Medicare Therapy Caps and Manual Medical Review for 2016

Medicare therapy cap
March 23, 2016
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This article addresses the 2016 Medicare Therapy caps for outpatient physical, occupational and speech therapy, together with the cap exceptions, manual medical review process and proper use of ABNs in connection with the caps.

For 2016, the therapy cap for occupational therapy (OT) is $1,960 and the separate from OT, but combined cap for physical therapy (PT) and speech-language pathology services (SLP) is $1,960. For example, 2016 payments for a patient’s combined PT and SLP services cannot exceed $1,960 unless an exception to the cap applies.  As discussed in detail below, exceptions to these caps are allowed for reasonable and necessary therapy services.

In addition to the $1,960 caps, therapy services costing above $3,700 for OT and $3,700 for PT and SLP combined are subject to manual medical review.

The therapy caps and manual medical review apply to Part B outpatient therapy settings.

For purposes of determining whether the caps are reached, Medicare includes all amounts paid for therapy services by Medicare and by the patient for any deductible and coinsurance.  If Medicare is the secondary payer, the secondary payment is applied to the therapy caps.

The therapy caps and manual medical review do not automatically apply to patients covered by Medicare Advantage plans. Providers and patients should check the MA plan for coverage rules on therapy services.

Providers should regularly check their Medicare carrier’s website for up to date announcements regarding the therapy caps and manual medical review process.

Qualifying for the Cap Exception

The cap exceptions were expiring on an annual basis, but Congress has extended the cap exception process through December 31, 2017.

Medicare will continue to pay for therapy services above the $1,960 caps if the services are medically necessary.  If a patient qualifies for an exception to the cap, the provider only needs to add the KX modifier to the claim indicating that services above the cap are medically necessary and justification is documented in the medical record.

A patient may qualify for the cap exception at any time during therapy when documented medically necessary services exceed the cap. All covered and medically necessary services qualify for the cap exception.  So, contrary to prior rules, qualification for the exception does not require a specific diagnosis.

Use of the exception does not exempt services from manual or other medical review. So, atypical use of the exception may invite contractor scrutiny, for example, when the KX modifier is applied to all services on claims that are below the cap or when the KX modifier is used for all of a therapist’s patients.

No special documentation is required to qualify for the cap exception. The therapist is responsible for consulting guidance in Medicare manuals and professional literature to determine if the patient may qualify for the exception because documentation justifies medically necessary services above the cap. However, the therapist’s opinion is not binding on the Medicare carrier who makes the final determination as to whether the claim is payable.

Documentation justifying the services must be submitted in response to any Additional Documentation Request (ADR) for claims that are selected for medical review. If medical records are requested for review, clinicians may include, at their discretion, a summary that specifically addresses justification for the cap exception.

In determining whether therapy qualifies for the cap exception, therapists must consider, for example, whether the services are appropriate to:

  • The patient’s condition, including the diagnoses, complexities, and severity;
  • The services provided, including their type, frequency, and duration;
  • The interaction of current active conditions and complexities that directly and significantly influence the treatment such that it causes services to exceed the cap.

In addition, initial evaluations are excepted from the cap when necessary to determine if the current status of the patient requires therapy.

According to CMS, clinicians and Medicare carriers should utilize available evidence related to the patient’s condition to justify providing medically necessary services to individual patients, especially when they exceed the cap. Medicare carriers are instructed not to limit medically necessary services that are justified by scientific research; however, therapists cannot utilize professional literature and scientific reports to justify payment for continued services after a patient’s goals have been met earlier than is typical. Likewise, professional literature and scientific reports should not be used as justification to deny payment to patients whose needs are greater than is typical or when a patient’s condition is not represented by the literature.

As always, when billing for therapy services, the diagnosis code that best relates to the reason for the treatment should be on the claim, unless there is a compelling reason to report another diagnosis code. For example, when a patient with diabetes is treated with therapy for gait training due to amputation, the preferred diagnosis is abnormality of gate (which characterizes the treatment).

The condition or complexity that caused treatment to exceed the cap must be related to the therapy goals and must either be the condition that is being treated or a complexity that directly and significantly impacts the rate of recovery of the condition being treated so that it is appropriate to exceed the cap. Documentation for the exception should indicate how the complexity (or a combination of complexities) directly and significantly affects treatment for a therapy condition.

Use of the KX Modifier

When the patient qualifies for the cap exception, the therapist must add a KX modifier to the therapy CPT code subject to the cap. The KX modifier must not be added to any line of service that is not medically necessary.

Use of the KX modifier does not eliminate the need for other therapy modifiers, including the GN, GP and GO modifiers and the G codes/C modifiers for functional limitations reporting.  Providers may report the modifiers in any order.  If there is insufficient room on a claim line for multiple modifiers, additional modifiers may be reported in the remarks field.

By appending the KX modifier, the clinician is attesting that the services billed:

  • Are reasonable and necessary services that require the skills of a therapist ;
  • Are justified by appropriate documentation in the medical record; and
  • Qualify for the exception.

If this attestation is determined to be inaccurate, the provider is subject to sanctions for providing inaccurate information on a claim.

If a claim for services above the cap is submitted without a KX modifier, it will be denied. However, the carrier may reopen or adjust the claim in cases where appending the KX modifier would have been appropriate.

Determining Therapy Payments to Date

When a Medicare patient is referred for therapy, the provider should first determine the amount of year to date payments for the patient’s therapy services to gauge progress toward the caps.  The Part B carrier’s website should have instructions for accessing the amount of a patient’s prior therapy payments.

Providers may also access the accrued amount of therapy services from inquiries into the Common Working File or through a 270/271 eligibility inquiry and response transaction.

Patients can find out how much has been paid towards their therapy by going online at “” to track their claims for therapy services.  In addition, a patient’s Medicare Summary Notice (MSN), which is typically sent out every three months, lists the services that the patient had and the amount billed.

Manual Medical Review Process

The Medicare Access and CHIP Reauthorization Act of 2015 eliminated the requirement for manual medical review of all claims exceeding the $3,700 threshold. Manual medical review has now been replaced with a targeted review process.

CMS has contracted with Strategic Health Solutions as the Supplemental Medical Review Contractor to perform medical review on a post-payment basis.  Claims will be selected for review for:

  • Providers with a high percentage of patients receiving therapy beyond the $3,700 threshold as compared to their peers.
  • Therapy provided in skilled nursing facilities, therapists in private practice, and outpatient physical or speech-language pathology providers or other rehabilitation providers.

CMS has stated that of particular interest in this medical review process will be the number of units/hours of therapy provided in a day.

As a practical matter, providers will have difficulty avoiding denials for claims over $3,700 that are selected for manual review.  Whether treatment is medically necessary will be a judgement call and if the claims are denied, it may simply require too much time and effort to justify medical necessity after what are likely to be 40+ therapy visits.

Use of Advanced Beneficiary Notice of Noncoverage (ABN)

In the past, a Medicare beneficiary was financially liable for therapy services above the cap regardless of whether he or she received an ABN.  This is no longer the case.  Now the provider must issue a valid ABN to the patient before providing services above the cap to hold the patient personally responsible for charges above the cap.  However, providers are caught in a “Catch-22” situation in that if the provider believes that services above the cap are medically necessary, the provider cannot issue an ABN to the patient because an ABN can only be used in connection with services that the provider determines are not medically necessary.  Therefore, the provider cannot issue an ABN to a patient on a prophylactic basis to allow collection of charges from the patient if the carrier determines that the services above were not medically necessary and denies payment.

Therapists are required to issue an ABN to Medicare patients prior to providing therapy that is not medically reasonable and necessary. For example, if the patient has been receiving PT and has achieved all of his or her PT goals, but still requests continued PT even though it is no longer medically necessary, the provider must issue an ABN prior to providing the services that will not be covered by Medicare to hold the patient personally liable for payment.

When an ABN has been issued for therapy services above the cap that are not medically reasonable and necessary, a GA modifier should be added to the claim. If the provider did not issue an ABN for therapy services above the cap that are not medically reasonable and necessary, the GA modifier cannot be used and the provider would be liable for charges above the cap.

  1. Therapy Services, Centers for Medicare and Medicaid Services, (accessed 3/16/2016).
  2. Id.
  3. Part B outpatient therapy settings include (1) therapists in private practice, (2) offices of physicians and certain non-physician practitioners, (3) Part B skilled nursing facilities, (4) home health agencies (but not if billing under Part A), (5) rehabilitation agencies, (6) Comprehensive Outpatient Rehabilitation Facilities (CORFs), (7) hospital outpatient departments, and (8) critical access hospitals.  42 U.S.C. 1395l(g); 42 CFR 410.60.
  4. Medicare Claims Processing Manual (hereinafter “MCPM”) Ch. 5, sec. 10.3, (accessed 3/16/2016).
  5. Medicare Limits on Therapy Services, Centers for Medicare and Medicaid Services, January 2016, (accessed 3/16/2016).
  6. Medicare Access and CHIP Reauthorization Act of 2015, Public Law 114-10 (2016).
  7. MCPM Ch.5, sec 10.3.1.
  8. MCPM 10.3.2.
  9. See Medicare Benefit Policy Manual Ch. 15 Section 220.2.
  10. Id. at Section 220.3.
  11. MCPM 10.3.3.
  12. HIPAA Eligibility Transaction System (HETS) Health Care Eligibility Benefit Inquiry and Response (270/271) 5010 Companion Guide, Centers for Medicare and Medicaid Services, August 2015, (accessed 3/16/2016).
  13. Medicare Limits on Therapy Services, Centers for Medicare and Medicaid Services, January 2016, (accessed 3/16/2016).
  14. Manual Medical Review of Therapy Claims Above the $3,700 Threshold, Centers for Medicare and Medicaid Services, February 2016, (accessed 3/16/2016).
  15. Id.
  16. Therapy Caps and Advanced Beneficiary Notice of Noncoverage (ABN), Form CMS-R-131, FAQs April 2013, CMS, (hereinafter, “ABN FAQs”) ( (accessed 3/16/16).
  17. ABN FAQs (A2).
  18. ABN FAQs (A4).