Senators advance bill to repeal Medicare outpatient therapy caps, physician payment formula

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Sen. Orrin Hatch (R-UT)
Sen. Orrin Hatch (R-UT)

The Senate Finance Committee has advanced a bill that would repeal the Medicare Part B cap on therapy reimbursements and replace it with a new outpatient therapy payment system.

Long-term care providers have lambasted the current system, which requires Medicare contractors to manually review claims in excess of a set annual amount. Providers and government oversight agencies have reported that this system has created confusion and a backlog of unprocessed claims.

Under the Senate bill, the manual review system would be replaced by a “prior authorization medical review” process at the beginning of 2015. This change would entail replacing the current G-Codes system for collecting standardized data elements, according to a mark-up of the legislation that was analyzed by the National Association for the Support of Long-Term Care.

The PAMR also would implement claims reviews on a more targeted basis, considering factors such as how a provider's billing patterns compare to peers'. Providers would be able to avoid the PAMR process if they have a low denial rate. And, as of 2017, reviews could be rolled back if the improper payment rate for outpatient therapy is well below the rate for Medicare fee-for-service generally.

The outpatient therapy measure is part of a bill that also would repeal the broken Sustainable Growth Rate system for setting Medicare physician pay rates. The House Ways & Means Committee passed a similar SGR-repeal bill Thursday.

The SGR was intended to peg doctors' payments to general economic growth. However, the system has been a failure, leading Congress to routinely pass “doc fixes” to prevent physician payment reductions. These fixes have had to be offset by spending cuts elsewhere in the Medicare program, sometimes taking a bite out of long-term care reimbursements.

A financing mechanism has not been determined for the bills that will now be considered by the full House and Senate. Sen. Orrin Hatch (R-UT), ranking member of the Senate Finance Committee, emphasized that offsets will be found.

“Let me say it in no uncertain terms: This bill will be offset. Period,” Hatch said.

With Congress set to conclude its last 2013 session today, it is unlikely that either SGR-repeal measure will be passed before the end of the year. To prevent the reimbursement cuts scheduled to take effect after Dec. 31, lawmakers are likely to pass another short-term doc fix. This would also extend the current therapy caps exceptions process through March, according to NASL.