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Guide to Medicare and Medicare Compliance for Private Physical Therapy Practices

Table of Contents

What is Medicare

Most clinicians in rehabilitation need to deal with patients who have Medicare as their health insurance. But what exactly is Medicare?

Medicare came into being through legislation, signed into law by President Lyndon Johnson, as part of the Social Security Amendments of 1965. It’s funded by payroll deductions as an addition to your Social Security deductions (FICA) as well as premiums paid for those receiving Part B benefits.

In short, Medicare is a federally funded and administered health insurance plan providing coverage for certain populations including those over 65, those who are disabled according to the Social Security Administration, people with end-stage renal disease and those with Amyotrophic Lateral Sclerosis. It’s administered by the Centers for Medicare and Medicaid (CMS) as part of the Health and Human Services Department. Billing, payment, credentialing and enforcement of the regulations are overseen by Medicare Administrative Contractors (“MAC”s). The US is divided into 12 geographical jurisdictions with each being overseen by a MAC. For the most part, anytime a clinical practice is dealing with “Medicare,” they do so through the MAC contracted for the jurisdiction where their practice is located.

The Parts of Medicare

Most in outpatient practice work with patients covered under Part B of Medicare. However, Medicare provides coverage through 4 separate parts:

Part A – covers inpatient hospital care, hospice care, skilled nursing care and some home health care.

Part B – pays for visits to physician and non-physician providers (Advanced Practice Registered Nurses (APRNs), Physician’s Assistants (PA-C)), therapists, testing procedures to help with diagnosis or treatment, some home health services and preventative services. 

Part C – also called Medicare Advantage (MA) are alternative insurance plans to Original Medicare. CMS pays private insurers to provide and administer these plans. They are often thought of as all-in-one types of plans because they cover all inpatient, outpatient, testing, treatment, pharmaceuticals and sometimes vision and dental as well. MA plans are offered and administered by private insurers like Humana, Cigna, UnitedHealthcare or Aetna. People who enroll in these plans have benefits that look like many of the other plans provided by those insurers.

Part D – provides coverage for medications but there are still financial limits. You may have heard of the “donut hole” which is also called the coverage gap and begins when the Medicare beneficiary has spent $4020 (for 2020) between their Medicare payment and their out-of-pocket payments. The patient exits the gap when total expenses reach $6350 (2020). This part is only available to those people covered under original Medicare. Those with MA plans don’t need Part D because their drug benefit exists within their base coverage.

How do I get Credentialed?

If you are a physical or occupational therapist in private practice, even if you are not an owner, you will need to enroll in Medicare to get paid. Enrolling establishes you as a credentialed provider. In fact, if you are not a credentialed provider you cannot see any Medicare patients at all, even if they want to pay you cash for services.

There are two ways to enroll. You can do it electronically through the Provider Enrollment, Chain and Ownership System (PECOS) located here. Or you can download the pdf form CMS – 855i which you would complete and return.

You must have a National Provider Identifier (NPI) number in order to enroll which can be obtained here. You should have this number as it is required by all payers when you bill for your services. The number is yours for the remainder of your career and will follow you regardless of where you practice.

How to Treat Medicare Patients

The primary rule when initiating treatment for Medicare patients is the care must be medically necessary. Medicare regards this to be true if:

  • The cost of care is reasonable when you consider the chances of the patient achieving their desired goals.
  • The treatment will reduce or eliminate the risk of the condition worsening or having a worse outcome if it is not treated.

Another rule for providing rehabilitation care to a patient with Medicare is the patient’s condition must be complex enough to require the skilled care and knowledge of a PT/OT. Medicare considers the definition of skilled care based on the individual therapist’s state statute.

Many people have impressions that frequently lead them to treat Medicare patients differently than those with private insurances. While there are special compliance requirements with Medicare patients, the reality is you should treat them like anyone else. Medicare expects you to evaluate the patient, determine their rehabilitation needs and address those needs.

One of those inaccurate impressions is the belief the patient must be making objective progress in order to continue with rehabilitation. As a reminder, following the ruling in Jimmo vs Sebelius, the patient does not have to be making progress in order to continue to be covered under Medicare. Medicare will cover maintenance care provided the level of care needed to maintain a certain level of function requires the skills (knowledge) of a physical or occupational therapist. In short, the complexity of the care must not be able to be completed by a family member, aide or anyone other than a PT/OT.

Another misperception relates to the KX modifier threshold of $2080 for PT/SLP combined and the same for OT care in 2020. Numerous people still believe the KX modifier functions like a hard cap and discharge patients from their care once they’ve reached that “cap”. This is incorrect. The KX modifier simply indicates to Medicare that specific treatment continues to be medically necessary and requires the skills of the PT/OT in order to continue towards meeting the patient’s goals. This serves as a mental check on whether the care continues to be reasonable and necessary. Is the cost going to be worth the outcomes and is the treatment helping this patient either improve or not get worse?

Medicare Billing Guidelines

Billing effectively is crucial since it reflects the level and intensity of the care provided by the clinician. Incorrect billing creates the risk of denials, underpayment and investigation for fraud or abuse.

The mechanics of billing Medicare has one major difference compared to billing other insurance companies. When billing timed CPT codes, Medicare not only looks at the individual 15-minute units but also considers the total time when factoring the allowable payment. This is commonly known as the 8-23-minute rule.

Let’s look at how this works. While the CPT coding manual defines each timed unit in 15 minute increments, the actual time value of each code is a range of 8-22 minutes per unit.  This means if you go anywhere between 8 and 22 minutes of a procedure you may bill only one unit of that code.

So, first you should total all the time spent on timed procedures and modalities (like ultrasound or attended e-stim). For any service provided for at least 15 minutes you must bill 1 unit. Sometimes that’s easy: if you provide 15 minutes of Therapeutic Exercise you bill 1 unit of that code, 30 minutes of Neuromuscular Re-education is 2 units of that code.

However, this is where Medicare’s totaling of the time complicates things.

Say you do:

 25 min therapeutic exercises + 23 min therapeutic activities = 48 min

You will bill 3 units and it’s broken down this way. You must bill one unit of therapeutic exercise and one unit of therapeutic activities. But you have 10 min of therapeutic exercise left over and 8 minutes of therapeutic activities remaining. You now need to bill the code for which you have the most remainder minutes (therapeutic exercises). So, you add the therapeutic activities minutes to the therapeutic exercise minutes and bill one more unit of therapeutic exercises.

One crucial reminder, you must follow the CPT code definitions for treatment and billing. Each code defines what type of treatment fits under that code and thus when you may bill that code. Your documentation must accurately reflect your decision to bill a particular code.

Additionally, all timed procedures and modality CPT codes define the care as one-on-one care. This means you may not be doing anything else with another patient during that time you are providing that billed service to that patient.

New starting in 2020 is the requirement to indicate, through to the application of modifiers, for any CPT code where care is provided in whole or part by a PTA or OTA. This was mandated by Congress in the SGR fix in 2017 and will result in a 15% reduction in payment for the services provided by the PTA/OTA for that service. The CQ for PTA’s and CO for OTA’s modifiers are to be attached to any CPT code where 10% or more of the care is provided by the PTA/OTA. This 10% de minimis standard is only applied to those codes where the PTA/OTA provides the care independent of the PT/OT. More information can be found here.

Documentation requirements

One of the more valuable things about Medicare is they tell you exactly what they are looking for in their documentation requirements. For starters, documentation must support the medical necessity of the care provided. This means your notes must be comprehensive enough and contain sufficient detail so anyone reviewing the medical record may easily see what you are treating and why you are providing that specific treatment. They should also be able to easily see if there is progress towards achieving the patient’s functional goals.

Medicare expects you to provide specific content to demonstrate support of medical necessity.

Dealing with Medicare Audits

The Medicare audit program uses the MACs to perform billing audits and it has changed since July 2017. CMS now uses the Targeted Probe and Educate program (TPE) to review selected claims and educate providers on Medicare billing requirements.

Currently, the CMS is targeting only those practices with the highest denial rate or with billing practices that are substantially different than their peers.  In the TPE the MAC’s can carry out up to 3 prepayment or post-payment audits on a practice. Typically, they review 20-40 claims to assess if they are coding/billing according to Medicare guidelines and the billed services are truly medically necessary. They are also looking to help the provider fix any identified problems.

What do you do if you are selected for a TPE review? First, do not ignore it – they don’t go away. Do not send any information until you receive the second letter telling you exactly what information they would like you to provide. You will have 45 days to comply so be sure you respond in that time frame. Send only the information they request, no more. More information may not help and may hurt instead.

The auditors will respond within 30 days. If the problems are relatively simple, they will educate you on the solutions and send you a letter outlining the results. If your error rate is determined to be moderate to high you will have an individualized education session. If you pass the first round you will not be reviewed again for at least 12 months.

Determination of the need to go beyond the initial review is decided based on your total denial rate. If your denial rate is generally higher than 15-20% of a specific threshold you will be considered non-compliant and require another review. You will need to respond to this failure within 56 days with the implementation of an action plan to correct the errors. You will then undergo another review of 20-40 claims to determine if you have corrected the errors. If you fail this round you will be referred to CMS for further action.

Of course, the best defense is a good offense. Setting your practice up to comply with the Medicare rules is much better than having to address an audit. To audit proof yourself, be sure you know the rules and regulations on document/billing and fully comply. If you have a low denial rate or your billing is in line with other similar practices, then the likelihood of an audit is almost nonexistent.

APTA has a substantial amount of information on audits that can be found here.

What is MIPS

Beginning January 1, 2019, private practice physical therapists in participating with Medicare were hit with the first value-based incentive program to hit outpatient physical therapy directly. The Merit-based Incentive Payment program (MIPs) was part of the Quality Payment Program established by Congress in the Medicare Access and CHIP Reauthorization Act of 2015.

As of 2019, MIPS required all PT’s participating in Part B to report certain specific information if they met/exceeded all three of the following criteria; annually were paid more than $90,000 in Part B payments AND provided care to more than 200 Medicare beneficiaries AND billed more than 200 professional services (individual CPT codes). Participation in this program subjected you to a payment adjustment of +/- 7%.

MIPS involves scoring the provider’s care in 4 categories; Quality, Cost, Improvement Activities, and Promoting Interoperability. PT’s are only required to report in two categories, Quality and Improvement Activities. You may report via either claims (if you have 15 therapists or fewer) or a certified registry if you participated in one.

Reporting Quality Measures occurs only at the initial evaluation and involves certifying you collected data on at least 6 items if reporting on claims (one being an outcome measure) or as many as applicable if reporting via a registry. There are 11 items in the PT/OT specialty set that PT’s and OT’s are eligible to use in complying with reporting these measures. The guidelines on what and who you must report on are complicate so you should check APTA and CMS resources.

The reporting of Improvement Activities in MIPS demonstrates the clinical practice is engaging in quality improvement activities. The Improvement Activities are reported annually and must occur for at least 90 days during that year. These activities are weighted as medium or high depending on the demands of the activity. PT/OT’s must report at least one of the following combination of activities:

            2 high-weighted activities

            1 high-weighted and 2 medium-weighted activities

            4 medium-weighted activities

A list of Improvement Activities for PT/OT’s can be found here.

The clinician or practice is scored based on points assigned for the completeness of their reporting which is judged based on comparison to national benchmarks. The payment adjustment is determined by the total score. Theoretically the higher the point total the higher the payment adjustment and vice versa.

The Bottom Line

Understanding Medicare’s requirements are key to getting and staying compliant. Requirements can change but many core principles have existed for some time and are expected to last for a long time to come.

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