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Therapy Cap

Manual Medical Review of Therapy Claims Above the $3,700 Threshold

The Pathway for SGR Reform Act of 2013 was signed into law recently by President Obama. This law extends the Medicare Part B Outpatient Therapy Cap Exceptions Process through March 31, 2014. Section 1103 of this Act contains a number of Medicare provisions affecting the outpatient therapy caps and manual medical review (MR) threshold.

The statutory Medicare Part B outpatient therapy cap for Occupational Therapy (OT) is $1,920 for 2014, and the combined cap for Physical Therapy (PT) and Speech-Language Pathology Services (SLP) is $1,920 for 2014. This is an annual per beneficiary therapy cap amount determined for each calendar year. Exceptions to the therapy cap are allowed for reasonable and necessary therapy services. Per beneficiary, services above $3,700 for PT and SLP services combined and/or $3,700 for OT services are subject to manual medical review. CMS is not precluded from reviewing therapy services below these thresholds.

The therapy cap applies to all Part B outpatient therapy settings and providers including:

  • Therapists’ private practices
  • Offices of physicians and certain nonphysician practitioners
  • Part B skilled nursing facilities
  • Home health agencies (Type of Bill (TOB) 34X)
  • Rehabilitation agencies (also known as Outpatient Rehabilitation Facilities-ORFs)
  • Comprehensive Outpatient Rehabilitation Facilities (CORFs)
  • Hospital outpatient departments (HOPDs)
  • Critical Access Hospitals (CAHs) (TOB 85X) - (2014)

In addition, the therapy cap will apply to outpatient hospitals as detected by:

  • Type of Bill 12X, 13X or 085X
  • Revenue code 042X, 043X, or 044X
  • Modifier GN, GO, or GP; and
  • Date of service on or after January 1, 2013

Effective April 1, 2013, the Recovery Auditors will conduct review for all claims processed on or after April 1, 2013. Recovery Auditors will complete two types of review.
Prepayment Review:

  • Claims submitted in the Recovery Audit 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.
  • In these states, the MAC will send an ADR to the provider requesting the additional documentation be sent to the Recovery Auditor.
  • The Recovery Auditor will conduct manual medical review within 10 business days of matching the provider’s claim to the medical documentation and will notify the MAC of the payment decision.
    Postpayment Review:
  • In the remaining states, CMS will grant an exception for all claims with a KX modifier and pay the claim upon receipt. The Recovery Auditors will then conduct postpayment manual medical review on the claim.
  • In these states, the Recovery Auditor will request additional documentation and conduct postpayment review and will notify the MAC of the payment decision.

Section 603 (b) of the American Tax Relief Act counts outpatient therapy services furnished in a Critical Access Hospital (CAH) toward a beneficiary’s annual cap and threshold amount using the Medicare Physician Fee Schedule rate. In 2014, CAHs will now be subject to the therapy cap, the manual medical review process, and the use of the KX modifier.

Please contact CMS with questions about the therapy cap review process at