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Written by: Bob Habasevich, PT on Tuesday, April 10, 2012 Posted in: Outpatient Rehab

Outpatient rehabilitation therapy services provided by hospitals have been a watershed opportunity for revenue growth for the past 25 years. For many providers growth of these services lines has exceeded inpatient therapy revenues. One reason for such growth has been the fact that hospitals have been exempt from the Medicare payment limitations known as “Therapy Caps”. Do not think this has gone unnoticed by healthcare reform and policy makers intent upon limiting Medicare spending as a way of improving our healthcare system.

Provisions included in the H.R. 3630:Middle Class Tax Relief and Job Creation Act of 2012 expect that beginning Oct. 1, 2012, hospitals will be subject to the same Medicare therapy caps and regulations as the rest of the outpatient therapy provider sector.

Given all the site neutral considerations of payment reform underway, this seems like a reasonable correction to our broken payment system. But for hospitals who have not been subject to the same rules as other outpatient therapy providers, this may present a logistical host of problems not anticipated.

For starters:

  • Concurrent tracking of the cost of care (Medicare payments) for each patient receiving outpatient therapy services will be an important exercise for hospital accounting and billing systems. They must communicate to caregivers to make certain the $3700 cap is enforced.
  • Next, each request for payment must include the national provider identifier of the physician who currently periodically reviews the plan of care.
  • Hospitals must initiate procedures using the “KX” modifier on claims above the cap.
  • Audits of billing procedures must consider the CMS developed National Correct Coding Initiative (NCCI) to promote national correct coding methodologies and to control improper coding leading to inappropriate payment in Part B claims.
  • The Coding Policy Manual should be utilized by carriers and FIs as a general reference tool that explains the rationale for NCCI edits. ref.(https://www.cms.gov/NationalCorrectCodInitEd/01_overview.asp) This will require increasing the dialogue with intermediaries for their interpretation of the regulations, (we all know how that works).
  • A manual medical review process for high-cost beneficiaries (those with more than $3700 in therapy services) will be initiated by intermediaries requiring after the fact justification of claims and retrospective defense procedures.

The House Middle Class Tax Relief & Job Creation Act of 2011 extends the therapy caps and at some point the system will get replaced by an alternative outpatient therapy payment methodology. In the meantime The Congressional Budget Office estimates including the hospital outpatient component into the current cap methodology would result in a net reduction in Medicare spending by $1.7 billion over 10 years. That wrings a lot of payment out of the outpatient therapy watershed. So “how ya doin?”