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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:

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 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.

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]