Medicare Reimbursement Down an Average 8% for Therapy Providers

I decided to try an experiment, recently.  I went to my neighborhood grocery store to buy the ingredients for French toast.  After the cashier rang up the eggs, I told him I’d only be paying 50% of the price of the bread and milk as part of my multiple product payment reduction plan.  I told him, I figured I covered most of the store’s utility costs in the eggs, and since I was combining up all my groceries in one trip, I shouldn’t have to pay over and over for his fixed costs.

I’m not invited to shop there anymore…

My grocer may not be ready for this model, but Medicare and others are.  Since April, Medicare has been using Multiple Procedure Payment Reduction (MPPR) as a way of capping costs, and it is having an effect.  We’ve studied our client’s payments, and MPPR, in combination with the budget sequestration, has driven Medicare visit reimbursement down an average of 8%. In other words, if your average payment per visit through Medicare was $80 in March, it is likely $73.50 now.

Because we make it our practice to inform our customers on issues that will impact their practice, and to help them think about their choices, we are tracking this change extra closely for two reasons:

  1. Managing the Medicare cap and MMR requires precise estimation of what Medicare will actually reimburse if you are to avoid triggering MMR audits or getting flagged for over/under use of the KX modifier.
  2. More and more payers (like Aetna, Tri-Care and some Blues) are starting to use the MPPR methodology to reduce contracted payments.

What is MPPR?

It is a lot like my grocer example above.  Medicare has established a value for every healthcare service provided.  It is called a Relative Value Unit (RVU). The RVU breaks all services into three components:

  • Work (skill and effort)
  • Practice expense (equipment and facility costs directly related)
  • Malpractice cost.

The combination of these 3 components determines the rate of pay for the service…I’ll spare you the geography multipliers explanation. MPPR reasons that if you provide multiple services in one visit, the payer should not be required to pay the practice expense at full rate for every service in the visit, since the first service kind of covered their obligation.  The logic boggles the mind, but it is reality.

MPPR specifically reduces payment of the Practice Expense portion of all services by 50% for everything after the first unit is paid.  Note: only the first unit is paid in full, not the first CPT code.

For Example:

A therapist sees a patient for 2 units of therapeutic exercise and 1 unit of manual therapy.

As you can see from the calculator in our platform, a provider in Portland will be paid:

$ 32.13                  1st unit of TherExercise

$ 23.74                  2nd unit of TherExercise

$ 22.37                  1st unit of Manual Therapy

$ 78.24                  Total Allowed

The $78.24 is a 17% reduction from the previous $94.32 total reimbursement.

Three Actions You Should Take Around MPPR

1. Understand its Impact on Your Practice

The reduction varies widely by therapist behavior, specialty and practice.  A one hour timed therapy visit could face 15-20% reductions while application of a splint might reduce 2%. While our clients’ reduction averages 8%, we’ve seen a range of 4% – 15%. Not having visibility to that can be disastrous.

Because charges in Clinicient are automatically created from the services documented by the therapist and the fee schedules for the charges are integrated, we are able to calculate by visit or charge both the expected reimbursement and actual allowed response from the payer. With that data we can accurately project the impact of your reduction as well as validate that Medicare accurately paid.

If you don’t have a system that manages both the charges, payments and can project expected, then the best step is to take your Jan-Mar payment info and average it by number of visits paid.  Then take your May – July payment info and do the same. The difference can be a rough estimate of the impact.

2. Include it in Your Medicare Cap Calculations

Poor management of the Medicare cap costs.  Excessive use of the KX modifier can cause review, exceeding the MMR limit causes RAC reviews and stopping treatment prior to the limit out of fear of exceeding it reduces patient benefit.  The hard part is good cap management requires not just knowing what has been used to date but projecting what will be used by services rendered but not yet paid.

Clinicient uses MPPR to project expected fees at a service level.  We monitor which services have been paid and which are outstanding.  We note the latest benefit info and include payments made after the benefit info was obtained and project an expected payment for the outstanding services.

I would recommend a similar process if you don’t have a system that takes this off your plate.  The trick is accurately projecting the expected allowed payment and knowing what has already hit the cap.  When in doubt get the latest benefit info and start calculating again.  No one wants to see an auditor or deliver services that Medicare won’t cover.

3. Monitor Other Payers for Change

Payers are adopting this idea.  It reduces cost and the government has justified the logic.  Payers do publish their intent to adopt this system, but they don’t typically broadcast it.  You don’t want the squeeze of more payers adopting reductions to come as a surprise.

Clinicient tracks payer trends as part of revenue reporting.  Watching what you expected get paid vs. what was allowed can show you if you are getting paid what you deserve, but the trend will also point out changes in reimbursement policy quickly.

If you don’t have a system that tracks expected vs. allowed, then watching payer trends over time as suggested for Medicare above is a best substitute.

This, unfortunately, is part of the future of healthcare and tracking all of this can seem overwhelming. It doesn’t have to be. The rules are published, so any system that has the clinical documentation, billing rules and payment info in one place can make policies that guide you. If you don’t have a system that does that, get a process for reviewing payment data and do it often.


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