Knowledge Base Article

“The difference between the almost right word and the right word is really a large matter--it's the difference between the lightning bug and the lightning.” Mark Twain, 1888

A Medicare patient comes to the hospital and has outpatient knee surgery that classifies to a Level 3, 4, or 5 Musculoskeletal procedure. The physician orders physical therapy (PT) to work with the patient and the therapist performs some therapeutic exercises with the patient prior to discharge.

Another Medicare patient with syncopal episodes and general weakness comes to the hospital emergency department and is placed in observation overnight. The physician orders physical therapy for the patient’s weakness. PT performs therapeutic exercises and some gait training with the patient prior to discharge. .

In both of the above scenarios, the services performed by the physical therapist have historically been reported to Medicare with Physical Medicine and Rehabilitation CPT codes (such as CPT 97110 for therapeutic exercise) with revenue code 0420. So these are therapy services, aren’t they? The answer might surprise you.

According to a paragraph in the July 2016 OPPS Update, these are “non-therapy outpatient department services (that are similar to therapy services)” because they are adjunctive to a comprehensive APC (C-APC) with a status indicator of “J1” or “J2.” Effective for claims received on and after July 1, 2016, for dates of service on and after January 1, 2015, these services are no longer to be reported with therapy CPT codes or therapy revenue codes when they are reported on a Medicare claim that will be paid under a C-APC. They are to be reported without a CPT code and with revenue code 0940 (Other Therapeutic Services). Revenue code 0940 will cause these “non-therapy” services to have a status indicator of “N” and payment will be packaged into the C-APC payment. This applies to services described by the Social Security Act as outpatient physical therapy, outpatient speech-language pathology and outpatient occupational therapy furnished either by therapists or non-therapists and included on the same claim as a comprehensive APC procedure or service.

As a reminder, C-APCs may be comprehensive APC procedures (SI of “J1”) where Medicare makes one comprehensive payment for a primary procedure and all adjunctive services associated with that procedure. A new category of C-APC was created for 2016 for a specific combination of services assigned to the Observation Comprehensive APC 8011 (SI = J2) where again only one comprehensive payment is made for the combination of services and all adjunctive services.

Hospitals only have a short time to develop a process to comply with this new Medicare billing requirement. One option is to create a pre-bill edit that holds claims with therapy revenue codes (0420, 0430 and 0440) when billed on the same claim with HCPCS codes with an SI of “J1” or with an observation HCPCS code (G0378). Then all charges reported with the therapy revenue codes could be combined and reported under revenue code 0940.

However hospitals decide to comply with the new requirement, they need to make sure the fix is in place by July 1st. If not, they may be confusing “therapy” and “non-therapy (similar to therapy)” services. And that’s bad, because it is not what it seems.