Corporate Compliance

Note from the instructor: Therapy Caps Applied to Hospital and Critical Access Hospital (CAH) Outpatient Therapy

Medicare Insider, November 25, 2014

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This week’s note from the instructor is written byKimberly Anderwood Hoy Baker, JD, regulatory specialist for HCPro.  
 
Note from the instructor: Therapy Caps Applied to Hospital and Critical Access Hospital (CAH) Outpatient Therapy
 
This week CMS released the updated outpatient therapy cap threshold for 2015. The outpatient therapy cap for 2015 will be $1940 for physical therapy and speech language pathology combined and $1940 for occupational therapy per beneficiary per year. This represents an increase from $1920 in 2014. The application of the therapy caps, and the exception process, is very different for PPS hospital outpatient departments and CAHs. In my note I thought I would take the opportunity to clarify how the application of the caps and the exception to the caps differs and what the means for therapy in CY2015.
 
Therapy Caps Applied to PPS Hospitals
 
The therapy caps originally only applied to PPS hospitals for a very short period of time beginning October 1, 2012, through December 31, 2012. Subsequent legislation extended the application of the caps, with the latest extension through March 31, 2015, in the Protecting Access to Medicare Act of 2014 (PAMA). Unless further action is taken by Congress, the therapy caps will no longer apply to therapy provided in PPS hospital outpatient departments beginning April 1, 2015. 
 
While the therapy caps apply to therapy in PPS hospitals, PPS hospitals can use the legislative exception process to the caps to provide and be paid for medically necessary therapy in excess of the caps. The exception process is also time limited and has also been extended through March 31, 2015, in PAMA.   When PPS hospitals provide therapy in excess of the therapy caps, and they determine the therapy is medically necessary, the therapy can be billed with the –KX modifier and the MAC will pay the therapy under the exception process up to $3700.
 
Once $3700 of therapy has been paid on behalf of the beneficiary additional therapy is subject to manual review by Recovery Auditors to verify it is medically necessary. The provider initially bills therapy they believe is medically necessary with the –KX modifier. Once the $3700 manual review threshold is reached, the MAC will either pay the claim (subject to manual post payment review) or hold the claim for prepayment manual review. Pre-payment review is conducted in the states included in the prepayment Recovery Auditor demonstration project (California, Florida, Illinois, Louisiana, Michigan, Missouri, New York, North Carolina, Ohio, Pennsylvania, and Texas) and post-payment review is conducted in all other states. 
 
Unless Congress acts, the therapy caps will no longer apply to PPS hospital therapy effective April 1, 2015. Congress could extend the therapy caps to hospitals for an additional limited timeframe or indefinitely. If that occurs, it will be important for PPS hospitals to determine if the therapy cap exception process is also extended. If it is not extended, therapy will be limited to the then-current threshold and the KX modifier will not allow claims in excess of the threshold to be paid. If, however, Congress elects to allow the application of the caps to PPS hospitals to expire, then PPS hospital will not need to be concerned about the extension of the exception process because therapy in their outpatient departments will not be limited by the cap. 
 
Therapy Caps Applied to CAHs
 
When Congress applied the therapy caps to PPS hospitals, they did not address CAH services. In the first extension of the application of the caps to PPS hospitals, they included CAH services in the calculation of the caps for CY2013, but did not actually apply the caps to CAH services themselves. The amount included in the caps for CAH services is calculated at the Medicare Physician Fee Schedule (MPFS) amount payable, rather than the cost-based payment the CAH receives to avoid penalizing patients receiving therapy at CAHs. For 2013, therapy provided at a CAH was counted toward the cap and could cause therapy at another provider to exceed the cap and require the KX modifier or trigger manual review. But if therapy services provided solely at the CAH exceeded the cap, no payment limitation would apply.
 
Congress did not further amend the Social Security Act related to application of the caps to CAHs; however, CMS applied the caps to CAHs through regulatory action. In the CY2014 MPFS Final Rule, CMS adopted regulations to apply the therapy caps to CAHs effective January 1, 2014. Unlike the caps applicable to PPS hospital therapy, this regulatory provision is not time-limited and will continue indefinitely unless CMS or Congress acts to change the application of the caps. This means CAH hospitals must be aware of the status of the exception process. If Congress allows the exception process to expire March 31, 2015, CAHs will not be able to bill therapy in excess of the caps after that time because the KX modifier exception process will no longer allow payment of medically necessary therapy.
 
In summary, the temporary application of the therapy caps to PPS hospitals may expire April 1, 2015, without further action by Congress, but the application of the caps to CAHs is not temporary and will not change unless Congress or CMS acts. The exception process allowing medically necessary therapy beyond the cap is also set to expire April 1, 2015, without congressional action. Providers should monitor the status of these provisions to ensure they know how therapy provided after April 1, 2015, will be treated when it exceeds the new $1940 caps for 2015.



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