Blog Post

CPT Update: Why the Valuation of the New PT and OT Eval Codes is Problematic

CMS comments highlight the flaws of the severity-complexity approach to payment reform. Click here to learn more about the potential problems, here.

Brooke Andrus
5 min read
July 19, 2016
image representing cpt update: why the valuation of the new pt and ot eval codes is problematic
No items found.
Share this post:


Get the latest news and tips directly in your inbox by subscribing to our monthly newsletter

The purpose of any type of reform is to drive change. And that’s certainly true when it comes to healthcare—and healthcare payment—reform. But, change often comes slowly—and in the wake of Medicare’s recently issued proposed physician fee schedule for 2017, I have to wonder whether it’ll come too slowly for physical and occupational therapists.

That’s because, while the Centers for Medicare & Medicaid Services (CMS) voiced its support for replacing the existing CPT codes for physical and occupational therapy evaluations and re-evaluations (codes 97001–97004) with a new, tiered set of codes that account for evaluation complexity, the agency’s recommendations for how those codes should be valued represent a major departure from the APTA’s original intentions.

Multiple Levels of Complexity—One Level of Payment

As I explained in my three-part series on the APTA’s proposed Physical Therapy Classification and Payment System (which you can read in this post, this post, and this post), the main selling point of the new therapy code set is that it allows PTs and OTs to account for the severity and complexity of their patients. The new codes fall into two broad categories: evaluation and intervention. And while the details of the intervention portion are still being ironed out by the American Medical Association (AMA) CPT coding work group, the evaluation portion made it into the 2017 proposed rule—which means that, barring any post-comment period overhauls, it’ll go into effect January 1, 2017.

But—and this is a big “but”—CMS is not recommending a tiered set of code value assignments to go along with the various levels of evaluation complexity.

What does that mean for PTs and OTs?

Assuming the new evaluation codes are adopted as described in the proposed rule, it means:

In essence, this coding system (or at least this portion of the coding system)—though hailed as an integral piece of the therapy industry’s payment reform movement—will have zero effect on payments in 2017.

Work Neutrality vs. Budget Neutrality: The Math Behind Medicare’s Proposal

Now, you’re probably wondering why CMS went against the valuation recommendations of pretty much every entity involved in the development of the new codes. To understand CMS’s reasoning, let’s first take a look at the logic behind the proposed stratification of work RVUs:

  • The current work RVU (Relative Value Unit) for PT and OT evaluation codes is 1.20.
  • In an effort to maintain work neutrality (i.e., to ensure an average RVU of 1.20 for evaluation codes in 2017), the Health Care Professionals Advisory Committee (HCPAC) recommended work RVUs of 0.75, 1.18, and 1.5 for low, moderate, and high complexity codes, respectively.
  • Furthermore, according to CMS, “The PT specialty society projected that the moderate complexity evaluation code would be reported 50 percent of the time because it is the typical evaluation, and the CPT codes for the low and high complexity evaluations are each expected to be billed 25 percent of the time.”

Theoretically, the range of code valuations, coupled with the projected reporting frequency for each level of code, would yield work neutrality (i.e., the average work RVU would still be 1.20). The problem is, there’s no way to guarantee that the actual distribution of reported codes would fall in line with those projections—which means there is no way to guarantee budget neutrality. And, as CMS points out, “work neutrality is distinct from the budget neutrality.”

To further explain this point, the agency provides this example: “If more than half of the services were reported using the ‘simple’ code, then there would be fewer overall work RVUs. If more than half of the services were reported using the ‘complex’ code, then there would be more overall work RVUs.” In other words, if CMS were to adopt varying work RVUs, it would risk going over budget if the higher-value codes ended up being used more frequently than predicted. And that’s a risk CMS isn’t willing to take.

The Upcoding Conundrum

Then, there’s the whole issue of upcoding—a concern that, as I explained in my PTCPS series, is shared among many of the therapy industry’s top leaders and advocates. This type of system-gaming can occur in two ways:

  1. Purposely seeking out—or waiting to see—patients who are past the acute stage of injury. “One of the issues we have with the complexity/intensity model is that it’s at the opposite end of the research,” Jeff Hathaway, the president of the Physical Therapy Business Alliance (PTBA), said in this article. “If we see the patient acutely, we’re going to save the most money, so it doesn’t make sense to support a payment system that rewards doing things further down the line.”
  2. Selecting—and tailoring documentation to support—codes that represent a higher level of severity and complexity than the patient actually presents with.

Carmen Elliott, the APTA’s senior director of payment policy, argued in this post that this kind of gaming should not even be an issue, as it goes against everything physical therapists stand for: “Physical therapists are extremely ethical providers, and that really distresses me when I hear [about potential gaming],” she said. “I don’t believe that will be the case.”

But, CMS begs to differ: “We are concerned that the coding stratification in the PT and OT evaluation codes may result in upcoding incentives...We are also concerned that stratified payment rates may provide, in some cases, a payment incentive to therapists to upcode to a higher complexity level than was actually furnished to receive a higher payment,” the agency explained in the proposed rule.

The result?

CMS is recommending a work RVU of 1.20 for all six therapy evaluation codes (there are three codes for PT evals and three for OT evals), because that’s “the long-standing value for the current evaluation codes, 97001 and 97003, and, thus, assures work neutrality without reliance on particular assumptions about utilization.” Additionally, the agency went against HCPAC’s recommendation to raise the work RVUs for the re-evaluation codes, instead “proposing to maintain the overall work RVUs for these services by proposing 0.60 work RVUs [for the new PT and OT re-evaluation codes].” However, because CMS was unclear as to why HCPAC recommended RVU increases for these codes, the agency included in its comments a request for “comments from stakeholders on whether there are reasons that the reevaluation codes should be revalued without regard to work neutrality particularly given the HCPAC’s interest in preserving work neutrality for the new evaluation codes.”

Future Impact on the Rehab Therapy Industry

While PTs and OTs certainly should be concerned about the immediate effects of uniform code valuations in a tiered coding system—chief among them, the fact that therapists must make the effort to code for severity and complexity even though they will receive no financial reward for doing so—the impact of this decision doesn’t end there. In fact, CMS’s unwillingness to provide variable payments based solely on severity and complexity could completely derail the APTA-led payment reform effort. After all, the intervention portion of PTCPS—which could be implemented as early as January 2018—also features a stratified structure based on severity and complexity.

If that’s the case, the APTA may need to change its tune on payment reform—particularly with respect to the role of outcomes data. While Elliott stated in this article that wrapping outcomes data into an alternative payment system likely wouldn’t happen anytime soon—due in part to the fact that there’s “not one standard tool PTs are using because they are in so many different practice settings with so many different tools”—pressure from Medicare may force the therapy community to figure out a way to incorporate outcomes data into future payment reform efforts sooner rather than later. And that’s the vision for payment reform that leaders like Larry Benz, PTBA board member and president and CEO of Confluent Health, have touted all along: “We don’t believe that our value is measured in severity and intensity,” Benz said in this article. “We believe that our value is really part of what I often refer to in old military terms as the force multiplier, or the ability for physical therapy to not be looked at in a siloed class, but how...we impact concurrent upstream and downstream costs of an episode of care.”

Other Therapy-Related Proposed Rule Provisions

While the new CPT codes certainly are the highlight of the proposed 2017 fee schedule, there are a few additional items of interest to rehab therapists (for more details on these developments, check out this APTA summary and this CMS fact sheet):

  • CMS has identified 10 commonly used therapy codes that may be misvalued (see page 352 of the proposed rule for the full list of these codes). By correcting the valuations of potentially misvalued codes, CMS is aiming to reduce net expenditures by 0.51%—without resorting to across-the-board payment cuts.
  • Despite requests to add certain rehab therapy services—including evaluations and therapeutic procedures—to the list of covered telehealth services, CMS does not intend to do so, noting that because PTs, OTs, and SLPs “are not authorized practitioners of telehealth...we do not believe it would be appropriate to add [these services] to the list of telehealth services at this time.”
  • A new Diabetes Prevention Program (DPP)—which would provide “dietary coaching, lifestyle intervention, and moderate physical activity” to prediabetic individuals—could be introduced in 2018, according to the APTA summary. CMS requested comment on the proposed program and its enrollment and eligibility criteria.

Want to put in your two cents on any of these provisions? CMS will accept comments on the proposed rule until September 6, 2016. The agency will then address those comments in its final rule, which should be released in late fall. Visit this federal register page to submit a formal comment, or share your thoughts in the discussion section below.


Download your evaluation complexity quick guide.

Enter your email address below, and we’ll send you a super-simple chart to help you decide which level of complexity—and thus, which CPT code—is appropriate for any given patient evaluation.


KLAS award logo for 2024 Best-in-KLAS Outpatient Therapy/Rehab
Best in KLAS  2024
G2 rating official logo
Leader Spring 2024
Capterra logo
Most Loved Workplace 2023
TrustRadius logo
Most Loved 2024
Join the PXM revolution!

Learn how WebPT’s PXM platform can catapult your practice to new heights.

Get Started
two patients holding a physical therapist on their shoulders