The following article was written by Zaven Sargsian from our law firm’s Salt Lake City office. The impact of this probe could be massive and certainly will affect many small businesses, which therefore impacts our law firm’s business. If you have any questions about the probe please call Zaven at (801) 478-8080 at any time.
In 2011, Medicare spending on outpatient therapy totaled $5.7 billion, with services provided to 4.9 million Medicare beneficiaries. That year, about 45,000 physical therapists, occupational therapists, and speech-language pathologists billed Medicare for outpatient therapy services. Of the total therapy services provided, about 11 percent was delivered by home health agencies.
i. Section 603 of the American Taxpayer Relief Act
Then in 2013, as a compromise to avoid the so-called fiscal cliff, the U.S. Congress enacted and President Obama signed it into law the American Taxpayer Relief Act of 2012 (“ATRA”). As the name suggests, the ATRA was primarily a tax bill. But like other acts of Congress, the bill contained enactments and amendments altering provisions unrelated to tax relief.
One such provision was Section 603 of the ATRA. That section, entitled “Payment for outpatient therapy services,” made an amendment to Section 1833(g) of the Social Security Act. In particular, subsection (B)(i) was added, which states:
With respect to outpatient therapy services furnished beginning on or after January 1, 2013, and before January 1, 2014, for which payment is made . . . the Secretary shall count toward the uniform dollar limitations described in paragraphs (1) and (3) and the threshold described in paragraph (5)(C) the amount that would be payable . . . .
What this amendment did was to extend the “exception process” to the annual caps on therapy services. The annual caps—which were increased in 2013 according to the Medicare Economic Index—are set at $1,900.00. There is one cap for physical therapy and speech-language pathology services combined, and another cap for occupational therapy services. In other words, each is separately capped at $1,900.00.
Without the ATRA amendment, the caps would have been enforced “with no process for beneficiaries to obtain additional outpatient therapy beyond the caps.” In other words, if Section 603 was not enacted, then starting January 1, 2013, any therapy resulting in charges more than the total annual threshold of $3,700 would have been automatically denied payment.
ii. How the exception process works
To exceed these caps, a HHA would need to go through the exception process. The exception process provides that “[a]ll covered and medically necessary services qualify for exceptions to caps.” CMS further states that all requests for “exception are in the form of a KX modifier added to claim lines.” But CMS warns that “atypical use of the automatic exception process may invite contractor scrutiny.” 
Initially, the clinician is responsible for determining if the beneficiary qualifies for an exception. But, at the end of the day, the “clinician’s opinion is not binding on the Medicare contractor who makes the final determination concerning whether the claim is payable.” Ultimately, CMS can deny a requested exception from the cap because the beneficiary does not meet “Medicare criteria for medical necessity to receive” additional services.
iii. CMS considers therapy services vulnerable to provider abuse
Although the exception process was extended, Medicare still views therapy related billing “vulnerable to abuse.” CMS considers therapy services as lacking clear guidelines “to determine the appropriate frequency, type, and duration of outpatient therapy services.” As a result, there is a mandatory review process. According to the review process, CMS “must review claims submitted on behalf of beneficiaries whose use of outpatient therapy services exceeded $3,700 in spending for physical therapy and speech-language pathology services combined or for occupational therapy services separately.”
What’s more, some states are subject to a “probe.” On August 29, 2013, CGS (a Celerian Group Company), a CMS contractor, announced that it will be conducting a “widespread home health probe” in Utah. CGS stated that based on its analysis of billing data, “Utah [has] been shown to have greater aberrancies,” including percent of claims with “20+ therapy visits.” In actuality, the catalyst of the “probe” appears to be an OIG report, released in 2012, indicating that a high percentage of HHAs in Utah have “Questionable Billing” practices—with around 40% of all Utah HHAs identified. The other states were Florida and Texas.
The stated goal of CGS’s review is to “reduce errors by preventing the initial payment of claims that do not comply with Medicare’s coverage, coding, payment and billing practices.” CGS will therefore “select claims with 10 or more therapy visits” to review—called the Additional Development Request (ADR) Process. CGS encourages Utah HHAs to “take action now to ensure that” the ADR process, in effect, goes smoothly. CGS gives steps HHA can take. Ultimately if CGS, after its review, denies payment or attempts to clawback a payout, and the HHA disagrees, the HHA can appeal by “using the Medicare Appeals Process.”
 See Mandated report: Improving Medicare’s payment system for outpatient therapy services, MedPac at Ch. 9, p. 230 (June 2013), available athttp://medpac.gov/chapters/Jun13_Ch09.pdf.
 American Taxpayer Relief Act (enacted Jan. 1, 2013), available athttp://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf
 Social Security Act, 42 U.S.C. § 1395u(i)(3) (2012).
 See MedPac at p. 230.
 Medicare Claims Processing Manual, Ch. 5, Section 10.3(A), available athttp://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c05.pdf.
 Medicare Claims Processing Manual, Pub. 100-04, chapter 29, available athttp://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c29.pdf.
 See MedPac at 238.
 CGS, Widespread Home Health Probe – Utah Home Health Providers (Aug. 29, 2013), available at http://www.cgsmedicare.com/hhh/pubs/news/2013/0813/cope23084.html.
 Inappropriate and Questionable Billing By Medicare Home Health Agencies, Dept. Health & Human Serv’s at Appx. A (Aug. 2012), available athttps://oig.hhs.gov/oei/reports/oei-04-11-00240.pdf.
 See Widespread Home Health Probe – Utah Home Health Providers.
 Additional Development Request (ADR) Process, CGS (last visited Sept. 17, 2013), available at http://www.cgsmedicare.com/hhh/medreview/adr_process.html