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RAC Therapy Reviews Underway: 2014 Therapy Claims

February 26, 2015 3 Comments

RAC therapy reviews are underway as CMS paved the way for manual medical review of therapy claims over the $3700 Greensmilethreshold by the Recovery Auditors (RACs). Effective January 16th CMS provided a contract addendum to the current (outgoing) RACs in all 4 regions to begin a review of therapy claims over $3700 submitted between March 1, 2014 through December 31, 2014 during the RAC “pause”.  All claims over the threshold were paid during the March – December period, including those in the prepayment review states. CMS has alerted the therapy community that all claims would be reviewed when the new RAC contracts were awarded, and given the delay in awards, CMS has initiated a limited restart, including therapy reviews.

RAC Therapy Reviews Underway

CMS has indicated that the therapy reviews will be phased with a series of ADRs (up to five) to clear the 2014 backlog of claims that must be reviewed by law.  The ADR review process, in which claims will be reviewed in chronological order, based on the month in which they were paid, for institutional providers including hospitals, skilled nursing facilities, CORFs, Rehab Agencies will process as follows:

  1. The 1st additional documentation request (ADR) sent to each provider for these claims will only request the documentation for one claim.
  2. The 2nd ADR sent to a provider can request up to 10% of the total number of eligible claims.
  3. The 3rd ADR sent to a provider can request up to 25% of the remaining eligible claims.
  4. The 4th ADR sent to a provider can request up to 50% of the remaining eligible claims.
  5. The 5th ADR sent to a provider can request up to 100% of the remaining eligible claims.

Background Information on Therapy Caps and $3700 Threshold

There is an annual per-beneficiary therapy cap amount determined for each calendar year (in 2015 this amount is $1940). Exceptions to the therapy cap are allowed for reasonable and necessary therapy services. Services costing more than $3,700 for PT and SLP services (combined) and/or $3,700 for OT services are subject to manual medical review, which CMS assigned to the Recovery Auditors effective April 1, 2013.

Per CMS, the therapy cap applies to all Part B outpatient therapy settings and providers, including:

  • Therapists’ private practices
  • Offices of physicians and certain non-physician practitioners
  • Part B skilled nursing facilities
  • Home health agencies (type of bill: 34X)
  • Rehabilitation agencies (also known as outpatient rehabilitation facilities, or ORFs)
  • Comprehensive outpatient rehabilitation facilities (CORFs)
  • Hospital outpatient departments (HOPDs)
  • Critical access hospitals (CAHs)

In addition, the therapy cap will apply to outpatient hospitals as detected by:

  • Type of bill (12X, 13X, or 085X)
  • Revenue code (042X, 043X, or 044X)
  • Modifier (GN, GO, or GP); and
  • Dates of service on or after Jan. 1, 2014

A CMS 2013 presentation provided an overview of manual medical review of claims over the $3,700 threshold, and it can be found on the CMS website.

(Note: portions of this post originally appeared in an article on RACMonitor

Photo: Éole Wind via Compfight

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Nancy Beckley

Nancy J. Beckley MS, MBA, CHC: President-Nancy Beckley & Associates LLC. Compliance outsourcing, risk assessment, compliance plans, compliance training, auditing, due diligence, investigation support for therapy providers.

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Comments (3)

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  1. Sean Slovik says:

    Good information. Thanks!

    One question on the $3700 threshold amount:

    Does the $3700 represent ?:
    a: the amount billed by the therapy provider
    b: the total of the allowed amount computed by by Medicare on each claim processed


    c: the total actual amount paid by Medicare as a primary payer (not including the amount paid by the secondary insurance if any)

    And lastly, though rare, how is the threshold amount calculated if Medicare is the secondary, and primary is a commercial insurance (ie BC/BS)?

  2. Sean – Thanks for you comment. The $3700 threshold is calculated the same way the $1940 therapy cap is calculated. It is based upon the scheduled reimbursement (MPFS) as adjusted by the 50% MPPR and the 2% sequestration. It includes both the 80% payable by Medicare and the 20% beneficiary responsibility. If you are a member of APTA you can access the Medicare Physician Fee Schedule tool to perform calculations. If Medicare is secondary (MSP) the same rules apply for Medicare reimbursement, it is just that the rules are only applicable to the amount that Medicare pays. If you are looking to determine how long it would take to reach a $3700 threshold with Medicare as secondary, I suggest you take a look at the remittance advice that you receive (assuming it represents an average visit) where Medicare is secondary and do a rough estimation. Keep in mind, that the cap is per the beneficiary, NOT per provider. So at some point, if Medicare was primary while the patient was at your clinic (or another clinic), the accrual toward the $3700 threshold would occur at a quicker pace in the calendar year.

  3. Sean Slovik says:

    Thanks for your detailed answer, but my situation is a little different.
    We run our outpatient PT/OT facility under our parent hospital which is a Critical Access Hospital in a rural community. We are paid in a different method, rather strange actually.

    For Medicare patients, the allowed amount from Medicare is 27% of the billed amount. Of that allowed amount, the secondary insurance portion is 20% of the billed amount and Medicare pays the balance, so basically: Medicare pays 7% of the billed charge and the secondary pays 20% of the billed charge. I know that all sounds wacky, but that is how it is. Medicare is paying very little. That is why I was wondering how it is calculated towards the $3700 threshold. I’m assuming in our situation, when the 27% of the billed amount reaches $3700, we have met the threshold?

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