Here Come the Rehab Therapy Caps

by Richard L. Peck, Editor-in-Chief
Unless Congress pulls a last-minute switcheroo-in which case, read this article as what might have been-the long-awaited (and fretted over) Medicare outpatient rehabilitation therapy caps have just gone into effect as you read this-on July 1, to be exact. Though enacted as part of the Balanced Budget Act of 1997 (BBA) to go into effect in 1999, the therapy caps were put on hold by Congress through 2002. The good news is that PT/SLP and OT outpatients in nonhospital settings are no longer restricted by the caps to $1,500 worth of services in each category. Now, and through December, they will be allowed $1,590 worth of services for PT/SLP and OT, respectively, now that the Medicare Economic Index (MEI) adjustments have been applied.

More good news: The caps were not effective until July 1 of this year; there is no retroactive application of them to the first half of 2003, as some SNF-based outpatient providers have worried.

All of this is made clear, according to Centers for Medicare and Medicaid Services (CMS) officials, by Program Memorandum AB-03-018 issued by CMS on February 7. In case Medicare program memoranda are not among your bedside reading, your fiscal intermediary (FI)/carrier failed to share this with you, or you don’t have Internet access (the memorandum is at, where it is displayed with somewhat daunting formality), Nursing Homes/Long Term Care Management asked CMS officials to offer a “plain English” rendition of the new requirements. The facts cited in the first two paragraphs above are one result, and there’s more.

For example, now that annual MEI indexing has gone into effect, providers can expect to see that $1,590 cap change-hopefully, increase-in 2004 and every year thereafter. The limit applies to the allowed amount, before deductibles and coinsurance are paid. In a case where the beneficiary has not paid any Medicare deductible for the year, and then is billed for $1,590 of services that are only therapy services, the $100 deductible and 20% coinsurance of $298 must be paid by the beneficiary. Medicare would pay $1,192. If the patient has already paid the $100 deductible for Medicare services, only the patient’s 20% coinsurance would apply, leaving Medicare responsible for paying $1,272 of billed therapy services. Therefore, patients who have already paid their Medicare deductible for 2003 don’t have to worry about paying a deductible for therapy services this year, since the caps just went into effect. The coinsurance, of course, applies to Medicare billings throughout the year.

It’s a theoretical possibility that the same patient will receive outpatient rehabilitation services from two separately billing providers. This raises the specter of a race to the cap: How can these providers keep track of each other’s billings to make sure they are not delivering uncovered services for a patient who has exhausted the cap? There is a way, although it’s not always easy. According to CMS officials, a provider billing electronically to an FI will have access to HIQA screens to check this. Providers billing carriers electronically, though, won’t have access to HIQA screens. When the HIPAA transactions standards go into effect (presumably by the October 16 deadline), screens called ELGA and ELGB will provide this information to those who bill to both carriers and FIs.

It’s also worth noting that institutional and noninstitutional providers can have different billing cycles, with the institutional providers restricted to once-a-month billing that could put them behind their noninstitutional collaborators in the cap fulfillment game. If it’s any consolation, CMS officials say that such dual-provider situations are rare in outpatient rehab.

Providers are obligated to tell patients when they exceed the cap. It is then up to patients, providers, social workers, and/or whomever wants to take the lead in this to arrange for patients to receive continued Medicare-covered therapy in a hospital-based outpatient setting. These settings are unaffected by the caps. Remember, though: Those who are not on a Part A stay but are residing in the Medicare-certified part of the SNF will not have Medicare-financed outpatient hospital services available to them after they exceed the cap; consolidated billing law prohibits this. Medicare patients residing in a non-Medicare-certified area of the SNF will be eligible for Medicare-financed outpatient hospital services after exceeding the cap, as will Medicare post-acute patients receiving outpatient rehab services at the SNF.

Those of you who read the Program Memorandum and notice the line at the end that says “This PM may be discarded after July 1, 2005,” don’t get your hopes up; it simply means that CMS has the option of issuing new instructions to FIs/carriers after that date on how to implement the therapy caps. It doesn’t mean that the caps themselves will “sunset” in 2005-indeed, they’ll go on forever until Congress says otherwise. And that’s the plain (or pain?) truth. NH

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