What Do We Really Get Paid?
Benchmarking Price for Outpatient Physical Therapy Services
By Kelly Sanders, PT, DPT, OCS, ATC
The American Physical Therapy Association (APTA) Private Practice Section (PPS) Payment Policy Committee started what has become known as the Milliman Project to answer a few key questions for PPS members.
These questions include:
- What are physical therapy services really reimbursed at?
- What are the geographic differences?
- What is the difference in price—comparing other alternatives for musculoskeletal pain?
- What is the difference in price—comparing the other services in the continuum of care?
In an effort to answer these questions, the PPS Payment Policy Committee engaged the Milliman Management Consulting Company, an international actuarial and consulting firm, to analyze commercial health insurance and Medicare claims data (excluding workers compensation and Medicaid). Data for physical therapy services, evaluation and management (E&M) codes, chiropractic, radiology, and orthopedic services for price comparisons—and as a point of reference—for bundled payment arrangements for all practices that bill on a Centers for Medicare & Medicaid Services (CMS) 1500 form. Specifically, this data was pulled from 2012 claims and was stratified by geographic region. The data is blinded to payer identity and provides average allowed amounts. Allowed amounts include the total of payer and patient financial responsibility. Also included is per-member, per-month (PMPM) data that is a key metric for payers as it provides a measure of their costs.
In an effort to look not only at physical therapy pricing, but also pricing for alternative interventions to physical therapy, codes evaluated by the Milliman Company included the following code ranges:
- 97001-97762 – Outpatient Therapy Codes
- 27125-27138 – Total Hip Replacement
- 99211-99215 – Evaluation and Management Codes
- 27440-27447 – Total Knee Replacement
- 98940-98942 – Manipulation
- 72148-72149 – Lumbar Magnetic Resonance Imaging (MRI)
In review of alternative treatment interventions, the data suggested that physical therapy was the lower cost option. Specifically, data on chiropractic care suggested not only that physical therapy was more cost effective but also demonstrated better outcomes with less visits and less return patients. Lumbar MRI data supported that using physical therapy as the first treatment intervention for musculo-skeletal injuries could decrease payer costs.
Overall, in review of the data, the Payment Policy Committee came to the following conclusions. First, there was a fair amount of variability on cost to payers by Current Procedural Terminology (CPT) code. Additionally, there was significant variability in the amounts paid to providers based on the geography where services were rendered. Commercial payer average allowable amounts were between the 50th and 75th percentiles and overall were 33 to 50 percent higher than Medicare’s allowable amounts. The allowed amounts in the Milliman data are higher than allowed amounts that private practice physical therapists are receiving. The conclusion we have come to is that hospital and physician practices are receiving higher payments than private practice physical therapists that are skewing those allowed amounts in the data.
A separate observation was that many providers’ billed amounts were close to the Medicare Fee Schedule, thus many were not getting paid the allowed amount by some commercial insurances and thus losing dollars. Based on this observation, the recommendation is that practices evaluate their billed amounts verses the allowed amounts on Explanation of Benefits (EOBs) and consider raising their billed amounts.
What are the take-away points? First, this data in combination with some key data on your practice should assist you in guiding contract negotiation or renegotiation. If you do not already know, review your practice costs to determine what level of payment is needed to sustain your practice and desired profit margins. Once determined, use the Milliman data to review your existing payer contracts as well as to guide you in new contract negotiation. Ask yourself, are the fee schedules in your contracts above your costs by an appropriate margin and how do they relate to the Milliman data for your region and coding? Once reviewed, prioritize which contracts and fee schedules you should consider renegotiating and what payment level you need to be successful. Assess which CPT codes your practice is billing, and consider if carving specific codes out of a contract is a reasonable proposal to your contracted payers. Finally, work to understand the payer’s perspective. What are their costs? Use PMPM data for the CPT codes you are discussing to help determine the payer side.
For detailed information on this topic, the Payment Policy Committee has posted both webinars on the Milliman project. These webinars can be found on the APTA PPS website under the Education tab. Follow the links to “Recorded Webinars” and look for the free webinars titled “What Do We Really Get Paid? Benchmarking Price for Outpatient Physical Therapy Services (April 2015)” and “What Does Everyone Else Get Paid? Benchmarking Price for Outpatient Physical Therapy Alternatives, Part 2 (September 2015).” Additional resources on Payment are also available on the APTA PPS website under the Payment tab in the column on the left side of the screen.
Kelly Sanders, PT, DPT, OCS, ATC, is the president of Movement for Life, Inc., a group of physical therapy clinics operating in California, Arizona, and North Carolina. She is also a member of the American Physical Therapy Association Private Practice Section Payment Policy Committee. She can be reached at firstname.lastname@example.org.