Incidents of billing rules produce more repayment demands than almost any other area of outpatient billing, and the reason is rarely bad intent. Practices apply the rule in the wrong setting, or they keep applying it after the clinical situation has moved past what it covers.
The money at stake is the difference between full payment and eighty-five percent. Services billed under a nonphysician practitioner’s own number pay at eighty-five percent of the physician fee schedule. Services that properly meet the incident-to conditions pay at the full rate. That fifteen percent gap on a high volume of visits is meaningful, which is exactly why it draws audit attention.
Two separate rules govern this territory, and mixing them up is where most trouble begins.
Two Rules That Live in Two Different Places
Incident-to applies in the office and clinic setting, meaning the non-institutional setting. Split or shared visit rules apply in facility settings, including hospitals, skilled nursing facilities, and emergency departments.
They do not overlap. A visit in a hospital cannot be billed incident-to. A visit in a physician office is not a split or shared visit. When a practice operates in both settings, the place of service on the claim determines which rule applies, and a team applying office logic to hospital rounds is billing incorrectly on every one of those encounters.
What Incident-To Actually Requires
The conditions sit in federal regulation, and all of them have to be met on the same encounter.
The service has to be part of a course of treatment the physician started. It has to be furnished in a non-institutional setting. The person performing it has to be an employee, leased employee, or contractor of the physician or the entity that employs the physician. The supervising practitioner has to provide direct supervision during the service. The practice has to bear the expense of the service.
The Physician Has to Start the Care
The supervising physician must have personally seen the patient, established the diagnosis, and set the plan of care. The nonphysician practitioner then carries out that plan on later visits.
Several Medicare contractors have indicated they expect documentation showing the physician remains involved in the care at intervals rather than disappearing after the first visit. The physician’s continuing role has to be visible in the record, not assumed from the fact that a plan exists somewhere in the chart.
New Patients & New Problems Fall Outside the Rule
This is the most common error, and it is the one auditors find fastest.
A new patient cannot be billed incident-to, because no physician-established plan exists yet. A new problem raised by an established patient also falls outside the rule, even though the patient is familiar and the chart is thick. The moment the encounter addresses something the physician has not evaluated and built a plan around, the visit belongs under the nonphysician practitioner’s own number at eighty-five percent.
The same applies when the plan of care changes materially. Once treatment moves away from what the physician established, the encounter has left the plan it was following.
Direct Supervision Now Allows Virtual Presence
This changed recently and many practices are still operating on the old rule.
Direct supervision historically meant the supervising practitioner was physically present in the office suite and immediately available. Effective January 1, 2026, CMS permanently adopted a definition allowing that immediate availability to be met through real-time audio and video communication. The supervising practitioner can satisfy the requirement from another location.
Two limits matter. Audio-only connections do not qualify, since the practitioner has to be able to see and hear in real time. The virtual option also does not apply to services carrying a global surgery indicator of 010 or 090, where physical presence is still required.
Split or Shared Visits in Facility Settings
A split or shared visit is an evaluation and management service in a facility setting performed in part by a physician and in part by a nonphysician practitioner in the same group, where either could have billed it independently. Payment goes to the one who performed the substantive portion.
Time or Medical Decision Making Decides Who Bills
Since January 1, 2024, the substantive portion means either more than half of the total time spent by both practitioners on the visit, or a substantive part of the medical decision making. Either path works, and that remains the current rule.
Time is counted in a specific way. Only distinct time counts toward the total. When both practitioners are with the patient at the same time or discussing the case together, only one of them can count that time. If the nonphysician practitioner spends ten minutes and the physician spends fifteen, the total is twenty-five minutes and the physician performed the substantive portion.
The 99291 and 99292 code family works differently, and so do prolonged services. Those use time alone, with no medical decision making option.
Teams still applying the old approach based on history, exam, or medical decision making as separate key components are using rules that expired at the end of 2023.
Documentation & the FS Modifier
The record has to identify both practitioners who performed the service. The one who performed the substantive portion bills under their own NPI, signs the record, and dates it. Modifier FS goes on the evaluation and management code.
Medicare does not pay for partial visits, so the reduced services modifier cannot be used to report one practitioner’s piece of a shared encounter.
Where Practices Get Caught
Audit findings cluster around a handful of patterns. Incident-to gets applied to new patient visits or to established patients presenting with something new. Supervision is not documented, so there is no evidence anyone was available during the service. Practices bill incident-to in a hospital, where the rule does not reach. Split or shared documentation names one practitioner but not both, or the billing practitioner never signed.
There is a structural trap as well. When physicians and nonphysician practitioners bill under different tax identification numbers, incident-to generally does not work, and practices set up that way sometimes discover it during an audit rather than during setup.
Commercial Payers Write Their Own Rules
Incident-to is a Medicare concept. Commercial plans set their own policies, and some do not recognize the arrangement at all while others apply different conditions.
Applying Medicare logic across every payer produces denials at best and repayment demands at worst. Check each contract and provider manual, and record the answer per payer rather than working from one general assumption.
Build the Check Into the Workflow
The reliable safeguard is a decision point before the claim goes out. Confirm the place of service, since that determines which rule applies. For office visits, confirm the patient is established, the problem is one the physician already evaluated, the plan has not materially changed, and supervision is documented. For facility visits, confirm both practitioners appear in the record, the substantive portion is clear from time or medical decision making, and modifier FS is attached.
Running that check at the point of coding costs far less than defending the same encounters years later.
If you want a review of how these rules are being applied across your current encounters, our team can audit a sample and show where the exposure sits.
