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A Guide to the Medicare Physical Therapy Threshold 2023

In 1997, the Balanced Budget Act (BBA) introduced the therapy cap to manage Medicare expenses. Initially, it was a temporary measure, but Congress renewed it annually. Fast forward to 2018, and the rigid cap was replaced with a more flexible annual threshold. This means that therapists must now monitor their patients' progress towards this threshold each year. For 2023, the threshold is $2,230 for combined PT and SLP services and OT services. This threshold accumulates across diagnoses, so all services provided to a patient within a certain period contribute towards their threshold, regardless of the number of diagnoses.

Physical Therapy Threshold 2023
Services Contributing to the Therapy Threshold

The therapy threshold encompasses all Part B outpatient therapy services in specific locations. Since 2014, the therapy cap and its associated rules have been applied uniformly to critical access hospitals (CAHs). If a patient's treatment in a CAH surpasses the threshold, the CAH must adhere to the soft cap exceptions process.

Tracking a Patient's Progress

When a new Medicare patient seeks treatment, it's imperative to ascertain if they've availed of any other therapy services during the current benefit period. These services would contribute to the threshold. Therapists can consult the allowable fee schedule to determine the patient's cumulative total toward the therapy threshold. If the patient cannot provide a history of their therapy services, therapists can obtain this data from CMS by liaising with their Medicare contractor.

Understanding the Therapy Threshold Exceptions Process

Automatic Exceptions (KX Modifier)

The therapy threshold doesn't necessarily limit reimbursement. If a therapist deems continued therapy medically essential, qualifying the patient for a threshold exception, they simply need to append the KX modifier to claims surpassing the threshold. This is termed the automatic exceptions process. By using the KX modifier, therapists confirm that the billed services:

  • Are eligible for the threshold exception
  • Are both reasonable and necessary
  • Necessitate a therapist's expertise and
  • Are supported by comprehensive documentation in the patient's medical record

Once a patient's treatment costs reach $3,000 for the current benefit period, these claims might undergo a targeted medical review.

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Targeted Medical Review

Introduced under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), the targeted medical review process becomes applicable when a patient's treatment expenses exceed $3,000. However, not all claims surpassing this amount will be reviewed. Auditors will select claims based on specific criteria, such as:

  • High claims denial percentage of the provider
  • Aberrant or suspicious billing patterns
  • Newly enrolled therapists or those without prior therapy service claims
  • Services rendered for specific medical conditions
  • Providers affiliated with groups that have previously raised red flags.

Providers might need to submit additional documentation to justify the services in case of a targeted review.

Advance Beneficiary Notice of Noncoverage (ABN)

If therapists wish to continue therapy for a patient who has crossed the threshold but doesn't qualify for an exception, they can utilize an Advance Beneficiary Notice of Noncoverage (ABN). This notice informs Medicare patient about potential non-coverage of upcoming therapy services and confirms their understanding of their financial responsibilities.

Medical Necessity and the GA Modifier

National and Local Coverage Determinations employ varying definitions of "reasonable and necessary." The provider must stay updated with these determinations. Generally, the medical necessity of services is evaluated based on the cost-effectiveness of the treatment concerning the patient's potential for relief or functional improvement and the potential consequences of not treating the condition. If services are deemed not medically necessary, providers should use the GA modifier to indicate the presence of an ABN on file.


Understanding the intricacies of the Medicare therapy threshold is crucial for therapists to ensure compliance and provide uninterrupted patient care. By staying informed and adhering to the guidelines, therapists can confidently navigate the complexities of Medicare regulations.

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