Outpatient Therapy and the Advanced Beneficiary Notice of Non-Coverage

Have you been issuing blanket ABN notices to therapy outpatients when they reach the $1,900 therapy cap ($1,900 for physical therapy and speech therapy combined, plus another $1900 for occupational therapy), wherein the patient accepts financial responsibility for therapy if the Centers for Medicare & Medicaid Services (CMS) deems that services were not medically necessary?

Last year’s advice from CMS to the therapy community is just the opposite of the advice given this year, based upon the statutory change in beneficiary liability for therapy over the cap resulting from the American Taxpayer Relief Act (ATRA). Last year CMS advised therapy providers to issue the voluntary form of the ABN to beneficiaries as a courtesy to let them know that therapy at costs over the cap was statutorily excluded as a Medicare benefit. The beneficiary was liable even in the absence of an ABN. In fact, last August CMS sent more than 500,000 letters to beneficiaries advising them of the statutory exclusion of therapy over the caps, and of their potential liability.

Therapy providers got into the routine of issuing a voluntary ABN to all patients who were near the therapy cap. The therapy provider basically was able to have its cake and eat it too: therapy claims over the therapy cap were submitted with the KX modifier (attesting to medical necessity), and if the claim was reviewed and denied, the beneficiary would be held liable.  It was a seemingly perfect world, but that dynamic has come to a screeching halt, as the CMS guidance issued this year is dramatically different as a result of the new law removing beneficiary liability for therapy over the caps.

In an FAQ document posted to its therapy services page online, CMS has issued long-awaited guidance to the therapy industry on the proper use of the Advanced Beneficiary Notice of Non-Coverage (ABN) for therapy exceeding the cap. According to CMS, “Section 603 (c) of the ATRA-amended §1833(g)(5) of the Social Security Act (the act) … (is) to provide limitation of liability (LOL) protections (see §1879 of the act) to beneficiaries receiving outpatient therapy services on or after Jan. 1, 2013 when services are denied and the services provided are in excess of therapy cap amounts and don’t qualify for a therapy cap exception. Now, the provider/supplier must issue a valid, mandatory ABN to the beneficiary before providing services above the cap when the therapy coverage exceptions process isn’t applicable.”

So how does this work for therapy over the $1,900 cap in 2013?

If a patient is receiving therapy and is about to exceed the cap, and the therapist feels that continued therapy is medically necessary, a KX modifier is to be used to attest to medical necessity. The KX modifier allows the claim to pass through the common working file to be processed for payment. If the therapist feels at any time during the course of therapy (before or after exceeding the therapy cap) that therapy is no longer medically necessary, it is appropriate to discuss discharge options with the patient, including the option of continued therapy. In this instance, since continued therapy is not medically necessary yet the patient requests additional therapy, a mandatory ABN is to be issued prior to providing services. Claims over the $1,900 therapy caps that are processed with the GA modifier (indicating therapy is not medically necessary, per payor policy) by definition may not also utilize the KX modifier. In 2013, in other words, you cannot have your cake and eat it too.

In a recent “Monitor Monday” Listener Survey, 39 percent of our listeners indicated that they understood the use of the mandatory ABN, while 34 percent reported that they understood the use of the voluntary ABN.  However, only 30 percent of listeners understood the use of the modifiers. Here’s the hitch: the correct modifier is the key to the effective use of the ABN, and it can spell the difference between a provider’s ability to bill the patient for services.

CMS contractors (MACs, RACs, ZPICs) routinely ask as part of the ADR process for a copy of any ABN that was issued to determine provider-versus-beneficiary liability for any potentially denied charges. It is clear that ABN education is required, as evidenced by 56 percent of our listeners looking for a refresher course on the proper use of the ABN.

In light of the fact that all claims over the $3,700 therapy threshold are subject to manual medical review by the Recovery Auditors (RACs), providers who feel that they have protected themselves with last year’s guidance (including the use of the voluntary ABN) may be surprised to learn that they may be held liable for all denied services.

CMS has indicated that, with the ATRA changes to beneficiary liability protection for therapy services,  providers will “seldom encounter situations for using a voluntary ABN or an optional notification for non-covered therapy services. An example of therapy services that are never covered by Medicare are physical therapy services rendered by a chiropractor. So, a chiropractor offering physical therapy services as allowed by his/her state’s scope of practice could issue a voluntary ABN to the beneficiary.”

Check with your Medicare contractor for webinars and courses on the use of the Advanced Beneficiary Notice. Noridian has posted ABN instructions along with a tutorial on their website. Information on the ABN and the form and form instructions can be downloaded from


About the Author

Nancy Beckley, president of Nancy Beckley & Associates LLC, is certified in healthcare compliance and has extensive experience specializing in rehabilitation and compliance. Her work includes establishing auditing and monitoring protocols for outpatient providers; conducting pre-acquisition compliance risk audits; strategic market-based planning and analysis; operational analysis, including benchmarking, coding and staffing; CORF development and implementation; managed care analysis; facilitation of credentialing, and managed care contract technical review.

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