MedPAC Considers Ways to Reduce Spending For Outpatient Therapy Beyond ‘Hard' Caps

Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.

The chairman and some members of the Medicare Payment Advisory Commission indicated they were unwilling to recommend the use of no-exception spending limits, or “caps,” on Medicare beneficiaries' therapy services and, instead, considered draft recommendations intended to tighten management of spending and reduce fraud.

“I would prefer not to have hard caps,” Commissioner George N. Miller Jr., a hospital executive in Okmulgee, Okla., said at the commission's Oct. 5 meeting.

Medicare beneficiaries “care most about … independence,” according to Commissioner Mary Naylor, a professor at the University of Pennsylvania School of Nursing. “So I do not support hard caps.”

MedPAC Chairman Glenn Hackbarth said, “Returning to a system of hard caps--no exceptions--would, in fact, impede access to needed care,” However, he added, “if we have no caps and do nothing else, we're talking about an increased Medicare expenditure above the current law baseline of roughly $1 billion a year, $10 billion over 10 years.”

Creation of Cap.

Legislation enacted in 1997 created an annual per Medicare beneficiary cap for outpatient therapy services, except when received from a hospital outpatient department.

The annual cap applied to physical and speech therapy combined, and separately to occupational therapy. From 1997 through the end of 2005, the caps were never imposed because Congress enacted a series of bills temporarily suspending them.

Congress allowed the caps to go into effect in 2006, but it established an exception process whereby beneficiaries can be granted an exception to the caps and receive an unlimited amount of therapy services to the extent deemed medically necessary. Congress has extended the exception process with the latest extension set to end Dec. 31.

At the same time, Congress required MedPAC to recommend improvements in the payment methodology.

“For those recommendations to be useful, they need to be produced before the provisions expire,” Adaeze Akamigbo, a MedPAC senior analyst, said.

The commissioners will vote at their Nov. 1-2 meeting on recommendations to change the methodology.

Draft Recommendations.

Draft recommendations discussed at the October meeting, which may be changed prior to the vote, suggested that to assure program integrity, the Department of Health and Human Services should be directed to:

• reduce the certification period for the outpatient therapy plan of care from 90 days to 45 days and use Affordable Care Act authorities to target high-use geographic areas and aberrant providers;

• place a temporary moratorium on enrollment of new providers, require providers to re-enroll, or suspend payments for services that show a high risk of fraud, if needed; and

• implement payment edits at the national level that target implausible amounts of therapy.


A second series of draft recommendations is aimed at reducing spending, which staff said has been growing rapidly since 1999, and would have Congress:

• reduce therapy caps for physical therapy and speech language pathology services combined and for occupational therapy, implement a manual review process for requests to exceed cap amounts, and provide the resources to the Centers for Medicare & Medicaid Services for this purpose; and

• include services delivered in hospital outpatient departments under therapy caps and apply a multiple procedure payment reduction of 50 percent to the practice expense portion of outpatient therapy services provided for the same therapy on the same day.


Since a multiple procedure discount does not apply to the “work” portion of the Medicare reimbursement, instituting one would reduce financial incentives to provide additional therapy services in the same session, staff said.

Better Data Collection.

In addition, to improve management in the longer term, Congress should direct HHS to prohibit the use of V-codes--which are used to identify encounters for reasons other than illness or injury--as a principal diagnosis on outpatient therapy claims and collect functional status information on therapy users using a streamlined standardized assessment tool. This tool should reflect demographic, diagnosis, biomedication, surgery, and functional limitations to classify patients across all therapy types. The information collected using this tool should measure the impact of therapy services on functional status and provide the basis for global payment approaches in the future.

Akamigbo said that CMS lacks data about use of the benefit, including the level that recipients improved as a result.

“There's almost no information available to CMS to judge whether therapy services are appropriately indicated for the patients who get them, what type of therapy and how much they should get, and once they get therapy, no information to determine their functional outcomes or improvement as a result of therapy services,” she said.

In addition, regional variation is not explained by health status, she said. In “high spending” counties, the average spending was $2,806, and in “low spending” counties, it was $477.

“States like Louisiana, Texas, and Mississippi, and two large counties in New York, are among the highest spending areas in the country,” Akamigbo said. “The lowest spending counties are concentrated in the Midwest, states like Iowa, Minnesota, and North Dakota.”

By Mindy Yochelson  

Request Health Care on Bloomberg Law