FAQ: 2013 Medicare Therapy Cap

This FAQ resource was updated March 26, 2013. As further details regarding legislation and administrative claims processing issues emerge, this page will be modified.

General Information on the Therapy Cap

What is the therapy cap amount for 2013?
In 2013, the annual per beneficiary therapy cap amount is $1900 for physical therapy and speech language pathology services combined and there is a separate $1900 amount allotted for occupational therapy services.

What provider settings are subject to the therapy cap in 2013?
In 2013, the $1900 therapy cap with an exceptions process applies to services furnished in the following outpatient therapy settings: physical therapists in private practice, physician offices, skilled nursing facilities (Part B), rehabilitation agencies (or ORFs), and comprehensive outpatient rehabilitation facilities (CORFs), and outpatient hospital departments. Legislation included outpatient hospitals under the cap for calendar years 2012 and 2013. The therapy cap will no longer apply to outpatient hospital departments on January 1, 2014, unless Congress passes legislation continuing the application to this setting.

Does the therapy cap apply to critical access hospitals?
For 2013, when a patient receives outpatient therapy services from a critical access hospital, the services will count toward dollars accrued toward the therapy cap. For example, if a patient receives $2,000 of outpatient therapy services in a CAH and upon discharge goes to a private practice to continue therapy services, the private practice would need to obtain an exception (in this case use the KX modifier). However, for 2013 the therapy cap does not apply to outpatient therapy services provided within CAHs themselves. This means that if the patient continued treatment in the critical access hospital, after exceeding $1,900 in therapy services, there would be no need to seek an exception through the automatic process. That is, the CAH would not need to submit the claim with a KX modifier. Also, if the patient exceeds $3,700 and continues care in CAH, the hospital would not need to obtain an exception through the manual medical review process.

Does the therapy cap with no exceptions process go back into effect on January 1, 2014?
Unless Congress passes legislation by the end of 2013 there will be a therapy cap with no exceptions process for all outpatient therapy settings except hospitals. Effective January 1, 2014, the therapy cap would not apply to hospitals unless Congress passes legislation. To remain informed of Congressional action related to the extension of the therapy cap exception process, sign up for PTeam.

Does the therapy cap apply to Medicare beneficiaries enrolled in a Medicare Advantage plan?
The Medicare Advantage may plan to apply a $1900 therapy cap with an exceptions process if it chooses to do so. However, many Medicare Advantage plans have chosen not to apply a therapy cap in the past. You should check with your Medicare Advantage plan regarding its payment policies.

Does the therapy cap apply if I need to provide an evaluation for a new patient to determine whether that patient needs therapy beyond the cap amount?
No. The evaluation (97001) or reevaluation (97002) to determine the need for therapy would be covered even if the patient has exceeded the therapy cap amount.

Therapy Cap Exceptions Process

Is there an exceptions process in 2013?
Yes. The exceptions process is applicable for therapy services in excess of the cap amount delivered any time during the 2013 calendar year. In 2013 there are two exceptions processes: an automatic exception process and a manual medical review exception process. The manual medical review exceptions process applies to patients who meet or exceed $3700 in therapy expenditures for PT/SLP combined and a separate $3700 in occupational therapy expenditures.

Automatic Exceptions Process

What is an "automatic exception"?
For 2013, an automatic exception to the therapy cap may be made when the patient's condition is justified by documentation indicating that the beneficiary requires continued skilled therapy, i.e., therapy beyond the amount payable under the therapy cap, to achieve their prior functional status or maximum expected functional status within a reasonable amount of time. Providers may utilize the automatic process for exception for any diagnosis for which they can justify services exceeding the cap. Therapists may request an automatic exception for claims that are between $1900 and $3700 in expenditures. Claims exceeding $3700 in expenditures will be subject to manual medical review in order to be paid.

How do I submit a request for an "automatic" exception?
When the beneficiary qualifies for a therapy cap exception, the provider shall add a KX modifier to the therapy procedure code subject to the cap limits. The codes subject to the therapy cap tracking requirements are listed in a table in the Claims Processing Manual, Chapter 5, Section 20(B), "Applicable Outpatient Rehabilitation Healthcare Common Procedure Coding System (HCPCS) Codes."

Should I append the KX modifier to all my therapy claims?
No. The provider should use the KX modifier to the therapy procedure code that is subject to the cap limits only when a beneficiary qualifies for a therapy cap exception. By attaching the KX modifier, the provider is attesting that the services billed:

  1. Qualified for the cap exception;
  2. Are reasonable and necessary services that require the skills of a therapist; and
  3. Are justified by appropriate documentation in the medical record.

Do providers need to submit documentation for "automatic" exceptions from the therapy cap?
No specific documentation is submitted for automatic process exceptions. The clinician is responsible for consulting guidance in the Medicare Manuals and in the professional literature to determine if the beneficiary may qualify for the automatic process exception. Medicare beneficiaries will be automatically excepted from the therapy cap and providers will not be required to submit documentation for an exception if the beneficiary meets the criteria for an automatic exception. Documentation justifying the services shall be submitted in response to any Additional Documentation Request (ADR) for claims that are selected for medical review. If medical records are requested for review, clinicians may include, at their discretion, a summary that specifically addresses the justification for therapy cap exception.

Manual Medical Review

What is "manual medical review"?
Claims for patients who meet or exceed $3700 in therapy expenditures will be subject to a manual medical review.

Criteria for medical review will be based on current medical review standards. Providers should make sure to comply with coverage, documentation and coding requirements set forth in the Medicare Benefit Manual (publication 100-02, chapter 15, section 220) and the Medicare Administrative Contractor (MAC) local coverage determination (LCD) for their jurisdiction.

How will "manual medical review" be performed in 2013?
On March 22, 2013, the Centers for Medicare and Medicaid Services (CMS) issued interim guidance on how the manual medical review process will be implemented in 2013 for outpatient therapy claims that exceed $3,700. From October 1, 2012, through December 31, 2012, CMS used a prior approval process under which providers would submit a request to their Medicare Administrative Contractors (MAC) for approval of up to 20 visits. With the request, providers would include information from the patients' medical record (eg, progress reports, daily notes, plan of care) to support the need for the additional visits.

For 2013, CMS has replaced the prior approval process. For claims with dates of services January 1, 2013, to March 31, 2013, MACs will conduct prepayment review. CMS requested that the MACs conduct these manual medical reviews within 10 days. Effective April 1, 2013, the Recovery Audit Contractors (RACs) will conduct 2 types of review for claims processed on or after April 1, 2013: prepayment review for states within the Recovery Audit Prepayment Review Demonstration, and immediate postpayment review for the remaining states.

  • Prepayment Review: States participating in the prepayment review demonstration are Florida, California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouri. The MAC will send an Additional Development Request (ADR) to the provider requesting that additional documentation be sent to the RAC. The RAC will conduct prepayment review within 10 business days of receiving the additional documentation and will notify the MAC of the payment decision.
  • Postpayment Review: In the remaining states, the RACs will conduct immediate postpayment review. The MAC will flag claims that exceed $3,700, request additional documentation and pay the claim. The MAC will send an ADR to the provider requesting that the additional documentation be sent to the RAC. The RAC will conduct postpayment review and will notify the MAC of its decision.

How many days will contractors have to make decisions on prepayment review when the $3,700 amount is exceeded.
Medicare Administrative Contractors (MAC) will have 10 business days to make decisions regarding whether services will be paid over the $3,700 amount.

If the MAC approves my request for services beyond the $3,700, do I still need to include the KX modifier on the claim form? Do I need to include additional information on the claim form submitted?
The provider will need to submit the KX modifier on the claim form when therapy services exceed $3,700.

Determination of the Amount of Dollars Accrued Toward the Cap

Does the cap amount "reset" for each diagnosis? For instance, if a patient receives PT services January-March for a hip replacement and is discharged, then returns in September as a result of a stroke, is there one cap for the first episode of treatment and a new cap for the second episode of treatment?
No, the therapy cap is an annual per beneficiary cap.

With the cap for 2013 of $1900 for Part B PT/SLP benefits, how does the cap count toward the patient responsibility of 20%? For example, in outpatient, the patient is responsible for 20% of allowable charges.
Medicare will pay 80% of the allowed charges ($1520.00) and the beneficiary will be responsible for the remaining 20% ($380.00).

Where do I find information about the amount of dollars that my patient has accrued toward the therapy cap?
All providers and contractors may access the accrued amount of therapy services from the ELGA screen inquiries into CWF. Providers/suppliers may access the remaining therapy services limitation dollar amount through the 270/271 eligibility inquiry and response transaction. Providers who bill to FIs will find the amount a beneficiary has accrued toward the financial limitations on the HIQA. Some suppliers and providers billing to carriers may, in addition, have access to the accrued amount of therapy services from the ELGB screen inquiries into CWF. Suppliers who do not have access to these inquiries may call the contractor to obtain the amount accrued.

What would occur in the following scenario? A provider furnishes services to a patient from April-July 2013 but does not submit the claim for those services until November 1, 2013. In October 2013 the same patient receives services from a physical therapist in private practice. The physical therapist checks the eligibility screens to determine how many dollars that patient has accrued toward the therapy cap on October 2 and at that time the care provided from April-July is not included. The physical therapist discovers on November 2 that the patient had exceeded the cap amount in July 2013 and therefore did not seek the manual medical review exception in October. Would the services provided in October be denied?
No.

Collecting Out of Pocket from Patients Who Do Not Qualify for a Therapy Cap Exception

If the patient does not qualify for an exception to the therapy cap in 2013, what are my options for delivery of services to my Medicare patients who exceed the cap amount?
If the patient does not qualify for an exception to the therapy cap, Medicare beneficiaries can continue to receive services and pay for these services out of pocket.

If the patient elects to pay out of pocket, the provider must obtain a signed Advanced Beneficiary Notice (CMS-R-131) (ABN) from the patient. Then the therapist can collect cash from the beneficiary or bill the patient's secondary insurance. The secondary insurance may require a denial from the Medicare program before it will cover these services.

If the cap exemption ends, and Medicare no longer is covering services beyond the cap, can we use GA/GY/GX codes and bill the secondary insurance plans for reimbursement?
Yes. You should provide the beneficiary with an ABN explaining that services beyond the cap amount are not covered and submit the claim to Medicare with the modifier for a denial.

If a Medicare beneficiary does not qualify for an exception to the therapy cap and chooses to continue treatment at what rate can the services be billed?
If the beneficiary chooses to continue treatment and does not qualify for an exception to the therapy cap, the services may be billed at the rate the provider/supplier determines. However, be aware that provision of free or deeply discounted services can potentially be a violation of the anti-kickback statutes.

Is it okay to offer Medicare patients an "aftercare" program if they use up the cap at a reduced rate or flat fee?
If a patient has exceeded the cap and there is no exceptions process, a physical therapist can continue treatment; however, the beneficiary will be financially responsible for these services. You should give the beneficiary an Advanced Beneficiary Notice (ABN).

When charging patients out of pocket, it is very important to have a set fee schedule that applies to all patients regardless of their insurer (Medicare or private insurance). Additionally, any discounts offered should also be offered to all patients regardless of their source of insurance coverage and all discount policies should be established in writing. For instance, you may have a policy that offers a 20% discount to patients with income less that a certain dollar amount in a given year or for patients with medical costs that exceed a set limit in a given year.

Additional Information to be Collected on the Medicare Claim Form in 2013

Do providers need to include national provider identifiers of the physician who reviews the therapy plan of care on the claim form?
Yes. As of October 1, 2012, each request for payment must include the national provider identifier of the physician who periodically reviews the therapy plan of care. For private practitioners, the NPI would be placed in the referring physician field and for institutional claims the NPI would be placed in the attending physician field.

Where can I obtain information regarding physician NPIs?
CMS has provided a list of physician NPIs on their website. It is available at the CMS website.

Does Medicare plan to collect additional information on the claim form regarding patient function? If so, specifically what data will Medicare collect?
As of January 1, 2013, CMS will implement a claims based data collection strategy that is designed to assist in reforming the Medicare payment system for outpatient therapy. The system is designed to provide for the collection of data on patient function during the course of therapy services. To assure a smooth transition, CMS sets forth a testing period from January 1 to July 1, 2013. After July 1, 2013, claims submitted without the appropriate G-codes and modifiers would be returned unpaid. More information is available about functional reporting on APTA's website.

Reports to Congress regarding the Therapy Cap

Did the legislation (HR 3630) mandate any reports on reforming the outpatient therapy benefit?
Yes. The legislation requires MedPAC to submit to Congress a report on how to improve the outpatient therapy benefit. When finalized, this report will be available on MedPAC's website.

Did the legislation (HR 3630) require any reports related to the Manual Medical Review Exceptions Process?
Yes. The legislation requires the GAO to issue a report to Congress no later than May 1, 2013 on the implementation of the manual medical review process. The report shall include data on the number of individuals and claims subject to the process, the number of reviews conducted and the outcomes of the reviews.

Where can I find additional resources regarding the therapy cap?
CMS has issued a fact sheet and a question and answer document regarding manual medical review, which is available at the CMS website.

Additional Resources

Are there additional resources available regarding the Medicare therapy cap?
Additional resources are available at the following links:

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