How to Bill for Physical Therapy Services

Physical therapy billing involves a complex process of translating clinical services into billable claims. This process ensures clinics receive proper reimbursement and helps patients understand their financial obligations. Navigating payer rules and regulatory guidelines, such as those from the Centers for Medicare & Medicaid Services (CMS), is a continuous challenge. Accurate documentation and coding are important to ensure efficient claim processing and timely payments.

Understanding Physical Therapy Billing Models

Physical therapy services are primarily billed through insurance or directly to the patient (self-pay). Insurance billing involves various payers, each with distinct rules. Providers can be either “in-network” or “out-of-network” with an insurance plan. In-network providers have a contract with the insurer, agreeing to charge specific negotiated rates for services, which often results in lower out-of-pocket costs for patients.

Out-of-network providers do not have a direct contract with the insurer, meaning they can set their own fees. Patients typically pay a higher percentage of the cost for out-of-network services, sometimes the entire amount upfront, then seek reimbursement from their insurer. Common insurance types include commercial plans, Medicare, Medicaid, Workers’ Compensation, and VA/Tricare.

Medicare Part B covers outpatient physical therapy services with specific requirements. Medicaid programs, administered by individual states, often require prior authorization for ongoing therapy visits. Workers’ Compensation and VA/Tricare plans also have unique authorization and billing protocols.

Self-pay models involve patients paying directly for services. This approach offers clinics flexibility in pricing and service delivery, sometimes with discounted rates for upfront payment. Patients may choose self-pay due to high deductibles, no insurance coverage, or a preference to avoid insurance complexities. While simplifying clinic billing by eliminating claims submission, it places the full financial burden on the patient.

Essential Information for Claim Preparation

Accurate claim preparation requires gathering patient and provider data, and correctly applying service and diagnosis codes.

Patient demographics include the patient’s full legal name, date of birth, address, and contact information. Accurate recording prevents common claim rejections.

Insurance details include the patient’s insurance policy number, group number, and the specific payer ID. Verifying coverage effective dates before rendering services helps prevent denials due to inactive policies. This upfront verification confirms patient eligibility for benefits at the time of service.

Provider information includes the National Provider Identifier (NPI) and Tax Identification Number (TIN). The NPI is a unique 10-digit identification number issued by the Centers for Medicare & Medicaid Services (CMS), required for all HIPAA-covered entities submitting electronic claims. Both individual therapists (Type 1 NPI) and practice organizations (Type 2 NPI) must obtain NPIs. The TIN (Employer Identification Number or Social Security Number) links services to the correct tax entity for reimbursement.

Current Procedural Terminology (CPT) codes describe specific physical therapy interventions. Examples include 97110 for therapeutic exercise, 97140 for manual therapy, and 97530 for therapeutic activities. Accurate CPT code selection reflects the services provided and time spent.

International Classification of Diseases, Tenth Revision (ICD-10) codes explain the patient’s medical condition and establish medical necessity. These alphanumeric codes range from three to seven characters, increasing in specificity. For instance, M54.5 denotes low back pain. Selecting the most specific ICD-10 code supported by documentation is important, as vague codes can lead to denials.

Modifiers are two-character alphanumeric codes appended to CPT codes, providing additional information without changing the service’s definition. For example, the GP modifier indicates a physical therapist provided the service. Modifier 59 signifies a distinct procedural service performed separately on the same day, important for National Correct Coding Initiative compliance.

Units of service translate time-based or service-based codes into billable quantities. Time-based codes are often billed in 15-minute increments. Accurate tracking of patient contact time ensures proper unit assignment.

Documentation within the patient’s medical record supports claim preparation. This includes:

• Initial evaluation (detailing condition, limitations, and goals)
• Plan of care (outlining interventions and outcomes)
• Daily treatment notes (recording activities and progress)
• Progress reports (summarizing treatment and justifying medical necessity)

This documentation must support billed services and diagnosis codes to prevent denials.

Prior authorization or referral requirements are conditions imposed by some payers, mandating approval from the insurance company or a physician before services are covered. Some payers require prior authorization for subsequent treatment visits, even if not for initial evaluations. Obtaining these approvals involves submitting the patient’s evaluation report, treatment plan, and medical necessity documentation. Failing to secure prior authorizations can result in claim denials.

The Claim Submission Process

After preparing a physical therapy claim, the next step is submission to the appropriate payer.

Most claims are submitted electronically, streamlining communication and often resulting in faster processing. Electronic claims are typically sent through a clearinghouse or directly from an Electronic Health Record (EHR) or Practice Management (PM) system.

A clearinghouse acts as an intermediary, receiving claims from providers, “scrubbing” them for errors, and transmitting them to insurance payers in a standardized format. This scrubbing helps identify potential issues like missing information or incorrect coding before the claim reaches the payer, reducing rejections. Many EHR systems integrate directly with clearinghouses for seamless electronic submission.

While electronic submission is preferred, paper claims using the CMS-1500 form are still used in some circumstances. This standard form is accepted nationwide by most insurance entities for professional services, including physical therapy. Physical therapists might use paper forms for payers who do not accept electronic submissions or when electronic submission is not feasible.

For paper claim submission, a completed CMS-1500 form is printed and mailed to the payer’s claims address. The form has specific fields for patient, provider, and service information that must be filled. Entries should be typed for legibility, and no decimal points are entered in ICD-10 codes or dollar amounts.

Tracking submitted claims is important. Most electronic systems provide confirmation of receipt from the clearinghouse and payer, allowing clinics to monitor claim status. For paper claims, maintaining a record of the mailing date is advisable. Consistent tracking helps ensure claims are processed within timely filing limits, which vary by payer (often 90 days to one year from the date of service).

Managing Payments and Denials

After a physical therapy claim is submitted, payment processing and addressing denials occur.

Payments are typically received electronically via Electronic Funds Transfer (EFT) and accompanied by an Electronic Remittance Advice (ERA). The ERA is a HIPAA-compliant digital report replacing the paper Explanation of Benefits (EOB). It details the payment, including the amount paid, adjustments, and the patient’s remaining financial responsibility.

Understanding these documents is important for reconciling payments. The ERA or EOB itemizes each service, showing the charged rate, insurer payment, and deductions for deductibles, co-pays, or co-insurance. It also explains claim rejections or denials, often with specific codes or reasons.

Claim denials are a common challenge in physical therapy billing, impacting a clinic’s revenue. Common reasons include:

• Lack of medical necessity
• Eligibility issues (patient not covered)
• Incorrect coding
• Missing or incorrect patient/provider information
• Expired prior authorizations
• Claims submitted past the timely filing limit

Appealing denied claims is a structured process. First, identify the reason for denial from the ERA or EOB, often requiring a review of patient documentation to support billed services and medical necessity. An internal appeal is then filed with the insurance company, typically requiring a written letter outlining the dispute and supporting documentation (e.g., updated medical records, physician’s statement). Most plans provide a timeframe, typically 180 days, to submit an appeal from the denial receipt date.

If the internal appeal is unsuccessful, an external appeal may be possible, where an independent third party reviews the claim. Meticulous record-keeping of all communication and submitted documents is important throughout this process. After the payer processes the claim and appeals are resolved, patients are billed for their remaining financial responsibility, including co-pays, deductibles, co-insurance, and any services not covered by their plan.