CMS Pub. 100-02, ch. 15, § 30.1

A3-3145, B3-2020.6, B3-8000-8099 (only instructions still applicable are included)

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.