The Centers for Medicare & Medicaid Services (CMS) has officially made permanent a significant regulatory change that allows healthcare providers to use real-time, two-way audio/video communications technology to satisfy the direct supervision requirement for most Medicare Part B services. This groundbreaking policy shift, which originated from temporary flexibilities introduced during the COVID-19 public health emergency, represents a fundamental transformation in how Medicare beneficiaries access care and how healthcare practitioners deliver supervised services.
The permanence of this policy creates expanded opportunities for patient access to physician extenders in office and clinic settings. Nonphysician practitioners (NPPs) performing services under direct supervision are no longer required to have their supervising physician physically present in the same office suite. This flexibility enables supervising physicians to provide oversight remotely while NPPs deliver quality care, and it allows many telehealth services to be provided from practitioners’ homes. This comprehensive analysis addresses the regulatory changes implemented in CMS’s final rule, the provisions of the Consolidated Appropriations Act, 2026 (CAA 2026), and the updated Telehealth FAQs released on February 4, 2026.
Understanding Medicare Direct Supervision Requirements
Medicare billing rules traditionally distinguish between services billed directly by nonphysician practitioners and those billed “incident to” a physician’s services. Services personally furnished by NPPs—including physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse midwives—are typically reimbursed at 85% of the physician fee schedule amount for the same service. However, Medicare’s “incident to” billing provision offers a financial advantage by allowing reimbursement at 100% of the physician fee schedule when specific criteria are met.
To qualify for “incident to” billing, NPP services must represent an integral, although incidental, part of the physician’s professional services in the office or clinic setting. This requirement establishes a clear framework: the physician must have initiated the course of treatment by personally seeing the patient for the specific problem or diagnosis before the NPP can subsequently provide services and bill “incident to” for that same condition.
The Evolution of Direct Supervision Standards
The cornerstone requirement for “incident to” billing is direct supervision by the physician. Historically, direct supervision mandated that the supervising practitioner be physically present in the office suite and immediately available to provide hands-on assistance and direction throughout the service delivery. This traditional interpretation required physical proximity, limiting flexibility for both practitioners and healthcare organizations.
Between March 31, 2020, and December 31, 2025, CMS implemented temporary regulatory flexibilities that revolutionized this requirement. These interim policies permitted direct supervision through virtual presence using real-time, two-way audio/video communications technology. Initially introduced as an emergency response to the COVID-19 pandemic, these flexibilities received overwhelmingly positive feedback from healthcare stakeholders regarding improved access to care, enhanced workforce utilization, and better support for provider shortages in underserved areas.
Permanent Virtual Direct Supervision Policy
Effective January 1, 2026, CMS formally established permanent regulations allowing virtual direct supervision for most Medicare Part B services described in 42 CFR § 410.26. Under this final rule, the “immediate availability” component of direct supervision can now be satisfied through virtual presence using audio/video real-time communications technology. Notably, audio-only technology is explicitly excluded from meeting this supervision requirement—visual connection remains mandatory.
This policy applies broadly to the majority of Medicare Part B services, with carefully defined exceptions for high-risk procedures. Services with global surgery indicators 010 or 090 (minor and major surgical procedures) continue to require in-person physical supervision due to the elevated clinical risk associated with these interventions. Additionally, CMS codified parallel supervision flexibilities for rural health clinics (RHCs) and federally qualified health centers (FQHCs) at 42 CFR § 405.2401(b), recognizing the unique needs of these critical access providers.
Addressing Stakeholder Concerns and Professional Responsibility
Some healthcare stakeholders expressed opposition to making virtual supervision permanent, raising concerns that remote oversight could obscure the distinct roles of NPPs in providing services incident to physician services and potentially create challenges for attribution and accountability. CMS acknowledged these legitimate concerns but concluded that “the benefits of increased flexibility and access outweigh potential attribution issues.”
The agency emphasized that supervising practitioners retain full professional responsibility and must exercise sound clinical judgment when determining the appropriate supervision modality for each patient encounter. This case-by-case assessment must carefully balance patient safety considerations, program integrity requirements, and access to care needs. Virtual supervision is a permissible option, not a mandate—practitioners should choose the supervision method that best serves patient welfare.
Extended Telehealth Flexibilities Under CAA 2026
On February 3, 2026, the Consolidated Appropriations Act, 2026 was signed into law, extending and permanently implementing several critical Medicare telehealth flexibilities beyond direct supervision requirements.
Extended Through December 31, 2027:
- Patients can receive non-behavioral/mental health telehealth services in their homes without geographic restrictions on originating sites
- FQHCs and RHCs can serve as Medicare distant site providers for non-behavioral/mental telehealth services
- All eligible Medicare providers can deliver telehealth services
- Annual in-person visit requirements (including within six months of initial Medicare behavioral/mental telehealth services) are waived
- Non-behavioral/mental telehealth services can be delivered using audio-only communication technology
Permanent Changes:
- Patients can receive behavioral/mental health telehealth services in their homes without geographic restrictions
- FQHC/RHC providers can serve as distant site providers for behavioral/mental telehealth services
- Behavioral/mental telehealth services can be delivered using two-way, real-time audio-only communication technology
Critical Enrollment Requirement Update
In a significant clarification issued February 4, 2026, CMS announced it did not extend the 2025 Physician Fee Schedule flexibility that allowed telehealth practitioners to use their currently enrolled practice location instead of their home address when providing services from home. Virtual-only telehealth practitioners whose sole physical practice location is their home address must now enroll their home address as an official practice location with Medicare. This enrollment requirement has important implications for practitioners transitioning to primarily home-based telehealth practice.
Strategic Implementation Considerations
The permanent adoption of virtual direct supervision and expanded telehealth flexibilities creates substantial opportunities for healthcare organizations to enhance care access and optimize reimbursement strategies. These policies are particularly valuable for practices experiencing provider shortages, those serving rural communities, and organizations supporting underserved populations facing significant barriers to in-person care.
However, healthcare providers must carefully evaluate how these telehealth flexibilities affect their practitioners’ distant site location enrollment requirements, especially when practitioners’ homes become their primary or sole physical practice location. Compliance with updated enrollment policies is essential to avoid billing errors and potential audit risks.
