Think you’re exempt from the therapy cap?

Think again; satellite clinics may not count

Here’s an issue you may not have considered amid all the headaches of Medicare’s pending $1,590 outpatient therapy cap. The Balanced Budget Act of 1997 built in a safety valve for patients who exceed the therapy cap; they still can receive services at an outpatient hospital department. But facilities must apply for the exemption, and the requirements are extensive.

"Congress was told there were a number of hospitals building satellite clinics that were not attached to the hospital and may not even be on the same campus. The question had to be asked, Is that a hospital outpatient department?’" says consultant Ken Mailly, PT, of Mailly & Inglett Consulting in Wayne, NJ. "So they created the notion of a provider-based entity, which could still be considered part of the hospital so long as it met certain requirements."

The requirements take up a 30-page application and include such items as having a physician on site, having an arrangement to take care of emergency needs without calling 911, and having the same governance and payroll as the hospital. "This isn’t the only requirement, but for instance, if you have to call 911 when someone has a heart attack at your facility, you’re freestanding," Mailly says. "In a hospital, you would just send them over to the emergency room. If you’re 10 miles away, you’re going to need an ambulance. If you’re a freestanding entity, you’re subject to the cap just like everybody else is."

The provider-based rules make no difference without the cap, Mailly says. But with the pending implementation of the cap, they do make a difference. "This becomes a very important issue. Nobody’s talking about this yet, and it’s simply because, quite frankly, they forgot," he says. "The focus was very much on the cap and whether it would be re-implemented. The whole issue of provider-based entities just slipped off the radar screen. Now — guess what — it matters again."

The way a facility is originally certified by the Centers for Medicare & Medicaid Services (CMS) is how it will remain certified unless a new application is submitted, Mailly says. "If you’ve changed something, you have to come back and say that to CMS. If you don’t do that, the way they certified you 10 years ago is how they recognize you now."

Fraud is an issue here, Mailly says. "If you build a satellite one mile away and pretend it’s attached to the hospital, that’s fraud."

CMS’ instructions on this issue (read them at say a facility is not entitled to be treated as provider-based just because the main provider is. "The facility or organization must be determined by CMS to be provider-based before the main provider bills for services of the facility or organization as if it were provider-based, or before it includes costs of those services on its cost report," the instructions read. "A facility that is not located on the campus of a hospital and is used as a site of physician services of the kind ordinarily furnished in physician offices will be presumed to be a freestanding facility, unless it is determined by CMS to have provider-based status."

Even if a facility does meet the requirements and is able to see patients who would otherwise have their services capped, that doesn’t solve the problem, says Tracy Gregg, PT, president of SunDance Rehab in Alexandria, VA. "If a skilled nursing facility patient had a family member who could take them to the hospital, they could get therapy. But they would have to be transported, and that’s difficult for elderly patients," she says. "It’s brainless when you have a therapist right next door to their room."

Gregg says this issue is what bothers her the most about the cap. "The ones it impacts are the ones who are least able to advocate for themselves. It’s only a problem for people who don’t have the ability to move around and get to a hospital," she says. "We have a decision to make as citizens about how we’ll take care of our elderly."

Need More Information?

  • Ken Mailly, PT, Mailly & Inglett Consulting, LLC, 68 Seneca Trail, Wayne, NJ 07470. Telephone: (973) 692-0033. E-mail:
  • Tracy Gregg, PT, President, SunDance Rehab, 803 Cameron St., Alexandria, VA 22314. Telephone: (703) 684-1004. E-mail: