Learn how PTs, OTs, and SLPs should document medically necessary services for Medicare billing.
The complexity of billing for Medicare Part B services can make it difficult for outpatient rehab therapy practices to maintain a profit. And with strict rules, reimbursements can easily be slowed down or denied when steps are missed. In a 2018 report, the Office of the Inspector General of the Department of Health and Human Services indicated that approximately 61% of Medicare claims for physical therapy alone contain regulatory errors.
Understanding the extensive regulations and requirements can reduce billing errors and improve the profitability of your department or practice. In this guide, we explain the Medicare therapy threshold for speech-language pathologists, physical, and occupational therapists to help you navigate when and how to document and submit claims under this rule.
The background on Medicare’s therapy threshold
Before 2018, Medicare had a therapy cap for any beneficiary receiving speech-language pathology, occupational, and physical therapy services. While Congress originally intended a hard stop after reaching the cap, the exceptions process allowed billing for medically necessary services beyond the established limit.
The Bipartisan Budget Act of 2018 repealed this cap, which was then replaced with the new therapy threshold, or KX modifier threshold. The therapy threshold is not designed as a hard limit. Instead, providers must use the KX modifier to demonstrate the medical necessity of services that exceed the threshold amount.
What are the Medicare therapy threshold limits for 2022?
Effective January 1, 2022, the 2022 therapy threshold limits for Medicare are:
- $2,150 for physical therapy and speech-language pathology services, combined.
- $2,150 for occupational therapy services.
In 2021, the thresholds were $2,110 for combined PT and SLP services, and $2,110 for OT services.
How to determine medical necessity
According to the Centers for Medicare and Medicaid Services (CMS), medical necessity is defined as “health-care services or supplies needed to prevent, diagnose, or treat an illness, injury, condition, disease, or its symptoms, and that meet accepted standards of medicine.” However, commercial and private payers maintain their own definitions of medical necessity, so always check payer regulations.
The American Physical Therapy Association (APTA) provides some further guidance, stating that a treatment is medically necessary when:
- It is based on an assessment by a licensed PT.
- It removes or assists with restrictions, limitations, or impairments of patient activities.
- It is provided under the supervision or direction of a PT throughout care.
- It requires professional judgment, skills, or knowledge.
- It has a purpose beyond patient convenience.
- It relies on current standards of practice, including evidence-based practice.
- It improves function or decreases injury risk.
The American Speech-Language-Hearing Association (ASHA) and American Occupational Therapy Association (AOTA) refer its members to the Medicare definition of medical necessity.
When submitting a claim, it’s vital to carefully review payer definitions to ensure your documentation defends and supports the patient’s clinical need for the services in question. Some states also have definitions of medical necessity that can guide defensible claims. You can also download our Medical Necessity Checklist to make sure your claims cover all the bases.
Medicare does not cover PT, OT, or SLP services for fitness, wellness, or preventive purposes. Even medically necessary services may be denied for reimbursement when you do not provide complete documentation.
How to bill beyond the therapy threshold
If a Medicare patient’s care surpasses the threshold, your reimbursement claim must include certain modifiers. If you do not include the appropriate modifiers for claims exceeding the therapy threshold, your reimbursement will be delayed or denied. With the appropriate modifiers and approved documentation, you can (in theory) provide unlimited services under that code as long as they remain medically necessary.
Each claim line that exceeds the therapy threshold must include the KX modifier to indicate medical necessity. The patient record should include defensible documentation to support the clinical need for the services in question so that they can return to maximum expected function within a reasonable timeframe. You do not have to obtain prior authorization to use this modifier.
CMS determines a Medicare beneficiary’s exemption eligibility based on:
- The severity and complexity of the patient’s specific diagnosis and condition.
- The duration, frequency, and type of services delivered to the patient.
- How the patient’s active health conditions and complexities result in the need for treatment beyond the therapy threshold.
For example, a patient who has had a stroke may need significant neuromuscular reeducation to regain the ability to perform activities of daily living. When these services exceed $2,150, you would include the KX modifier when you bill for 97112 (neuromuscular re-education). In your documentation, you can notate the complexity of your patient’s case, their goals for recovery, and other contributing factors that showcase medical necessity.
Unlike the KX modifier, the GA modifier is used when you have exceeded the therapy threshold for a service but have not met the guidelines for medical necessity. To use this modifier, you must have an Advance Beneficiary Notice (ABN) form on file for the patient and service(s) in question. The ABN waives your liability by giving the patient notice that you do not expect Medicare to cover the provided service.
With the ABN in place, you would submit the claim to Medicare with the modifier included on the line item for any services that exceed the threshold. Most likely, you will then receive a denial with a claim adjustment citing reason code 50, or “not covered due to not being considered medically necessary by the payer.” Once the claim is adjudicated, you can bill the patient for his or her secondary insurance policy for these non-covered services. You cannot directly bill the patient before first submitting the claim to Medicare, even if they expect to pay.
In one example provided by the American Speech-Language-Hearing Association (ASHA), an SLP gave a Medicare patient a physician-ordered hearing test three times a week while she received steroids to treat sudden progressive hearing loss. Because Medicare will not consider this level of evaluation medically necessary, the SLP obtains a patient ABN for their clinic’s records and bills the code 92550 (audiological function test) with the GA modifier included on the claim.
Frequently asked questions about the therapy threshold
The therapy threshold is a complex topic to understand, and other Medicare billing rules and regulations can create additional hurdles for claims. Here are some of the most common questions we’ve found about the therapy threshold, and where you can get more information on this rule.
What’s the difference between a targeted medical review threshold and the therapy threshold?
While the therapy threshold sets a limit on the total price of services Medicare will cover for their beneficiaries (unless the services are deemed medically necessary), a targeted medical review is another threshold that, once triggered, any services provided to that patient will be subject to review from a medical review contractor.
The medical review threshold for 2021 is $3,000. This means claims that exceed the therapy threshold by more than $890 in 2021 could receive a medical review. The $3,000 medical review threshold will last until 2028 when CMS will set a new limit.
CMS retains a third-party contractor to conduct targeted medical reviews. However, not every claim that exceeds $3,000 will receive a review. Some factors that increase the chance of receiving medical review include:
- History of lack of compliance
- A substantial percentage of denied claims
- Billing practices that diverge from norms of other providers
- Treatments for certain medical conditions
- Limited history as a provider (new to the profession)
Do I need to include specific documentation when a patient has surpassed the therapy threshold?
As always, you should strive for defensible documentation when submitting any claims. However, you don’t need to change anything about your normal documentation process when you surpass the therapy threshold. As a refresher, defensible documentation must meet these criteria:
- Compliance with all Medicare billing regulations.
- A complete plan of care that includes treatment goals.
- Supporting information on how you plan to attain objectives, including defense for the type of treatment, duration, and frequency provided.
- Details from each treatment session, including updates on patient progress or inability to progress.
- Caregiver instructions and comments.
- A discharge summary with details about patient abilities before and after the final treatment session.
Is there an exception process for the therapy threshold?
While the pre-2018 therapy cap model had an exception process, the therapy threshold model allows exceptions only when the provider includes the KX or GA modifier as appropriate. In addition, some services may be subject to targeted medical review.
Unlike with the old exceptions process, you do not need to submit additional forms or documentation. Simply including the modifier attests that the services in question:
- Are defended by provider documentation in the patient record.
- Require professional therapeutic skills.
- Are medically necessary and reasonable.
- Meet eligibility requirements for an exception.
Which clinics does the therapy threshold apply to?
The therapy threshold applies to rehab services provided in all outpatient settings, including:
- The offices of physicians and some non-physician health care providers
- Skilled nursing facilities under Medicare Part B
- Outpatient rehabilitation agencies or facilities
- Outpatient services provided at home
- Outpatient hospital departments
- Critical access hospitals
- Private practices
How can clinics maintain compliance with the therapy threshold?
Medicare compliance is complicated, so choosing the right EMR and billing system for your clinic can do a world of difference. Our Insight Platform offers a few ways to make compliance easier for therapists and billers alike, including:
- Threshold smart alerts: Set your own limit for when you’re nearing the therapy threshold for a patient, and the platform will automatically notify you when you reach it, so you can avoid getting caught off-guard with a denied claim.
- Automated KX modifier: Once you’ve reached the threshold, the Insight Platform will prompt you to verify medical necessity and automatically add the KX modifier to the patient’s claim, if appropriate.
- ABN letter templates: Need a patient to sign an ABN? No problem—the platform offers customizable templates, including an ABN letter, so you can print, upload, and keep notes on file for any patient that needs it.
- A single system for billing, EMR, analytics, and more: It’s easier to maintain Medicare compliance when all your clinic needs are met in one place. Access financial analytics, billing automation tools, threshold reports, and much more, to simplify your clinic’s compliance needs.
Where can I find more information on CMS’s therapy threshold and medical necessity criteria?
Speech-language pathologists, occupational, and physical therapists can consult these resources for additional details about the Medicare therapy threshold and criteria for medical necessity: