On October 31, 2025, the Centers for Medicare & Medicaid Services (“CMS”) issued the Calendar Year 2026 Medicare Physician Fee Schedule (“PFS”) Final Rule, permanently adopting a revised definition of “direct supervision ” that allows supervising physicians or non-physician practitioners (“NPPs”) to meet the presence and “immediate availability” requirement via real-time, two-way audio and video telecommunications technology. This policy, which takes effect January 1, 2026, makes permanent a COVID-19-era flexibility for virtual direct supervision and resolves the transition extensions that CMS had adopted through December 31, 2025.

As previewed in the proposed rule from earlier this year—and as we discussed in our prior blog post—CMS has finalized this policy change without revision.  Under the final rule, diagnostic tests subject to 42 CFR § 410.32 can be virtually supervised, provided the supervising physician/NPP remains immediately available through real-time, two-way audio and visual technology (excluding audio-only) throughout the performance of the test.

Key Elements of the Final Policy for Diagnostic Tests

In July 2025, CMS proposed to make permanent the virtual direct supervision policy for Level 2 diagnostic tests and other services requiring direct supervision, with the same following core parameters CMS has now finalized:

• The supervising physician or NPP may satisfy the presence and “immediate availability” for the entirety of the Level 2 test requirements for direct supervision through real-time, two-way audio and visual interactive telecommunications technology. Audio-only communication is insufficient.
• The policy applies across office-based settings, including Independent Diagnostic Testing Facilities (“IDTFs”), consistent with the general direct supervision framework for diagnostic tests. In IDTF settings only physicians with proficiency in the performance and interpretation of the tests can supervise.
• CMS expressly excluded services that have a 010 or 090 global surgery indicator from being furnished under virtual direct supervision. These indicators represent either a minor procedure that requires 10 days of post-operative reimbursed care (010) or major procedures that require 90 days of post-operative reimbursed care (090). For such services, in-person supervision remains required to ensure patient safety and the ability for rapid on-site intervention in high-risk or complex clinical scenarios.

Although as of the time of publication of this blog post, the final rule for services paid under the Hospital Outpatient Prospective Payment System (“OPPS”) for calendar year 2026 is  still under review at the Office of Management and Budget, the proposed rule that was published in July included language to be added to 42 CFR § 410.27  and 42 CFR § 410.28 to mirror the PFS language and make virtual supervision of diagnostic tests for Medicare hospital outpatients permanent.

Practical Implications for Healthcare Providers and Compliance Considerations

The permanent adoption of virtual direct supervision has meaningful operational, compliance, and risk management implications for physician practices, IDTFs, and other suppliers furnishing diagnostic tests under Medicare. Healthcare providers should review and update their supervision protocols and compliance policies to reflect the new permanent definition of direct supervision. The adoption of virtual direct supervision is expected to increase access to Level 2 diagnostic services, particularly in settings facing provider shortages or geographic barriers. Providers must ensure that their telecommunication systems meet CMS requirements for real-time, two-way audio and visual interaction, and that all supervision arrangements are documented in accordance with Medicare regulations.

It is important to note that state laws and professional standards may impose additional requirements or limitations on virtual supervision, particularly concerning the administration of contrast media or other medications in response to adverse reactions. Providers should consult applicable state regulations and professional guidance, such as those issued by the American College of Radiology and the American Society of Radiologic Technologists, to ensure full compliance.

Healthcare providers should also continue to monitor CMS guidance and any future rulemaking for additional refinements or reporting requirements related to virtual direct supervision.

This permanent adoption of virtual direct supervision represents a significant modernization of supervision standards for diagnostic testing that can expand access to care, improve scheduling flexibility, optimize workforce deployment, and alleviate workforce shortages. At the same time, healthcare providers should approach implementation through a careful compliance lens that accounts for state law requirements, professional standards, safety risk profiles, and rigorous documentation and supervision protocols.

Reed Smith will continue to follow developments concerning virtual supervision regulations. If you have any questions about this client alert, seek guidance specific to your business, please do not hesitate to contact the authors or your healthcare attorneys at Reed Smith.