March 2006

Legislative Watch

By George G. Olsen, JD

Déjà Vu All Over Again

A congressional decision has reinstated caps on rehabilitation and physical therapy.

The therapy cap issue was hotly contested throughout the legislative process governing the massive budget reconciliation legislation. The version of the bill passed by the Senate included a 1-year extension of the moratorium. The House-passed bill, however, did not contain any provision addressing the caps. In fact, the House bill did not contain a single Medicare provision. House and Senate conferees met before Christmas to reconcile the vast differences between the hundreds of provisions in the two bills. The bitterly contested conference produced an agreement, which was narrowly passed by the House and then by the Senate right before Congress recessed for Christmas. However, because of small changes made in the conference report on the Senate floor, the legislation must be passed by the House again when it returns from recess at the end of January 2006. The vote is expected to occur the week of February 1, and it is anticipated that it will be narrowly adopted and then sent to the president for signature into law.

Congress’ failure to extend the moratorium is the result of several factors. First, Congress was under enormous pressure to reduce the federal deficit by curtailing spending. The huge financial demands on the federal treasury were exacerbated by Hurricane Katrina, the threat of pandemic avian flu, the need for heating subsidies for low income individuals because of high fuel prices, and the cost of preventing a reduction in payments under the physician fee schedule. In this atmosphere, any provision that cost money—and an extension of the moratorium would cost money—encountered enormous resistance. Second, Congress was frustrated by the inability of the Centers for Medicare and Medicaid Services (CMS) and the provider community to develop an alternative to the therapy caps. Third, Congress believed that an exceptions process could protect beneficiaries who needed therapy services in excess of the caps.

THE DEFICIT REDUCTION ACT

The Deficit Reduction Act permits the caps to go into effect on January 1, 2006, but creates an exceptions process that permits payments in excess of the caps if the services are determined to be medically necessary. Section 5107(a)(1) of the legislation provides: “With respect to expenses incurred during 2006 for services, the Secretary shall implement a process under which an individual…may, upon request of the individual or a person on behalf of the individual, obtain an exception from the uniform dollar limitation…if the provision of such services is determined to be medically necessary.” The provision states further: “Under such process, if the Secretary does not make a decision on such a request for exception within 10 business days of the date of the Secretary’s receipt of the request, the Secretary shall be deemed to have found the services to be medically necessary.”

Section 5107(a)(2) expresses Congress’ intent that the exceptions process be implemented on a timely basis. It provides: “The Secretary of Health and Human Services shall waive such provisions of law and regulation…as are necessary to implement the amendments made by paragraph (1) on a timely basis and, notwithstanding any other provision of law, may implement such amendments by program instruction or otherwise.” The legislation does not permit any administrative or judicial review of the exceptions process.

In sum, in lieu of extending the moratorium, Congress established an exceptions process by which expenses in excess of the caps may be incurred by a Medicare beneficiary provided that they are determined to be medically necessary by the Secretary. If the Secretary does not act on the exception request within 10 business days, the services that are the subject of the exception request are deemed to be medically necessary. Important: Although the therapy caps are now in effect because the moratorium expired, the exceptions process is not. The exceptions process is not yet law because the House still needs to pass the legislation and the president must sign it. When those events occur, the exceptions mechanism will become effective. Since it is not now effective, CMS has given no guidance on how the exceptions process would work or what standards and procedures would be applied.

Section 5107(b) of the Deficit Reduction Act also requires the implementation of clinically appropriate code edits in order to identify and eliminate improper payments for therapy services. The provision states: “By not later than July 1, 2006, the Secretary of Health and Human Services shall implement clinically appropriate code edits with respect to payments under Part B…for physical therapy services, occupational therapy services, and speech-language pathology services in order to identify and eliminate improper payments for such services including edits of clinically illogical combinations of procedure codes and other edits to control inappropriate billings.” This provision is also not yet in effect.

IMPLEMENTATION OF THE THERAPY CAPS

To date, CMS has issued several documents that provide some important details about the operation of the therapy caps in 2006. For example, see http://new.cms.hhs.gov/transmittals/downloads//R759CP.pdf. See also http://new.cms.hhs.gov/ContractorLearningResources/downloads/JA4115.pdf. There follows some of the key points:

The therapy caps are in full force and effect as of January 1, 2006. From that date until December 31, 2006, the financial limitation is $1,740 for physical therapy and speech-language pathology combined and $1,740 for occupational therapy. The cap is an annual limit for each beneficiary; it is not applied per diagnosis or per provider.

The therapy caps apply to outpatient therapy services furnished by rehabilitation agencies, physician’s offices, comprehensive outpatient rehabilitation facilities (CORFs), skilled nursing facilities (SNFs)(Part B), home health agencies (Part B), and physical therapists in private practice. The caps also apply to outpatient rehabilitation services furnished by a separately certified hospital-based provider such as a hospital-based SNF. They do not apply to services furnished directly or under arrangements by a hospital to an outpatient or to an inpatient who is not in a covered Part A stay.

The cap is predicated on the allowable charges covered by Medicare. Assuming that the beneficiary has met the Medicare deductible, Medicare will pay for 80% of the $1,740 and the beneficiary will be responsible for the remaining 20%.

If a patient has exceeded their cap and wants to pay for services out of pocket, the provider does not have to bill the beneficiary the Medicare allowable amount. Instead, the services may be billed at a rate determined by the provider.

One of the most critical questions is how providers and CMS will track a patient’s status under the caps. In a recent Frequently Asked Questions document, CMS stated: “It is important to ask patients if they have received therapy services at any time in 2006. In addition, you [the provider] should access the information provided by CMS. There are two ways to access this information. Dollar amounts accrued toward the therapy limits may be viewed electronically on the ELGA or ELGB screens within the CWF (Common Working File) or on the HIQA screen for those providers who bill through fiscal intermediaries. If you do not have access to these screens through your billing software, you can contact your Medicare contractor directly and request information regarding therapy services provided to a particular beneficiary. The amount accrued toward the financial limit is based on the date claims are received rather than the date of service.”

CMS stresses that its system cannot report the amount of services that have not been billed or that have been billed but not yet processed. As a result, claims must be submitted on a timely basis and error free so they can be promptly processed and reflected in the databases.

Patients should be given accurate information regarding their financial obligations if their therapy services exceed the caps. CMS recommends, but does not require, the use of the Notice of Exclusion of Benefits (NEMB) form, which is available at http://www.cms.hhs.gov/BNI/11_FFSNEMBGeneral.asp. CMS will provide all beneficiaries with Medicare Summary Notices informing them that the caps will be in place in 2006. CMS also says that it will inform beneficiaries who are receiving therapy services of the amounts that have been applied toward the caps.

When a patient has exceeded their therapy cap, a hospital outpatient department can provide the services and be paid by Medicare provided that the patient is discharged from the first provider setting and registered as a hospital outpatient. According to CMS, “If a resident in a Medicare-certified section of a skilled nursing facility exceeds the cap, the hospital may not send its therapists to provide the services and bill for them due to consolidated billing rules. However, the outpatient hospital may send its therapists to provide covered services to a resident in the non-Medicare certified section of the facility (ie, one that is certified only by Medicaid as an SNF or not certified) or to a SNF non-resident who goes to the SNF for outpatient treatment (note: these patients must be registered as outpatients of the hospital).” Please see http://www.medicare.gov.

A hospital cannot send therapy staff to provide services in nonresidential health settings such as CORFs, rehabilitation agencies, physical therapists in private practice, and physician’s offices and bill for them as if they were provided at the hospital.

A hospital may make an arrangement with another entity such as a rehabilitation agency or a privately practicing physical therapist to furnish services to individuals who are registered as outpatients of the hospital.

THE EXCEPTIONS PROCESS

Many of the as yet unanswered questions about the therapy caps pertain to the new exceptions process created by the Deficit Reduction Act of 2005. Thus far, CMS has said virtually nothing about how the process will work when it becomes law. Substantial questions abound: Who may file for an exception? What can an exception request cover—the next needed treatment, an entire plan of care, something else? When does the 10 business day period begin to run and when does it end? Will the exceptions process be retroactively effective to January 1, 2006? Does CMS have the capacity to review the torrent of requests that it will undoubtedly receive? Can an exception request be filed before a patient reaches their limitation on the grounds that the therapist has a reasonable expectation that the patient will exceed the limit? How will CMS process separate exception requests submitted by a physical therapist and a speech—language pathologist for the same patient for the same time period? Rehabilitation stakeholders—provider and patient groups alike—have been meeting to identify the issues attendant to the exceptions process and will be seeking answers from CMS about the exceptions process.

George G. Olsen, JD, is an attorney with the law firm of Williams & Jensen, PLLC, Washington, DC.

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