CMS Clarifies 2013 Manual Medical Review and Critical Access Hospital Therapy Cap Participation

February 25, 2013

CMS continues to offer clarification for the provisions of the American Taxpayer Relief Act that extended the manual medical review process for therapy claims over $3,700 and expansion of certain therapy mandates to Critical Access Hospitals (CAHs.)

Therapy Services in CAHs

A meeting with CMS officials confirmed that all therapy services performed in CAHs will be applied to the total therapy cap dollar amount in 2013. There are some provisions to this implementation.

  • The dollar amount accrued toward the cap will be converted to fee schedule rates, not calculated CAH rates. This conversion will be automatic in the system and providers will not need to calculate the separate rates to determine the total therapy dollars for their beneficiaries. More information on how to determine the beneficiary therapy dollars accrued is posted on ASHA's Medicare Administrative Contractor (MAC) Resources for Therapy Claims site.
  • The therapy cap and the exceptions process, utilizing the -KX modifier for all claims over $1,900, will not be applied to CAHs in 2013. Therapy services can continue to be performed in CAHs above the $1,900 therapy cap without an exceptions process.
  • The $3,700 manual medical review process will not by applied to claims from CAHs for outpatient therapy services. The Medicare Administrative Contractors reserve the right to perform medical reviews on all claims, but claims from CAHs will not be automatically stopped for this purpose.
  • The therapy services claims-based functional reporting, utilizing G-codes and severity modifiers, does apply to CAHs.

Manual Medical Review

CMS released interim guidance for the manual medical review process that was initially mandated in October 2012 and extended for 2013 therapy claims reaching $3,700 for combined speech-language pathology and physical therapy services. For 2013, the MACs have been instructed to conduct prepayment review on the claims reaching the $3,700 threshold and to complete such reviews within 10 days, until a long-term strategy is developed. Prepayment review occurs when a reviewer makes a claim determination before claim payment has been made.

The 2013 legislation also extended the use of an Advanced Beneficiary Notice (ABN), which CMS has not issued additional guidance on. An ABN establishes patient liability for payment for services that do not meet Medicare coverage criteria and must be signed by the patient prior to providing the service in order to collect payment. For more information on ABN, see the CMS Advance Beneficiary Notice of Noncoverage (ABN), Form CMS-R-131, Updated Manual Instructions [PDF]. More information regarding prepayment is posted on the MACs' website.


The manual medical review process for claims reaching $3,700 was initiated in the Middle Class Tax Relief and Jobs Creation Act, and was extended in the American Taxpayer Relief Act for 2013. The process implemented by CMS in 2012 proved to be problematic for both providers and Medicare, and a more efficient, long-term solution is being developed for 2013. Additionally, for the first time, CAHs are subject to some of the provisions of the therapy cap, due to the 2013 legislation. CMS has indicated that, like the extension of the therapy cap provisions to outpatient hospital departments in 2012, CAHs should expect that all therapy cap provisions may be extended to CAHs in 2014.

ASHA Resources

Manual Medical Review Process for Therapy Claims

Medicare Part B Therapy Cap Exceptions Process

Claims-Based Outcomes Reporting for Medicare Part B Therapy Services

For more information or questions, contact the Health Care Economics and Advocacy team at

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