In the past, many gray areas in the rules made leasing hygiene and other care- providing employees questionable and the practice open to scrutiny. However, recent changes in federal rules make it possible for dentists to take full advantage of this time and money saving strategy and utilize the services of Professional Employer Organizations (PEO's) to lease their entire staff, including themselves.

This has all come about through the first significant change in the definition of the term "employee" in 25 years, which helps both the health care and PEO industries. Medicare, of course, is the federal health insurance program established in 1965 for people aged 65 and older. It is administered by the Health Care Financing Administration (HCFA), an arm of the U.S. Department of Human Services, and the rules established for the Medicare program set the standards for all health care providers. In what is being called a significant victory for PEO's, HCFA has announced momentous changes to the Medicare Manual to open important new employee markets to the PEO industry.

The HCFA announcement involves changes to the "Incident to Physician's Professional Service" rules defining which services and supplies are integral though incidental to personal professional services for which payment can be authorized under Part B of the Medicare program.

In recent years, PEO's have fundamentally altered the American workplace. While HCFA long ago acknowledged this entrepreneurial response to the needs of small business, it had been unable to adjust its rules to permit dentists to take full advantage of this demand-driven trend. Now they can. The new changes, effective now, were made to the Medicare Carriers Manual which provides direction on claim processing to third party insurance organizations under contract to HCFA.

The new manual changes specify that an employee is someone who is a "leased employee" of an employee leasing company (PEO) supplying services under such an agreement, providing the following is true:

The dentist or health care facility exercises control over all actions taken by the leased employee with regard to the rendering of dental/medical services (in other words, is the "worksite" employer), to the same extent as the dentist or health care facility would exercise control over employees directly employed by them.

To address the issue of control over delivery of health care services, the National Association of Professional Employer Organizations appeared before HCFA's practicing Physician Advisory Panel. The panel determined that if a dentist retains direct supervision and control over services provided in their offices, as required by Medicare, there should be no concern over how dentists arrange for their employees financially. Therefore, dentists are now free to enter into a professional employment arrangement for their entire staffs.

The American Medical Association (AMA) is on record stating that, ". . . for reimbursement purposes, the Medicare program should have no interest in the financial arrangements between the physician and staff. The AMA believes that the method used by physicians to employ their staff is irrelevant to Medicare payment. Medicare payment to physicians who lease staff, or employ staff directly, should be the same."

PEO's have long argued that the above changes will play an important role in efforts to manage the rising cost of health care. A substantial portion of any health care practice (or any small business) is the human resources necessary to operate the practice and the expenses directly related to maintaining those resources.