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MEDICARE

MedPAC Recommendations for Changes to Medicare Outpatient Therapy Services

The Medicare Payment Advisory Commission (MedPAC) is an independent congressional agency established by the Balanced Budget Act of 1997 (P.L. 105—33) to advise the U.S. Congress on issues affecting the Medicare program. In addition to advising the Congress on payments to health plans participating in the Medicare Advantage program and providers in Medicare's traditional fee-for-service program, MedPAC is also tasked with analyzing access to care, quality of care, and other issues affecting Medicare. Two reports—issued in March and June each year—are the primary outlets for Commission recommendations.

Included in the last report, issued on June 15, 2013, are three chapters on reports mandated by the Congress in the Middle Class Tax Relief and Job Creation Act of 2012. The chapters included a chapter on Medicare payment for outpatient therapy services.

Mandated report: Improving Medicare's payment system for outpatient therapy services

Medicare's outpatient therapy benefit covers services for physical therapy, occupational therapy, and speech— language pathology. Outpatient therapy services are designed to restore function patients have lost due to illness or injury and to maintain improved function. These services can be beneficial when necessary but may be subject to inappropriate use.

[Note that this wording differs from that in the Social Security Act, which states that coverage is provided for services that are "reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member, ..." Treatment is covered for treatment of illness or injury — not just to improve function. RW] The report later notes "The prescribed course of therapy must be reasonable and necessary to treat the individual's illness or injury."

The Middle Class Tax Relief and Job Creation Act of 2012 required the Commission to study therapy services provided under Medicare Part B and make recommendations for reforming Medicare's payment system for outpatient therapy. The legislation also directed the Commission to examine: (1) how to better document patients' functional limitations and severity of condition and thus better assess patients' therapy needs and (2) private sector initiatives to manage outpatient therapy.

In 2011, Medicare spending on outpatient therapy totaled $5.7 billion for 4.9 million beneficiaries. There are two annual spending limits (caps) on outpatient therapy services per beneficiary to restrain excessive spending and utilization. There is one cap for physical therapy and speech—language pathology services combined and another cap for occupational therapy services. Each cap equals $1,900 in 2013. A broad exceptions process allows providers to deliver services above either spending cap relatively easily, limiting the effectiveness of the caps.

A manual review process was implemented in October 2012 for beneficiaries whose annual spending on physical therapy and speech—language pathology services combined or on occupational therapy exceeds $3,700. However, the manual review process does not apply to the majority of beneficiaries who exceed the caps. While the caps are permanent by statute, the exceptions process expires periodically under current law unless explicitly reauthorized by the Congress.

Medicare lacks clear guidelines to determine the appropriate frequency, type, and duration of services for patients needing outpatient therapy. Further, Medicare's physician oversight requirements for outpatient therapy are relatively weak. Due to the lack of comprehensive coverage guidelines and effective mechanisms to control volume, the use of outpatient therapy varies widely across the country. Medicare spending on outpatient therapy users in the highest spending areas of the country is five times more than that in the lowest spending areas of the country, even after controlling for differences in patients' health status.

In Chapter 9 of the report, the Commission makes three recommendations that are intended to decrease inappropriate use of outpatient therapy services and to provide the program with essential data on patients' conditions, services they received, and outcomes. The recommendations would improve payment accuracy by fully accounting for the efficiencies of a single provider delivering multiple therapy services to a patient on the same day, increase physician oversight of outpatient therapy regimens, and provide physicians and therapy practitioners with clear guidance regarding when such services are medically indicated and the outcomes that should be expected. The recommendations also lay out a rigorous review process designed to minimize the potential for abuse of the outpatient therapy benefit while giving beneficiaries who need higher levels of outpatient therapy the means to obtain it.

The Commission's recommendations would increase Medicare spending for outpatient therapy services relative to a policy of hard therapy caps (i.e., caps with no exceptions). However, hard therapy caps would decrease access to therapy services not only for those who might otherwise receive questionable levels of therapy but also for those whose medical conditions appropriately warrant high levels of therapy services.

The following recommendations are found in Chapter 9. Mandated report: Improving Medicare's payment system for outpatient therapy services:

9-1 The Congress should direct the Secretary to:
reduce the certification period for the outpatient therapy plan of care from 90 days to 45 days, and
develop national guidelines for therapy services, implement payment edits at the national level based on these guidelines that target implausible amounts of therapy, and use authorities granted by the Patient Protection and Affordable Care Act of 2010 to target high-use geographic areas and aberrant providers.

9-2 To avoid caps without exceptions, the Congress should:
reduce the therapy cap for physical therapy and speech—language pathology services combined and the separate cap for occupational therapy to $1,270 in 2013. These caps should be updated each year by the Medicare Economic Index.
direct the Secretary to implement a manual review process for requests to exceed cap amounts, and provide the resources to CMS for this purpose.
permanently include services delivered in hospital outpatient departments under therapy caps.
apply a multiple procedure payment reduction of 50 percent to the practice expense portion of outpatient therapy services provided to the same patient on the same day.

9-3 The Congress should direct the Secretary to:
prohibit the use of V codes as the principal diagnosis on outpatient therapy claims, and
collect functional status information on therapy users using a streamlined, standardized, assessment tool that reflects factors such as patients' demographic information, diagnoses, medications, surgery, and functional limitations to classify patients across all therapy types. The Secretary should use the information collected using this tool to measure the impact of therapy services on functional status, and provide the basis for development of an episode-based or global payment system.

Definition of outpatient therapy

Outpatient therapy services include three separate categories of clinical services that aim to improve and restore function that patients have lost after an illness or injury and to help patients maintain improved function: physical therapy, occupational therapy, and speech— language pathology services.

Physical therapy—Restore and maintain physical function and treat or prevent further impairments that result from disease or injury.

Occupational therapy—Restore and maintain the ability to conduct activities of daily living, such as bathing and dressing, and instrumental activities of daily living, such as food preparation and household management.

While outpatient therapy can improve outcomes for patients with certain conditions, the challenge for Medicare is ensuring that therapy services are delivered to the patients who will benefit from them. The Commission believes that Medicare needs to gather more clinical data on outcomes to better determine who needs therapy services and the relative effectiveness of their treatment.

The current payment system has strong incentives to provide more therapy services and few controls in place to check inappropriate use. In addition, Medicare pays for these services without information pertaining to their outcomes. Over the long term, Medicare could consider improving the way it pays for therapy by bundling therapy with episodes of care and tying payments to a patient's functional improvement.

CMS has recognized three instruments for providers to document physical and occupational therapy:
Outpatient Physical Therapy Improvement in Movement Assessment Log (OPTIMAL),
Activity Measure for Post-Acute Care (AM—PAC).

CMS has also recognized the National Outcomes Measurement System (NOMS) to measure the functional status of speech—language pathology patients. CMS has not explicitly endorsed or required any of them for the purposes of collecting functional status measures.

The three tools recommended for physical and occupational therapy assessment vary in how extensively they are used and in their assessment methods.
OPTIMAL (for physical therapy) assesses patients with musculoskeletal conditions in outpatient settings. It assesses a patient's ability and confidence in performing 21 mobility actions such as standing, walking, bending, and climbing stairs (Guccione et al. 2005).
FOTO, a robust computer-adaptive tool, also assesses a patient's functional status and improvement, as well as the number of visits needed for a specific functional improvement. The predictive model for therapy needs under FOTO considers patients' age, sex, diagnosis, impairment, acuity, severity, and surgical history to estimate the number of visits and expected functional improvement given a specified duration. We found that some private benefit managers (vendors that contract with health plans to manage their outpatient therapy benefits) use FOTO because of its ease of use.
The AM—PAC tool also uses computer-adaptive technology to assess a patient's ability to perform three types of physical, personal, and instrumental activities as well as applied cognitive activities (Haley et al. 2006)

AM—PAC, FOTO, and OPTIMAL tools assess function more accurately for physical and occupational therapy patients than for speech—language pathology patients (Ciolek and Hwang 2010). The NOMS tool for speech—language pathology measures function in patients with substantial speech, cognitive, or communication impairments. The tool assesses up to 15 functional communication measures, such as memory, spoken language comprehension and expression, and swallowing difficulty. Assessments based on the NOMS tool help determine severity, complexity, and treatment goals based on demographic information, diagnoses, and level of functional communication and swallowing.

[None of the above tools is sensitive enough to measure lymphedema treatment outcomes prior to the point where the lymphedema has resulted in a functional disability. See files on Functional Outcomes Measures elsewhere on this web site. RW]