April 2005

Legislative Watch

By George G. Olsen, JD; and Karina V. Lynch, JD

Show Me the Impact

New studies focus on outpatient therapy caps.

Figure 1. Ciolek D and Hwang W. Utilization Analysis: Characteristics of High Expenditure Users of Outpatient Therapy Services, CY 2002, Final Report. November 22, 2004. CMS Contract No. PSC 500-99-0009/0009, Table 12, at 31.

• Beneficiaries Who Received Outpatient Therapy Services. AdvanceMed found that 9.3% of beneficiaries enrolled in Medicare Part B in 2002 received some form of outpatient therapy.
• Expenditures on Outpatient Therapy Services. During 2002, total Medicare expenditures for outpatient therapy services were 2.3% of all Medicare Part B expenditures. The average annual expenditure per therapy user was $896 while the average annual expenditure per Part B enrollee was $85. AdvanceMed determined the median expenditure value ($466) was a better representation of the “typical” outpatient therapy patient than the average annual expenditure.
• Change in Number of Beneficiaries Receiving Outpatient Therapy Services. There did not appear to be any evidence that beneficiaries are receiving outpatient therapy services at a rate greater than the observed growth of Part B fee for service enrollment.
• Change in Expenditures. From 1998 to 2002, the overall growth rate of outpatient therapy expenditures compared to the Part B Trust Fund was essentially identical.
• Total Outpatient Therapy Expen-ditures CY 1998 through CY 2002. AdvanceMed gathered data on total outpatient therapy expenditures, the increase in therapy expenditures from prior years, and the increase in total Part B trust fund expenditures from prior years (for a period from 1998 through 2002). It found that during this period, notable fluctuations in outpatient therapy expenditures were observed that “may reflect the impact of specific payment policy provisions during the five year period.”
• Demographics of Outpatient Therapy Users. During 2002, most outpatient therapy users were in the age groups 70-74 and 75-79.
• Beneficiary Diagnosis. In general, the results demonstrate differences in the types of diagnosis that are most often treated under physical therapy, occupational therapy, and speech-language pathology plans of care. The findings also highlight diagnosis coding issues that could impact later patient classification activities, and may be relevant to other CMS payment policy considerations.
• Most Frequently Observed PT, OT, and SLP Diagnosis and the Estimated Impact of Two Caps (PT/SLP combined and OT separate) Versus Three Separate PT, OT, and SLP Caps. By excluding hospital outpatient therapy expenditures, AdvanceMed simulated the impact of the application of the outpatient therapy financial limitations on CY 2002 claims data. This data is presented in the chart in Figure 1.
• Impact of Financial Limitations on Beneficiaries by Diagnosis. AdvanceMed found there is no beneficiary diagnosis pattern that clearly identifies particular conditions more likely to surpass the physical therapy financial limitation amounts. However, in reviewing the top 98 most frequently reported physical therapy diagnoses identified in its prior report, AdvanceMed determined there are 15 other diagnoses that have higher rates of beneficiaries surpassing the financial limitations than acute stroke.
• Impact of Hospital Outpatient Exception on a Beneficiary’s Likelihood to Surpass the Financial Limitations. Data analysis indicated that it was “questionable” whether the hospital outpatient services exception from the financial limitations is an equitable remedy to ensure beneficiary access to outpatient therapy services should the threshold be reached in another provider setting.
• Provider Setting Impact on Episodic Practice Patterns. AdvanceMed found that the setting appeared to play a major role in influencing the episodic payments for outpatient therapy service and very different patterns were apparent depending on the type of therapy.
• Implications of CY 2002 Outpatient Therapy Utilization Findings on Alternative Payment System Options. The report considered a number of options, including the imposition of volume controls. However, AdvanceMed found that, while this approach might limit growth in spending, it has a number of limitations and would not provide an incentive for providing appropriate services and, in fact, might encourage overutilization. A second approach would be to establish a separate sustainable growth rate (SGR), as used in the physician fee schedule, for outpatient therapy services. AdvanceMed concluded that this would be administratively difficult if it required the merging of carrier and intermediary processed outpatient therapy claims data, but that it would better respond to specific unusual fluctuations in outpatient therapy procedure volume billing from year to year.
• Track Outpatient Therapy Expenditures on a Different Basis Than the Per-Beneficiary Basis Currently Required. AdvanceMed’s April 2004 report reviewed the merits of limiting the number of visits or services permitted rather than payment amount, implementing the financial limitations on a per-beneficiary, per-provider basis, and applying the limits on a provider level. AdvanceMed found concerns with each of these approaches and opined they would present “numerous technical challenges,” and would be administratively complex.
• Allow Higher Caps for Patients with Greater Need. The results of the AdvanceMed study found that there are currently no diagnoses or clinical classification groups that can be specifically identified, based on claims diagnosis or demographic variables, to qualify for an outlier payment exception.
• Intensify and Expand Medical Review Efforts. AdvanceMed commented that this would be prohibitively expensive and extremely burdensome on providers and Medicare contractors.
• Expand the Moratorium or Delete Outpatient Therapy Caps. AdvanceMed considered this option and stated that it would eliminate the barrier to the amount of covered outpatient therapy services a beneficiary could receive, regardless of medical condition. However, the study also reported that if this approach were implemented in isolation, the objectives of reducing unnecessary services and controlling spending growth would not be met.

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