Incident-To Billing vs. Direct NPP Billing: In-Network and Out-of-Network Payment Differences and Health Plan Cost Implications (2015–2021)

Incident-To Billing vs. Direct NPP Billing: In-Network and Out-of-Network Payment Differences and Health Plan Cost Implications (2015–2021)

For example, in Medicare, valid incident-to billing allows services by non-physician practitioners (NPPs, such as nurse practitioners or physician assistants) to be billed under the supervising physician’s NPI at 100% of the Medicare Physician Fee Schedule (MPFS) rate.1 Direct billing under the NPP’s NPI reimburses at 85% of the MPFS rate.2 This creates a strong incentive for compliant incident-to billing to maximize practice revenue while keeping payer costs lower.

In other words, for commercial health plans, reimbursement often benchmarks to MPFS for in-network providers. However, out-of-network claims are frequently paid at “usual, customary, and reasonable” (UCR) rates, which can exceed 120–200% of MPFS depending on the plan, geography, and market data.3 To be clear, if a physician is in-network (allowing incident-to at 100% MPFS) but the NPP is out-of-network, direct NPP billing can result in the plan paying a higher UCR amount—potentially costing the health plan more than if the claim had been billed incident-to under the in-network physician.4

Hypothetical Examples: Payment Scenarios

To explain, consider a DO psychiatry practice using two common CPT codes (2015–2021 period):

  • 99214: Office/outpatient E/M visit, established patient, moderate complexity (e.g., medication management, follow-up for depression/anxiety).
  • 90837: Psychotherapy, 60 minutes (e.g., individual therapy for PTSD or bipolar disorder).

Assumptions:

  • In-network reimbursement = MPFS benchmark.
  • Out-of-network UCR = 150% of MPFS (hypothetical; actual UCR varies widely).
  • Volume: 100 claims per code per year.
  • Rates are national average non-facility MPFS values.5,6

Scenario 1: Valid Incident-To Billing (In-Network Physician – 100% MPFS)

Lowest cost to the health plan.

Scenario 2: Direct NPP Billing (In-Network NPP – 85% MPFS)

Plan pays less; practice earns less.

Scenario 3: Direct NPP Billing (Out-of-Network NPP – 150% UCR)

To illustrate, the plan pays significantly more, a potential “loss” to the plan, compared to incident-to.

Summary Table: MPFS Rates and Hypothetical Plan Costs/Losses (2015–2021)

Year 99214 MPFS 90837 MPFS Scenario 1 Total (100% MPFS) Scenario 3 Total (150% UCR) Hypothetical Plan Loss vs. Incident-To
2015 $106 $135 $241,000 $361,500 $120,500
2016 $106 $134 $240,000 $360,000 $120,000
2017 $108 $136 $244,000 $366,000 $122,000
2018 $109 $138 $247,000 $370,500 $123,500
2019 $110 $140 $250,000 $375,000 $125,000
2020 $110 $141 $251,000 $376,500 $125,500
2021 $132 $152 $284,000 $426,000 $142,000

Notes: Totals are for 100 claims of each code. Loss = Scenario 3 total − Scenario 1 total. 2021 saw a notable increase in 99214 due to CMS E/M code revaluation.7

Implications for Health Plans and Practices

  • Health Plan Perspective: Valid incident-to billing keeps payments at the in-network MPFS level, minimizing costs. Out-of-network NPP billing via UCR can inflate expenses significantly (e.g., 50% higher in the examples above), creating hypothetical losses ranging from $120,000–$142,000 for just 200 claims annually.
  • Practice Perspective: Incident-to maximizes revenue (100% vs. 85%), but non-compliance risks audits and recoupments. Direct out-of-network NPP billing could yield higher payments if UCR > MPFS, but increases patient cost-sharing and denial risk.
  • Trend Over 2015–2021: Rates were relatively stable until 2021. E/M changes increased the 99214 reimbursement. Cumulative losses for a large plan could reach millions if many claims shift from incident-to to out-of-network NPP billing.

To explain the relevance, a medical billing expert witness can be instrumental in reviewing documentation to determine whether the incident-to criteria were met, helping resolve disputes over payment rates and compliance in litigation or audits.8

Citations

  1. Billing a PA’s Services Incident to a Physician’s – AAPC Knowledge Center, May 1, 2023. https://www.aapc.com/blog/87837-billing-a-pas-services-incident-to-a-physicians/
  2. Medicare Claims Processing Manual, Chapter 12 – CMS (ongoing, reflects longstanding 85% NPP rate). https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c12.pdf
  3. Understanding Out-of-Network Reimbursement – Healthcare Financial Management Association (HFMA), various publications, 2015–2021. https://www.hfma.org/
  4. Commercial Health Plan Reimbursement Policies – Kaiser Family Foundation (KFF) Health Insurance Reports, 2015–2021. https://www.kff.org/
  5. Medicare Physician Fee Schedule Look-Up Tool – CMS (historical rates 2015–2021). https://www.cms.gov/medicare/physician-fee-schedule/search
  6. 2021 Medicare Physician Fee Schedule Final Rule Summary – CMS, November 2020. https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2021-medicare-physician-fee-schedule-final-rule
  7. E/M Code Revaluation Impact 2021 – American Medical Association (AMA) CPT Updates. https://www.ama-assn.org/practice-management/cpt
  8. Understanding Incident to Billing in Medicare: Key Compliance Guidelines, Audit Risks, and the Vital Role of Medical Billing Expert Witnesses – No World Borders, January 2026. https://noworldborders.com/expert-witness/medical-billing-expert-witness/

 

Tags:

Michael F. Arrigo

Michael Arrigo, an expert witness, and healthcare executive, brings four decades of experience in the software, financial services, and healthcare industries. In 2000, Mr. Arrigo founded No World Borders, a healthcare data, regulations, and economics firm with clients in the pharmaceutical, medical device, hospital, surgical center, physician group, diagnostic imaging, genetic testing, health I.T., and health insurance markets. His expertise spans the federal health programs Medicare and Medicaid and private insurance. He advises Medicare Advantage Organizations that provide health insurance under Part C of the Medicare Act. Mr. Arrigo serves as an expert witness regarding medical coding and billing, fraud damages, and electronic health record software for the U.S. Department of Justice. He has valued well over $1 billion in medical billings in personal injury liens, malpractice, and insurance fraud cases. The U.S. Court of Appeals considered Mr. Arrigo's opinion regarding loss amounts, vacating, and remanding sentencing in a fraud case. Mr. Arrigo provides expertise in the Medicare Secondary Payer Act, Medicare LCDs, anti-trust litigation, medical intellectual property and trade secrets, HIPAA privacy, health care electronic claim data Standards, physician compensation, Anti-Kickback Statute, Stark law, the Affordable Care Act, False Claims Act, and the ARRA HITECH Act. Arrigo advises investors on merger and acquisition (M&A) diligence in the healthcare industry on transactions cumulatively valued at over $1 billion. Mr. Arrigo spent over ten years in Silicon Valley software firms in roles from Product Manager to CEO. He was product manager for a leading-edge database technology joint venture that became commercialized as Microsoft SQL Server, Vice President of Marketing for a software company when it grew from under $2 million in revenue to a $50 million acquisition by a company now merged into Cincom Systems, hired by private equity investors to serve as Vice President of Marketing for a secure email software company until its acquisition and multi $million investor exit by a company now merged into Axway Software S.A. (Euronext: AXW.PA), and CEO of one of the first cloud-based billing software companies, licensing its technology to Citrix Systems (NASDAQ: CTXS). Later, before entering the healthcare industry, he joined Fortune 500 company Fidelity National Financial (NYSE: FNF) as a Vice President, overseeing eCommerce solutions for the mortgage banking industry. While serving as a Vice President at Fortune 500 company First American Financial (NYSE: FAF), he oversaw eCommerce and regulatory compliance technology initiatives for the top ten mortgage banks and led the Sarbanes Oxley Act Section 302 internal controls I.T. audit for the company, supporting Section 404 of the Sarbanes Oxley Act. Mr. Arrigo earned his Bachelor of Science in Business Administration from the University of Southern California. Before that, he studied computer science, statistics, and economics at the University of California, Irvine. His post-graduate studies include biomedical ethics at Harvard Medical School, biomedical informatics at Stanford Medical School, blockchain and crypto-economics at the Massachusetts Institute of Technology, and training as a Certified Professional Medical Auditor (CPMA). Mr. Arrigo is qualified to serve as a director due to his experience in healthcare data, regulations, and economics, his leadership roles in software and financial services public companies, and his healthcare M&A diligence and public company regulatory experience. Mr. Arrigo is quoted in The Wall Street Journal, Fortune Magazine, Kaiser Health News, Consumer Affairs, National Public Radio (NPR), NBC News Houston, USA Today / Milwaukee Journal Sentinel, Medical Economics, Capitol ForumThe Daily Beast, the Lund Report, Inside Higher Ed, New England Psychologist, and other press and media outlets. He authored a peer-reviewed article regarding clinical documentation quality to support accurate medical coding, billing, and good patient care, published by Healthcare Financial Management Association (HFMA) and published in Healthcare I.T. News. Mr. Arrigo serves as a member of the board of directors of a publicly traded company in the healthcare and data analytics industry, where his duties include: member, audit committee; chair, compensation committee; member, special committee.

Leave a Reply