinical nurse specialists, and certified
nurse midwives cannot provide the required physician supervision when other hospital
staff are performing diagnostic tests, when these nonphysician practitioners personally
perform a diagnostic service they must meet only the physician supervision requirements
that are prescribed under the Medicare coverage rules at 42 CFR Part 410 for that type of
practitioner when they directly provide a service. For example, under section 410.75
nurse practitioners must work in collaboration with a physician, and under section 410.74
physician assistants must practice under the general supervision of a physician.
With respect to individual diagnostic tests, the supervision levels listed in the quarterly
updated Medicare Physician Fee Schedule (PFS) Relative Value File apply. For
diagnostic services not listed in the PFS, Medicare contractors, in consultation with their
medical directors, define appropriate supervision levels in order to determine whether
claims for these services are reasonable and necessary. Updates to the PFS Relative
Value Files will be issued in future Recurring Update Notifications. For guidance
regarding the numeric levels assigned to each CPT or HCPCS code in the PFS Relative
Value File, see Chapter 15 of this manual, Section 80, “Requirements for Diagnostic X-
ray, Diagnostic Laboratory, and Other Diagnostic Tests.”
For diagnostic services furnished during calendar year (CY) 2010 whether directly or
under arrangement in the hospital or in an on-campus outpatient department of the
hospital, as defined at 42 CFR 413.65, “direct supervision” means that the physician must
be present on the same campus where the services are being furnished. For services
furnished in an off-campus provider based department as defined at 42 CFR 413.65, he or
she must be present within the off-campus provider based department. The physician
must be immediately available to furnish assistance and direction throughout the
performance of the procedure. The physician does not have to be present in the room
when the procedure is performed. “In the hospital” means the definition specified in
42CFR 410.27(g), which is areas in the main building(s) of the hospital or CAH that are
under the ownership, financial, and administrative control of the hospital or CAH; that
are operated as part of the hospital or CAH; and for which the hospital or CAH bills the
services furnished under the hospital’s or CAH’s CMS Certification Number.

For diagnostic services furnished during CY 2011 and following, whether directly or
under arrangement in the hospital or in an on-campus or off-campus outpatient
department of the hospital as defined at 42 CFR 413.65, “direct supervision” means that
the physician must be immediately available to furnish assistance and direction
throughout the performance of the procedure. As discussed below, the physician is not
required to be present in the room where the procedure is being performed or within any
other physical boundary as long as he or she is immediately available.
For services furnished during CY 2010 and following under arrangement in nonhospital
locations, “direct supervision” means the definition specified in the PFS at 42 CFR
410.32(b)(3)(ii). The supervisory physician must remain present within the office suite
where the service is being furnished and must be immediately available to furnish
assistance and direction throughout the performance of the procedure. The supervisory
physician is not required to be present in the room where the procedure is being
performed.
Immediate availability requires the immediate physical presence of the supervisory
physician. CMS has not specifically defined the word “immediate” in terms of time or
distance; however, an example of a lack of immediate availability would be situations
where the supervisory physician is performing another procedure or service that he or she
could not interrupt. Also, for services furnished on-campus, the supervisory physician
may not be so physically distant on-campus from the location where hospital outpatient
services are being furnished that he or she could not intervene right away. The hospital
or supervisory physician must judge the supervisory physician’s relative location to
ensure that he or she is immediately available.
For services furnished in CY 2011 and following, which require direct supervision, the
supervisory practitioner may be present in locations such as physician offices that are
close to the hospital or provider based department of a hospital where the services are
being furnished but are not located in actual hospital space, as long as the supervisory
physician remains immediately available. Similarly, as of CY 2011 for services requiring
direct supervision, the supervisory practitioner may be present in a location in or near an
off-campus hospital building that houses multiple hospital provider based departments
where the services are being furnished as long as the supervisory physician is
immediately available.
The supervisory physician must have, within his or her State scope of practice and
hospital-granted privileges, the knowledge, skills, ability, and privileges to perform the
service or procedure. Specially trained ancillary staff and technicians are the primary
operators of some specialized diagnostic testing equipment, and while in such cases CMS
does not expect the supervisory physician to operate this equipment instead of a
technician, the physician that supervises the provision of the diagnostic service must be
knowledgeable about the test and clinically able to furnish the test.

The supervisory responsibility is more than the capacity to respond to an emergency, and
includes the ability to take over performance of a procedure or provide additional orders.
CMS would not expect that the supervisory physician would make all decisions
unilaterally without informing or consulting the patient’s treating physician or
nonphysician practitioner. In summary, the supervisory physician must be clinically
appropriate to supervise the service or procedure.
As specified at 42 CFR 410.28(f), for services furnished on or after February 21, 2002,
the provisions of paragraphs (a) and (d)(2) through (d)(4), inclusive, of 42 CFR 410.32
apply to all diagnostic laboratory tests furnished by hospitals and CAHs to outpatients.
20.4.5 - Outpatient Diagnostic Services Under Arrangements
(Rev. 143, Issued: 04-29-11, Effective: 05-31-11, Implementation: 05-31-11)
When the hospital makes arrangements with others for diagnostic services, such services
are covered under Part B as diagnostic tests whether furnished in the hospital or in other
facilities. Diagnostic services furnished under arrangement in on-campus hospital
locations, off-campus hospital locations, and in nonhospital locations must be furnished
under the appropriate level of physician supervision according to the requirements of 42
CFR 410.28(e) and 410.32(b)(3), as discussed in the applicable sections above.
Independent laboratory services furnished to an outpatient under arrangements with the
hospital are covered only under the "diagnostic laboratory tests" provisions of Part B (see
Section 10, above), but are to be billed along with other services to outpatients. See Pub.
100-02, Medicare Benefit Policy Manual, Chapter 1, “Inpatient Hospital Services,”
Section 50.3, for: (1) the definition of an independent clinical laboratory; (2) the
requirements which such a laboratory must meet; and (3) instructions to the A/B MAC
(A) when it is not approved. The “cost” to the hospital for diagnostic laboratory services
for outpatients obtained under arrangements is the reasonable charge by the laboratory.
Laboratory services may also be furnished to a hospital outpatient under arrangements
by:
1. The laboratory of another participating hospital; or
2. The laboratory of an emergency hospital or participating skilled nursing facility that
meets the hospital conditions of participation relating to laboratory services.
20.5 - Outpatient Therapeutic Services
(Rev. 82; Issued: 02-08-08; Effective: 01-01-08; Implementation: 03-10-08)
Sources: 42 CFR 410.27; 65 FR 18536, April 7, 2000
20.5.1 - Coverage of Outpatient Therapeutic Services Incident to a
Physician’s Service Furnished on or After August 1, 2000, and Before
January 1, 2010
(Rev. 128, Issued: 05-28-10, Effective: 07-01-10, Implementation: 07-06-10)

Therapeutic services and supplies which hospitals provide on an outpatient basis are
those services and supplies (including the use of hospital facilities) which are incident to
the services of physicians and practitioners in the treatment of patients. All hospital
outpatient services that are not diagnostic are services that aid the physician or
practitioner in the treatment of the patient. Such therapeutic services include clinic
services, emergency room services, and observation services. Policies for hospital
services incident to physicians’ services rendered to outpatients differ in some respects
from policies that pertain to “incident to” services furnished in office and physician-
directed clinic settings. See Chapter 15,“Covered Medical and Other Health Services,”
section 60.
To be covered as incident to physicians’ services, the services and supplies must be
furnished by the hospital or CAH or under arrangement made by the hospital or CAH
(see section 20.1.1 of this chapter). The services and supplies must be furnished as an
integral, although incidental, part of the physician or nonphysician practitioner’s
professional service in the course of treatment of an illness or injury.
The services and supplies must be furnished in the hospital or at a department of the
hospital which has provider-based status in relation to the hospital under 42 CFR 413.65.
The services and supplies must be furnished under the order of a physician or other
practitioner practicing within the extent of the Act, the Code of Federal Regulations, and
State law, and furnished by hospital personnel under the direct supervision of a physician
or clinical psychologist as defined at 42 CFR 410.32(b)(3)(ii) and 482.12. This does not
mean that each occasion of service by a nonphysician need also be the occasion of the
actual rendition of a personal professional service by the physician responsible for care of
the patient. However, during any course of treatment rendered by auxiliary personnel,
the physician must personally see the patient periodically and sufficiently often to assess
the course of treatment and the patient’s progress and, where necessary, to change the
treatment regimen. A hospital service or supply would not be considered incident to a
physician’s service if the attending physician merely wrote an order for the services or
supplies and referred the patient to the hospital without being involved in the
management of that course of treatment.
The physician or clinical psychologist that supervises the services need not be in the same
department as the ordering physician. For services furnished at a department of the
hospital which has provider-based status in relation to the hospital under 42 CFR 413.65,
“direct supervision” means the physician or clinical psychologist must be present and on
the premises of the location (the provider-based department of the hospital) and
immediately available to furnish assistance and direction throughout the performance of
the procedure. It does not mean that the physician must be present in the room when the
procedure is performed.
If a hospital therapist, other than a physical, occupational or speech-language pathologist,
goes to a patient’s home to give treatment unaccompanied by a physician, the therapist’s
services would not be covered. See Chapter 15, "Covered Medical and Other Health

Services," Sections 220 and 230, for outpatient physical therapy and speech-language
pathology coverage conditions.
20.5.2 - Coverage of Outpatient Therapeutic Services Incident to a
Physician’s Service Furnished on January 1, 2010 through December
31, 2019
(Rev.267, Issued: 02-04-2020, Effective: 01-01-2020, Implementation: 01-06-2020)
Therapeutic services and supplies which hospitals provide on an outpatient basis are
those services and supplies (including the use of hospital facilities and drugs and
biologicals that cannot be self-administered) which are not diagnostic services, are
furnished to outpatients incident to the services of physicians and practitioners and which
aid them in the treatment of patients. These services include clinic services, emergency
room services, and observation services. Policies for hospital outpatient therapeutic
services furnished incident to physicians’ services differ in some respects from policies
that pertain to “incident to” services furnished in office and physician-directed clinic
settings. See Chapter 15, “Covered Medical and Other Health Services,” Section 60.
To be covered as hospital outpatient therapeutic services, the services and supplies must
be furnished by the hospital or CAH or under arrangement made by the hospital or CAH
(see section 20.1.1 of this chapter). The services and supplies must be furnished as an
integral, although incidental, part of the physician or nonphysician practitioner’s
professional service in the course of treatment of an illness or injury.
The services and supplies must be furnished in the hospital or at a department of the
hospital that has provider-based status in relation to the hospital under 42 CFR 413.65.
For therapeutic services furnished during CY 2010, as specified at 42 CFR 410.27(g), "in
the hospital or CAH" means areas in the main building(s) of the hospital or CAH that are
under the ownership, financial, and administrative control of the hospital or CAH; that
are operated as part of the hospital or CAH; and for which the hospital or CAH bills the
services furnished under the hospital’s or CAH’s CMS Certification Number.
Hospital outpatient therapeutic services and supplies must be furnished under the order of
a physician or other practitioner practicing within the extent of the Act, the Code of
Federal Regulations, and State law. They must be furnished by hospital personnel under
the appropriate supervision of a physician or nonphysician practitioner as required in this
manual and by 42 CFR 410.27 and 482.12. This does not mean that each occasion of
service by a nonphysician need also be the occasion of the actual rendition of a personal
professional service by the physician responsible for care of the patient. However, during
any course of treatment rendered by auxiliary personnel, the physician must personally
see the patient periodically and sufficiently often to assess the course of treatment and the
patient’s progress and, when necessary, to change the treatment regimen. A hospital
service or supply would not be considered incident to a physician’s service if the
attending physician merely wrote an order for the services or supplies and referred the

patient to the hospital without being involved in the management of that course of
treatment.
CMS requires direct supervision (defined below) by an appropriate physician or non-
physician practitioner in the provision of all therapeutic services to hospital outpatients,
including CAH outpatients. CMS may assign certain hospital outpatient therapeutic
services either general supervision or personal supervision. When such assignment is
made, “general supervision” means the definition specified at 42 CFR 410.32(b)(3)(i),
that is, the procedure or service is furnished under the physician's overall direction and
control, but the physician's presence is not required during the performance of the
procedure. “Personal supervision” means the definition specified at 42 CFR
410.32(b)(3)(iii), that is, the physician must be in attendance in the room during the
performance of the service or procedure.
Effective January 1, 2011 through December 31, 2019, hospitals may change to general
supervision for a portion of services defined as non-surgical extended duration
therapeutic services (“extended duration services”) but only as specified in this manual
for those services (see section 20.7). Pulmonary rehabilitation, cardiac rehabilitation, and
intensive cardiac rehabilitation services require direct supervision which must be
furnished by a doctor of medicine or osteopathy, as specified at 42 CFR 410.47 and
410.49, respectively.
The list of services for the period of January 1, 2010 through December 31, 2019 that
may be furnished under general supervision or that are defined as non-surgical extended
duration therapeutic services is available on the OPPS Website at
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-
Payment/HospitalOutpatientPPS/index.html.
Beginning January 1, 2010, according to 42 CFR 410.27, in addition to physicians and
clinical psychologists, licensed clinical social workers, physician assistants, nurse
practitioners, clinical nurse specialists, and certified nurse-midwives may furnish the
required supervision of hospital outpatient therapeutic services that they may personally
furnish in accordance with State law and all additional rules governing the provision of
their services, including those specified at 42 CFR Part 410. These nonphysician
practitioners are specified at 42 CFR 410.27(g).
Considering that hospitals furnish a wide array of very complex outpatient services and
procedures, including surgical procedures, CMS would expect that hospitals already have
the credentialing procedures, bylaws, and other policies in place to ensure that hospital
outpatient services furnished to Medicare beneficiaries are being provided only by
qualified practitioners in accordance with all applicable laws and regulations. For
services not furnished directly by a physician or nonphysician practitioner, CMS would
expect that these hospital bylaws and policies would ensure that the therapeutic services
are being supervised in a manner commensurate with their complexity, including
personal supervision where appropriate.

For therapeutic services furnished during CY 2010 in the hospital or CAH or in an on-
campus outpatient department of the hospital or CAH, as defined at 42 CFR 413.65,
“direct supervision” means that the physician or nonphysician practitioner must be
present on the same campus where the services are being furnished. For services
furnished in an off-campus provider based department as defined in 42 CFR 413.65, he or
she must be present within the off-campus provider based department. The physician or
nonphysician practitioner must be immediately available to furnish assistance and
direction throughout the performance of the procedure. The physician or nonphysician
practitioner does not have to be present in the room when the procedure is performed.
For therapeutic services furnished during CY 2011 and following, whether in the hospital
or CAH or in an on-campus or off-campus outpatient department of the hospital or CAH
as defined at 42 CFR 413.65, “direct supervision” means that the physician or
nonphysician practitioner must be immediately available to furnish assistance and
direction throughout the performance of the procedure. As discussed below, the
physician is not required to be present in the room where the procedure is performed or
within any other physical boundary as long as he or she is immediately available.
Immediate availability requires the immediate physical presence of the supervisory
physician or nonphysician practitioner. CMS has not specifically defined the word
“immediate” in terms of time or distance; however, an example of a lack of immediate
availability would be situations where the supervisory physician or nonphysician
practitioner is performing another procedure or service that he or she could not interrupt.
Also, for services furnished on-campus, the supervisory physician or nonphysician
practitioner may not be so physically distant on-campus from the location where
hospital/CAH outpatient services are being furnished that he or she could not intervene
right away. The hospital or supervisory practitioner must judge the supervisory
practitioner’s relative location to ensure that he or she is immediately available.
For services furnished in CY 2011 and following, a supervisory practitioner may furnish
direct supervision from a physician office or other nonhospital space that is not officially
part of the hospital or CAH campus where the services are being furnished as long as he
or she remains immediately available. Similarly, as of CY 2011, an allowed practitioner
can furnish direct supervision from any location in or near an off-campus hospital or
CAH building that houses multiple hospital provider-based departments where the
services are being furnished as long as the supervisory practitioner is immediately
available.
The supervisory physician or nonphysician practitioner must have, within his or her State
scope of practice and hospital-granted privileges, the knowledge, skills, ability, and
privileges to perform the service or procedure. Specially trained ancillary staff and
technicians are the primary operators of some specialized therapeutic equipment, and
while in such cases CMS does not expect the supervisory physician or nonphysician
practitioner to operate this equipment instead of technician, CMS does expect the
physician or nonphysician practitioner to be knowledgeable about the therapeutic service
and clinically able to furnish the service.

The supervisory responsibility is more than the capacity to respond to an emergency, and
includes the ability to take over performance of a procedure or provide additional orders.
CMS would not expect that the supervisory physician or nonphysician practitioner would
make all decisions unilaterally without informing or consulting the patient’s treating
physician or nonphysician practitioner. In summary, the supervisory physician or
nonphysician practitioner must be clinically able to supervise the service or procedure.
20.5.3 - Coverage of Outpatient Therapeutic Services Incident to a
Physician’s Service Furnished on or After January 1, 2020 – Changes to
Supervision Requirements
(Rev. 10541; Issued: 12-31-20; Effective: 01-01-21; Implementation: 01-04-21)
Starting January 1, 2020, CMS requires, as the minimum level of supervision, general
supervision by an appropriate physician or non-physician practitioner in the provision of
all therapeutic services to hospital outpatients, including CAH outpatients. “General
supervision” means the definition specified at 42 CFR 410.32(b)(3)(i), that is, the
procedure or service is furnished under the physician's overall direction and control, but
the physician's presence is not required during the performance of the procedure. CMS
may assign certain hospital outpatient therapeutic services either direct supervision or
personal supervision. When such assignment is made, “direct supervision” means the
definition specified at 42 CFR 410.32(b)(3)(ii), that is, the physician must be
immediately available to furnish assistance and direction throughout the performance of
the procedure. It does not mean that the physician or must be present in the room when
the procedure is performed. “Personal supervision” means the definition specified at 42
CFR 410.32(b)(3)(iii), that is, the physician must be in attendance in the room during the
performance of the service or procedure.
The list of services starting January 1, 2020 and ending December 31, 2020 that are
defined as non-surgical extended duration therapeutic services where the initiation of the
service must be performed under direct supervision is available on the OPPS Website at
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-
Payment/HospitalOutpatientPPS/index.html. Starting January 1, 2021, the minimum level
of supervision for non-surgical extended duration therapeutic services will be general
supervision for the entire service including for the initiation of the service.
20.5.4 - Coverage of Outpatient Therapeutic Services Incident to a
Physician’s Service Furnished on or After January 1, 2024 – Changes to
Direct Supervision Requirements for Pulmonary, Cardiac and Intensive
Cardiac Rehabilitation
(Rev. 12421; Issued: 12-21-23; Effective: 01-01-24: Implementation: 01-02-24)
Beginning January 1, 2024, the required direct supervision of pulmonary rehabilitation
services, as specified at 42 CFR 410.47, and cardiac rehabilitation and intensive cardiac
rehabilitation services, as specified at 42 CFR 410.49, may be furnished by a doctor of

medicine, a doctor of osteopathy, a physician assistant, a nurse practitioner, or a clinical
nurse specialist.
20.6 - Outpatient Observation Services
(Rev. 215, Issued, 12-18-15, Effective, 01-01-16, Implementation: 01-04-16)
A. Outpatient Observation Services Defined
Observation care is a well-defined set of specific, clinically appropriate services, which
include ongoing short term treatment, assessment, and reassessment before a decision can
be made regarding whether patients will require further treatment as hospital inpatients or
if they are able to be discharged from the hospital. Observation services are commonly
ordered for patients who present to the emergency department and who then require a
significant period of treatment or monitoring in order to make a decision concerning their
admission or discharge.
Observation services are covered only when provided by the order of a physician or
another individual authorized by state licensure law and hospital staff bylaws to admit
patients to the hospital or to order outpatient tests. In the majority of cases, the decision
whether to discharge a patient from the hospital following resolution of the reason for the
observation care or to admit the patient as an inpatient can be made in less than 48 hours,
usually in less than 24 hours. In only rare and exceptional cases do reasonable and
necessary outpatient observation services span more than 48 hours.
Hospitals may bill for patients who are directly referred to the hospital for outpatient
observation services. A direct referral occurs when a physician in the community refers a
patient to the hospital for outpatient observation, bypassing the clinic or emergency
department (ED) visit. Effective for services furnished on or after January 1, 2003,
hospitals may bill for patients directly referred for observation services.
See, Pub. 100-04, Medicare Claims Processing Manual, chapter 4, section 290, at
http://www.cms.hhs.gov/manuals/downloads/clm104c04.pdf for billing and payment
instructions for outpatient observation services.
Future updates will be issued in a Recurring Update Notification.
B. Coverage of Outpatient Observation Services
When a physician orders that a patient receive observation care, the patient’s status is that
of an outpatient. The purpose of observation is to determine the need for further
treatment or for inpatient admission. Thus, a patient receiving observation services may
improve and be released, or be admitted as an inpatient (see Pub. 100-02, Medicare
Benefit Policy Manual, Chapter 1, Section 10 “Covered Inpatient Hospital Services
Covered Under Part A” at https://www.cms.gov/Regulations-and-
Guidance/Guidance/Manuals/Downloads/bp102c01.pdf). For more information on

correct reporting of observation services, see Pub. 100-04, Medicare Claims Processing
Manual, chapter 4, section 290.2.2.)
All hospital observation services, regardless of the duration of the observation care, that
are medically reasonable and necessary are covered by Medicare. Observation services
are reported using HCPCS code G0378 (Hospital observation service, per hour). As of
January 1, 2008, HCPCS code G0378 for hourly observation services is assigned status
indicator N, signifying that its payment is always packaged. No separate payment is
made for observation services reported with HCPCS code G0378. In most
circumstances, observation services are supportive and ancillary to the other separately
payable services provided to a patient. Beginning January 1, 2016, in certain
circumstances when observation care is billed in conjunction with a clinic visit, Type A
emergency department visit (Level 1 through 5), Type B emergency department visit
(Level 1 through 5), critical care services, or direct referral for observation services as an
integral part of a patient’s extended encounter of care, comprehensive payment may be
made for all services on the claim including, the entire extended care encounter when
certain criteria are met. For information about billing and payment methodology for
observation services in years prior to CY 2008, see Pub. 100-04, Medicare Claims
Processing Manual, Chapter 4, §§290.3-290.4. For information about payment for
extended assessment and management under composite APCs and comprehensive APCs,
see §290.5.
Payment for all reasonable and necessary observation services is packaged into the
payments for other separately payable services provided to the patient in the same
encounter. Observation services packaged through assignment of status indicator N are
covered OPPS services. Since the payment for these services is included in the APC
payment for other separately payable services on the claim, hospitals must not bill
Medicare beneficiaries directly for the packaged services.
C. Services Not Covered by Medicare and Notification to the Beneficiary
In making the determination whether an ABN can be used to shift liability to a
beneficiary for the cost of non-covered items or services related to an encounter that
includes observation care, the provider should follow a two step process. First, the
provider must decide whether the item or service meets either the definition of
observation care or would be otherwise covered. If the item or service does not meet the
definitional requirements of any Medicare-covered benefit under Part B, then the item or
service is not covered by Medicare and an ABN is not required to shift the liability to the
beneficiary. However, the provider may choose to provide voluntary notification for
these items or services.
Second, if the item or service meets the definition of observation services or would be
otherwise covered, then the provider must decide whether the item or service is
“reasonable and necessary” for the beneficiary on the occasion in question, or if the item
or service exceeds any frequency limitation for the particular benefit or falls outside of a
timeframe for receipt of a particular benefit. In these cases, the ABN would be used to

shift the liability to the beneficiary (see Pub. 100-04, Medicare Claims Processing
Manual; Chapter 30, “Financial Liability Protections,” Section 20, at
https://www.cms.gov/Regulations-and-
Guidance/Guidance/Manuals/Downloads/clm104c30.pdf for information regarding
Limitation On Liability (LOL) Under §1879 Where Medicare Claims Are Disallowed).
If an ABN is not issued to the beneficiary, the provider may be held liable for the cost of
the item or service unless the provider/supplier is able to demonstrate that they did not
know and could not have reasonably been expected to know that Medicare would not pay
for the item or service.
30 - Drugs and Biologicals
(Rev. 1, 10-01-03)
A3-3112.4.B, HO-230.4.B
See the Medicare Benefit Policy Manual, Chapter 15,”Covered Medical and Other Health
Services,” §50 for a description of conditions for coverage for drugs and biologicals.
Notwithstanding the instructions in the Medicare Benefit Policy Manual, Chapter 15,
“Covered Medical and Other Health Services,” drugs and biologicals furnished to
hospital or SNF inpatients who have exhausted Part A benefits, or who are not eligible
under Part A, are not covered under Part B except the following:
• 	Hemophilia clotting factors (The limitation contained in 42 CFR 410.10(q) states
that this applies to hemophilia patients competent to use these factors without
supervision);
• 	Immunosuppressive drugs;
• 	Oral anti-cancer drugs;
• 	Oral drug prescribed for use as an acute anti-emetic used as part of an anti-cancer
chemotherapeutic regimen; or
• 	Epoetin Alfa (EPO).
Specific coverage for each of the above drugs is found in Medicare Benefit Policy
Manual, Chapter 15, “Covered Medical and Other Health Services,” §§50.
In addition pneumococcal pneumonia, influenza virus, and hepatitis B vaccines are
covered under Part B. See the Medicare Claims Processing Manual, Chapter 18,

“Preventive and Screening Services,” and the Medicare Benefit Policy Manual, Chapter
15, for additional information concerning these vaccines.
40 - Other Covered Services and Items
(Rev. 1, 10-01-03)
A3-3112.4.C, HO-230.4.D
Covered services and items provided by the hospital in connection with a clinic visit or a
physician’s treatment of outpatients include the use of the following:
• 	Hospital facilities, including the use of the emergency room;
• 	Services of nurses, nonphysician anesthetists, psychologists, technicians,
therapists, and other aides; and
• 	Medical supplies such as gauze, oxygen, ointments, and other supplies used by
physicians or hospital personnel in the treatment of outpatients.
Additional examples of covered items are surgical dressings; splints, casts, and other
devices used for reduction of fractures and dislocations; prosthetic devices; leg, arm,
back, and neck braces, trusses, and artificial legs, arms, and eyes.
50 - Sleep Disorder Clinics
(Rev. 1, 10-01-03)
A3-3112.5
Sleep disorder clinics are facilities in which certain conditions are diagnosed through the
study of sleep. Such clinics are for diagnosis, therapy, and research. Sleep disorder
clinics may provide some diagnostic or therapeutic services that are covered under
Medicare. These clinics may be affiliated either with a hospital or a freestanding facility.
Whether a clinic is hospital-affiliated or freestanding, coverage for diagnostic services
under some circumstances is covered under provisions of the law different from those for
coverage of therapeutic services.
60 - Intermittent Peritoneal Dialysis Services
(Rev. 1, 10-01-03)
A3-3112.6
See the discussion of dialysis services in the Medicare Benefits Policy Manual, Chapter
11, “End Stage Renal Disease.”
70 - Outpatient Hospital Psychiatric Services
(Rev. 1, 10-01-03)
A3-3112.7, HO-230.5

70.1 - General
(Rev. 12425; Issued: 12-21-23: Effective: 01-01-24; Implementation: 01-02-24)
There is a wide range of services and programs that a hospital may provide to its
outpatients who need psychiatric care, ranging from a few individual services to
comprehensive, full-day programs; from intensive treatment programs to those that
provide primarily supportive services.
In general, to be covered the services must be:
• 	Incident to a physician’s service (see §20.4); and
• 	Reasonable and necessary for the diagnosis or treatment of the patient’s
condition.
This means the services must be for the purpose of diagnostic study or the services
must reasonably be expected to improve the patient’s condition.
A. 	Coverage Criteria
The services must meet the following criteria:
1. 	Individualized Treatment Plan
Services must be prescribed by a physician and provided under an individualized
written plan of treatment established by a physician after any needed consultation
with appropriate staff members. The plan must state the type, amount, frequency,
and duration of the services to be furnished and indicate the diagnoses and anticipated
goals. (A plan is not required if only a few brief services are furnished.)
2. 	Physician Supervision and Evaluation
Services must be supervised and periodically evaluated by a physician to determine
the extent to which treatment goals are being realized. The evaluation must be based
on periodic consultation and conference with therapists and staff, review of medical
records, and patient interviews. Physician entries in medical records must support
this involvement. The physician must also provide supervision and direction to any
therapist involved in the patient's treatment and see the patient periodically to
evaluate the course of treatment and to determine the extent to which treatment goals
are being realized and whether changes in direction or emphasis are needed.
3. 	Reasonable Expectation of Improvement

Services must be for the purpose of diagnostic study or reasonably be expected to
improve the patient's condition. The treatment must, at a minimum, be designed to
reduce or control the patient's psychiatric symptoms so as to prevent relapse or
hospitalization, and improve or maintain the patient's level of functioning.
It is not necessary that a course of therapy have as its goal restoration of the patient to
the level of functioning exhibited prior to the onset of the illness, although this may
be appropriate for some patients. For many other psychiatric patients, particularly
those with long-term, chronic conditions, control of symptoms and maintenance of a
functional level to avoid further deterioration or hospitalization is an acceptable
expectation of improvement. "Improvement" in this context is measured by
comparing the effect of continuing treatment versus discontinuing it. Where there is
a reasonable expectation that if treatment services were withdrawn the patient's
condition would deteriorate, relapse further, or require hospitalization, this criterion is
met.
Some patients may undergo a course of treatment that increases their level of
functioning, but then reach a point where further significant increase is not expected.
Such claims are not automatically considered noncovered because conditions have
stabilized, or because treatment is now primarily for the purpose of maintaining
present level of functioning. Rather, coverage depends on whether the criteria
discussed above are met. Services are noncovered only where the evidence clearly
establishes that the criteria are not met; for example, that stability can be maintained
without further treatment or with less intensive treatment.
B. Partial Hospitalization and Intensive Outpatient Program
Partial hospitalization is a distinct and organized intensive treatment program for
patients who would otherwise require inpatient psychiatric care. See §70.3 for
specific program requirements.
An intensive outpatient program is a distinct and organized ambulatory treatment
program for patients who have an acute mental illness, including substance use disorder
(SUD). Intensive outpatient services are not required to be provided in lieu of inpatient
hospitalization. See §70.4 for specific program requirements.
C. 	Application of Criteria
The following discussion illustrates the application of the above guidelines to the
more common modalities and procedures used in the treatment of psychiatric patients
and some factors that are considered in determining whether the coverage criteria are
met.

1. 	Covered Services
Services generally covered for the treatment of psychiatric patients (including
patients with SUD) are:
• 	Individual and group therapy with physicians, psychologists, or other
mental health professionals (including SUD professionals) authorized by the
State.
• 	Occupational therapy services are covered if they require the skills of a
qualified occupational therapist and be performed by or under the supervision
of a qualified occupational therapist or by an occupational therapy assistant.
• 	Services of social workers, trained psychiatric nurses, and other staff
trained to work with psychiatric patients (including patients with SUD). These
include principal illness navigation services provided by auxiliary staff,
including peer support specialists.
• 	Drugs and biologicals furnished to outpatients for therapeutic purposes,
but only if they are of a type which cannot be self-administered.
• 	Activity therapies but only those that are individualized and essential for
the treatment of the patient's condition. The treatment plan must clearly
justify the need for each particular therapy utilized and explain how it fits into
the patient's treatment.
• 	Family counseling services. Counseling services with members of the
household are covered only where the primary purpose of such counseling is
the treatment of the patient's condition. These include counseling services for
caregivers.
• 	Patient education programs, but only where the educational activities are
closely related to the care and treatment of the patient. These services include
caregiver training services furnished for the benefit of the patient.
• 	Diagnostic services for the purpose of diagnosing those individuals for
whom an extended or direct observation is necessary to determine functioning
and interactions, to identify problem areas, and to formulate a treatment plan.
2. 	Noncovered Services
The following are generally not covered except as indicated:
• 	Meals and transportation.

• 	Activity therapies, group activities, or other services and programs which
are primarily recreational or diversional in nature. Outpatient psychiatric day
treatment programs that consist entirely of activity therapies are not covered.
"Geriatric day care" programs are available in both medical and nonmedical settings.
They provide social and recreational activities to older individuals who need some
supervision during the day while other family members are away from home. Such
programs are not covered since they are not considered reasonable and necessary for
a diagnosed psychiatric disorder, nor do such programs routinely have physician
involvement.
• 	Psychosocial programs. These are generally community support groups in
nonmedical settings for chronically mentally ill persons for the purpose of
social interaction. Outpatient programs may include some psychosocial
components; and to the extent these components are not primarily for social or
recreational purposes, they are covered. However, if an individual's outpatient
hospital program consists entirely of psychosocial activities, it is not covered.
• 	Vocational training. While occupational therapy may include vocational
and prevocational assessment and training, when the services are related
solely to specific employment opportunities, work skills or work settings, they
are not covered.
3. 	Frequency and Duration of Services
There are no specific limits on the length of time that services may be covered. There
are many factors that affect the outcome of treatment; among them are the nature of
the illness, prior history, the goals of treatment, and the patient's response. As long as
the evidence shows that the patient continues to show improvement in accordance
with his/her individualized treatment plan, and the frequency of services is within
accepted norms of medical practice, coverage may be continued.
If a patient reaches a point in his/her treatment where further improvement does not
appear to be indicated, evaluate the case in terms of the criteria to determine whether
with continued treatment there is a reasonable expectation of improvement.
70.2 - Coverage Criteria for Outpatient Hospital Psychiatric Services
(Rev. 1, 10-01-03)
A3-3112.7.B, HO-235.5.B
The services must meet the criteria outlined in the National Coverage Determinations
Manual.

70.3 - Partial Hospitalization Services
(Rev. 12425; Issued: 12-21-23: Effective: 01-01-24; Implementation: 01-02-24)
Partial hospitalization programs (PHPs) are structured to provide intensive psychiatric
care through active treatment that utilizes a combination of the clinically recognized
items and services described in §1861(ff) of the Social Security Act (the Act). The
treatment program of a PHP closely resembles that of a highly structured, short-term
hospital inpatient program. It is treatment at a level more intense than outpatient day
treatment or psychosocial rehabilitation. Programs providing primarily social,
recreational, or diversionary activities are not considered partial hospitalization.
A. Program Criteria
PHPs work best as part of a community continuum of mental health services
(including SUD services) which range from the most restrictive inpatient hospital
setting to less restrictive outpatient care and support. Program objectives should
focus on ensuring important community ties and closely resemble the real-life
experiences of the patients served. PHPs may be covered under Medicare when they
are provided by a hospital outpatient department or a Medicare-certified CMHC.
Partial hospitalization is active treatment that incorporates an individualized
treatment plan which describes a coordination of services wrapped around the
particular needs of the patient, and includes a multidisciplinary team approach to
patient care under the direction of a physician. The program reflects a high degree of
structure and scheduling. According to current practice guidelines, the treatment
goals should be measurable, functional, time-framed, medically necessary, and
directly related to the reason for admission.
A program comprised primarily of diversionary activity, social, or recreational
therapy does not constitute a PHP. Psychosocial programs which provide only a
structured environment, socialization, and/or vocational rehabilitation are not covered
by Medicare. A program that only monitors the management of medication for
patients whose psychiatric condition is otherwise stable, is not the combination,
structure, and intensity of services which make up active treatment in a PHP.
B. Patient Eligibility Criteria
1. Benefit Category
Patients must meet benefit requirements for receiving the partial hospitalization
services as defined in §1861(ff) and §1835(a)(2)(F) of the Act. Patients admitted to a

PHP must be under the care of a physician who certifies the need for partial
hospitalization, including the need for a minimum of 20 hours per week of
therapeutic services, as evidenced by their plan of care. The patients also require a
comprehensive, structured, multimodal treatment requiring medical supervision and
coordination, provided under an individualized plan of care, because of a mental
disorder (including SUD) which severely interferes with multiple areas of daily life,
including social, vocational, and/or educational functioning. Such dysfunction
generally is of an acute nature. In addition, PHP patients must be able to cognitively
and emotionally participate in the active treatment process, and be capable of
tolerating the intensity of a PHP program.
Patients meeting benefit category requirements for Medicare coverage of a PHP
comprise two groups: those patients who are discharged from an inpatient hospital
treatment program, and the PHP is in lieu of continued inpatient treatment; or those
patients who, in the absence of partial hospitalization, would be at reasonable risk of
requiring inpatient hospitalization. Where partial hospitalization is used to shorten an
inpatient stay and transition the patient to a less intense level of care, there must be
evidence of the need for the acute, intense, structured combination of services
provided by a PHP. Recertification must address the continuing serious nature of the
patients’ psychiatric condition requiring active treatment in a PHP.
Discharge planning from a PHP may reflect the types of best practices recognized by
professional and advocacy organizations that ensure coordination of needed services
and follow-up care. These activities include linkages with community resources,
supports, and providers in order to promote a patient’s return to a higher level of
functioning in the least restrictive environment.
2. Covered Services
Items and services that can be included as part of the structured, multimodal active
treatment program, identified in §1861(ff)(2) include:
• 	Individual or group psychotherapy with physicians, psychologists, or other
mental health professionals authorized or licensed by the State in which they
practice (e.g., licensed clinical social workers, mental health counselors,
marriage and family therapists, clinical nurse specialists, certified alcohol and
drug counselors);
• 	Occupational therapy requiring the skills of a qualified occupational
therapist. Occupational therapy, if required, must be a component of the
physicians treatment plan for the individual;
• 	Services of other staff (social workers, psychiatric nurses, and others)
trained to work with psychiatric patients (including patients with SUD). These

include principal illness navigation services provided by auxiliary staff,
including peer support specialists;
• 	Drugs and biologicals that cannot be self administered and are furnished
for therapeutic purposes (subject to limitations specified in 42 CFR 410.29);
• 	Individualized activity therapies that are not primarily recreational or
diversionary. These activities must be individualized and essential for the
treatment of the patient’s diagnosed condition and for progress toward
treatment goals;
• 	Family counseling services for which the primary purpose is the treatment
of the patient’s condition. These include counseling services for caregivers;
• 	Patient training and education, to the extent the training and educational
activities are closely and clearly related to the individuals care and treatment
of his/her diagnosed psychiatric condition. These services include caregiver
training services furnished for the benefit of the patient; and
• 	Medically necessary diagnostic services related to mental health treatment
(including SUD).
Partial hospitalization services that make up a program of active treatment must be
vigorous and proactive (as evidenced in the individual treatment plan and progress
notes) as opposed to passive and custodial. It is not enough that a patient qualify
under the benefit category requirements in or of §1835(a)(2)(F) unless the patient
also has the need for the active treatment provided by the program of services defined
in §1861(ff). It is the need for at least 20 hours per week of intensive, active
treatment of the patient's condition to maintain a functional level and to prevent
relapse or hospitalization that qualifies the patient to receive the services identified in
§1861(ff).
3. Reasonable and Necessary Services
This program of services provides for the diagnosis and active, intensive treatment of
the individual’s serious psychiatric condition (including SUD) and, in combination,
are reasonably expected to improve or maintain the individual’s condition and
functional level and prevent relapse or hospitalization. A particular individual
covered service (described above) as intervention, expected to maintain or improve
the individual’s condition and prevent relapse, may also be included within the plan
of care, but the overall intent of the partial program admission is to treat the serious
presenting psychiatric symptoms (including SUD). Continued treatment in order to
maintain a stable psychiatric condition or functional level requires evidence that less
intensive treatment options (e.g., intensive outpatient, psychosocial, day treatment,

and/or other community supports) cannot provide the level of support necessary to
maintain the patient and to prevent hospitalization.
Patients admitted to a PHP do not require 24 hour per day supervision as provided in
an inpatient setting, must have an adequate support system to sustain/maintain
themselves outside the PHP and must not be an imminent danger to themselves or
others. Patients admitted to a PHP generally have an acute onset or decompensation
of a covered Axis I mental disorder, as defined by the current edition of the
Diagnostic and Statistical Manual published by the American Psychiatric Association
or listed in Chapter 5, of the version of the International Classification of Diseases
(ICD) applicable to the service date, which severely interferes with multiple areas of
daily life. Examples include eating disorders, mood disorders, psychotic disorders,
and substance use disorders. The degree of impairment will be severe enough to
require a multidisciplinary intensive, structured program, but not so limiting that
patients cannot benefit from participating in an active treatment program. It is the
need, as certified by the treating physician, for the intensive, structured combination
of services provided by the program that constitute active treatment, that are
necessary to appropriately treat the patient’s presenting psychiatric condition
(including SUD).
For patients who do not meet this degree of severity of illness, and for whom partial
hospitalization services are not necessary for the treatment of a psychiatric condition
(including SUD), professional services billed to Medicare Part B (e.g., services of
psychiatrists and psychologists) may be medically necessary, even though partial
hospitalization services are not.
Patients in PHP may be discharged by either stepping up to an inpatient level of care
which would be required for patients needing 24-hour supervision, or stepping down
to a less intensive level of outpatient care when the patient’s clinical condition
improves or stabilizes and the patient no longer requires structured, intensive,
multimodal treatment.
4. Reasons for Denial
a. Benefit category denials made under §1861(ff) or §1835(a)(2)(F) are not
appealable by the provider and the limitation on liability provision does not apply
(HCFA Ruling 97-1). Examples of benefit category based in §1861(ff) or
§1835(a)(2)(F) of the Act, for partial hospitalization services generally include the
following:
• 	Day care programs, which provide primarily social, recreational, or
diversionary activities, custodial or respite care;
• 	Programs attempting to maintain psychiatric wellness, where there
is no risk of relapse or hospitalization, e.g., day care programs for the
chronically mentally ill; or

• 	Patients who are otherwise psychiatrically stable or require
medication management only.
b. 	Coverage denials made under §1861(ff) of the Act are not
appealable by the
provider and the Limitation on Liability provision does not apply (HCFA Ruling 97-
1). The following services are excluded from the scope of partial hospitalization
services defined in §1861(ff) of the Social Security Act:
• 	Services to hospital inpatients;
• 	Meals, self-administered medications, transportation; and
• 	Vocational training.
c. Reasonable and necessary denials based on §1862(a)(1)(A) are appealable
and the Limitation on Liability provision does apply. The following examples
represent reasonable and necessary denials for partial hospitalization services
and coverage is excluded under §1862(a)(1)(A) of the Social Security Act:
• 	Patients who cannot, or refuse, to participate (due to their
behavioral or cognitive status) with active treatment of their mental
disorder (except for a brief admission necessary for diagnostic purposes),
or who cannot tolerate the intensity of a PHP; or
• 	Treatment of chronic conditions without acute exacerbation of
symptoms that place the individual at risk of relapse or hospitalization.
5. Documentation Requirements and Physician Supervision
The following components will be used to help determine whether the services
provided were accurate and appropriate.
a. Initial Psychiatric Evaluation/Certification.--Upon admission, a certification by
the physician must be made that the patient admitted to the PHP would require
inpatient psychiatric hospitalization if the partial hospitalization services were not
provided and that the patient requires at least 20 hours of services per week. The
certification should identify the diagnosis and clinical need for the partial
hospitalization. Partial hospitalization services must be furnished under an
individualized written plan of care, established by the physician, which includes the
active treatment provided through the combination of structured, intensive services
identified in §1861 that are reasonable and necessary to treat the presentation of
serious psychiatric symptoms (including SUD) and to prevent relapse or
hospitalization.

b. Physician Recertification Requirements.--
• 	Signature – The physician recertification must be signed by a
physician who is treating the patient and has knowledge of the patient’s
response to treatment.
• 	Timing – The first recertification is required as of the 18th
calendar day following admission to the PHP. Subsequent
recertifications are required at intervals established by the provider, but
no less frequently than every 30 days.
• 	Content – The recertification must specify that the patient would
otherwise require inpatient psychiatric care in the absence of continued
stay in the PHP and describe the following:
• 	The patient’s response to the therapeutic interventions provided by
the PHP;
• 	The patient’s psychiatric symptoms (including SUD) that continue
to place the patient at risk of hospitalization; and
• 	Treatment goals for coordination of services to facilitate discharge
from the PHP.
c. 	Treatment Plan.--Partial hospitalization is active treatment pursuant to an
individualized treatment plan, prescribed and signed by a physician, which identifies
treatment goals, describes a coordination of services, is structured to meet the
particular needs of the patient, and includes a multidisciplinary team approach to
patient care. The treatment goals described in the treatment plan should directly
address the presenting symptoms and are the basis for evaluating the patient’s
response to treatment. Treatment goals should be designed to measure the patient’s
response to active treatment. The plan should document ongoing efforts to restore the
individual patient to a higher level of functioning that would permit discharge from
the program, or reflect the continued need for the intensity of the active therapy to
maintain the individual’s condition and functional level and to prevent relapse or
hospitalization. Activities that are primarily recreational and diversionary, or provide
only a level of functional support that does not treat the serious presenting psychiatric
symptoms (including SUD) placing the patient at risk, do not qualify as partial
hospitalization services.
d. 	Progress Notes.--Section 1833(e) of the Social Security Act prevents
Medicare
from paying for services unless necessary and sufficient information is submitted that
shows that services were provided and to determine the amounts due. A provider
may submit progress notes to document the services that have been provided. The

progress note should include a description of the nature of the treatment service, the
patient’s response to the therapeutic intervention and its relation to the goals indicated
in the treatment plan.
See the Medicare Claims Processing Manual, Chapter 4, “Hospital Outpatient
Services,” §260 for billing instructions for partial hospitalization services.
70.4 - Intensive Outpatient Services
(Rev. 12425; Issued: 12-21-23: Effective: 01-01-24; Implementation: 01-02-24)
Intensive outpatient programs (IOPs) are structured to provide intensive psychiatric
care through active treatment that utilizes a combination of the clinically recognized
items and services described in §1861(ff) of the Social Security Act (the Act). An IOP
furnishes treatment at a level more intense than outpatient day treatment or
psychosocial rehabilitation, but less intense than a PHP. Programs providing
primarily social, recreational, or diversionary activities are not considered intensive
outpatient programs.
A. Program Criteria
IOPs work best as part of a community continuum of mental health services
(including SUD services) which range from the most restrictive inpatient hospital
setting to less restrictive outpatient care and support. Program objectives should
focus on ensuring important community ties and closely resemble the real-life
experiences of the patients served. IOPs may be covered under Medicare when they
are provided by a hospital outpatient department, a Medicare-certified CMHC, a
rural health clinic (RHC), a Federally qualified health center (FQHC), or an Opioid
Treatment Program (OTP). See chapter 13 in this manual for RHCs and FQHCs; see
chapter 17 in this manual for OTPs.
An IOP is active treatment that incorporates an individualized treatment plan which
describes a coordination of services wrapped around the particular needs of the
patient and includes a multidisciplinary team approach to patient care under the
direction of a physician. The program reflects a high degree of structure and
scheduling. According to current practice guidelines, the treatment goals should be
measurable, functional, time-framed, directly related to the reason for admission to
the program, and medically necessary.
A program comprised primarily of diversionary activity, social, or recreational
therapy does not constitute an IOP. Psychosocial programs which provide only a
structured environment, socialization, and/or vocational rehabilitation are not
covered by Medicare. A program that only monitors the management of medication
for patients whose psychiatric condition is otherwise stable, is not the combination,
structure, and intensity of services which make up active treatment in an IOP.

B. Patient Eligibility Criteria
1. Benefit Category
Patients must meet benefit requirements for receiving the intensive outpatient
services as defined in §1861(ff) of the Act. Patients admitted to an IOP must be
under the care of a physician who certifies the need for intensive outpatient services,
including the need for a minimum of 9 hours per week of services, as evidenced by
their plan of care. The patients also require a comprehensive, structured, multimodal
treatment requiring medical supervision and coordination, provided under an
individualized plan of care, because of a mental disorder (including SUD) which
severely interferes with multiple areas of daily life, including social, vocational,
and/or educational functioning. Such dysfunction generally is of an acute nature. In
addition, IOP patients must be able to cognitively and emotionally participate in the
active treatment process and be capable of tolerating the intensity of an IOP
program.
Generally speaking, an IOP is less intensive than a PHP. For patients of an IOP,
section 1835(a)(2)(F)(i) of the Act does not apply, that is, individuals receiving IOP
do not require inpatient psychiatric care in the absence of such services. Patients
meeting benefit category requirements for Medicare coverage of an IOP are those
who need more intensive treatment than that provided by outpatient services, but who
need less intensive treatment than that provided by a PHP. There must be evidence
of the need for the acute, intense, structured combination of services provided by an
IOP. Recertification must address the continuing serious nature of the patients’
psychiatric condition requiring active treatment in an IOP.
Discharge planning from an IOP may reflect the types of best practices recognized by
professional and advocacy organizations that ensure coordination of needed services
and follow-up care. These activities include linkages with community resources,
supports, and providers in order to promote a patient’s return to a higher level of
functioning in the least restrictive environment.
2. Covered Services
Items and services that can be included as part of the structured, multimodal active
treatment program, identified in §1861(ff)(2) include:
• 	Individual or group psychotherapy with physicians, psychologists, or
other mental health professionals authorized or licensed by the State in which
they practice (e.g., licensed clinical social workers, mental health counselors,

marriage and family therapists, clinical nurse specialists, certified alcohol
and drug counselors);
• 	Occupational therapy requiring the skills of a qualified occupational
therapist. Occupational therapy, if required, must be a component of the
physician’s treatment plan for the individual;
• 	Services of other staff (social workers, psychiatric nurses, and others)
trained to work with psychiatric patients (including patients with SUD). These
include principal illness navigation services provided by auxiliary staff,
including peer support specialists;
• 	Drugs and biologicals that cannot be self-administered and are furnished
for therapeutic purposes (subject to limitations specified in 42 CFR 410.29);
• 	Individualized activity therapies that are not primarily recreational or
diversionary. These activities must be individualized and essential for the
treatment of the patient’s diagnosed condition and for progress toward
treatment goals;
• 	Family counseling services for which the primary purpose is the treatment
of the patient’s condition. These include counseling services for caregivers;
• 	Patient training and education, to the extent the training and educational
activities are closely and clearly related to the individual’s care and treatment
of his/her diagnosed psychiatric condition. These services include caregiver
training services furnished for the benefit of the patient; and
• 	Medically necessary diagnostic services related to mental health treatment
(including SUD).
Intensive outpatient services that make up a program of active treatment must be
vigorous and proactive (as evidenced in the individual treatment plan and progress
notes) as opposed to passive and custodial. It is the need for at least 9 hours per
week of intensive, active treatment of the patient's condition to maintain a functional
level that qualifies the patient to receive the services identified in §1861(ff).
3. Reasonable and Necessary Services
This program of services provides for the diagnosis and active, intensive treatment of
the individual’s serious psychiatric condition (including SUD) and, in combination,
are reasonably expected to improve or maintain the individual’s condition and
functional level. A particular individual covered service (described above) as
intervention, expected to maintain or improve the individual’s condition and prevent
relapse or hospitalization, may also be included within the plan of care, but the

overall intent of the intensive outpatient program is to treat the serious presenting
psychiatric symptoms (including SUD). Continued treatment in order to maintain a
stable psychiatric condition or functional level requires evidence that less intensive
treatment options (e.g., outpatient, psychosocial, day treatment, and/or other
community supports) cannot provide the level of support necessary to maintain the
patient and to prevent relapse or hospitalization.
Patients admitted to an IOP do not require 24-hour per day supervision as provided
in an inpatient setting, must have an adequate support system to sustain/maintain
themselves outside the IOP, and must not be an imminent danger to themselves or
others. Patients admitted to an IOP generally have an acute onset or
decompensation of a covered Axis I mental disorder, as defined by the current edition
of the Diagnostic and Statistical Manual published by the American Psychiatric
Association or listed in Chapter 5, of the version of the International Classification of
Diseases (ICD) applicable to the service date, which severely interferes with multiple
areas of daily life. Examples include eating disorders, mood disorders, psychotic
disorders, and substance use disorders. The degree of impairment will be severe
enough to require a multidisciplinary intensive, structured program, but not so
limiting that patients require the level of treatment provided in an inpatient setting,
and not so limiting that patients cannot benefit from participating in an active
treatment program. Additionally, patients in an IOP will generally require fewer
hours of services per week than patients participating in a PHP. It is the need, as
certified by the treating physician, for the intensive, structured combination of
services provided by the program that constitute active treatment, that are necessary
to appropriately treat the patient’s presenting psychiatric condition (including SUD).
For patients who do not meet this degree of severity of illness, and for whom an
intensive outpatient program is not necessary for the treatment of a psychiatric
condition (including SUD), professional services billed to Medicare Part B (e.g.,
services of psychiatrists and psychologists) may be medically necessary, even though
an intensive outpatient program is not.
Patients in IOP may be discharged by either stepping down to a less intensive level of
outpatient care when the patient’s clinical condition improves or stabilizes and the
patient no longer requires structured, intensive, multimodal treatment, or by stepping
up to a more intensive level of care. This could include a PHP or an inpatient level of
care (which would be required for patients needing 24-hour supervision).
b. 	Reasons for Denial
a. 	Benefit category denials made under §1861(ff) are not appealable by the
provider and the limitation on liability provision does not apply (HCFA Ruling
97-1). Examples of benefit category based in §1861(ff) of the Act for intensive
outpatient program services generally include the following:

o 	Day care programs, which provide primarily social, recreational,
or diversionary activities, custodial or respite care;
o 	Programs attempting to maintain psychiatric wellness, where there
is no risk of relapse or hospitalization, e.g., day care programs for
the chronically mentally ill; or
o 	Patients who are otherwise psychiatrically stable or require
medication management only.
b. 	Coverage denials made under §1861(ff) of the Act are not appealable by
the
provider and the Limitation on Liability provision does not apply (HCFA Ruling 97-
1). The following services are excluded from the scope of intensive outpatient
services defined in §1861(ff) of the Social Security Act:
• 	Services to hospital inpatients;
• 	Meals, self-administered medications, transportation; and
• 	Vocational training.
c. 	Reasonable and necessary denials based on §1862(a)(1)(A) are
appealable and the Limitation on Liability provision does apply. The following
examples represent reasonable and necessary denials for intensive outpatient
program services and coverage is excluded under §1862(a)(1)(A) of the Social
Security Act:
• 	Patients who cannot, or refuse, to participate (due to their behavioral
or cognitive status) with active treatment of their mental disorder
(except for a brief admission necessary for diagnostic purposes), or
who cannot tolerate the intensity of an IOP; or
• 	Treatment of chronic conditions without acute exacerbation of
symptoms that place the individual at risk of relapse or hospitalization.
b. 	Documentation Requirements and Physician Supervision
The following components will be used to help determine whether the services
provided were accurate and appropriate.

b. 	Initial Psychiatric Evaluation/Certification.--Upon admission,
certification by the physician must be made that the patient admitted
to the IOP requires a minimum of 9 hours of services per week. The
certification should identify the diagnosis and clinical need for the
intensive outpatient program. Intensive outpatient services must be
furnished under an individualized written plan of care, established by
the physician, which includes the active treatment provided through
the combination of structured, intensive services identified in § 1861
that are reasonable and necessary to treat the presentation of serious
psychiatric symptoms (including SUD) and to prevent relapse or
hospitalization.
b. Physician Recertification Requirements.--
• 	Signature – The physician recertification must be signed by a
physician who is treating the patient and has knowledge of the patient’s
response to treatment.
• 	Timing – Recertifications are required at intervals established by
the provider, but no less frequently than every 60 days following the
initial IOP certification.
• 	Content – The recertification must specify that the patient requires
a minimum of 9 hours of mental health treatment services per week and
describe the following:
• 	The patient’s response to the therapeutic interventions provided by
the IOP;
• 	The patient’s psychiatric symptoms (including SUD) that continue
to require intensive treatment; and
• 	Treatment goals for coordination of services to facilitate discharge
from the IOP.
c. 	Treatment Plan.--An intensive outpatient program is active treatment
pursuant to an individualized treatment plan, prescribed and signed by a
physician, which identifies treatment goals, describes a coordination of services,
is structured to meet the particular needs of the patient, and includes a

multidisciplinary team approach to patient care. The treatment goals described
in the treatment plan should directly address the presenting symptoms and are the
basis for evaluating the patient’s response to treatment. Treatment goals should
be designed to measure the patient’s response to active treatment. The plan
should document ongoing efforts to restore the individual patient to a higher level
of functioning that would permit discharge from the program, or reflect the
continued need for the intensity of the active therapy to maintain the individual’s
condition and functional level and to prevent relapse or hospitalization. Activities
that are primarily recreational and diversionary, or provide only a level of
functional support that does not treat the serious presenting psychiatric symptoms
(including SUD) placing the patient at risk, do not qualify as intensive outpatient
program services.
d. 	Progress Notes.--Section 1833(e) of the Social Security Act prevents
Medicare from paying for services unless necessary and sufficient information
is submitted that shows that services were provided and to determine the
amounts due. A provider may submit progress notes to document the services
that have been provided. The progress note should include a description of the
nature of the treatment service, the patient’s response to the therapeutic
intervention and its relation to the goals indicated in the treatment plan.
See the Medicare Claims Processing Manual, Chapter 4, “Hospital Outpatient
Services,” §261 for billing instructions for intensive outpatient program services.
70.5 - Laboratory Services Furnished to Nonhospital Patients by
Hospital Laboratory
(Rev. 82; Issued: 02-08-08; Effective: 01-01-08; Implementation: 03-10-08)
A nonhospital patient is an individual who is neither an inpatient nor outpatient of the
hospital furnishing the service. (See the Medicare Benefit Policy Manual, Pub. 100-02,
Chapter 1, “Inpatient Hospital Services,” section 10, for the definition of a hospital
inpatient and section 20.1 for the definition of a hospital outpatient). Nonhospital
patients primarily are individuals from whom a specimen had been taken and sent to the
hospital for analysis and the patient does not receive hospital outpatient services on the
same day. For all hospitals except CAHs and Maryland waiver hospitals, if a beneficiary
receives hospital outpatient services on the same day as a specimen collection and
laboratory test, then the patient is considered to be a registered hospital outpatient and
cannot be considered to be a non-patient on that day for purposes of the specimen
collection and laboratory test. However if the non-CAH or Maryland waiver hospital
only collects or draws a specimen from the beneficiary and the beneficiary does not also
receive hospital outpatient services on that day, the hospital may choose to register the
beneficiary as an outpatient for the specimen collection or bill for these services as non-
patient on the 14X bill type.

For CAHs, payment for clinical diagnostic laboratory tests is made at 101 percent of
reasonable cost, only if the individuals are outpatients of the CAH, as defined in 42 CFR
410.2, and are physically present in the CAH at the time the specimens are collected.
Clinical diagnostic laboratory tests performed for persons who are not physically present
(non-patients) at the CAH when the specimens are collected are made in accordance with
the provisions of sections 1833(a)(1)(D) and 1833(a)(2)(D) of the Social Security Act.
See also 42 CFR 413.70(b)(iii). Similarly, for Maryland waiver hospitals, the waiver is
limited to services to inpatients and registered outpatients as defined in 42 CFR 410.2.
Therefore payment for non-patients (specimen only, TOB 14X) who are not registered
outpatients at the time of specimen collection will be made on the clinical diagnostic
laboratory fee schedule. Such services are covered to the extent appropriate.
See the Medicare Claims Processing Manual, Pub. 100-04, Chapter 16, “Laboratory
Services from Independent Labs, Physicians, and Providers,” section 40.3, for billing and
payment of clinical diagnostic laboratory services for patients and non-patients.
80 - Rental and Purchase of Durable Medical Equipment
(Rev. 1, 10-01-03)
A3-3113, HO-235, HHA-220
Rental and purchase of DME is covered under Part B for use in a patient’s home. DME
rendered to inpatients of a SNF or hospital is covered as part of the prospective payment
system and not separately payable. See the Medicare Benefit Policy Manual, Chapter 15,
§§110 for coverage of Durable Medical Equipment and the Medicare Claims Processing
Manual, Chapter 20, “Durable Medical Equipment, Prosthetics and Orthotics, and
Supplies (DMEPOS),” for special billing instructions.
90 - Services of Interns And Residents
(Rev. 1, 10-01-03)
A3-3115, HO-237
A. General
For Medicare purposes, the terms “interns” and “residents” include physicians
participating in approved postgraduate training programs and physicians who are not in
approved programs but who are authorized to practice only in a hospital setting, e.g.,
individuals with temporary or restricted licenses, or unlicensed graduates of foreign
medical schools. Where a senior resident has a staff or faculty appointment or is
designated, for example, a “fellow,” it does not change the resident’s status for the
purposes of Medicare coverage and reimbursement. As a general rule, services of interns
and residents are paid as provider services by the A/B MAC (A).
B. Services Furnished by Interns and Residents Within the Scope of an Approved
Training Program

Medical and surgical services furnished by interns and residents within the scope of their
training program are covered as provider services. Effective with services furnished on
or after July 1, 1987, this includes services furnished in a setting which is not part of the
provider where a hospital has agreed to incur all or substantially all of the costs of
training in the nonprovider facility. Providers are required to notify the A/B MAC (B) of
such agreements. Where the provider does not incur all or substantially all of the training
costs and the services are performed by a licensed physician, the services are
reimbursable on a reasonable charge basis by the A/B MAC (B). Prior to July 1, 1987,
the covered services of interns and residents were reimbursed by the A/B MAC (B) on a
reasonable charge basis as physician services if furnished by a licensed physician off the
provider premises regardless of who incurred the training costs.
C. Services Furnished by Interns and Residents Outside the Scope of an Approved
Training Program - Moonlighting
Medical and surgical services furnished by interns and residents that are not related to
their training program, and are performed outside the facility where they have their
training program, are covered as physicians’ services and paid on a reasonable charge
basis where the requirements in 1 and 2, below, are met. Medical and surgical services
furnished by interns and residents that are not related to their training program, and are
performed in an outpatient department or emergency room of the hospital where they
have their training program, are covered as physicians’ services and paid on a reasonable
charge basis where the following criteria are met:
1. 	The services are identifiable physicians’ services, the nature of which requires
performance by a physician in person and which contributes to the diagnosis or treatment
of the patient’s condition;
2. 	The intern or resident is fully licensed to practice medicine, osteopathy, dentistry
or podiatry by the State in which the services are performed; and
3. 	The services performed can be separately identified from those services that are
required as part of the training program.
When these criteria are met, the services are considered to have been furnished by the
individuals in their capacity as physicians and not in their capacity as interns and
residents.

Transmittals Issued for this Chapter

Rev # 	Issue Date 	Subject 	Impl Date 	CR#
R12421BP 12/21/2023 	January 2024 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)
01/02/2024 	13488
R12425BP 12/21/2023 	Enforcing Billing Requirements for
Intensive Outpatient Program (IOP)
Services with New Condition Code 92 -
Additional Publication Update
01/02/2024 	13496
R10541BP 12/31/2020 	January 2021 Update of the Hospital
Outpatient Prospective Payment System
(OPPS
01/04/2021 	12020
R267BP 	02/04/2020 	January 2020 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)
01/06/2020 	11605
R266BP 	01/15/2020 	January 2020 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)- No Longer
Sensitive/Controversial
Rescinded and Replaced by Transmittal
267
01/15/2020 	11605
12/20/2019 	January 2020 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)-
SENSITIVE/CONTROVERSIAL
01/06/2020 	11605
R215BP 	12/18/2015 	January 2016 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)
01/04/2016 	9486
R194BP 	09/03/2014 	Pub. 100-02 Language-Only Update for
ICD-10
Upon
Implementation
of ICD-10
8605
R182BP 	03/21/1014 	Implementing the Part B Inpatient
Payment Policies from CMS-1599-F
04/21/2014 	8666

R181BP 	03/14/2014 	Pub. 100-02 Language-Only Update for
ICD-10 – Rescinded and replaced by
Transmittal 194
10/01/2014 	8605
R169BP 	03/01/2013 	April 2013 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)
04/01/2013 	8228
R157BP 	06-08-2012 	July 2012 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)
07/02/2012 	7847
R152BP 	12/29/2011 	January 2012 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)
01/03/2012 	7672
R143BP 	04/29/2011 	Manual Restructuring of Chapter 6,
Section 20, Subsections 20.4.4 and
20.5.2
05/31/2011 	7354
R137BP 	12/30/2010 	January 2011 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)
01/03/2011 	7271
R128BP 	05/28/2010 	July 2010 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)
07/06/2010 	6996
R116BP 	12/11/2009 	January 2010 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)
01/04/2010 	6751
R107BP 	05/22/2009 	July 2009 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)
07/06/2009 	6492
R101BP 	01/16/2009 	January 2009 Update of the Hospital
Outpatient Prospective Payment System
(OPPS)
01/05/2009 	6320

R100BP 	12/31/2008 	January 2009 Update of the Hospital
Outpatient Prospective Payment System
(OPPS) – Rescinded and replaced by
Transmittal 101
01/05/2009 	6320
R90BP 	06/19/2008 	July Update of the Hospital Outpatient
Prospective Payment System (OPPS)
07/07/2008 	6094
R82BP 	02/08/2008 	January 2008 Update of the Hospital
Outpatient Prospective Payment System
(OPPS) Manualization
03/10/2008 	5946
R42BP 	12/16/2005 	January 2006 Update of the Hospital
Outpatient Prospective Payment System
(OPPS) Manual Instruction: Changes to
Coding and Payment for Observation
01/03/2006 	4259
R37BP 	08/12/2005 	Conforming Changes for Change
Request 3648 to Pub. 100-02
09/12/2005 	3912
R19BP 	09/10/2004 	Hospital Services Covered Under Part B 	10/12/2004 	3444
R10BP 	05/07/2004 	Chapter 6, Hospital Services Covered
Under Part B
N/A 	3298
R1BP 10/01/2003 	Introduction to the Benefit Policy
Manual N/A 	N/A
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