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Incident-To vs. Direct Billing: The Billing Rules Every Clinic Gets Wrong (2025 Guide)

Accurate billing isn’t optional. It’s the backbone of compliant revenue cycle operations.
Yet clinics across the U.S. routinely misapply Incident-To and Direct Billing rules — creating avoidable denials, revenue loss, and exposure to payer audits.

Understanding the difference isn’t just about coding correctly. It’s about protecting reimbursement, avoiding recoupments, and ensuring your providers stay compliant with CMS and commercial payer requirements.

This guide breaks down the rules in plain, operational terms.

1. What Is Incident-To Billing?

Incident-To billing allows a non-physician provider (NP, PA, CNS) to deliver care but bill the service under the physician’s NPI — reimbursed at 100% of the Physician Fee Schedule.

This is highly beneficial, but CMS enforces strict criteria.

To bill Incident-To, ALL of the following must be true:

✔ The physician performed the initial visit and established the plan of care.

NPPs cannot initiate a diagnosis or create the care plan for Incident-To.

✔ The supervising physician is physically present in the office suite during the visit.

Not in a different building
Not “available by phone”
Not on telehealth
Must be in the same suite, immediately available

✔ The patient is established — not new.

✔ The NPP is following the physician’s established treatment plan.

No new symptoms, no new diagnoses, no treatment changes unless physician is directly involved.

✔ Documentation must reflect:

supervising physician
proof of on-site presence
reference to the established care plan
confirmation that treatment follows the existing plan

If even one condition is missing → the service CANNOT be billed Incident-To.

2. What Is Direct Billing?

Direct Billing is when the NP or PA bills under their own NPI.

Direct Billing applies when:

The patient is new
The provider is addressing a new complaint or diagnosis
The treatment plan is changed or adjusted
The supervising physician is not physically present
The payer does not allow Incident-To (common with Medicaid & many commercial plans)

Reimbursement:

Medicare: 85% of Physician Fee Schedule
Commercial plans: rate varies by contract
Medicaid: many states don’t allow Incident-To at all

Direct Billing is simple, compliant, and often safer when there’s any gray area.

3. Common Billing Mistakes Clinics Make (Every Week)

Even large clinics get these wrong:

❌ Billing Incident-To when the physician is NOT on-site.

One of the top reasons payers recoup full claims.

❌ Using Incident-To for new patients or new diagnoses.

Any new problem = Direct Billing only.

❌ Updating medications or treatment plans without physician involvement.

Plan changes immediately invalidate Incident-To.

❌ Billing Incident-To in states or payer plans where it is not allowed.

Example:

Most Medicaid plans do not allow it
Several commercial plans have their own restrictions

❌ Missing documentation proving supervising physician presence.

If it’s not documented, auditors assume it didn’t happen.

❌ Behavioral health misuse.

In BH, treatment plans change often → most BH visits do NOT qualify for Incident-To.

4. Operational Workflow: When to Use Which Billing Type

Use this decision tree:

INCIDENT-TO — Use only if ALL conditions apply:

Physician did the initial visit
Established patient
No change in treatment plan
Physician is physically present
Payer allows Incident-To
Documentation supports compliance

DIRECT BILLING — Use in ANY of these cases:

New patient
New symptom or diagnosis
Treatment plan changed
Physician not present
Payer does not permit Incident-To
BH visits where diagnosis/treatment updates occur

When unsure → go Direct Billing.
It protects compliance and avoids recoupments.

5. Documentation Requirements (Non-Negotiable)

To stay audit-proof, documentation must include:

✔ Supervising physician name

✔ Statement confirming the physician was on-site

✔ Original care plan from the physician

✔ NPP note stating they are following the established plan

✔ Any medical decision-making changes clearly reviewed by physician

Documentation gaps are the #1 reason clinics fail audits.

6. Revenue Impact: 100% vs 85%

Incident-To:

✔ 100% reimbursement
✔ Higher revenue per encounter
✔ Only valid with strict rules

Direct Billing:

✔ 85% (Medicare), varies with commercial
✔ Lower reimbursement
✔ But compliant, safe, and audit-proof

Trying to push Incident-To without meeting all rules leads to:

denials
payer recoupments
compliance flags
long-term audit exposure

Correctly switching between both ensures maximum revenue without risk.

7. Why This Matters for Your RCM Strategy

Correct use of these billing types helps you:

✔ Protect cash flow

Avoid losing 15% reimbursement due to preventable errors.

✔ Reduce denials

Billing the wrong way can generate immediate denials — especially with Medicare Advantage and Medicaid.

✔ Shorten AR cycles

Clean claims = faster payments.

✔ Prevent compliance issues

Payers recoup entire amounts when Incident-To rules are violated.

✔ Improve staff competency

Most front-office and clinical teams don’t know these rules.

Conclusion

Most clinics unknowingly misuse Incident-To billing, exposing themselves to compliance risk and avoidable revenue loss.
Mastering these rules ensures:

accurate reimbursement
faster payments
fewer denials
audit-proof documentation
fully compliant operations

If your clinic needs help reviewing Incident-To workflows, evaluating compliance, or optimizing your billing cycle, our team is here to support you.