Six Years of Frozen Outpatient Rehab Payment Rates. CMS, Really?

Is it reasonable to expect hospitals to have a six-year payment rate freeze for outpatient hospital rehabilitation services?

This article appears in the September/October 2018 edition of HealthLeaders magazine.

The pace and scope of change in healthcare affects many hospital services. In particular, hospital outpatient rehabilitation services is one such affected. 

Physical, occupational, and speech therapy services live under the umbrella of hospital outpatient rehabilitation services, provided by credentialed professionals under treatment plans ordered by clinicians that define the type, frequency, and duration of services.

Hospital leaders may not be aware that the Medicare fee-for-service Part B payment for these outpatient therapy services is not through the hospital Outpatient Prospective Payment System (OPPS), but rather through the Medicare Physician Fee Schedule (MPFS) payment system.

It is true that these services are billed on hospital claims under the hospital’s national provider identification (NPI) number, but because the Medicare statute has a separate and unique benefit for outpatient rehabilitation services, the payment rate applicable to both freestanding therapy offices or clinics and to outpatient hospitals is via the MPFS.

Pursuant to MACRA, the MPFS payment rates are "frozen," meaning they do not receive any inflationary update, between 2020 and 2026. Instead, in order for clinicians and therapists to earn year-over-year increases for their services outside of increasing the number of patients and/or services, they will have to report under one of the two tracks provided by the Quality Payment Program (QPP) established by MACRA—that is, either report under the Merit-based Incentive Payment Program, or MIPS, or be qualified under an Advanced Alternative Payment Model, or APM.

In fact, unless a therapist meets the low-volume threshold exception, his or her MPFS payments will be reduced by 5% in 2020, 7% in 2021, and 9% annually thereafter if the therapist does not satisfactorily report. The inflationary updates that resume in 2026 for those that do not participate in the QPP is a measly 0.25% after the six years of the payment freeze.

It appears that CMS does not anticipate applying these annual reductions to therapy MPFS payments paid to hospitals, but this is unclear as CMS does not address therapy services paid to outpatient hospitals in the proposed rules.

The 2019 MPFS proposed rule has a provision for therapists who are in private practice to participate in MIPS, but there is no discussion of how hospital-employed therapists can participate.

Furthermore, even if CMS had thought to address how hospital-employed therapists could participate, the problem is that therapist NPIs are not reported on hospital claims when hospitals bill for their services.

This is likely an example of the unintended consequences of legislation impacting hospitals and CMS not thinking through all the areas that may be affected. It was important for hospital leaders to comment to CMS (the comment period closed on September 10) and question if it was reasonable to expect hospitals to have a six-year payment rate freeze for outpatient hospital rehabilitation services.

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