In today’s outpatient therapy environment, Medicare — through its claim reviewers and army of RAC auditors — is denying or recouping payment for entire episodes of care in which multiple therapy sessions were provided.

It all comes down to the accuracy of documentation for patients attended to by physical therapists (PTs), occupational therapists (OTs), and speech and language pathologists (SLPs). It has become increasingly difficult for some outpatient therapy clinics to get reimbursed because of inadequate documentation.  

Therapists already spend an enormous number of working hours compiling documentation and performing related administrative tasks. If, however, they fail to capture important information, or if they neglect to convey that therapy was essential in a patient’s functional recovery, all of their time and effort could be lost.

There are pitfalls to outpatient therapy documentation that can negatively impact a provider’s bottom line and increase the risk of devastating adjustments from audits. The following are five of the most common such pitfalls and how to avoid them.

1. Not Building a Case for Medical Necessity.

This is one key reason why claims are denied and/or adjusted. RAC auditors can spot poor therapy documentation a mile away, and they are looking for it. The definition of “medical necessity” is any situation in which a patient requires the skill of a licensed therapist (PT, OT or SLP) to regain or develop function in a specific activity, as detailed in a recent report by the Centers for Medicare & Medicaid Services.1

Third parties’ perceived value of therapy services often hinges on whether or not a patient becomes more functional and independent in meaningful activities. In some degenerative neurological cases, which require precise documentation to be reimbursed, Medicare will pay for therapy to maintain the highest possible level of function as the patient regresses due to the disease, according to a U.S. District Court for the District of Vermont-approved settlement agreement (Jimmo v. Sebelius, 2013.2

Unfortunately, therapists often center their documentation on impairment deficits (i.e., pain, range of motion, strength, balance, etc.) instead of addressing the functional areas. This impairment information is important and should be documented, but this should be done within the context of the functional deficit. A chart is flagged if the claim reviewer or RAC auditor cannot quickly identify the initial functional level and functional (long-term) goals of the activities being cited.  

What to do?

  • Make the functional deficit(s) the core of each therapist’s documentation, being sure to include a detailed description of the problem and how various impairments contribute to the problem. Track functionalprogress with accepted functional tests throughout the treatment cycle (from the initial evaluation to the discharge summary).
  • Set and track measureable functional long-term goals in each treatment note. Short-term goals or impairment goals represent beneficial information for physicians and other therapists, but they are not required to for compliance purposes or to prove medical necessity. Focus on the patient’s function in specific and detailed activities.
  • Use the required field mechanism in your therapy electronic medical record (EMR) to make sure the therapists are addressing medical necessity and capturing all of the required CMS and TJC elements for each type of report.

2. Not Having the Proper Signatures on All Reports.

Claim reviewers and RAC auditors are quick to look for the physician’s timely signature on the plan of care for therapy documentation. “Timely” means within 72 hours of initiating treatment, and in the absence of such a provision, the documentation as to why it took longer is necessary. Also, clinical notes that aren’t signed by the therapist become a problem because backdating or back-signing is not allowed by regulations, according to the CMS Manual System, Transmittal 88. 1. 

What to do?

  • Establish a manual system or activate mechanisms in your therapy EMR that will track plans of care sent to the physicians with accuracy and alert the therapist and/or administrative staff if a plan of care is outstanding.
  • Create a manual system or a daily report in your therapy EMR that will show all unsigned documents for any given day, and require therapists to sign each such document before they leave for the day. This problem can be exacerbated when therapists go on vacation or when they are PRN.
  • Activate the mechanism in your therapy EMR that will alert point-of-care therapists to any unsigned notes.



3. Not Having All the Required Reports for the Treatment Cycle Completed.

Documentation of therapy services through the treatment cycle — from the initial evaluation to the discharge — is an intense and complex process. There are specific reports due at certain times.

On the first visit, the therapist must complete the initial evaluation, a plan of care for the physician to sign and a treatment note with accurate billing for that day. On each subsequent visit, the therapist must complete a treatment note that shows what was performed and how the patient is responding and progressing. On every 10th visit, the therapist must complete a progress report that compares initial and current functional levels. If there is a change in the patient’s diagnosis, condition, or support system, the therapist must complete a reevaluation. On the last visit, the therapist must complete the discharge summary and that day’s treatment note. If a Medicare patient is receiving therapy after 90 days, the therapist must complete a recertification for the physician to sign. 

That’s seven different types of reports. Each report must be generated for just one patient’s treatment cycle. It would be easy to have any number of those reports slip through the cracks, which could have dire consequences when the medical record is reviewed or audited.

What to do?

  • Manually create a system or activate your therapy EMR to provide alerts to the treating therapist that certain reports are due soon. This will allow the therapist to stay on top of (and ahead of) due dates.
  • Perform regular in-house chart audits to make sure that all necessary reports have been generated, signed, and dated.

4. Discrepancy Between What Was Billed and What Was Reflected in the Treatment Note.

The information given in units and interventions on a claim that doesn’t line up with therapists’ treatment notes will quickly draw the attention of a claim reviewer or RAC auditor. Usually, such a discrepancy results from simple human error that occurs when the therapist manually transfers billing information from the treatment note to a superbill that then is given to someone who manually keys it into the billing system. If charges are lost, under-billing occurs. If overcharging occurs, and especially if it occurs with any frequency, it could become a matter of investigated fraud and abuse.

What to do?

  • Put manual safeguards in place to minimize human error.
  • Use a therapy EMR that interfaces with the hospital’s billing system or clinic’s practice management system and takes the charges directly from the therapist’s treatment note.

 5. Improper Use Or Omission of the KX Modifiers and Functional Limitation G-codes.

The rules and regulations governing the application of KX modifiers to the billed CPT codes on patients who are over the Medicare Cap ($1,900 for PT and SLP combined; $1,900 for OT) is tricky and potentially costly. The therapist must exhibit transparency regarding how much each patient has used toward his or her Medicare Cap. If the KX modifier is applied on the claim before the patient has reached the cap, or if it is not applied after the cap is reached, Medicare can deny payment.

For the new functional limitation reporting, G-codes representing each patient’s level of function in particular activities must be submitted on the claim on the day of the initial evaluation, following each 10th-visit progress report, and for the discharge summary. If they are not present on the claims for those dates of services, the whole episode of care can be denied.

What to do?

  • For KX modifiers, put manual safeguards and alerts in place to let therapists know where the patient stands with the Medicare caps. This requires accessing the common working file for each Medicare patient and manually tracking how much they are using at your clinic. Have the therapists use the KX modifiers as close to the cap as possible.
  • On G-codes, devise streamlined approaches that allow therapists to quickly address functional limitation reporting and capture such codes. Have a manual system that alerts the treating therapist to modify and submit the G-codes on the day of the initial evaluation, following every 10th visit, and for the discharge summary.
  • Activate the Medicare cap tracking and functional limitation reporting mechanisms of your therapy EMR, which systematically will remind therapy and administrative staff on all of the above.

Again, these are just some of the most common pitfalls and our experience regarding best practices of how to avoid them.

About the Author

Gerry Stone is a physical therapist and the founder/chief clinical officer of The Rehab Documentation Company, Inc., makers of ReDoc Software. He served on the Neuro-Muscular panel of American Physical Therapy Association to help to write The Guide to Physical Therapist Practice, Volume 1, (1995-1997). He has extensive knowledge of the CMS and TJC regulations and billing structures pertaining to rehab settings.

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1. Recent report by CMS.

2. Settlement agreement (Jimmo v. Sebelius, 2013).

3. CMS Manual System, Transmittal 88

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