Everything you need to know to streamline rehab therapy billing.

You know Medicare serves are a vital source of health care for many patients but coping with the complexities of its billing processes poses a constant challenge. You might even think about limiting your patient volume and income by accepting only private insurance at your rehab therapy practice. While there’s nothing wrong with a diverse payer mix (we certainly recommend it), accepting Medicare patients can significantly increase your patient pool.

If you want to optimize the potential benefits of Medicare as a physical therapist (PT), occupational therapist (OT), or speech-language pathologist (SLP), your claims process has to be air-tight with Medicare’s strict billing guidelines. Billing delays, denials, and inefficiencies will reduce the overall value of your Medicare claims, so bolstering your knowledge of billing practices will not only improve the speed of reimbursements, but also the profitability of your practice.

In our guide, we cover the most significant compliance hurdles that PTs, OTs, and SLPs face with Medicare billing.

Medicare’s past and parts

President Lyndon B. Johnson created the Medicare program when he signed the Social Security Amendments of 1965. Medicare first provided health care coverage to Americans enrolled in cash assistance programs. In 1972, the program expanded to cover people ages 65 and older and those who have a disability or end-stage renal disease.

Today, Medicare covers those over 65 years old, and people of all ages who have mental and physical disabilities, pregnant women, families with low income, and those who need long-term care. According to Medicare’s Enrollment Dashboard, about 64 million Americans received health coverage through the program in 2021.

Medicare initially provided medical and hospital coverage. Today, Medicare insurance also covers prescription drugs, home health, and hospice, including treatments that fall under the rehab therapy umbrella. The Centers for Medicare and Medicaid Services (CMS) manage the components of Medicare: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage), Part D (prescription medications), and Medigap, an optional policy that helps with out-of-pocket Medicare costs.

Medicare Part A

Sometimes called hospital insurance, Medicare Part A pays for care during inpatient admissions. Patients use Part A to cover medical stays in hospice care, skilled nursing facilities, and hospitals. Part A also includes home health care.

Medicare Part B

Part B is the most relevant section of Medicare for rehab therapy practices. This portion covers outpatient services from health care providers, home health care, preventive services such as wellness visits and vaccines, and medical devices such as hospital beds and wheelchairs. Most Medicare reimbursements for outpatient rehabilitative therapists will fall under Part B.

Medicare Part C

As an alternative to Medicare Part A and B coverage, eligible patients can opt for Medicare Part C plans through private insurance companies. Also called Medicare Advantage, these plans cover both inpatient and outpatient services and may also feature vision, dental, and other types of add-on coverage.

Medicare Part D

Prescription drugs are covered under Medicare Part D. This category also includes many preventive vaccines.

Medicare Supplemental Plans

Commonly called Medigap, Medicare supplemental insurance covers out-of-pocket costs for patients. Several types of standardized Medigap plans are available through private insurance companies. You may process this type of insurance coverage for a patient’s deductible or copayment.

What is the difference between Medicare and Medicaid?

Medicare is a federal health insurance program for individuals age 65 and older and those of all ages who have qualifying disabilities. People who qualify because of age or health conditions can receive benefits at any income level. Medicaid, which is administered through both federal and state governments, provides health coverage to low-income individuals.

If you decide to treat Medicare patients, you must follow Medicare guidelines for reimbursement. If you also accept Medicaid at your practice, both the federal and state Medicare rules for outpatient physical therapy and state Medicaid rules apply. For example, not every state provides reimbursement for PT, OT, or SLP services through Medicaid.

Some people qualify for both Medicare and Medicaid, which can further complicate the billing process. You might find the two programs have conflicting views about billing for a particular service. In this case, you must follow the stricter guidelines, which can mean a lower level of reimbursement. For example, if your state Medicaid program doesn’t cover PT services that Medicare has deemed medically necessary (or vice versa), your patient may have to pay out of pocket.

Providers: How to accept and treat Medicare patients

To treat Medicare beneficiaries (patients), you must become certified or credentialed through CMS as a licensed OT, PT, or SLP rehab provider. Start by obtaining an NPI on the National Plan & Provider Enumeration System (NPPES) if you don’t have one already. Then, complete the online Medicare Enrollment Application.

After applying, a Medicare Administrative Contractor (MAC) will reach out to complete the process and may request additional information. CMS will assign a coordinator who has experience in the regulations that apply in your state. Once you receive your Medicare billing credentials, you must let CMS know 30 days in advance if you move to a new practice location, change owners, or experience legal sanctions.

A provider’s golden rule: Medical necessity and defensible documentation

Besides credentialing, another aspect of Medicare compliance that providers will need to maintain is accurate chart notes that defensibly document their medically necessary care for Medicare patients. Medical necessity is required to receive reimbursement for rehab therapy services from Medicare. Your claim must clearly show that the treatments you provided meet the currently accepted medical standards for the patient’s condition.

To fulfill the medical necessity standard, always strive to submit defensible documentation. In other words, your documentation should be able to legally prove medical necessity in the case of a Medicare audit. Your notes should illustrate the patient’s diagnosis, condition, and limitations and explain how the provided therapies address these issues. Detail the treatments you provided during the session and for how long. Include the care plan, measurable goals, and progress toward those goals, as well as subjective and objective observations (both yours and the patient’s).

Physician referrals and Medicare Plan of Care

Medicare requires a plan of care that is written and initiated by the therapist and certified by a physician or non-physician practitioner. Oftentimes, Medicare patients are referred by a primary physician to a rehabilitative therapist, but physician referrals are not always a requirement for seeking care.

In general, Medicare outpatient rehabilitation providers agree to provide and document the following elements of patient care in their Plan of Care:

  • Diagnosis, dysfunction, or impairment, including both objective and subjective notes from the provider and patient.
  • Assessment of the patient’s desired outcomes and potential for rehabilitation.
  • A comprehensive plan of care that includes:
    • The time frame of care
    • Interventions and services provided
    • Expected results
    • Long-term goals for the patient
    • Frequency and duration of treatment sessions
  • Notes for each treatment session, including whether the patient kept the appointment, the services or interventions provided, the length of time of the session, and observations.
  • Progress reports at least every tenth visit that includes:
    • Evaluation of patient’s progress toward treatment objectives
    • Judgment about whether continued treatment will help the patient’s condition improve
    • Notes about changing provided therapies, if applicable
    • Indication for terminating services, if applicable
  • Discharge notes that follow the format of a progress report while documenting the final outcomes of treatment.
  • Certification of a new plan of care by the patient’s referring physician if progress toward functional goals is slower than they expected.

The therapy threshold or KX modifier threshold

While Medicare Part B does cover a range of rehab therapy services, patients are subject to a “therapy threshold.” Providers can provide services that exceed the threshold if they certify the medical necessity of that care using the KX modifier when billing for reimbursement.

CMS adjusts the threshold annually, and the KX modifier threshold will increase from $2,110 in 2021 to $2,150 as of January 1, 2022. Without the KX modifier in place, CMS will likely deny any rehab services that surpass the threshold. Luckily, some EMR systems, including the Insight Platform, can automatically track the threshold for each Medicare patient and can notify therapists and billers when a patient is near the max or may require the modifier.

Rules for using assistants, techs, or students

Assistants, techs, and therapy students can all make a measurable difference in freeing up a provider’s time or lightening their workload. But, due to Medicare’s strict licensing requirements for services, clinic technicians and therapy students are not able to be reimbursed for provided services.

Therapy assistants, however, are eligible for partial reimbursement for provided services when they are supervised by a licensed provider. When billing,  CMS requires using the CQ or CO modifier to indicate services provided by an occupational therapy assistant (CO) or a physical therapy assistant (CQ).

Since 2020, clinics have been required to report the use of an assistant on claims, but as of January 1, 2022, Medicare will reduce reimbursement by 15% for services provided “in whole or in part” by an OTA or PTA. Depending on how often you use assistants at your clinic, the 15% cut in reimbursements can become significant. The billing rules around the CO and CQ modifier are complex, but we’ve tackled the topic (and included examples) in our Assistant Modifier Guide.

Jimmo v. Sebelius and the maintenance coverage standard

Lastly, providers should also be aware of the Jimmo settlement agreement made by CMS in 2013’s Jimmo v. Sebelius decision. The case was centered on providing patients with routine maintenance of their condition, showcasing that medically necessary care does not necessarily mean a patient will show visible progress. Under this standard, your services are medically necessary as long as they slow the patient’s deterioration or help maintain function.

Provider and documentation resources

Have more questions about provider or documentation compliance? Check out the following resources:

Billers: How to process Medicare claims

Healthy practice revenue relies on billing compliantly with Medicare, but even the smallest error may result in reimbursements that take weeks or months longer than expected.

According to the Medical Group Management Association, reworking each denied claim costs about $25, and up to 65% of rejected but repairable claims are not worked. Even at a 90% rate of “clean” (never denied) claims, a practice that bills 500 Medicare claims each month would pay about $1,250 a month just to rework its 50 denials.

With those statistics in mind, let’s review the most essential billing compliance rules in place for outpatient rehab therapists.

HCPCS and CPT codes

Sometimes pronounced “hick-picks,” the acronym HCPCS stands for Healthcare Common Procedure Coding System. Medicare gives a code to every diagnostic test, surgery, procedure, therapy, and medical treatment a patient can receive from a healthcare provider. This coding system provides a uniform billing standard across the U.S. healthcare system, a requirement under the federal HIPAA law.

CMS developed HCPCS based on the American Medical Association’s (AMA) Current Procedural Terminology (CPT) codes. Many private insurance companies use CPT codes or a variation for billing.

HCPCS codes are categorized in either Level I or Level II:

  • Level I HCPCS codes reflect the AMA’s five-digit CPT codes. They represent treatments and therapies ordered by a licensed healthcare provider.
  • Level II HCPCS codes are administered by CMS rather than AMA. Comprising one letter followed by four numbers, these codes indicate billing for pharmacy, durable medical equipment, and ambulance services.

8-Minute rule and calculating service units

Medicare billing follows many strict rules for reimbursement, but one of the most well-known is the “8-Minute Rule.” This rule determines the number (or units) of timed services that were provided to a patient during their visit. The units are made up of 15-minute increments of direct, one-on-one therapy and apply to time-based service codes only.

To determine the number of units to bill for a code, add the total treatment time for all services and divide by 15. However, leftover minutes (or “remainders”) can also count as a unit of service if more than 8 minutes (or half of a 15-minute unit) were provided. And if two timed services were provided, both less than 8 minutes apiece but together the total time exceeds 15 minutes, you can bill for a single unit of the longer service.

If you’re confused—you’re not alone. The “8-Minute Rule” is complex but essential to understand, which is why we’ve compiled an entire 8-Minute Rule guide, with examples, steps, and an FAQ.

Billing code modifiers

Code modifiers provide important information Medicare will use to process your claim. These are some of the most common modifiers you’ll encounter as a rehab therapist:

  • GP: services provided by a licensed PT
  • GO: services provided by a licensed OT
  • GN: services provided by a licensed SLP
  • CQ: services provided by a PTA
  • CO: services provided by an OTA
  • KX: patient’s OT expenses OR combined PT and SLP expenses for a visit exceeded the therapy threshold
  • GA: the coded service requires an Advanced Beneficiary Notice (ABN), and you have this document on file for the patient
  • 52: provider reduced a portion of the service or procedure based on clinical judgment or professional discretion
  • 59: paired codes not usually reported together but both of which refer to a distinct surgery, session, organ, body part, procedure, legion, injury, or site of treatment on the same patient on the same day
  • 95: the patient received telehealth services through a computer, phone, and/or video technology
  • XP: service given by a separate practitioner
  • XE: service occurred during a separate patient encounter

Billers beware: NCCI edit pairs and MPPR impacts

Two common hurdles for Medicare billing are the National Correct Coding Initiative (NCCI) code edits and the multiple procedure payment reduction (MPPR). Both of these compliance topics can negatively impact practice revenue if not followed correctly.

NCCI code edits consist of a list of CPT codes that should not be billed together, otherwise known as procedure-to-procedure (PTP) edits. If code pairs appear on a claim, they can trigger an immediate denial for reimbursement. NCCI also blocks medically unlikely edits (MUEs), which occur when your claim exceeds the maximum service units for a single person on the same day. NCCI edits update annually and have a history of causing claim issues as clinics adapt to new PTP edits. We talk about that history and other compliance concerns for clinics on our NCCI Edits guide.

MPPR decreases the practice expense portion of a reimbursement by 50% when multiple units of specific services considered “always therapy” are billed together on a claim. MPPR reduces practice payment received for every service provided to a patient after the first in a single day, even when your patient saw providers in multiple rehab disciplines. There are ways clinics can mitigate the impact of MPPR, which we discuss further in our MPPR guide.

Medicare billing resources

If you have more questions about Medicare billing compliance, check out these resources:

Medicare audits and other concerns

As a provider, you are expected by CMS to know and follow the complicated Medicare rules for rehabilitative therapy. In addition to a claim being denied or delayed, CMS can also audit your practice if certain red flags are raised due to billing practices or documentation issues.

Preparing for a Medicare audit requires you to invest a great deal of time and money, and willingly participating in an audit doesn’t guarantee that you’ll avoid fines and penalties from CMS, either.

Common audit risks

Certain red flags may alert CMS and trigger an audit of your practice or hospital billing department. Here are some common circumstances:

  • Excessively using the KX modifier
  • Billing excessive units beyond expected for a service or treatment
  • Using the wrong provider NPI for billing
  • Failing to include a certified care plan
  • Ignoring or incorrectly calculating units for the 8-minute rule
  • Lacking adequate supervision for services provided by an assistant
  • Lacking sufficient defensible documentation for medically necessary care
  • Failing to obtain an Advance Beneficiary Notice of Noncoverage when necessary
  • Submitting incomplete referrals, certifications, or recertifications, such as claims lacking a physician signature

As a general rule of thumb, here are some clinic best practices that can help minimize the risk of an audit:

  • Providers should document clearly, defensibly, and completely: Every clinic should set documentation standards for their therapists that help maintain compliance and keep everyone up-to-date with changes or compliance issues. A team that is aware of penalties and works to standardize defensible documentation in all chart notes is the best defense against a potential audit.
  • Regularly review denied claims to improve processes: Conducting a self-audit regularly can help you mitigate future billing issues. Reporting tools can also help you track billing metrics to determine where your team needs more support.
  • Set up Biller best practices: Educate billing staff about detecting and reducing red flags, and establish procedures to report and correct internal billing violations before claims are submitted.
  • Leave it to the experts: Compliance is complicated, period, and there are dedicated Medicare experts that can help clinics avoid audits or issues. While some clinics can hire compliance officers or committees, those experts are not a viable solution for every clinic. But where there’s a gap in your team, your EMR and billing system can fill the space. To learn more about the Insight Platform’s compliance expertise, schedule a free, no-obligation demo.

The medical review threshold

Even when you use the KX modifier for services exceeding the therapy threshold, OT services or combined PT and SLP services exceeding $3,000 could receive a targeted CMS medical review. However, CMS will not review every eligible claim that exceeds the medical review threshold.

If your claim does get picked for targeted medical review, a third-party agency hired by CMS will analyze the claim(s) in question. The claims inspector will verify that you provided appropriate services for the type and severity of your patient’s diagnosis at an appropriate duration and frequency. If documenting defensibly, your patient’s chart should be able to certify the patient’s level of complexity, severity, and that treatment beyond the threshold was necessary for the patient’s care.

If your practice has a high rate of claims errors on Medicare procedures, CMS may refer you to its Targeted Probe and Educate (TPE) program. TPE gives you a chance to address issues with billing, but CMS may audit your practice if you don’t successfully complete the program.

Types of audits and other resources

CMS conducts several different types of audits depending on the billing issues at hand:

  • MAC audit: An audit from a Medicare Administrative Contractor (MAC) addresses improper reimbursements. With a MAC audit, the contractor can medically review all practice claims, request additional documentation, and gather outside data to detect billing problems.
  • RAC audit: An audit from a Recovery Audit Contractor (RAC) focuses on finding and fixing incorrect payments. The RAC can request information and documentation from your practice to complete the audit.
  • CERT audit: A random audit from a Comprehensive Error Rate Testing (CERT) contractor analyzes the statistical likelihood of payment errors. As with other types of audits, you will likely receive a documentation request if you have a claim selected for CERT.
  • ZPIC audit: Zone Program Integrity and Program Safeguard audits take effect when Medicare has reason to suspect purposeful fraud. Zone Program Integrity Contractors (ZPICs) conduct the audits.

Preparing for an expected audit can reduce your chances of accruing costly penalties. Consult these resources if you receive an audit notice from CMS:

MIPS, MVPs, and the future of Medicare reimbursements

CMS has gradually been taking steps to transition from service-based to value-based reimbursement models. Currently, CMS offers payment bonuses or penalties to eligible Part B rehabilitative therapy clinics through the Merit-Based Incentive Payment System (MIPS). Over a gradual rollout of the program, MIPS is designed to reward clinics based on their performance within four categories: quality, advancing care information, improvement activities, and cost or resource use.

Whether you receive a negative or positive adjustment depends on objectives called MVPs (MIPS Value Pathways). You can receive higher reimbursement by successfully completing MVP activities and measures. If you’re curious to learn more about participating in MIPS or MVPs, check out our MIPS 101 blog post, or visit our partner Keet Health, a QCDR-certified application for rehab therapists.

CMS’s annual Proposed and Final Rules

Each year, CMS releases possible changes in a proposed rule for the upcoming year, followed by a comment period, and ending with a final ruling after the public comment period has ended. Anyone is welcome to leave a comment on the proposed ruling, and CMS will publish their final rule on their website, prior to the next calendar year when it takes effect. The agency published the final rule for 2022 on November 2, and you can read the final rule in its entirety on the Federal Register.

2022 Final Rule highlights

Like all things CMS publishes, the Final Rule for 2022 is extensive (just over 1,060 pages), so we’ll just cover the highlights as they apply to outpatient rehab therapy practices. We’ll cover more of the changes in our 2022 Medicare Guides for Clinics (coming soon).

  • During the COVID-19 pandemic, CMS temporarily added certain telehealth services to Medicare coverage. The 2022 final rule extends these telehealth additions through December 23, 2023.
  • New Remote Therapeutic Monitoring (RTM) CPT codes were added, which allow therapists to bill for time spent collecting, analyzing, monitoring, and educating patients on therapies, medications, or other approved services. We offer a full list of the new RTM codes on our 2022 Highlights blog post.
  • Starting January 1, 2022, CMS will make an 85% payment reduction for reimbursements that include the assistant modifier.

Medicare is complicated, but your clinic system doesn’t have to be.

At Clinicient, our Insight Platform is designed to simplify the complex. With a plethora of automations for billing, documentation, and compliance, clinics can submit more claims, faster, and stay on top of Medicare updates before they happen. The Insight Platform is equipped with:

  • An automated unit calculator for the 8-minute rule and a therapy threshold tracker, with customizable smart alerts.
  • Automatic updates when new rules are released, plus customizable billing rules for commercial, private, and government payers.
  • An analytics and reporting suite with simple dashboards to track revenue, first-pass payment rates, and denials, so you can stay on top of potential compliance concerns.
  • Customizable documentation and letter templates, plus a whole lot more.

Whether you need a better EMR, a faster billing engine, or the complete package from referral to reporting, the Insight Platform is designed to meet the needs of outpatient rehab therapy clinics of all sizes.

Learn more by scheduling a free, no-obligation demo today.


6 responses to “The complete Medicare guide for physical, occupational, and speech therapy.

    1. Hi Alex! I hope the information below helps!

      For re-evaluation codes 97164 and 97168:

      -A single complexity level code
      -Applies when there is an established and ongoing POC
      -Do re-eval for variation from POC goals & Expired POC
      -Do not do routine re-evals or re-evals for MC Progress Notes
      -Requires an examination including a review of history and the use of standardized tests and measures
      -Requires a REVISED plan of care using a standardized patient assessment instrument and/or measurable assessment of functional outcome
      -You can re-evaluate and treat the same visit
      -Do not bill for 97750 Physical Performance Testing on the same visit you perform a re-evaluation
      -Typically 20 min. of face-to-face time but this is an untimed code.
      -A few states require re-evaluation be done after a certain number of days/treatments–especially in a Direct Access scenario. You should check your state regulations on this point.

  1. Are there any regulations regarding goal writing? Say a therapist hasn’t evaluated standing but made a goal for transfers to toilet or walking?

    1. Hi There! Thanks for reaching out. Goals should be “end of episode” specific. They should activity limitation or participation restriction related and have an outcome measure associated with them. They do not need to be represented by sequential goals e.g. sitting, standing, transferring. Hope that helps–cheers!

  2. How does a private practice occupational (or physical therapist) who performs a home modification assessment for a Medicare B eligible customer bill Medicare if the therapist does not have a NPI # and is a non-provider? Is there a special form they fill out and send to CMS? I am presenting a webinar on this topic and want to provide the correct information. Also, if a Certified Aging in Place Professional (CAPS, or other such certified individual) performs a home evaluation, can they just except “cash pay” or do they have to submit a claim to CMS, or does the consumer pay the bill and then they submit the bill to Medicare for reimbursement? Thank you.

    1. Hi There! It’s not possible to bill Medicare without an NPI or a certification as an OTPP or a PTPP. You could bill the patient cash as they are not a Medicare provider, i.e. they are “Out-of-Network”. The patient cannot bill it to Medicare and the person doing the evaluation should have them sign a wavier to that effect. Let us know if you have any other questions!

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