Budget bill kills therapy cap, clarifies Stark law
Grant Huang, CPC, CPMA
Director of Content
The Medicare therapy cap has been permanently repealed as part of the budget bill passed in February to keep the federal government funded until March 23. For healthcare providers, the provisions that had nothing to do with the federal budget had the most impact. Passage of the bill means that there will no longer be an annual maximum dollar amount above which Medicare won’t cover physical therapy, speech-language pathology, and outpatient treatment. You can find the full language of the therapy cap repeal provision here, under “Medicare Extenders” in Sec. 50202 of the bill, which is simply called the Bipartisan Budget Act of 2018.
Congress had allowed patients to exceed the cap if there was documentation to support medical necessity for therapy beyond the dollar amounts imposed: $2,010 for physical therapy (PT) and speech language pathology (SLP) combined and another $2,010 for occupational therapy (OT).
Under the new rules, you will still need to apply modifier KX (service qualifies for therapy cap and are reasonable/necessary), but there is no longer a hard cap that will result in denials.
Providers could exceed cap only at great risk
The onus was on providers, such as orthopaedic practices employing physical and occupational therapists, to claim medical necessity for services to patients that went over those limits. CMS had also set a higher “threshold amount” of $3,700 for PT and SLP combined and a separate $3,700 for OT. Providers that billed for services above these thresholds would place a bullseye on themselves for Medicare contractors to audit their documentation to verify medical necessity.
This was not an idle threat because Medicare’s Recovery Audit Contractors (RACs) specifically flagged providers exceeding the threshold amounts for in-depth manual reviews by their auditors. Remember: RACs are private firms that are paid by CMS based on the amount of provider overpayments they identify, giving them a financial incentive to aggressively perform audits of Medicare providers.
This ordeal has been permanently ended by the bipartisan budget package, passed to avert another government shutdown, and signed by President Donald J. Trump on Feb. 9. The repeal is retroactive back to Jan. 1, 2018, though it’s unlikely many Medicare beneficiaries have hit the cap amounts just a month into the new year.
On threshold amount, RACs lose their teeth
The threshold amount still exists after the passage of the bill and is actually being reduced to $3,000. Thus, while there are no longer hard caps on therapy coverage, providers with patients who exceed $3,000 in annual Medicare therapy payments will be flagged for possible medical review. However, the RAC threat is being greatly reduced because the legislation imposes a new annual limit of $5 million in funding for reviews of providers that improperly exceeding the threshold amount.
Stark law sees clarifications
The bill makes some clarifications to the Stark self-referral law, adding a provision that allows a series of “contemporaneous documents” that show a pattern of conduct between two parties in lieu of a formal written contract or agreement. The provision also gives parties 90 days from the effective date of arrangements to produce signatures.
Another change revises Stark to allow “indefinite holdovers” on the same terms and conditions of an agreement for space and equipment leases, and for personal service arrangements, following their expiration and so long as they continue to meet Stark exceptions.
Other Medicare provisions
The bill also funds a four-year extension of the Children’s Health Insurance Program (CHIP), which is in addition to the six-year extension provided by the January continuing resolution that stopped the first government shutdown, limiting it to just a few hours.
More importantly for Medicare patients, the bill also speeds up the closure of the Medicare Part D “donut hole,” changing the implementation date from 2020 (as required by the Affordable Care Act) to 2019. The donut hole refers to the prescription drug coverage gap faced by patients who hit $3,750 in spending on drugs, after which they must pay in full and out-of-pocket until they reach the yearly catastrophic coverage threshold of $5,000, at which point Part D coverage resumes (both dollar figures are for 2018).
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