Healthcare News & Insights

RACs now reviewing outpatient therapy claims

Physical therapy


Your hospital should get ready to see more recovery audit contractors (RACs). As of April 1, as mandated by the American Taxpayer Relief Act of 2012 (ATRA), RACs will be manually reviewing outpatient therapy claims exceeding $3,700.

ATRA extends the Medicare Part B Outpatient Therapy Cap Exceptions Process through Dec. 31, 2013. The cap applies to all Part B outpatient therapy settings and providers including:

  • hospital outpatient departments (HOPDs)
  • comprehensive outpatient rehab facilities (CORFs)
  • rehab agencies/outpatient rehab facilities (ORFs)
  • home health agencies
  • Part B skilled nursing facilities
  • Offices of physicians and certain nonphysician practitioners, and
  • therapists’ private practices.

The cap for occupational therapy (OT) is $1,900 for 2013, and the combined cap for physical therapy (PT) and speech-language patherology services (SLP) is also $1,900 for 2013. Per beneficiary, services above $3,700 for PT and SLP combined and/or $3,700 for OT services are subject to manual medical review. Of course there are exceptions to the therapy cap for “reasonable and necessary therapy services,” according to the Centers for Medicare & Medicaid Services (CMS).

Payment reviews

For dates of service from Jan. 1, 2013 to March 31, 2013, Medicare administrative Contractors (MACs) will conduct prepayment reviews for claims reaching the monetary threshold. And MACs have 10 days to do their manual reviews.

However, for all claims processed on or after April 1, 2013, RAC will complete two kinds of reviews: prepayment and postpayment.

For prepayment reviews:

  • Claims submitted in the 11 Recovery Audit Prepayment Review Demonstration states will be reviewed on a prepayment basis. These states include Florida, California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouri.
  • In these states, the MAC will send an additional development request (ADR) to the provider requesting the additional documentation be sent to the RAC (unless another process is used by the MAC and the RAC).
  • The RAC will conduct a prepayment review within 10 business days of receiving the additional documentation and will notify the MAC of the payment decision.

For postpayment reviews:

  • RACs will conduct immediate postpayment review in the remaining 39 states.
  • In these states, the MAC will flag the claims that meet the criteria, request additional documentation and pay the claim. The MAC will send ADR to the provider requesting the additional documentation be sent to the RAC. The RAC will conduct postpayment review and will notify the MAC of the payment decision.


With the money-grubbing reputation RACs have had in the past, it’s important for your hospital’s therapy providers to track RAC requests and monitor the process so no deadlines are missed.

In addition, it’s also vital to implement an effective monitoring and auditing process of your facility’s therapy claims, especially for medical necessity on claims over the therapy cap.

(Photo Credit: <a href=””>Walk The Line To SCI Recovery</a> via <a href=””>Compfight</a> <a href=”″>cc</a>)

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