FAQ: 2014 Medicare Therapy Cap

General Information on the Therapy Cap in 2014

Congress passed the Pathway for SGR Reform Act of 2013, which took effect January 1, 2014, temporarily extending the therapy cap exceptions process so that it is in effect from January 1, 2014-March 31, 2014. Subsequently, Congress passed the Protecting Access to Medicare Act of 2014, which extended the therapy cap exceptions process and manual medical review at $3700 until March 31, 2015. The temporary patch is intended to allow the House and Senate time to finalize legislation that would permanently repeal the flawed SGR formula and address the therapy cap.

What is the therapy cap amount for 2014?
In 2014, the annual per beneficiary therapy cap amount is $1920 for physical therapy and speech language pathology services combined and there is a separate $1920 amount allotted for occupational therapy services.

What provider settings are subject to the therapy cap in 2014?
In 2014, the $1920 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), critical access hospitals, and outpatient hospital departments. For outpatient hospital departments the therapy cap will apply from January 1, 2014-March 31, 2015. If Congress does not pass legislation prior to March 31, 2014 the therapy cap will not apply to outpatient hospitals after that date. Critical access hospitals, would not be considered in the hospital exemption and therefore the cap will continue to apply to critical access hospitals in 2015.

Does the therapy cap apply to critical access hospitals?
For 2014, when a patient receives outpatient therapy services from a critical access hospital, the therapy cap will apply, as well as any potential extension of the therapy cap exceptions and manual medical review process, in the same manner as all other settings. This is a significant change from the policy that applied in 2013 and prior years. This means that if the patient continues treatment in the critical access hospital, after exceeding $1,920 in therapy services, the CAH would 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.

Will the therapy cap with no exceptions process go back into effect at some time?
Unless Congress passes legislation by March 31, 2015, there will be a therapy cap with no exceptions process for all outpatient therapy settings except hospitals. Effective April 1, 2015, the therapy cap would not apply to outpatient hospitals unless Congress passes legislation. However, it will continue to apply to critical access hospitals and all the other settings. To remain informed of Congressional action related to the extension of the therapy cap exceptions process, sign up for APTA's Advocacy updates at www.apta.org/PTeam.

Does the therapy cap apply to Medicare beneficiaries enrolled in a Medicare Advantage plan?
The Medicare Advantage may plan to apply a $1920 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 2014?
There is an exceptions process in effect from January 1, 2014-March 31, 2015. The exceptions process is applicable for therapy services in excess of the cap amount delivered in that three month time frame. There are two exceptions processes in effect for these three months: 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 January 1, 2014-March 31, 2015 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 $1920 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?
From January 1, 2014- February 28, 2014 Recovery Audit Contractors (RACs) conducted either prepayment or postpayment review for claims exceeding $3700, depending on the state as follows:

Prepayment Review:
Claims submitted in the RAC prepayment review demonstration states will be reviewed on a prepayment basis. These states are Florida, California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouri. The MAC will send an ADR to the provider requesting the 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 the claims that exceed $3700, 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.

Beginning February 28, 2014 the pre- and postpayment manual medical review process changed temporarily due to the CMS transition to new recovery audit contracts. Due to the pause in RAC contracts, no prepayment reviews will be conducted. Instead, all claims will undergo postpayment reviews after the new contracts are in place. Because of the volume of claims CMS anticipates will accumulate during this transition, the 10-day reviewing time frame will not apply to these reviews. The new recovery auditors will review the claims in the order that they were paid.

If the MAC approves my request for services beyond the $3700, 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 $3700.

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 2014 of $1920 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 ($1536.00) and the beneficiary will be responsible for the remaining 20% ($384.00).

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.

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 2014, 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.

CMS provides specific information with regard to ABNs on the website at the following link: http://cms.hhs.gov/Medicare/Billing/TherapyServices/Downloads/ABN-Noncoverage-FAQ.pdf

Can I provide an ABN to all my patients that exceed the therapy cap, just in case Medicare denies payment for the services?
No. You should not issue routine ABNs to every patient. The ABN should be given to the patient only in instances when you believe the services will be denied as not medically necessary.

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 2014

Do providers need to include national provider identifiers of the physician who reviews the therapy plan of care on the claim form?
Yes. Starting 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 following link: http://www.cms.gov/Regulations-and-Guidance/HIPAA-Administrative-Simplification/NationalProvIdentStand/index.html?redirect=/NationalProvIdentStand/

Will Medicare continue to collect additional information on the claim form regarding patient function? If so, specifically what data will Medicare collect?
Beginning January 1, 2013, CMS implemented 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. More information is available about functional reporting on APTA's website at http://www.apta.org/Payment/Medicare/CodingBilling/FunctionalLimitation/

Reports to Congress regarding the Therapy Cap

Is the MedPAC report on reforming the outpatient therapy benefit available?
Yes. This report will be available on MedPAC's website at http://www.medpac.gov/

Is the GAO report on the implementation of the manual medical review exceptions process available?
Yes. Congress required GAO to issue a report no later than May 1, 2013 on the implementation of the manual medical review process in 2012. The report, which includes data on the number of individuals and claims subject to the process, the number of reviews conducted and the outcomes of the reviews, is available at http://www.gao.gov/assets/660/655806.pdf

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:

CSM 2016