Are you planning your budget and reimbursement for outpatient therapy services delivered in 2016? It’s time to take a look at some of the elements that will affect payment. From a Medicare perspective, this includes the therapy cap update, multiple procedure payment reduction, sequestration reductions, and Physician Quality Reporting System (PQRS) reductions.

The Therapy Cap

Outpatient therapy providers for physical therapy, occupational therapy, and speech-language pathology will have additional room to spare (if you want to call another $20 additional room!) in 2016. MedLearn Matters edition MM9448 provides information on the therapy caps update. The article covers the change request (CR) to the Medicare Claims Processing Manual (and just to make sure you have all the facts, it is also captioned at Transmittal 3417). The $20 increment for 2016 is a result of the annual update based on the Medicare Economic Index. Per the CMS transmittal, this applies, per beneficiary, annual financial limitations on expenses considered incurred for outpatient therapy services under Medicare Part B (commonly referred to as “therapy caps”). 

Keep in mind that the therapy cap applies to a beneficiary and not to the facility. So a beneficiary in 2016 can receive $1,960 of medically necessary therapy for physical therapy and speech-language pathology combined, and $1,960 of medically necessary occupational therapy. So, what can a beneficiary hope to receive with another $20 of “cap” room? Likely less than 15 minutes of therapy, or one treatment of unattended electrical stimulation!

An exceptions process to the therapy caps for reasonable and medically necessary services was required by the Deficit Reduction Act (2005). In October 2012, hospitals came under the therapy cap, and by 2013, therapy provided at critical access hospitals (CAHs) was calculated to the beneficiary’s cap as if the CAHs were under the cap. By 2014 critical access hospitals, while still being paid on the basis of cost, were subject to the therapy caps along with the reset of the outpatient therapy universe. The exceptions process for the therapy caps has been extended several times through legislation during recent years. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) further extended the therapy caps exceptions process through Dec. 31, 2017 and staves off for the next two years the annual uncertainly of therapy benefits.

Multiple Procedure Payment Reduction (MPPR) and Sequestration

The multiple procedure payment reduction policy for outpatient therapy remains in effect for all disciplines in 2016. Payment for the first code is paid per the CMS fee-scheduled amount and the second and subsequent codes billed on that date of service have a 50-percent reduction in the practice expense portion of the code. As they say, you can’t make it up on volume. The MPPR amount continues at 50 percent, whereas previously it had been at 20 percent for private practice settings and 25 percent for institutional settings.

The 2-percent sequestration reduction to Medicare payments for outpatient therapy under the Medicare Physician Fee Schedule (MPFS) also remains in effect in 2016. The sequestration payment reductions are applied to claims after determining payment per the application of the current MPFS, coinsurance, any applicable deductible, and any applicable Medicare secondary payment adjustments. Only the final payment is subject to the sequestration reduction. 

PQRS Reductions

Outpatient physical therapy and occupational therapy providers in private practice (billing on the CMS 1500) that do not successfully report at least three measures on 50 percent of their Medicare patients are subject to a 2-percent reduction in payment for 2016. Letters notifying providers of the reduction were in the mail in November. CMS recently re-extended the date (to Dec. 16th) by which an eligible provider or group practice reporter can file an appeal if they believe the data is in error.   

A lot of therapy providers have been surprised at their letters of notification of the 2-percent reduction, as they were under the impression that they have been reporting successfully. Physical therapy reporting in 2014 featured a requirement that the medication management measure not only be reported with the therapy evaluations codes, but also on any date of service on which therapeutic exercise or manual therapy was performed. Providers have said that the lack of reporting with these codes likely led to their non-compliance when medication management was selected as one of the minimum of three measures to be reported in 2014.  

Stay Tuned

Are you beginning to think that understanding expected payment for a 45-60 minute therapy session is complicated? Members of the American Physical Therapy Association will benefit from the use of the member-only Medicare fee schedule calculator, which is set up to work with any CMS payment locality and to include the MPPR and sequestration reductions. 

Join me Jan. 20, 2016 for my annual therapy update for outpatient therapy providers, which will include more detail on payment updates but also offer updates and guidance on the Recovery Auditor (RA) program, manual medical review of therapy over $3,700, and lessons learned from Office of Inspector General (OIG) reports on outpatient therapy technical denials. I’ll also preview some upcoming coding changes that are in the works. 

About the Author

Nancy Beckley is founder and president of Nancy Beckley & Associates LLC, providing compliance planning and outsourced compliance services to rehab providers in hospitals, rehab agencies, and private practice. Nancy is certified in healthcare compliance by the Healthcare Compliance Certification Board. She is on the board of the National Association of Rehabilitation Providers and Agencies. She previously served on the CMS Professional Expert Technical Panel for Comprehensive Outpatient Rehabilitation Facilities. Nancy is a familiar voice on Monitor Monday where she serves as a senior national correspondent.

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