Physical Therapy Services Inside Orthopedic Practices: Billing and Compliance

Why orthopedic groups bring therapy in-house

Many orthopedic practices employ physical or occupational therapists so patients can receive rehabilitation in the same location after an injury or surgery. This can improve continuity of care and communication between surgeon and therapist. It also creates a distinct billing operation with different rules from surgery and office visits. Therapy is billed in timed units, subject to plans of care, therapy thresholds, and visit limits, and must follow federal rules on self-referral. Orthopedic groups that treat therapy like any other ancillary service often run into enrollment, documentation, and compliance problems.

Therapist enrollment

For Medicare, therapists who work in a physician practice should be enrolled individually as physical or occupational therapists and reassign benefits to the group, and the claim should list the therapist as the rendering provider. Medicare does not allow therapy services to be billed incident to a physician unless the person furnishing the service meets therapist qualifications, and even then, billing under the therapist's own NPI is the clearer path. Commercial plans have their own credentialing requirements, and some contract therapy separately from physician services or through therapy benefit managers.

Plans of care and certification

Medicare requires outpatient therapy services to be furnished under a plan of care established by a physician, nonphysician practitioner, or the therapist, and certified by a physician or nonphysician practitioner. Certification is required within the timeframe Medicare specifies and must be renewed at least every 90 days or when the plan changes significantly. When the orthopedist is also the certifying physician, the practice can streamline this process, but the signed and dated certification must still exist in the record. Missing certifications are a frequent cause of therapy payment denials on review.

Modifiers and therapy thresholds

Medicare therapy claims require discipline modifiers, GP for physical therapy and GO for occupational therapy, on each therapy line. When services are furnished in whole or in part by a physical therapist assistant, modifier CQ may apply and may reduce payment. When a patient's annual therapy spending exceeds the KX modifier threshold, the KX modifier attests that services remain medically necessary, and claims above a higher amount may be subject to targeted medical review. Practices should track each patient's annual therapy amounts across all providers where possible.

Timed codes and documentation

Therapy codes such as therapeutic exercise, neuromuscular reeducation, manual therapy, and therapeutic activities are timed in 15-minute units, while evaluations are untimed. Medicare uses a specific method to calculate units based on total timed minutes, and many commercial payers follow similar rules. Daily notes should record the time for each timed service and total timed minutes. Progress reports are required at intervals Medicare specifies, documenting objective progress toward goals.

Self-referral and compliance

Physician practices that refer patients to their own physical therapy service must meet federal physician self-referral law requirements, typically through the in-office ancillary services exception, which has specific supervision, location, and billing conditions. State laws may add restrictions or disclosure requirements. Practices should review arrangements with counsel. Billing staff can support compliance by ensuring the therapy service bills under the group's own number at qualifying locations and by maintaining accurate records.

Postoperative therapy and global periods

Therapy after surgery is not part of the surgeon's global surgical package. Physical therapy services furnished after an orthopedic procedure are billed separately by the therapy provider, even when the surgeon's practice provides them. The surgeon's postoperative visits remain part of the global period, but the therapist's services do not. Keep these clearly separated in the billing system so therapy claims are not mistakenly held or bundled.

Reporting and performance tracking

An in-house therapy department should be measured separately from the surgical practice so leadership can see whether it is sustainable and compliant. Useful measures include visits per patient episode, units per visit by code, cancellation and no-show rates, authorization denials, the percentage of plans of care certified on time, KX modifier usage, and net collections per visit by payer. Comparing units per visit across therapists may reveal inconsistent documentation or coding, while a high rate of authorization denials may show that front desk staff are not checking therapy benefits before the first visit. Commercial plans often limit therapy visits per year, and some combine physical therapy, occupational therapy, and chiropractic visits into one limit, so tracking remaining visits helps patients avoid surprise bills. Regular reporting also supports compliance by showing that therapy volumes reflect patient needs rather than referral patterns, which is important under self-referral rules.

Frequently asked questions

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