View original article here – https://www.aaos.org/aaosnow/2021/jun/managing/managing04/
Many orthopaedic surgery practices provide ancillary physical, occupational, and hand therapy (collectively referred to as “PT” throughout this article). As with other medical specialties, delivery of PT on an economically viable basis is becoming more challenging. This article addresses long-term business challenges specific to PT and how orthopaedic surgery practices are successfully meeting those challenges.
Insurers have been increasing copays on many outpatient services to help control healthcare utilization. These copays have an inordinately high impact on PT, for which patients are typically seen for two or three visits per week for three to four weeks. Higher copays have led to steady decreases in the average number of visits and total revenue per PT patient. However, the decreases have been partially offset by longer patient visits (and higher charges).
PT providers must ensure that patients receive as much value as possible from each visit to justify higher copays (which do not increase as visit time/charges increase) and allow for better outcomes over fewer visits. Fortunately, most payers pay by PT procedure, and most PT procedures are 15-minute timed codes. So, as visit length increases from 45 to 60 minutes, for example, the per-visit payment increases. However, PT providers commonly undercharge for their treatment time, so it is important for each provider to understand thoroughly PT coding and billing rules and to charge appropriately for all time spent treating patients.
However, although average visits per PT patient decreased (from 12 to eight, for example), a rise in the number of individual PT patients has allowed for an increase in total visits—in part counteracting the decrease in average per-patient PT visits.
Increasing percentage of Medicare patients
Medicare patients often make up 40 percent or more of PT patients treated by orthopaedic surgery groups, particularly groups with significant joint replacement practices. Medicare PT payment rates are actually among the higher PT payment rates in many states. Medicare’s restrictive PT billing rules, though, basically result in lower PT charges per provider work hour compared to commercial and workers’ compensation patients.
Medicare’s PT billing rules prohibit a PT provider from charging for two Medicare patients during the same time period. Medicare also only pays for treatment by licensed therapists and assistants, so it will not pay for any patient treatment done by a staff member (“technician”) who does not have a PT, occupational therapy (OT), physical therapy assistant (PTA), or certified occupational therapy assistant (COTA) license. PT practices can often appropriately charge for more patient treatment time by alternating the scheduling of Medicare and non-Medicare patients. In doing so, it helps to avoid writing off charges for two Medicare patients treated at the same time and often allows technicians to work with more commercial and workers’ compensation patients, who can typically be charged for gym time monitored by a technician. Alternating patients is the goal, so schedulers must have flexibility to fit all patients in as necessary.
PT practices also adjust to increasing Medicare populations by using PTAs. PTA compensation rates are about 66 percent of therapist compensation rates, and PTAs are typically easier to recruit than therapists. PT practices are also starting to use PTAs in place of technicians to help treat patients in the gym because Medicare will pay for PTA services (not technician services) and the compensation cost difference between PTAs and techs is narrowing.
Another key to effectively dealing with an increasing Medicare population is to ensure that all PT providers are familiar with Medicare and non-Medicare billing rules and only apply the restrictive Medicare rules to payers that actually apply the rules. The vast majority of commercial and workers’ compensation carriers do not apply Medicare PT billing rules, so PT providers should not default to Medicare rules.
PTA/COTA payment cuts
Currently, Medicare and other payers pay for PTA services at the same rates as therapist services. For dates of service on and after January 1, 2022, Medicare will apply a 15 percent payment cut on PTA services. TRICARE, Humana, and other payers are expected to follow Medicare’s lead. Given this payment cut, orthopaedic surgery groups are understandably questioning whether they should hire PTAs or have PTAs treat Medicare patients.
Despite this payment cut, employing PTAs will still be advantageous. The underlying analysis is simple: Medicare pays about $100 per hour for therapist services; on the other hand, total compensation, payroll taxes, and benefit costs for a therapist are about $55 per hour. After subtracting total compensation, net Medicare payments are about $45 per hour.
After 2021, Medicare will pay about $85 per hour for PTA services, whereas total compensation, payroll taxes, and benefit costs for a PTA are about $35 per hour. So, net Medicare PTA payments minus PTA total compensation costs will be about $50 per hour. This quick calculation shows that, even after the 15 percent PTA payment cut, PT practices will net an additional $5 per hour for PTA services. Also, keep in mind that many payers will not apply a 15 percent cut; in those cases, the benefit of using a PTA will increase to about $20 per provider hour. Please note that these financial examples use average payment and compensation rates; each practice should test this difference using its individual payment and compensation rates.
Overall PT payment rate decreases
PT payment rates have been trending downward over the past two decades. Most recently, Medicare PT payment rates decreased an average of about 3.5 percent from 2020 to 2021. These decreases in Medicare rates will result in decreases in commercial and workers’ compensation rates tied to the Medicare fee schedule.
Total PT revenue is a product of three factors: the number of new patients, average visits per patient, and the per-visit payment rate. As average visits per patient and payment rates have been trending downward—trends that are expected to continue—the key to increasing PT revenue is growing the number of new PT patients. Fortunately, demographic trends, specifically an older and more active population, have resulted in substantial increases in PT patients.
Medicare utilization data for 2015–2019 show that both the percentage of beneficiaries who received PT and the total number of PT users increased by about 5 percent per year. These data included only the original fee-for-service Medicare population, which actually decreased from 2015 to 2019 because of increasing Medicare Advantage enrollment. From 2015–2019, Medicare Advantage enrollment increased by 32 percent. If we assume original Medicare and Medicare Advantage PT utilization rates are similar, the number of PT patients over age 65 increased by about 35 percent. This increase in individual PT patients (or episodes) is more than enough to offset decreases in PT payment rates and average visits per patient.
However, demographic trends alone are not enough to ensure increases in PT patients. Each practice needs to schedule PT referrals as soon as possible by providing convenient appointment times for all patients. Operating hours should be set to accommodate patient schedules rather than provider preferences.
Consistently successful PT practices offset decreases in average visits per patient and payment rates with increases in individual PT patients. Orthopaedic surgery groups often see increases in individual PT patients at a rate of 5 percent or more per year. If your PT practice is not increasing individual PT patients by at least 5 percent per year, this issue must be addressed because the other factors impacting revenue, including visits per patient and payment rates, are almost impossible to change.
Cary B. Edgar, JD, is the founder and president of PT Management Support Systems, a company that helps U.S. orthopaedic groups manage their physical and hand therapy services.
- Data.CMS.gov: CMS Market Saturation and Utilization Data Tool. Available at: https://data.cms.gov/market-saturation/states-and-counties. Accessed xx.
- Kaiser Family Foundation: Total Number of Medicare Beneficiaries. Available at: https://www.kff.org/medicare/state-indicator/total-medicare-beneficiaries. Accessed xx.