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Therapy $3700 Cap

February 6, 2014 0 Comments

The therapy $3700 cap (alternatively called threshold) is still in place for Medicare through 3/31/2014.  9825503886_b732bfcf54_cClaims over the therapy $3700 threshold will be reviewed by the Recovery Auditors (RACs) on either a prepayment or post-payment review basis.  Many providers use a quick estimate of $100 in Medicare allowable reimbursement per date of service, and then can finger count to 37 visits when the therapy threshold will trigger manual medical review by the RACs.  The more scientific, but not 100% accurate is to use a tool provided on your Medicare MACs website, such as C-SNAP with WPS or Connex with NGS.  These tools will indicate the amount of outpatient therapy utilization that is accurate as of the time you checked.  If you are the only provider billing, and know that for sure, you might feel a little more confident that the therapy utilization number is accurate.

There are some issues that outpatient therapy providers should be aware of in calculating therapy utilization.  While it is important to provide all therapy services that are medically necessary, it is also important to watch for an event that will trigger a RAC review.  Therapy providers have found themselves in a quandary when they deem therapy medically necessary, feel they have provided documentation to support medical necessity, only to find that the RAC reviewer did not agree.  In many instances the specified “detailed reason for denial” is simply a quote from the documentation, followed by a quote from the RAC stating “not medically necessary.”  Therefore therapy providers are trying to be cautious about approaching the $3700 threshold for fear of not being reimbursed, or worse yet, to have to reimburse money you have already received.

Therapy $3700 Cap Important Facts

All Part B therapy services count toward the therapy cap, and there are some areas that may surprise you, in that hospitals and critical access hospitals are now subject to the therapy caps.  Keep in mind that hospitals send their claims to the Medicare Part A MAC on a monthly basis.  So this week they are dropping their January claims.  You might have a patient in your outpatient facility right now that is approaching the $1920 therapy cap because of a hospital inpatient stay that you were aware of, but not aware of how the claim was billed.  It might shock you.  Consider if the beneficiary had a more extensive stay and they were close to the $3700 threshold, when you verification shoed a nominal amount of utilization.  The therapy that you will provide and bill will automatically entitle you to a 100% mandatory RAC review, and if the RAC does not agree with you it make take you over 2 1/2 years to get a hearing at the ALJ level (your best chance of winning your case).

Let’s take a look at therapy 3700 cap issues:

  1. Hospital inpatients, that did not have Part A coverage, or had exhausted Part A coverage:  All applicable services will be billed to Medicare Part B.  If that patient had BID physical therapy and speech therapy, it will all be billed as Part B therapy – and it counts toward the therapy cap!
  2. Hospital observation patients, even if occupying a hospital bed for over a day:  Observation is an outpatient stay, and all therapy services provided during the observation stay are billed as Part B therapy – and it counts toward the therapy cap!

Even though CMS has suspended enforcement of the “2 Midnight Rule” for hospitals, there is much trepidation on the part of hospitals such that there is an upward trend toward observation status.

Coming up this week:  what will the suspension of appeals at the ALJ Level (3rd Level of Appeals) will mean for therapy providers that are now receiving stacks of ADRs for post-payment review by the RACs under manual medical review?  Wednesday, February 12th join me and RAC Monitor Publisher Chuck Buck (register here – info coming soon) in LIVE reports from the Office of Medicare Hearings and Appeals ALJ Appellate Forum as a hearing is held on the backlog at the ALJ and what the suspension of appeals at the ALJ will bring to therapy providers.

How many $3700 therapy cap RAC appeals have you started at your facility?  What level at they at?  If they haven’t been scheduled at the ALJ level are you prepared to wait 24-30 months just to get a hearing?  Let me know.

 Photo Credit: Numbers by Andy Maguire is licensed under a Creative Commons Attribution 4.0 International License Based on a work at

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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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