A BEGINNER’S GUIDE TO

AUTHORIZATION & MEDICAL NECESSITY

FOR ALL INSURANCE PLANS
 TABLE OF CONTENTS
KEY TERMS AND DEFINITIONS................................................................. 2
COMMONLY USED ABBREVIATIONS ....................................................... 3
WHAT IS AUTHORIZATION? ..................................................................... 4
HOW DO YOU KNOW IF AUTHORIZATION IS REQUIRED? ..................... 5
INSURANCE VISIT LIMITATIONS .............................................................. 6
WHAT IS A UNIT? ...................................................................................... 7
WHAT IS A CPT CODE? .............................................................................. 7
AUTHORIZATION TYPES & DIFFERENCES ................................................ 8
DOCUMENTATION REQUIREMENTS ........................................................ 9
MEDICAID & AUTHORIZATION .............................................................. 10
EXAMPLE OF MEDICAID AUTHORIZATION – EVAL ONLY .................... 11
EXAMPLE #1 OF MEDICAID AUTHORIZATION APPROVAL .................. 12
EXAMPLE #1 OF MEDICAID AUTHORIZATION DENIAL ........................ 13
EXAMPLE #2 OF MEDICAID AUTHORIZATION DENIAL ........................ 14
MEDICARE & DIFFERENT PLANS/TYPES ................................................ 15
MEDICARE THRESHOLD .......................................................................... 16
WHAT IS MEDICAL NECESSITY?.............................................................. 16
MEDICARE & THE KX MODIFIER ............................................................. 17
COMMERCIAL & MANAGED MEDICARE PLANS .................................... 18
EXAMPLE OF HUMANA AUTHORIZATION APPROVAL ......................... 19
EXAMPLE OF BCBS AUTHORIZATION DENIAL ...................................... 20
EXAMPLE OF UHC AUTHORIZATION APPROVAL.................................. 21
EXAMPLE OF AMBETTER PARTIAL AUTHORIZATION APPROVAL ....... 22

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 Key Terms and Definitions
Commercial plans: Commercial payers are managed by a private or public insurance
company. Examples: BCBS, United Health Care, Cigna, Aetna, Humana, Managed
Medicare plans

Federal Plans: Federal Payers are state/government administered plans. Examples:

Medicare, Medicaid, Tricare, VA

Deductible: the amount the patient pays before the health insurance begins to pay

Copay: a flat rate that patient pays for a health service (varies by service)

Coinsurance: Cost-sharing requirement that the patient is to pay as the percentage of

the allowed amount for covered services.

Out-of-Pocket: This is a set dollar amount that the insured must pay for all medical costs
after met the insurance plan pays 100% of any medical cost.

Medical Necessity Review: A submission of documentation to the patient’s insurance,

which the insurance will review for the continued medical necessity of the services being
provided to the patient. If medical necessity is determined, services may continue; if not,
services must cease.

Authorizations: Also known as Pre-Certifications, and Prior Authorizations. These are

written notifications from a patient’s insurance approving the medical necessity of the
services to be provided to the patient.

Primary Care Provider (PCP) Referral: An authorization of medical necessity for

services that the PCP obtains on behalf of the servicing provider. It is not the same thing
as an Authorization which is solely processed by the insurance.

Direct Access: A patient is considered to be Direct Access when they are completely self-
referred. There is no physician referral, and the patient may be treated for therapy
without one. Patients without scripts can be seen direct access. Direct access cannot be
done with patients that have federal payer insurances or insurances that require
authorization.

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 Commonly Used Abbreviations

PT PHYSICAL THERAPY
OT OCCUPATIONAL THERAPY
SLP SPEECH LANGUAGE PATHOLOGY (SPEECH THERAPY)
MCR MEDICARE
MCD MEDICAID
MM MANAGED MEDICARE
MCR ADV MEDICARE ADVANTAGE
PCP PRIMARY CARE PROVIDER
DA DIRECT ACCESS
MNR MEDICAL NECESSITY REVIEW
BMN BASED ON MEDICAL NECESSITY
DED DEDUCTIBLE
OOP OUT-OF-POCKET
HMO HEALTH MAINTENANCE ORGANIZATION
PPO PREFERRED PROVIDER ORGANIZATION
POS POINT OF SERVICE
EPO EXCLUSIVE PROVIDER ORGANIZATION
DX DIAGNOSIS
TX TREATMENT
IV INSURANCE VERIFICATION
CPT CURRENT PROCEDURAL TERMINOLOGY (CODES)
MSPQ MEDICARE SECONDARY PAYER QUESTIONNAIRE
POC PLAN OF CARE
PN PROGRESS NOTE
HEP HOME EXERCISE PROGRAM
CLOF CURRENT LEVEL OF FUNCTION
PLOF PRIOR LEVEL OF FUNCTION

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 What is Authorization?

Authorizations, Prior Approval, Pre-Certifications, and Prior

Authorizations.
***THESE TERMS ARE INTERCHANGEABLE AND MEAN THE SAME THING***

Authorizations: These are written notices from a patient’s insurance approving health services
and deeming them medically necessary.

• How it works: If this is needed prior to treatment, this must be obtained and approved
for the services to be covered.
• The preferred method to obtain authorization varies depending on the insurance (i.e. an
online form, portal, phone call or fax)
• Some insurance policies require authorization before Initial Evaluation, some require it
after, and there are others that require it after a certain number of visits.
• If authorization is required and is not obtained, the claims will not be covered or paid by
the insurance.
• The CPT codes being billed must be approved by the insurance company.

***INSURANCE PLANS THAT REQUIRE AUTHORIZATION WILL ALWAYS REQUIRE A PT SCRIPT AS WELL***

Why Do Some Insurance Providers Require Authorization?

• Insurance providers use authorization to ensure that a specific service is necessary and
worth the cost.

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 How Do You Know if Authorization is Required?
***THIS INFORMATION IS FOUND ON THE PATIENT’S COMPLETED INSURANCE VERIFICATION FORM***

Examples:
This patient DOES NOT require authorization BEFORE or AFTER Eval

This patient requires authorization BEFORE Eval

This patient requires authorization AFTER Eval

This patient requires authorization AFTER Eval

This patient requires a Medical Necessity Review after the 60th visit

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 Insurance Visit Limitations

Visit Limitations: An insurance policy may invoke a limitation on the number of therapy visits a
patient may be seen for within their plan year.

• Hard Limit: This limit is absolute; Any visits billed over this limit will be denied.
o Ex: 20 visit hard limit for physical therapy. This patient can only be seen for 20 visits
of PT within their plan year.

• Soft Limit: This patient can be seen past this visit limit if requirements are met. These
parameters are usually a medical necessity review or an authorization.
o Ex: 20 visit soft limit for physical therapy. After the 20 visits have been used, an
authorization would have to be obtained to bill even just one more visit.

• Combined Limit: The listed limitation is combined between multiple disciplines.

o Example: 20 visit hard limit combined between PT and OT. But the limit cannot be
exceeded, just as with an individual hard limit.

• Based on Medical Necessity (BMN): The patient may be seen for as many visits as are
medically necessary. The insurance may also require medical necessity review, or
authorization to determine this medical necessity.

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 What is a Unit?

A unit is a metric we use to account for the time a therapist bills for a specific treatment
• Units are an essential part of receiving payment from insurance providers for a service
• Unit times:
o On average, 1 unit ~ 15 minutes of treatment time
§ An hour-long treatment ~ 4 total units (on average)

What is a CPT Code?

CPT CODES: Current Procedural Terminology codes, or modalities, are 5-digit codes that tells us
more about the service(s) being provided.
• Therapists will commonly bill 2 - 4 CPT codes/modalities per visit

Common CPT Codes Billed in Physical Therapy:

97161- EVAL CODE (LOW COMPLEXITY)
97162- EVAL CODE (MODERATE COMPLEXITY)
97163- EVAL CODE (HIGH COMPLEXITY)
97140- MANUAL THERAPY
97110- THERAPEUTIC EXERCISE
97530- THERAPEUTIC ACTIVITY
97112- NEUROMUSCULAR REEDUCATION

Typical CPT Codes Billed for 1 Visit

EVAL 97161
97110
97140
97530
TREATMENT 97110
97140
97530
97112

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 Authorization Types & Differences
Potential Types of Authorization Needed

BEFORE EVAL: AFTER EVAL: Can CONTINUATION DATE EXTENSION: MEDICAL

Can only bill only bill eval code OF CARE: Bill what Bill what is NECESSITY
code(s) approved is approved approved REVIEW

Authorization Workflow:

AUTH TEAM UPDATES VISIT

PSC TRIGGERS AUTH TEAM GIVES UPDATES
TRACKING SECTION OF
& UPLOADS ANY APPROVAL
INSURANCE PATIENT CHART, PSC
OR DENIAL
VERIFICATION PROCESS DOCUMENTATION TO
UPLOADS DOCUMENTATION
IN LEADING REACH TO PATIENT MEDICAL
LEADING REACH
RECORDS

AUTH AFTER EVAL: AUTH

IV TEAM INDICATES ON IV PSC TRACKS VISITS AND/OR
TEAM SUBMITS FOR AUTH
FORM IF AUTHORIZATION IS EXPIRATION DATE
THE DAY AFTER EVAL IS
REQUIRED FOR THE PATIENT THROUGHOUT TREATMENT
COMPLETE

AUTH BEFORE EVAL: AUTH

PSC WILL CREATE NEW TASKS
IV TEAM CREATES TASK FOR TEAM SEES TASK & OBTAINS
AS NEEDED FOR
AUTH TEAM (BEFORE OR AUTH APPROVAL AND
CONTINUATION OF CARE OR
AFTER EVAL) UPLOADS TO LEADING
DATE EXTENSIONS
REACH

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 Documentation Requirements
FOR ALL PLANS THAT REQUIRE AUTHORIZATION (INCLUDING BUT NOT LIMITED TO)

Submitting Authorization Before Evaluation:

• PT Script
• Screen notes, if applicable
• Any additional notes from the referring provider office

Submitting Authorization After Evaluation:

• Original PT script
• Signed POC
• Initial Evaluation report
• FOTO survey & score

Submitting for Subsequent Authorization:

• Most recent POC SIGNED

• Most recent Progress Note
• Initial eval note always needed.
• POC:
o Use current POC if not expired.
o If most recent POC has expired, a new one is needed for any more
authorization approvals.

Additional Notes:

• Some insurances do not allow you to submit for more authorization until:
o The current authorization has expired
o All of the visits/units have been used

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 Medicaid & Authorization

Traditional Medicaid Additional Medicaid Plans

• Authorization BEFORE & AFTER • Authorization AFTER evaluation

evaluation • Current PT script, eval note, signed
• Current PT script with ICD-10 code POC, FOTO score
required. • Authorization submitted via GAMMIS
• AFTER eval: script, eval note, signed portal
POC, FOTO score • Can take 2-7 business days to receive
• Authorization submitted via GAMMIS approval or denial
portal • Requires HEP in documentation
• Can take 2-14 business days to receive • Avoid “sports related” language in notes
approval or denial • Avoid using the term “chronic’ in notes
• Can approve for up to 3 months out at (3+ months old)
one time Amerigroup
• Cannot be “chronic” Caresource
Peachstate Health Plan

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Example of Medicaid Authorization – Eval Only

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Example #1 of Medicaid Authorization Approval

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Example #1 of Medicaid Authorization Denial

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Example #2 of Medicaid Authorization Denial

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 Medicare & Different Plans/Types

Traditional Medicare Managed Medicare Medicare Supplement

• Patient must be: • Managed by • Used in addition to a
o 65+ commercial payers. patient’s Medicare
o Disabled • Known as either benefits, to offer the
o ESRD (end stage Medicare Advantage, patient additional
renal disease) or Medicare coverage.
• Managed by the federal Replacement Plans • Medicare will be the
government. • If a patient has one primary payer, and the
• Every patient with this of these plans, their Medicare Supplement will
policy will have the Medicare benefits no be secondary.
same applicable longer apply. • Typically, will cover the
benefits to be met each • This plan will replace patient’s deductible set by
year. These amounts Medicare as the Medicare, or the co-
change each calendar primary payer and insurance after the
year. will have benefits deductible is met.
• Patient cannot be just like a regular
Direct Access with this commercial
policy. insurance.

Managed Medicare Plans

Managed Medicare plans are commercial based plans, offered by private companies who have
contracts with Medicare

• Ex. BCBS Medicare Advantage, AARP UHC Medicare Advantage, Aetna Medicare, Humana
Medicare, etc.
• These plans are alternative options to the traditional Part A/Part B federal Medicare plan.
• If you have a Managed Medicare Plan, you NO longer have Medicare. Your plan REPLACES
Medicare.
• Follows Medicare guidelines (This only means that they follow Medicare medical necessity
rules)

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 Medicare Threshold
Medicare Threshold: Sum dollar amount that Medicare states they will pay, in therapy services,
per beneficiary, each year.

The Medicare Threshold will apply for all therapy services and will start over at the beginning of
each year. This amount typically changes each year.

• How it works: PT/SLP have a combined threshold; with each patient visit, the amount used
increases and the amount remaining decreases
• OT has a separate threshold.
• Once this threshold has been reached, a medical necessity review and a KX modifier may
be needed to continue treatment.
• 2024 Threshold: $2,330

What is Medical Necessity?

What is a Medical Necessity Review?

• A submission of documentation to the patient’s insurance, which the insurance will review
for the continued medical necessity of the services being provided to the patient. If
medical necessity is determined, services may continue; if not, services must cease.

• The treating Therapist will complete this form when they are approaching or exceeding
the $3,500 threshold. This form allows for an internal review to be conducted by PTS
Compliance Team. By conducting this review, it withstands why we are needing to
produce such a high threshold for the patient.

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 Medicare & The KX Modifier
KX Modifier: The KX modifier is an indication that is found on a patient’s daily billing note
showing the services are being rendered are medical necessary for the patient.

• The KX Modifier is used only with patient’s who primary/secondary insurance is Medicare.

• KX Modifiers are showing Medicare that the patient has exceeded the annual threshold
allowed for Physical Medicine and that services are still being rendered to provide the
patient the basic functionality of everyday life (medically necessary)

• If we do not add the KX modifier, when necessary, this will cause claims to be denied by
Medicare.

Checkpoints

• There are checkpoints in place to ensure that the therapist determines medical necessity,
or the lack thereof, before the Threshold is met
• At $1700 and $2700 the case will be reviewed for:
o Is it medically necessary to continue treatment with this patient?
o What functional limitations remain?
o Are they bridging the gap between CLOF and PLOF in a measurable way?
o Are they making measurable progress towards the functional goals and/or is
continued progress towards goals expected?
o Verify you have a valid, signed plan of care.
o Documentation must support continued need of skilled care.

Internal Threshold Tracking

$2330 $3000 $3500

$1700 • CMS KX Threshold
$2700 • CMS Medical
• Hard Stop –
• Checkpoint #1 • Checkpoint #2 Record
• Claims must Internal Review
• Performed by • Performed by Threshold
indicate modifier • Performed by
Treating Treating • Case is subject to
if medically Compliance
Therapist Therapist targeted medical
necessary Team
review

Tip: This image is available on the Compliance Resource page!

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 Commercial & Managed Medicare Plans

Managed Medicare - Medicare Replacement - Medicare Advantage

***THESE TERMS ARE INTERCHANGEABLE AND MEAN THE SAME THING***

Ambetter Humana BCBS Oscar Clover UHC MM

MM
Auth req No NO Plan- No No Yes
before eval specific
Auth after Yes Yes Plan- Yes Yes Yes
eval specific
Bill TX Yes Yes Yes Yes Yes
Codes?
Can Up to 7 Yes Up to 2 Yes Up to 7 Up to 10
Backdate? days days days days
Approved by Visits Visits Visits Units Visits Visits
Visits or
Units?
Lists CPT No Yes Yes Yes Yes No
Codes on
Auth
Turnaround Auto or 3- Auto 2-3 2-5 2-3 Auto or
time 4 days, business business 3-4
business plans days days business
days vary days
Script with Yes Yes Yes Yes Yes Yes
ICD-10 code
req?
Can have 2 No Yes No Yes No No
open
cases/auths?

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Example of Humana Authorization Approval

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Example of BCBS Authorization Denial

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Example of UHC Authorization Approval

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Example of Ambetter Partial Authorization Approval

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