Wednesday, February 14, 2018

Congress Permanently Repeals Medicare Part B Therapy Caps

Daniel Ciolek

As you are probably aware by now, on Friday, February 9, both houses of Congress passed a budget deal enacted by the President that provides short-term funding to keep the government open through March 23, 2018, and establishes a two-year budget framework. One very important provision in the deal that immediately impacts residents of AHCA/NCAL member facilities is the permanent repeal of the Medicare Part B outpatient therapy caps. This message outlines the major provisions impacting Part B therapy contained in the new law.

AHCA/NCAL are overall pleased with the actions by Congress to permanently repeal the therapy caps.  First, this law permanently removes the risk of dramatically reduced revenues when the caps were enforced.  Second, while we are disappointed that Congress again imposed a Part A market basket cut to help pay for the Part B therapy cap repeal provisions, this law permanently removes the recurring risk for future payment cuts to pay for 1-2-year extensions of the cap exceptions process that we have experienced over the past decade.  Finally, and most importantly, this law now assures that our residents can receive necessary and uninterrupted physical therapy (PT), occupational therapy (OT), and speech-language pathology (SLP) services to improve or maintain their function and quality of life.        


The Medicare Part B outpatient therapy caps limited the amount of PT, OT, and SLP services Medicare would cover per year. These caps were first implemented in 1999 and were enforced for limited periods through 2005. Since 2006, an exceptions process was enacted allowing for medically necessary therapy services above the cap amounts. However, the exceptions process provisions expired at the end of 2017.  Before today's new law, beginning January 1, 2018, Medicare would only cover $2,010 of PT/SLP services combined, and $2,010 of OT services per year. There were no exceptions - even if the therapy was urgently needed for a beneficiary to restore function to remain home, return home, or to maintain their quality of life.  We estimate that, without repeal, SNF Part B therapy revenues would have declined more than $811 million per year (37% of total SNF Part B payments).

What's in the New Law That You Need to Know and Share with Billing and Therapy Staff

  • Therapy caps have been repealed - This means there are no longer any artificial annual limits. 
  • The repeal is retroactive to January 1, 2018 - This means that if you had any residents that had claims denied because they went over the $2,010 cap threshold in 2018 so far, you should be able to resubmit the claims for payment. This should also apply to Medicare Advantage denials as these plans must offer comparable coverage (we are awaiting specific CMS guidance for such situations).  
  • You will still need to submit a KX modifier on claims for any beneficiary services furnished over $2,010 annually for PT and SLP services combined, and over $2,010 annually for OT services separately - This modifier is being used as an attestation of medical necessity. Claims over $2,010 annual thresholds will be denied for noncompliance without this coding. 
  • CMS will restore a targeted medical review program for a limited number of claims over a $3,000 annual threshold - Congress authorized a $5 million annual limit for CMS to conduct limited post-pay medical review, and only on claims that meet specific targeting criteria (such as a pattern of high costs within similar patient populations or similar types of providers). The law prohibits recovery audit contractors from performing these reviews. In recent years, CMS has used a Supplemental Medical Review Contractor (SMRC) to conduct these reviews, and we will update you as CMS begins to implement the new law.
  • The calendar year (CY) 2019 Fee Schedule Update for part B therapy HCPCS billing codes will be 0.25% - In the prior 2014 MACRA "Doc Fix" legislation, Congress had locked in a fee schedule increase of 0.5% for CY 2019. This law has reduced that increase by 0.25%, which we estimate to average about a $350 impact on payments per SNF in 2019 (depending on Part B volume).
  • Starting in CY 2022 the reimbursement for Part B therapy services furnished by PT assistants and OT assistants will be reduced by 15% - This law does not change reimbursement for Part A SNF PPS services furnished by PT or OT assistants - it only impacts Part B billing. The overall impact on SNFs would vary depending on the percentage of treatments furnished by therapy assistants. SNFs with no therapy assistants will not be affected. Most medium to large SNFs likely operate with between 25-50% of therapy furnished by therapy assistants, so we estimate the negative revenue impact for most of these SNFs starting CY 2022 would range from 2.9-5.9% of their Part B Medicare payments. 

We are currently conducting additional impact analyses and will provide updates as they become available.   

If you have additional questions, please contact Dan Ciolek at

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