Regulatory Changes for 2017


Medicare Physician Fee Schedule Update for Calendar Year 2017

By Alpha Lillstrom Cheng, JD, MA
March 3, 2017

The Centers for Medicare & Medicaid Services (CMS) is responsible for developing, proposing, and finalizing regulations in order to implement health legislation that has been passed by Congress and signed into law. The regulatory process consists of publishing proposed rules and requests for information in order to allow for public review and to receive stakeholder input in the form of “comments.” On behalf of the over 4,200 members, the Private Practice Section (PPS) regularly analyzes and responds to regulatory initiatives that pertain to private practice physical therapy.

CMS has expressly undertaken a significant change in reimbursement; moving away from volume, toward value. This means transitioning away from the standard fee-for-service model and toward payment on the basis of quality. As a result, regulatory proposals relevant to the practice of and payment for all services including physical therapy are increasing in number and complexity. This year three such rules will go into effect. First are changes to the Medicare Physician Fee Schedule that will result in payment adjustments for care provided by physical therapists and others paid under the fee schedule. This article will point out those changes and the impact they have on therapists in private practice. Future articles will provide similar analysis of two additional final rules: the rule to expand the Comprehensive Care for Joint Replacement (CCJR) bundling program and to create a similar model for surgical hip and femur fracture treatment (SHFFT) as well as the rule to implement the Quality Payment Program (QPP) that rewards value and outcomes through one of two paths: the Merit-based Incentive Payment System (MIPS) or participation in Advanced Alternative Payment Models (APMs).

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Medicare Physician Fee Schedule
The CMS annual update of the Medicare Physician Fee Schedule (MPFS) for Calendar Year (CY) 2017 was effective January 1, 2017.1

Payment Rate
For the time being, fee-for-service remains the basis of reimbursement models, and the MPFS is a key reference for payment well beyond the Medicare program. Payments under the MPFS are based on the resources typically used to furnish the service in question. Relative value units (RVUs) are applied to each service as part of the mechanism used to calculate provider work and practice expense. These RVUs become payment rates through the application of a conversion factor that is updated each year. The 2017 Medicare Conversion Factor is 35.8887. This is slightly higher than 2016.

Evaluation Codes
Before CMS proposed modifications for the 2017 MPFS, the American Medical Association (AMA)’s Current Procedural Terminology (CPT) Code Editorial Review Panel deleted CPT codes 97001 and 97002 and created four new CPT codes (97161–97164) to describe physical therapy evaluation procedures. CMS adopted these recommendations. In place of what had been the single CPT code 97001, CMS will use three new codes to categorize physical therapy evaluations into three levels of complexity—low, moderate, and high.2 The new code 97161 will represent the “low” complexity evaluation, which is expected to take 20 minutes of a therapist’s time with a patient and/or their family.3 The evaluation for cases of “moderate” complexity (91762) is estimated to take 30 minutes, while the highly complex cases (91763) are anticipated to require 45 minutes of a therapist’s time in order to complete an evaluation.4 Reevaluation of the established physical therapy plan of care will use the fourth new code (97164) instead of the previous code (97002).5 Table 23 (see sidebar on p.20) in the final rule includes the long descriptors and the required components of each of the four new CPT codes for the physical therapy services.6

Despite the comments of PPS and other stakeholders, which strongly encouraged CMS to follow the recommendation made by the AMA’s Relative Value Scale Update Committee (RUC) and the Health Care Professionals Advisory Committee (HCPAC) that the RVUs in CY 2017 for these new stratified codes be 0.75 for low, 1.18 for moderate, and 1.5 for highly complex evaluations, the final rule stated that all three codes will be priced as a group. Instead of being valued individually to reflect the level of complexity, each of the three levels of evaluation will have an RVU of 1.20.7 In contrast, the RVU of the reevaluation code for physical therapy was increased in the final rule from the proposed 0.6 to 0.75.8

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Potentially Misvalued Codes
CMS has the authority to periodically reassess the value of “codes that account for the majority of spending [on therapy] under the physician fee schedule.” 9 In the 2017 MPFS final rule, CMS identified 10 potentially misvalued codes commonly used in physical therapy: electrical stimulation (97032), ultrasound therapy (90735), therapeutic exercises (97110), neuromuscular reeducation (97112), aquatic therapy/exercises (97113), gait training therapy (97116), manual therapy techniques (97140), therapeutic activities (97530), self-care management training (97535), and electrical stimulation other than wound (G0283).10 CMS acknowledged that physical therapy organizations are working with the AMA Relativity Assessment Workgroup to survey and submit changes to certain CPT codes on the misvalued code list and expect the valuation analysis and recommendations from the AMA RUC in February 2017.11 As of this writing, that analysis and recommendations have not been filed. CMS officials have indicated that they plan to discuss valuation of the 10 potentially misvalued codes in the 2018 MPFS update.

2017 Therapy Cap Update
The Medicare outpatient therapy cap amounts are updated each year. The CY 2017 therapy cap was set at $1,980.12 Since January 1, 2006, CMS has been empowered to provide an exception to the therapy cap. That exceptions process has been extended multiple times through subsequent legislation including the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). CMS’s current authority to provide an exception to the cap on therapy expires on December 31, 2017.

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Since 2012, CMS has also been required to apply a manual medical review process to therapy claims when a beneficiary’s outpatient physical therapy and speech-language pathology services incur combined expenses that exceed a threshold amount of $3,700.13 As a result of MACRA, additional flexibility was added so that not all claims exceeding the monetary threshold are subject to a manual medical review. Instead, CMS is permitted to do a targeted medical review for those claims filed by therapy providers with a high claims denial rate or who have atypical billing practices compared to their peers.14

In order to repeal the therapy cap, extend the exceptions mechanism, or maintain the manual medical review process, corrective legislation must be passed before each of these provisions expires on December 31, 2017. The popular bipartisan Medicare Access to Rehabilitation Services Act (H.R.807/S.253) was reintroduced on February 1, 2017. The House bill is sponsored by Representatives Erik Paulsen (R-MN), Ron Kind (D-WI), Marsha Blackburn (R-TN), and Doris Matsui (D-CA). Senator Ben Cardin (D-MD) is once again leading the bill in the Senate and is joined by Senators Susan Collins (R-ME), Bob Casey (D-PA), and Dean Heller (R-NV) serving as original cosponsors of the Senate bill. PPS members are urged to contact their representative and their senators asking them to put their full support behind this legislation. Moreover, your lobbyists encourage all private practice physical therapists to respond to legislative alerts as we once again lobby vigorously to repeal this arbitrary cap that is so harmful to our Medicare patients who are most in need of our services.

The payment for physical therapy services was marginally improved by the CY 2017 MPFS. The Medicare conversion factor increased slightly, and the therapy cap was raised by 20 dollars over last year. This year physical therapists are to use a new CPT coding system that acknowledges varying levels of complexity in patient evaluations; however, the payment rate maintains a single RVU for physical therapy evaluations and is not stratified to reflect the complexity of care. Only reevaluations received a small increase in reimbursement. CMS also used the MPFS to identify 10 commonly used physical therapy codes as “potentially misvalued” and suggested that the values for those codes will be changed through rulemaking that will take effect in 2018.

At the time of this writing, it remains unclear how the Department of Health and Human Services (HHS) and CMS will perform under the new Trump administration. Each administration uses the power of rulemaking to implement laws according to their own agenda and interpretation—within the confines of the law as drafted and the discretion given to the Secretary. Your PPS lobbyists will remain vigilant and engaged on how the regulations proposed will impact private practice physical therapists.


1. CMS-1654-F: Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY2017; Medicare Advantage Bid Pricing Data Release; Medicare Advantage and Part D Medical Loss Ratio Data Release; Medicare Advantage Provider Network Requirements; Expansion of Medicare Diabetes Prevention Program Model; Medicare Shared Savings Program Requirements,, pp. 80170.

2. There are three new codes, also stratified by complexity, to replace a single code, CPT code 97003, for occupational therapy (OT) evaluation.

3. Ibid., pp. 80337.

4. Ibid., pp. 80337.

5. Ibid., pp. 80337.

6. Ibid., pp. 80337.

7. Ibid., pp. 80334.

8. Ibid., pp. 80336.

9. Ibid., pp. 80338.

10. Ibid., pp. 80339.

11. Ibid., pp 80339.

12. Ibid., pp 80391.

13. Ibid., pp 80392.

14. Ibid., pp 80392.


Alpha Lillstrom Cheng, JD, MA, is a registered federal lobbyist working with Connolly Strategies & Initiatives, which has been retained by PPS. An attorney by training, she provides guidance to companies, nonprofit organizations, and political campaigns. For six years, she served as Senior Policy Advisor and Counsel for Health, Judiciary, and Education issues for Senator Jon Tester (Montana), advising and contributing to the development of the Affordable Care Act, as well as working on issues of election law, privacy, government transparency, and accountability. Alpha has also directed Voter Protection efforts for Senators Bob Casey, Al Franken, Russ Feingold, and Mark Begich. She was Senator Franken’s Policy Director during his first campaign and was hand-picked to be the Recount Director for his eventual 312-vote win in 2009.

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