Therapy Services: The Uphill Climb to Better Codes and Reimbursement

By Lynn S. Berry, PT, CPC

Over the last three decades, there has been remarkable change in therapy services billing rules due to legislative efforts to bring the cost of health care down and to pay for the quality (rather than quantity) of care. Therapists must juggle clinical concerns with documentation burdens to meet the challenge.

Rules Changed Due to Costs

From 1998-2008 therapy expenditures increased 10.1 percent per year, while the number of beneficiaries receiving that therapy increased only 2.9 percent. In 2010, 7.6 million beneficiaries received outpatient services, with Medicare payments exceeding $5.6 billion. Since then, expenditures have continued to rise.

The reason for this is largely because of how physical and occupational therapists (PTs and OTs) are reimbursed. Their therapy codes include both timed codes (with multiple units) and untimed codes. Therapists use a combination of treatment codes at each visit, which could become problematic if payment is based on the number of codes billed.

First, it allows for misuse of codes. Some procedures and modalities are assigned higher relative value units (RVUs) than others, so they are paid at a higher rate. If there is insufficient documentation of the rationalization of each procedure, an incorrect, higher-value code may be used. Second, there could be incorrect calculation of timed code units due to insufficient documentation of minutes, or inclusion of independent treatment time (which is non-billable). For some, it could also include maximizing the number of treatments billed, as they are not bundled. These factors increase use of care and drive up costs.

Therapy Caps Limit Expenditures

In 1972, Medicare law first allowed payment of PTs in independent practice. In 1979, section 279 (b) of the Social Security Act (SSA) amendments put a limit on payment for services furnished by a PT in independent practice of no more than $100 of incurred expenses in a year. Continued legislative acts have increased the cap.

In 1987, OT in independent practice was recognized with a $500 cap for services per year (equal to the PT cap). The caps continued to rise until 1997, when the Balanced Budget Act expanded the cap to outpatient therapy services furnished in skilled nursing facilities (SNFs), physician’s offices, and home health agencies (Part B), in addition to PT private practice offices. Section 4541 (c) and (d) of the SSA increased the financial limitation to no more than $1,500 of the incurred expenses in a year, and included one cap imposed on PT and speech-language pathology (SLP) combined, and another cap on OT. Outpatient hospitals were exempt from the cap. There were moratoria on the caps (except for January – November 1999) until 2001, when they were finally applied.

Since then, the cap amount has increased each year, rising to $1,880 in 2012 and to $1,900 in 2013 for each cap, with any amount over the cap being denied. The services were tracked on claims through the use of modifier GP Services delivered under an outpatient physical therapy plan of care for PT, modifier GO Services delivered an outpatient occupational therapy plan of care for OT, and modifier GN Services delivered under an outpatient speech-language pathology plan of care for SLP.

Most years, Congress has enacted an automatic exception to the cap when there is documented medical necessity for exceeding it. The therapist is required to attest to medical necessity of the care by adding modifier KX Requirements specified in the medical policy have been met on the claim. The American Taxpayer Relief Act (ATRA) of 2012 reflects new legislation reinstating this automatic exception from Jan. 1, 2013 through Dec. 31, 2013; and it applies the $1,900 cap to the outpatient hospital setting.

Multiple Procedure Reductions and More

In 2011, the Medicare Physician Fee Schedule (MPFS) Final Rule brought therapists a multiple procedure payment reduction (MPPR), with a 25 percent reduction on the practice expense component of facility payments and a 20 percent reduction on the practice expense of outpatient services, if any one of the three therapies or any more than one unit is billed. This had an effect on payment of services, but not enough to reduce the skyrocketing costs. The Medicare Payment Advisory Commission (MedPac) advised Congress late in 2012 to increase the MPPR to 50 percent for all outpatient therapy settings. ATRA puts this into effect as of April 1, 2013.

Therapists also participate in the Physician Quality Reporting System (PQRS), which will start imposing penalties in 2015 if successful reporting standards are not attained. Therapists, like other providers, must add the non-payable G codes and modifiers to their claims in addition to the therapy modifiers.

The Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA) added another caveat. From Oct. 1, 2012 to Dec. 31, 2012, hospital outpatient departments were added as subject to the cap process for claims from Jan. 1, 2012 to Dec. 31, 2012. For the three-month period, a manual review was required for any services over $3,700.This was a three-phased process, in which a therapist could apply for pre-approval of services up to 20 days at a time with a 10-day turnaround, or the claims were suspended and subject to pre-payment manual review with a 60-day turnaround. This has caused many problems for therapists, including delays in getting claims paid and some denials if documentation was judged inadequate to justify medical necessity. There were also glitches in the system and problems with each contractor having their own process for manual review. Many beneficiaries dropped their care because of fear they would have an increased financial burden.

MedPac also advised Congress to have the manual therapy review process continue for all outpatient settings. ATRA adopts this as part of the legislation from Jan. 1, 2013 to Dec. 31, 2013. Whether this will include a pre-approval process or just suspension with pre-payment manual review is not yet clear.

One more regulation from section 2005 (g) of MCTRJCA was implemented through the 2013 MPFS Final Rule: The establishment of a claims-based data collection system is designed to collect data on functional outcomes of patients through an entire episode of care (to determine whether therapy is effective), and to aid in the design of a new payment therapy system. The goal is to reduce the cost of care while increasing its quality.

New G Code Reporting Adds to Administrative Burden

The new, claims-based collections system (see companion article, “PTs Rise to 2013 G Code Challenge”) is effective Jan. 1, 2013, with implementation no later than July 1, 2013. Its goal is to establish an improved payment system based on quality care, which produces efficient (less costly) and effective (measurable) results for patients with similar conditions and functional limitations who have good potential to benefit from the treatment provided. It’s effective for all outpatient settings, including hospitals, critical access hospitals, SNFs, comprehensive outpatient rehabilitation facilities, rehabilitation agencies, and home health agencies (when the beneficiary is not under a home health plan of care). It applies to both therapists and therapy services furnished either personally by or incident-to physicians and certain non physician practitioners, including applicable nurse practitioners, certified nurse specialists, and physician assistants.

The imposition of these codes on initial claims, every 10 days, at discharge, with assessments that must be completed to determine which impairments and modifiers to apply, plus added documentation requirements, will cause great burden to all therapists in the outpatient setting.

On the Horizon

For PT, the American Physical Therapy Association (APTA) is already working on a new payment system. Their draft of an Alternative Payment System (APS), or the Physical Therapy Classification and Payment System (PTCPS), was released to members for comment March 15, 2012. The CPT® Editorial Panel in Memphis, Tenn., Oct. 2-3, 2012, fully supported their efforts. A workgroup will be started that is open to all advisors to rewrite the Physical Medicine and Rehabilitation Section of CPT®. This is a two-part, per session payment system: One set of codes for evaluations, and another set of per-session codes for treatments. Each combines consideration of the complexity of the visit and the severity or complexity of the patient’s condition. APTA expects this system to begin Jan. 1, 2015.

What It All Means for Therapy

At some point, we’ll have a new coding system for therapy acknowledging the complexity of evaluation and treatment options used, as well as the severity of the variety of patients encountered by the therapist, which reimburses accordingly. Therapists can then move forward to provide efficient, effective care for their patients and meet the challenge of high quality care at reasonable cost.

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2 Responses to “Therapy Services: The Uphill Climb to Better Codes and Reimbursement”

  1. Jason says:

    Does the transition from ICD-9 Codes to ICD-10 Codes effects Therapist (PT,OT) practice as a whole , if so how? Is this transition beneficial for them due to the evolutionary change to the medical world?

  2. Brad says:

    Yes, except for certain workers’ comp and auto claims, which are not covered by HIPAA. However, many workers’ comp carriers are converting to ICD-10 to prevent confusion.

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