Medicare Compliance & Reimbursement

CMS rolls out two-pronged exceptions process.

Financial limitations on outpatient therapy services have been putting the reimbursement screws to providers and beneficiaries since Jan. 1--but finalizing an exceptions procedure that will help lighten the load has taken the Centers for Medicare & Medicaid Services a month and a half. Although providers, benes and advocacy groups are content for now, the battle to abolish the new outpatient therapy caps is not likely to fall off the radar any time soon.

The new exceptions process, which provides automatic coverage exceptions for certain conditions and permits manual exception requests for others, goes into effect March 13 and will be retroactive to Jan. 1. CMS outlines the new procedure in a recent fact sheet. The agency's exceptions process for "medically necessary" services is in line with stipulations in the Feb. 8 Deficit Reduction Act.

The process is "a good first step toward ensuring that Medicare beneficiaries continue to have coverage for the physical therapy they need," says American Physical Therapy Association president Ben F. Massey, Jr. in a recent statement. APTA and other advocacy groups, including the American Occupational Therapy Association, were concerned that without an adequate exceptions procedure, arbitrary application of the therapy caps would adversely affect providers' ability to receive payment for medically necessary services from benes who were unable to afford them.

The new outpatient therapy caps apply to Medicare Part B outpatient physical therapy, speech-language pathology and occupational therapy services. (The caps do not apply to outpatient hospital and hospital emergency room rehabilitation services.)

The caps originally went into effect with the Balanced Budget Act of 1997 to slow Medicare's rapidly rising costs for outpatient therapy, but a sequence of moratoriums kept the caps suspended for most of their history. The most recent moratorium expired Dec. 31, 2005, and two $1,740 caps went into effect for physical therapy services (including speech-language pathology services) and occupational therapy services beginning Jan. 1. This marks the first time outpatient therapy caps have been in effect since 2003.

Automatic Exceptions Catch And Cover Most Services

To streamline exceptions and reimbursement, CMS has compiled a comprehensive list of conditions and "clinically complex situations" that it will use to qualify benes for automatic exception to the therapy caps. Providers can use these situations to justify an exception for any condition that requires skilled therapy services.

The agency anticipates that most benes who require exceptions will qualify for the automatic exceptions process, minimizing coverage problems and preventing unnecessary costs. Neither providers nor benes will need to submit any formal documentation to obtain automatic exception approval for services that exceed the caps.

To acquire automatic exception for a specific service, a provider must be able to demonstrate that a bene has a qualifying, Medicare-eligible condition that's both medically necessary and has a "direct and significant impact on the need for [the] course of therapy being provided," according to the CMS fact sheet. To obtain payment, the provider must submit an appropriate claim for one of these predetermined conditions or complexities. (For further information about the claims process for automatic exceptions due to a qualifying condition or complexity, see "Providers Bear The Burden Of Proof For Outpatient Therapy Exceptions" in the next article.)

If a bene's condition doesn't qualify for automatic exception, then providers or benes may fax a written request to the claims processing contractor for coverage for up to 15 "treatment days" beyond the cap. CMS recognizes a treatment day as "a day on which one or more services are provided." The written request must include appropriate documentation and justification for the exception.

The Medicare contractor will evaluate the manual exception request and perform a medical review to determine how many additional treatment days, if any, are medically necessary. If a contractor doesn't issue a final decision regarding an exception request within 10 business days, CMS will consider the service request medically necessary and therefore subject to exception. To avoid incurring unnecessary costs, the agency encourages providers to submit manual exception requests before the coverage exception must begin. CMS will, however, approve exceptions retroactively as necessary.

Complicated Exceptions May Prove The Need For A Better Solution

"We have yet to see how well Medicare contractors will be able to implement and apply this process," notes Massey.

Indeed, not all contractors will be able to implement the exceptions process immediately, CMS confirms.

Massey's skepticism questions the policy's long-term financial outlook, as well as its short-term implementation. "Even if [the exceptions procedure] works well, Congress only authorized this new process through 2006," Massey points out. "Congress must address this issue again this year, and we are confident that this experience will demonstrate to legislators that they must completely repeal the caps and provide a more permanent solution for Medicare beneficiaries needing physical therapy," he asserts.

For the time being, CMS requires all Medicare contractors to accept claims adjustment requests for 2006 services that they denied on the basis that those services exceeded the therapy caps. Contractors must continue to accept adjustment requests until they are able to implement the exceptions process.

Providers should request that their carriers reopen and review any 2006 claims their carriers denied because the claims exceeded the caps, CMS advises. In addition, providers who haven't yet submitted 2006 claims that qualify for the exception should do so now and refund benes for prior services as applicable.

To view the CMS fact sheet, visit www.cms.hhs.gov/apps/media/press/release.asp?Counter=1782.

CMS officials will also explain the exceptions process in AOTA teleconference on Feb. 27. For details, visit www.aota.org/nonmembers/area3/links/link11.asp.