What is the new Therapy Cap process

New Therapy Cap Process: Frequently Asked Questions

What is the new Therapy Cap process? 


Starting October 1, 2012, claims for patients who meet or exceed $3,700 in therapy expenditures will be subject to prior authorization. For outpatient therapy services that exceed $3700 there will be a prior authorization approval process that will be implemented in three distinct phases. Providers will be assigned to one of three phases for manual medical review and will receive notification from CMS by letter and contractor websites regarding which phase they are included.

Why is CMS doing this? 

This process is required by Section 1833(g)(5)(C) of the Social Security Act, as added by Section 3005 of the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJA), which was signed into law on February 22, 2012.

What is the prior authorization threshold?

Starting October 1, 2012, claims for patients who meet or exceed $3,700 in therapy expenditures will be subject to prior authorization. For outpatient therapy services that exceed $3700 there will be a prior authorization approval process that will be implemented in three distinct phases.

How is the $3,700 calculated?

The $3,700 is calculated using all outpatient therapy services provided (except those provided in Critical Access Hospitals) within the category of physical therapy/speech language therapy and then a separate category for occupational therapy services.

What does the $3,700 threshold represent?

The threshold represents the total allowed charges under Part B for services furnished by independent practitioners, and institutional services under Part B (hospital outpatient departments, skilled nursing facilities, and home health agencies).

Does therapy provided in a critical access hospital (CAH) count? 

No. Services provided in a CAH are not counted and CAHs are not subject to the prior authorization process.

What are the Phases? 

Phase I October 1, 2012 to December 31, 2012
Phase II November 1, 2012 to December 31, 2012
Phase III December 1, 2012 to December 31, 2012

How do I know what Phase I am in?

Each provider subjected to a phase will be notified via US Mail. There will also be a posting to the CMS website external link  with the providers in phase I and II. Providers not on the list are deemed to be in Phase III.

How did CMS come up with the phases?

The phases were developed taking into account specific provider characteristics (e.g., claims volume and payment) and then adjusted to distribute workload evenly at the Medicare Administrative Contractor.

If I am in Phase III, what happens to my claims during the timeframe of October 1, 2012 to November 30, 2012?

Phase III is scheduled to begin for services expected to be furnished on or after December 1, 2012. Claims for services furnished before this time will be treated in the same manner as claims for services below the $3,700 threshold.

If I am in Phase III would a Medicare contractor conduct review of my claims from October 1, 2012 to November 30, 2012?

Medicare contractors have the authority to review any claim at any time. However, pre-approval requests shall not be reviewed any sooner than 15 calendar days before the start of each Phase.

How to I know where to submit my request for prior authorization?

We prefer you submit your request via Faxgate. The Faxgate numbers and addresses are noted on the job aids and on the forms located on the Palmetto GBA website.

What are the guidelines CMS contractors will use when conducting the review?

The contractors will use the coverage and payment policy requirements contained within Pub. 100-02, Section 220 of the Medicare Benefit Policy manual and any applicable local coverage decisions when making decisions as to whether a service shall be preapproved.

How long will a contractor have to make a decision on a pre-approval request?

10 business days.

What happens if a contractor’s decision about request for an exception is not made within 10 business days?

If a decision is not made within 10 business days, the request for exception will be deemed to be approved. You will receive a letter from Palmetto GBA indicating the approval of your request.

If a decision was made within 10 business days and the request for an exception was denied, and the provider furnishes the service to the beneficiary and submits a claim, what happens?

The claim is not payable under Medicare, the claim will be denied, and the
beneficiary will be liable for the services. You will receive a decision letter that will detail the reason for the denial.

Will claims that are pre-approved be guaranteed payment?

Authorization does not guarantee payment. Retrospective review may still be performed.

Why would a Medicare contractor review therapy that has been preapproved?

There are many reasons retrospective review would be needed after a preapproval:

Clinically inappropriate modalities
Patient’s clinical therapy needs do not match what was reported, e.g.
Patient’s functional level is greater than reported
Patient reached functional independence more quickly than predicted
Excessive or inappropriate therapy was furnished, e.g.
Therapy more often or of longer duration than is reasonable and medically necessary
Therapy provided to clinical treatment area not reasonable and necessary, e.g. therapy to shoulder when knee is the issue

Can I appeal the claim? 

Yes you may appeal unapproved services.

Why is the beneficiary liable?

Medicare only covers therapy services up to $1,880 cap in 2012. For services between $1,880 and $3,700, if the conditions for an exception are not met, the beneficiary is financially responsible. For services above the $3,700 threshold, if a request for an exception to the $3,700 threshold is not met, the beneficiary is financially responsible.

Am I required to provide the beneficiary an Advanced Beneficiary Notice (ABN) for services above the therapy cap of $1,880?

There is no legal requirement for issuance of an ABN. However, CMS strongly recommends a voluntary ABN where the provider believes that Medicare may not cover the services.

What happens if I request pre-approval and gain approval for 20 treatment days and I actually furnish 30 treatments?

The claim will be subject to prepayment medical review.

How is CMS educating beneficiaries about the therapy cap and the threshold?

CMS conducted a mailing in September to beneficiaries who have received therapy services at or near the cap. The mailing informed them of the cap and of the fact that if services above the cap are denied, that they will be financially liable.

What is the therapy cap amount for 2012?

The annual per beneficiary therapy cap amount for 2012 is $1880 for physical therapy and speech language pathology services combined (PT/SLP). There is a separate $1880 amount allotted for occupational therapy services.

What provider settings are subject to the therapy cap in 2012?

Effective January 1, 2012, the $1880 therapy cap with an exceptions process, applies to services furnished in the following outpatient therapy settings: physical therapists in private practice, physician offices, skilled nursing facilities (SNF) (Part B), rehabilitation agencies (or ORFs), and comprehensive outpatient rehabilitation facilities (CORFs). In addition, the therapy cap with an exceptions process will apply to hospital outpatient departments no later than October 1, 2012, until the end of 2012.

Does the therapy cap with no exceptions process go back into effect on January 1, 2013?

Unless Congress passes legislation by the end of the year there will be a therapy cap with no exceptions process for all outpatient therapy settings, except hospitals. Effective January 1, 2013, the therapy cap would not apply to hospitals unless Congress passes legislation.

Does the therapy cap apply to Medicare beneficiaries enrolled in a Medicare Advantage plan?

The Medicare Advantage Plan may apply the $1880 therapy cap with an exceptions process if it chooses; however, many Medicare Advantage plans chose not to apply the therapy cap in the past. You should check with your Medicare Advantage plan regarding its payment policies.

If we are not contracted with a Medicare Advantage Plan and they are not required to pay our normal Medicare payment then would we apply the therapy cap for beneficiaries with those plans?

The cap will only be tracked through outpatient therapy claims that process through the regular fee for service Medicare system.

Does the cap amount 'reset' for each diagnosis? For instance, if a patient receives PT services January-March for a hip replacement and is discharged, then returns in September as a result of a stroke, is there one cap for the first episode of treatment and a new cap for the second episode of treatment?

No. The therapy cap is an annual per beneficiary cap.

With the cap for 2012 of $1880 for Part B PT/SLP benefits, how does the cap count toward the patient responsibility of 20%?

For example, the patient is responsible for 20% of allowable charges as an outpatient. Medicare will pay 80% of the allowed charges ($1504.00) and the beneficiary will be responsible for the remaining 20% ($376.00).

Where do I find information about the amount of dollars that my patient has accrued toward the therapy cap?

All providers and contractors may access the accrued amount of therapy services from the ELGA screen inquiries into CWF. Providers/suppliers may access the remaining therapy services limitation dollar amount through the 270/271 eligibility inquiry and response transaction. Providers who bill to fiscal intermediaries (FIs) will find the amount a beneficiary has accrued toward the financial limitations on the HIQA. Some suppliers and providers billing to carriers may, in addition, have access to the accrued amount of therapy services from the ELGB screen inquiries into CWF. Suppliers who do not have access to these inquiries may call the contractor to obtain the amount accrued.

Do providers need to include national provider identifiers of the physician who reviews the therapy plan of care on the claim form?

Yes. Starting October 1, 2012, each request for payment must include the national provider identifier (NPI) of the physician who periodically reviews the therapy plan of care. APTA anticipates CMS will issue further guidance to providers regarding placement of the NPI on the claim form.

Where can I find additional resources regarding the therapy cap?

CMS has issued a fact sheet and a question and answer document external link  regarding manual medical review which are now available.

Why was my redetermination request denied when I submitted a letter showing my patient was no longer incarcerated at the time of my service?

The claim cannot be allowed until the Common Working File (CWF) is updated with the incarceration end date. Your patient will need to contact the Social Security Administration to have their record updated.

If I submit my Appeal through Palmetto GBA's eServices, do I need to submit the Appeal request and documentation hard copy as well?

There is no need to mail or fax a hard copy form once an eAppeals is submitted via Palmetto GBA's eServices. You will receive an acceptance message confirming receipt and then another message with the Document Control Number (DCN) when the appeal has started processing.

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