Page 18 - Medicare Benefit Policy Manual

Providers may retain physicians on a full-time or part-time basis in, for example, the
fields of pathology, psychiatry, anesthesiology, and radiology, and in many instances
(especially in teaching hospitals) in other fields of medical specialization as well. Any
one of these physicians may be engaged in a variety of activities including teaching,
research, administration, supervision of professional or technical personnel, service on
hospital committees, and other hospital-wide activities, as well as direct medical services
to individual patients. The provider’s arrangement may be with a single physician or
with a group of physicians who assume joint responsibility for discharging agreed-upon
duties.

It is necessary to distinguish between the medical and surgical services rendered by a
physician to an individual patient, which are paid under Part B, and provider services
(including a physician’s services for the provider) which are paid under Part A. This is
necessary because the payments are made from different trust funds, A/B MACs (A) and
(B) are involved in handling the claims, and the method of determining the payments for
Part A benefits differs from the Part B payment calculation.

Provider-based physicians may include those on a salary, or a percentage arrangement,
lessors of departments, etc. (whether or not they bill patients directly). The services to
the patient are known as the professional component. The services to the provider are
known as the provider component.

A. The Professional Component

The professional component of a provider-based physician’s services pertains to that part
of the physician’s activities that is directly related to the medical care of the individual
patient. It represents remuneration for the identifiable medical services by the physician
that contribute to the diagnosis of the patient’s condition or to his treatment. These
services are covered under Part B. Claims for professional services are processed by the
A/B MAC (B) and are paid, where applicable, under the fee schedule.

B. The Provider Component

The portion of the physician’s activities representing services which are not directly
related to an identifiable part of the medical care of the individual patient is the provider
component. Payment for provider component services can be made only to a provider,
and is included in the provider’s prospective payment system (PPS) rate. Provider
services include teaching, research conducted in conjunction with and as part of patient
care (to the extent that such costs are not met by special research funds), administration,
general supervision of professional or technical personnel, laboratory quality control
activities, committee work, performance of autopsies, and attending conferences as part
of the physician’s provider service activities. Such services are covered under Part A
where they relate to inpatient services.

30.2 - Teaching Physician Services
(Rev. 1, 10-01-03)