Never in the history of managing outpatient therapy (physical therapy, or PT, occupational therapy, or OT, and speech-language pathology, or SLP), have the challenges of maintaining profitability while providing quality services been so formidable.

The number of new and confusing Medicare Part B rules, regulations, and requirements affecting therapy providers just in the past 18 months is staggering. These changes are affecting the morale and efficiency of rehab directors and therapists everywhere, along with significantly impacting bottom lines. 

Today, not only do therapy professionals need to be on their clinical game, they must become astutely business-savvy in Medicare and other third-party payment plans. They must become more adept in the collection, tracking, and analysis of key business performance indicators. They need to be willing to redesign policies, procedures, and clinic workflow to maximize reimbursement, prevent denials, and improve patients’ outcomes and satisfaction.

This article primarily will focus on the seemingly uncelebrated yet insidious Medicare rule that took effect April 1, 2013, called the Multiple Procedure Payment Reduction (MPPR) policy. It will provide a brief description of MPPR and its ramifications on outpatient therapy reimbursement, along with optional solutions for rehab directors.

In short, Section 3134 of the Patient Protection and Affordable Care Act (PPACA) added section 1848(c)(2)(K) of the Social Security Act, which specifies that the Secretary of Health and Human Services shall identify potentially “misvalued” codes by examining multiple codes and units that are frequently billed in conjunction with furnishing a single service. Section 633 of the American Taxpayer Relief Act of 2012 revised the reduction from 20 percent for private practice and 25 percent for hospitals (and 50 percent for all settings).

Therefore, Medicare will pay 100 percent for the first unit of the intervention with the highest practice expense (PE) payment, and 50 percent of the PE for subsequent units provided to the same patient on the same day. Remember, it is not the first Intervention/CPT code that is paid in full for that day; it is only the first unit.

The MPPR applies to all therapy services furnished to a patient on the same date. It does not matter if the services are provided by one or multiple therapy disciplines, (PT, OT, or SLP). Again, MPPR specifically reduces the PE payment for all services by 50 percent for everything after the first unit is paid. 

The American Physical Therapy Association (APTA) estimates that the application MPPR policy will reduce payments by approximately 6-7 percent in aggregate for outpatient therapy services ( However, the effect on hospital outpatient therapy departments will vary depending on the average duration of the treatment sessions and the CPT codes billed.

Below are strategies that rehab directors can consider to help minimize the effect of MPPR on their bottom line.

  • Recognize that there are multiple potential code combinations that, when submitted, determine the total reimbursement for services in a given day. Set standard code combinations for all therapists to follow that will reap the best reimbursement for any given date of service.
    • Determine how much it costs, per patient visit, to operate the department. Take the total cost divided by the average number of patients treated per day and add in a reasonable profit margin the department should generate. This amount will be the minimum revenue per patient visit that the outpatient therapy department should sustain. The net revenue per visit from each insurance plan must be above the department’s cost per visit.
    • Establish fee schedule charges that are above the Medicare fee schedule amounts and are representative of the costs that would apply to all patients, regardless of the payor. (Medicare pays the lower of the Medicare fee schedule amount and submitted charges.)
      • Monitor the average Medicare visit reimbursement with MPPR to make sure it is higher than the cost per patient visit. Make adjustments to reduce the cost per visit, or, within ethical limitations, modify the treatment plan to increase reimbursement per visit.
      • Review contracts with nonfederal insurers who may be adopting Medicare’s MPPR policy; this would include workers’ compensation, commercial and Medicare Advantage plans. Increasingly, more payors are starting to use the MPPR methodology to reduce contracted payments.
      • Analyze the payor mix and physician referral base. Make adjustments to the percentage of Medicare patients and diversify physician marketing efforts accordingly.
      • Be creative with one-on-one time with patients by utilizing physical therapy assistants more effectively, employing the use of more group therapy (97150) following a first intervention.
      • Use ethical discretion and, where possible, reduce the average treatment time to 30 minutes per session, per day. Under MPPR, 45-to-60-minute therapy sessions could see a reduction in reimbursement by as much as 15-20 percent.

In conclusion, rehab directors and therapists must become aware of all the ramifications of changes in Medicare, which most other insurance carriers usually quickly adopt, and be proactive in counteracting the negative financial effects with practical solutions and strategies.

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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