Medicare in 2022: Thresholds for Outpatient Therapy

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The Bipartisan Budget Act of 2018 (BBA of 2018) was a game-changer for outpatient therapy services. Notably, it ended the tough Medicare capitulations for therapy payments by replacing hard payment caps with annual thresholds, but better yet, it allowed therapists the ability to exceed those set thresholds by appending claims using the KX modifier, but only if the services furnished are justified as necessary.

While the BBA of 2018 combined the Medicare payment threshold for physical therapy (PT) and speech-language pathology (SLP), occupational therapy services (OT) operate under a different amount. This is something that multidisciplinary facilities may need to keep in mind to ensure seamless payment of services, as well as when to include the KX modifier, when to start documenting, and how to avoid unnecessary audits. Here’s everything you need to know about these important aspects. 

What is the Medicare Therapy Threshold Exceptions Process? 

The Medicare therapy threshold refers to the amount of money the Medicare fund covers for patients receiving outpatient therapy services, namely PT, OT, and SLP. When therapists offer services to Medicare beneficiaries, the patient pays 20% of the Medicare-approved amount and Medicare covers the rest (80%).

For 2022, the Medicare therapy threshold amount is:

  • $2,150 for physical therapy and speech-language pathology services combined
  • And $2,150 for OT services

Of this threshold amount, $1720 is paid for by Medicare, while the beneficiary pays the remaining $430 as coinsurance requirements – 80% and 20%, respectively.

So what happens when services exceed the therapy threshold? In these instances, there is a two-tiered exceptions process that comes into play. The first tier is when services exceed the annual threshold, requiring the use of a KX modifier as confirmation that services are medically needed. The second is when services rendered exceed $3000, in which case a targeted medical review takes effect. 

Using the KX Modifier

The KX modifier plays an important role in promoting service delivery and accessibility for Medicare beneficiaries who may otherwise struggle to receive care, as well as ensuring that therapists who provide medically necessary services beyond Medicare’s annual threshold are fairly compensated.

For claims that do exceed the yearly threshold, providers must include the KX modifier as a way to signal that the furnished services were medically necessary and that supporting documentation exists. While documentation isn’t required to be attached to a claim appended with the KX modifier, the patient’s medical record should include thorough notes that justify the services rendered in the event of an audit or targeted medical review.

What is the Targeted Medical Review Threshold?

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) established the targeted medical review process and the BBA of 2018 retained it. Simply put, this means that from 2018 until 2028, the targeted medical review therapy threshold is $3,000 for PT and SLP combined and another $3,000 for OT.

As the second tier of the exceptions process, a targeted review means that only some claim lines will be subjected to a review process – generally the lines that exceeded the $3000 threshold.

The Centers for Medicare and Medicaid Services (CMS) outsources targeted medical reviews to a supplemental medical review contractor (SMRC), such as Noridian Healthcare Solutions. An SMRC specializes in looking over issues identified by professional organizations, comparative financial reports, internal audit reports by CMS, the Comprehensive Error Rate Testing Program, federal agencies, and more.

Any of the following factors can trigger the medical review process:

  • When a provider seems to be less compliant with requirements and has a high percentage of denied claim lines
  • Where a pattern of billing is aberrant compared to other therapy providers (this includes instances of medically unlikely units being billed in a single day)
  • Newly enrolled providers rendering services for the first time
  • When services are provided for targeted medical conditions
  • If a provider belongs to the same group as another provider who has triggered a review

While practices in good standing may not ever trigger a targeted medical review, providers should always be ready to provide documentation that justifies medically necessary services in the event one of their claims is selected.

When to Start Documenting for KX Modifiers

The BBA of 2018 not only requires that claims must use KX modifiers if medically necessary OT, PT, and SLP services provided go beyond the therapy threshold, but that those claims must have justification for those services documented in the patient’s medical record.

Some providers may be tempted to not create documentation that fully illustrates the medical necessity of services rendered, especially when the odds of triggering a review or audit are low. Whether this is due to workflow inefficiencies or even a misunderstanding of how KX modifiers function, being caught without proper documentation can be considered fraud or abuse of the system.

To avoid these serious consequences, providers should start documenting for KX modifiers when any of the scenarios below become apparent. 

  • A patient seeking care that involves both PT and SLP services – an early indication that the services will surpass the therapy threshold
  • When a single episode of care is so complex that the therapy provided will likely go over the Medicare cap 
  • When a patient requires a subsequent plan of care in the same calendar year for a problem unrelated to the previous one
  • When the patient’s medical history indicates multiple episodes of therapy for the same condition, either due to a revision to the diagnosis or recurrence of symptoms

Avoiding Unnecessary Audits in 2023

Audits are time-consuming, stressful, and could impact a therapy practice negatively, even when the audit returns with positive feedback. Therapists should do everything required to meet Medicare compliance standards, especially when they need to bill for medically necessary care that exceeds Medicare’s established thresholds. To avoid CMS contractor chart audits, providers should:

  • Only use the KX modifier after clearly determining that an outpatient therapy service is medically necessary and exceeds the $2,150 threshold. 
  • Ensure appropriate documentation is provided in the patient’s medical records that justify the medical necessity of the rendered service. 
  • Avoid early application of the KX modifier because it might indicate an abuse of practice, potentially triggering a review.

While the BBA of 2018 brought financial reprieve for therapists treating Medicare beneficiaries, it also means they must effectively deal with the additional documentation requirements and billing compliance, a small price to pay for fairer reimbursement opportunities!

Software for Claims That Go Beyond the Therapy Threshold

For practices that are interested in taking advantage of the KX modifier so they can offer care to Medicare beneficiaries, but aren’t confident in their ability to utilize the KX modifier correctly, there are options! By utilizing an all-in-one electronic medical record (EMR) system like Raintree, therapists can reap the benefits of optimized clinical documentation coupled with automated revenue cycle management (RCM) and billing tools in order to facilitate thorough documentation, accurate claim modifiers, Medicare compliance, and more!

Interested in the convenience of Raintree’s billing software, but not ready to leave your EMR platform? We believe that every therapy and rehab practice should seek digital solutions that are perfectly tailored to suit your needs. That’s why we designed our interoperable RCM tools to seamlessly integrate with established programs, no overhaul required!

From clinical documentation and billing tools to patient engagement and robust business intelligence features, your practice deserves a powerful, efficient, and flexible platform! Schedule a discovery call today with one of our experts to discuss how Raintree’s all-in-one EMR can streamline all of your organization’s workflows.

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Blogs are created for educational and informational purposes only.  The information provided does not constitute or, is not intended to constitute, legal or medical advice. When you read this information, visit our website, or access our materials, you are not forming an attorney-client, provider-patient, or other relationship with us.

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