2013 Medicare Therapy Cap Claims – Some Recent Updates

by | Last updated Jun 5, 2023 | Published on Jun 4, 2013 | Resources, Medical Coding News (A) | 0 comments

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The annual cap amount established for rehabilitation services under Medicare remains a bottleneck for patients who need long term treatment from an outpatient therapy clinic. If the therapy services exceed the cap amount, patients are forced to either stop the therapy or pay from their pocket regardless if their health condition is good or bad. The harmful effects of the therapy cap on Medicare beneficiaries made Congress revisit-think this matter and take measures for avoiding a hard cap. A major reform has been introduced in 2013 – an increase in the cap amount along with an exception clause for services that exceed the cap amount. The cap exception is valid till December 31, 2013. The therapy cap will no longer be applicable to outpatient hospital departments from January 1, 2014.

Snapshot of Therapy Cap Reforms in 2013

  • The annual therapy cap amount per beneficiary will be $1900 in 2013. Similar to earlier mode, this cap amount will be for physical therapy and speech language pathology services combined and there is a separate $1900 amount allotted for occupational therapy services. However, Medicare will pay only 80% of $1900. The remaining 20% is the beneficiary’s share.
  • Two exception processes are applicable for therapy services provided in excess of the cap amount any time during the year 2013. These are the automatic exception process and a manual medical review exception process. Critical Access Hospitals (CAH) are not required to obtain an exception through either of these processes if the patient takes continued treatment from there.
  • Providers are required to submit on the Medicare claim form, the National Provider Identifier (NPI) of the physician who reviews the therapy plan of care periodically. CMS has implemented a claims-based data collection strategy designed to reform the Medicare payment system for outpatient therapy. The system is designed to provide data collection on patient function during the course of relevant therapy services. CMS has implemented a testing period which will run from January 1 to July 1, 2013 to ensure a smooth transition. However, after July 1, 2013, claims submitted without mentioning the proper G-codes and modifiers will not be paid.

Exceptions: A Detailed View

The main aim of exceptions is to enable beneficiaries to access medically necessary services such as physical therapy, speech language pathology and occupational therapy services above the therapy cap. Automatic Exception is applicable when the claims are between $1900 and $3700. If the claims exceed $3700, then they will be subjected to Manual Medical Review.

Automatic Exception

Providers can utilize Automatic Exception process for any diagnosis for which they can justify the services that exceed the cap amount. Once the beneficiary is found to qualify for automatic exception, the provider should add the KX modifier next to therapy procedure code (Applicable Outpatient Rehabilitation Healthcare Common Procedure Coding System (HCPCS) Codes) subject to the cap limits. The KX modifier is attached to codes to specify that the services billed are eligible for cap exception, are reasonable and necessary and require the skills of a a therapist. The modifier also attests that the services billed are justified by appropriate documentation in the patient’s medical record. Even though no specific documentation is required for automatic process exceptions, documentation that justifies the services need to be submitted on receiving an Additional Documentation Request (ADR), which is essential for claims that are chosen for medical review.


Medical Review

CMS had a prior approval process for medical review in which providers would send their request including the information in the patient’s medical record to the corresponding Medicare Administrative Contractor (MAC) for approval of visits (not exceeding 20). This process is no longer implemented in 2013. MAC will conduct prepayment review for the claims of services dated from January 1, 2013 to March 31, 2013 within 10 days. Two types of medical claims review are conducted for requests on or after April 1, 2013 by Recovery Audit Contractors (RACs), which are:

  • Prepayment Review – It is for the states under Recovery Audit Prepayment Review Demonstration such as Florida, Texas, Pennsylvania, New York, North Carolina, Louisiana, Illinois, California, Ohio, Michigan and Missouri. Claims from these states will go through a prepayment review automatically. In this review, the MAC will first send an Additional Development Request (ADR) to the providers stating that they should send additional documentation to RAC. Once the documentation is received, RAC will conduct a prepayment review within 10 business days and send notification to MAC regarding the payment decision.
  • Post payment Review – This review is for the states which are not included in the previous case. Here, an immediate post payment review is conducted by RAC so that the MAC will flag the claims which exceed $3,700. It will then send an ADR to the providers to send additional documentation to RAC. On receiving this request, RAC will carry out prepayment review and notify MAC about the payment decision.

What if the Beneficiary is Not Eligible for Exceptions?

If the beneficiary is not eligible for exceptions, then he/she must pay for the services from their own pocket. In this case, providers are required to obtain a signed Advanced Beneficiary Notice (ABN) from the corresponding patient. After that, they can receive cash from beneficiaries or bill the patient’s secondary insurance (this requires adenial from Medicare). If the cap exemption ends and Medicare will not cover the services beyond that, providers must send an ABN to the beneficiary indicating this matter and submit the claims to Medicare with the modifier for a denial.

In cases where the beneficiary who is not qualified for an exception, who decides to continue treatment, the services will be billed according to the rate determined by providers. If such a situation arises, providers need to be cautious about the fact that free or deeply discounted services may be in violation of the anti-kickback statutes. It is better to seek help from a professional medical billing and coding professional to avoid these issues. The role of an experienced medical billing company is essential in this new scenario to ensure that you receive accurate reimbursement for services provided.

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