For years, rehab therapists have had a love-hate relationship with Medicare’s therapy cap exceptions process. On the one hand, therapists often see it as a barrier to providing patients with the care they need; on the other, it’s the only means for therapists to continue treatment after a Medicare patient has exhausted his or her annual payment allotment for therapy services (a.k.a. the therapy cap). Reform of the cap has been a long time coming, and yet, year after year Congress has instead opted to merely re-extend the exceptions process. At the end of 2013, lawmakers issued a temporary extension to the cap with plans to reconvene in 2014 to revisit the issue. But that extension is set to expire March 31, and a permanent solution has yet to emerge from Capitol Hill.

The Story of the Cap and its Exceptions Process

Introduced as part of the Balanced Budget Act (BBA) of 1997, the therapy cap places a yearly limit on Medicare’s coverage of outpatient therapy services. In 2014, that amount is $1,920 for occupational therapy and an additional $1,920 for physical therapy and speech therapy, combined. The cap applies to all Part B outpatient therapy settings and providers, including private practices, skilled nursing facilities, home health agencies, outpatient rehabilitation facilities, comprehensive outpatient rehabilitation facilities, and hospital outpatient departments.

This limit was always meant to be a “hard cap.” But in 1999—the first year an absolute cap was set to go into effect—and every year since, Congress has acted to prevent the enforcement of a true cap. And that’s how the exceptions process came to be: since 2005, therapists have been allowed to continue treatment above the therapy cap as long as their services qualify as “medically necessary” according to Medicare.

Eventually, the exceptions process evolved into a two-tiered system in which therapists can continue treating past the cap up to a second cap threshold—$3,700 in 2014—as long as they attest that ongoing therapy is medically necessary as justified by supporting documentation in the patient’s medical record. (They do this by attaching the KX modifier to any post-cap claims they submit to Medicare.) However, providing services beyond this secondary threshold involves a tedious manual medical review process that, according to this report from the Center for Medicare Advocacy, “deters many providers from processing Exceptions, thus limiting beneficiary access to needed therapy services.” Essentially, the $3,700 threshold “serves as a de facto absolute cap for many beneficiaries,” meaning “many beneficiaries who need ongoing therapy go without therapy services altogether.”

This is especially true for individuals with chronic conditions who require care on an ongoing, long-term basis. While Medicare has made strides to ensure coverage for these individuals—most recently as part of a court-ordered effort to dispel the myth of patient improvement as a condition of reimbursement—conflicting Medicare policy verbiage makes it unclear as to whether Medicare will apply this rule above the cap. Specifically, Subsection A of the Medicare Claims Processing Manual reads: “...atypical use of the automatic exception process may invite contractor scrutiny. Particular care should be taken to document improvement and avoid billing for services that do not meet the requirements for skilled services, or for services which are maintenance rather than rehabilitative treatment.”

If there’s one thing that lawmakers and therapy providers can agree on, it’s that there has to be a better—and less confusing—alternative to the therapy cap exceptions process. But while government leaders tend to err on the side of cost savings (i.e., putting a total kibosh on treatment above the cap), providers are calling for a system that will ensure patients always have access to the therapy services they need. Of course, the definition of “need” is an endlessly debatable topic, as discussed in this blog poston medical necessity. With so many different points of view, it’s no wonder the proposals on the table vary so widely, with possibilities ranging from doing away with the cap entirely to making it even more restrictive.

Here’s a breakdown of the proposed solutions included in the Center for Medicare Advocacy report referenced above:

Senate Finance Committee: Repeal and Replace the Cap

The Senate Finance Committee (SFC) introduced legislation that would eliminate the cap and replace it with a medical review program involving prior authorization of services. With this system, the Secretary of Health and Human Services would be responsible for identifying services for medical review based on factors like “outlier billing patterns and newly enrolled providers.”

According to the report, the SFC still needs to flesh out the details of how this system would work, but as the report states, “it is clearly an acknowledgement that the current therapy cap policy is broken and needs to be repealed, along with instituting a more targeted approach toward medical review.”  

MedPAC Recommendation: Lower the Cap

The Medicare Payment Advisory Commission (MedPAC) recommended reducing the therapy cap from $1,920 to $1,270 and instituting a catch-all exceptions process akin to a “more streamlined” version of the current manual medical review process. As the report explains, “In short, MedPAC's solution to beneficiaries' current challenges accessing ongoing, medically necessary therapy services is to lower the therapy cap, eliminate the automatic review and apply manual medical review to all claims that exceed the cap.” The author goes on to suggest the impact of this proposal, if adopted, would be “limiting Medicare expenditures...while ignoring the welfare of Medicare beneficiaries.”


If you’re a rehab therapist who treats Medicare patients, the outcome of the therapy cap saga will directly affect the way you provide—and receive reimbursement for—your services. So make sure your voice is heard before it’s too late. The APTA has set up this page to ensure that members and nonmembers alike can take action. Simply follow the instructions under the “Take Action” section at the bottom of the page.

PT Billing Secrets: 5 Things Payers Don’t Want You to Know - Regular BannerPT Billing Secrets: 5 Things Payers Don’t Want You to Know - Small Banner
  • CMS’s Final Bow: The 2019 Final Rule Image

    articleNov 5, 2018 | 8 min. read

    CMS’s Final Bow: The 2019 Final Rule

    Last week, the Centers for Medicare and Medicaid Services (CMS) published its 2019 final rule . Clocking in at just over 2,300 pages, the final rule isn't exactly a light read—especially because the legal lingo can be harder to interpret than Shakespearean verse. Luckily, we have the script—with all its twists and turns—decoded and ready for you to review. Here's the synopsis of all the physical therapy, occupational therapy, and speech-language pathology Medicare changes for 2019: Out, …

  • articleNov 18, 2010 | 4 min. read

    What PTs Should Know About 2011 Final Rule Medicare Changes

    Some major changes are headed our way in terms of the 2011 Medicare Final Rule on the Physician Fee schedule and Other Policies to be effective January 1, 2011.  The Rule included a number of provisions that have impact on outpatient therapy services. The net effect of the policies could lead to payment reductions of approximately 30%. If you see Medicare patients and they impact your revenue, there are several things to pay attention to and deal …

  • 9 Most Common Medicare Misconceptions for PTs, OTs, and SLPs Image

    webinarSep 8, 2016

    9 Most Common Medicare Misconceptions for PTs, OTs, and SLPs

    To say that Medicare regulations are confusing is an understatement. But, it’s not just the barely-readable government gobbledygook that throws providers for a loop; it’s also the fact that the rules are always changing. If you treat Medicare patients, we’re willing to bet you’ve been tripped up by at least one of these common misconceptions—maybe without even knowing it. And that could leave a nasty bruise on your practice’s bottom line—especially if you ever find yourself at …

  • articleAug 28, 2013 | 7 min. read

    No Workarounds: Following the Rules of the Therapy Cap and the Importance of Solid Documentation

    If you’re like most rehab therapists, finding a letter from Medicare in your mailbox is enough to make your brow sweat and your heart skip a beat. With all of the regulations we have to follow—and the potential penalties associated with noncompliance—it’s no surprise that we have grown to fear Medicare. We’re afraid of doing something wrong. Or in some cases, we’re afraid of not getting paid. Thus, rather than defend our decisions, our expertise, and our …

  • Common Questions from our Modifier Open Forum Image

    articleJul 7, 2014 | 10 min. read

    Common Questions from our Modifier Open Forum

    Should I have my patients sign an advance beneficiary notice of noncoverage (ABN) just in case Medicare doesn’t pay? No, by having your patient sign an ABN, you are acknowledging that you do not believe that the services you are providing are either medically necessary or covered by Medicare. If you have an ABN on file, you should include a modifier GA or GX modifier on your claim so Medicare knows to deny the claim and assign …

  • Senate Recesses with No Decision on SGR Bill Image

    articleMar 31, 2015 | 3 min. read

    Senate Recesses with No Decision on SGR Bill

    Let the trepidation commence. The Sustainable Growth Rate (SGR) formula—which Medicare uses to calculate reimbursements—and the therapy cap are both officially in limbo. On March 26, the House of Representatives passed legislation that would repeal SGR and extend the therapy cap exceptions process for another two years. (As an aside, the bill did not include an ICD-10 delay, so that transition is continuing as scheduled.) Enactment of that bill wouldn’t be the optimal outcome for rehab therapists, …

  • 2013 Medicare Therapy Cap FAQ Image

    articleFeb 4, 2013 | 6 min. read

    2013 Medicare Therapy Cap FAQ

    In January, WebPT released the Medicare Allowable Fee Schedule in preparation for the new Medicare Therapy Cap Alerts we’ll launch this month. In short, this new feature will allow you to reproduce your Allowable Fee Schedule within WebPT as published by Medicare. This fee schedule will inform a tracking tool and subsequent alerts so you can see how much of the therapy cap your patients have accrued using your services. As a result of this launch, we’ve …

  • articleNov 19, 2013 | 4 min. read

    Therapy Cap Recap

    If you’re a rehab therapist who treats Medicare patients, you’ve got a bevy of rules and regulations to follow and knowing all of them inside and out is a tall order, to say the least. If decoding government legalese isn’t really your thing, don’t worry—we’ve dedicated this entire month to serving up a smorgasbord of digestible, easy-to-understand guides on the important Medicare policies that apply to you. On today’s menu: the therapy cap. As part of the …

  • articleFeb 18, 2013 | 4 min. read

    Top 5 Medicare Compliance FAQs

    Navigating the murky waters of Medicare can be as scary as finding yourself on a lifeboat in the middle of the ocean with a tiger on board —well, maybe not just as scary, especially if you have WebPT to help. We’re filling this month’s blogs with all sorts of valuable and applicable information on everything there is to know about 2013 Medicare. But what better way to get up to speed than with some frequently asked questions. …

Achieve greatness in practice with the ultimate EMR for PTs, OTs, and SLPs.