Physical Therapy Medicare Guidelines 2025 Proposed Rule Changes

As a physical therapist, a significant part of your role is helping patients improve their mobility, but that’s not all you do. You also have to stay aware of ever-changing insurance regulations, like Medicare updates. These insurance intricacies can impact the viability of your practice by either increasing or decreasing payments for therapy services. 

We know finding time to stay informed can be challenging, so we’ve taken the time to unravel what’s happening with the CMS Proposed Rule 2025. That way, you can focus on your core duties and still get the information you need without getting bogged down by a 2000-page document. 

Conversion Factor Cuts for Physical Therapists

Yes, you read that correctly. The Centers for Medicaid and Medicare Services (CMS) have proposed another conversion factor reduction. But what exactly is a conversion factor, anyway? 

For clarity, the conversion factor, or CF, converts the relative value unit (RVU) into an actual dollar amount. Relative value units (RVUs) define the value of procedures and services assigned to each Current Procedural Terminology (CPT) code covered by Medicare. Multiplying an RVU by the conversion factor and a geographical adjustment, produces the compensation level for a specific service. The conversion factor is updated annually and adjusted based on legislative changes, the Medical Economic Index (MEI), and other factors. 

In 2024, the CF was $32.74, but the new 2025 conversion factor is $32.36, a 2.8% decrease from the previous year. This is better than the 2024 prior rule, as there was a 3.4% decrease between the 2024 and 2023 conversion rates. 

How This Affects Physical Therapists

While the reduction isn’t as significant as in previous years, it’s still a reduction. Practice owners will have to figure out how to navigate the decreased rate from Medicare when providing physical therapy sessions to Medicare-approved patients. This can be challenging for practices primarily serving Medicare Part B patients. These issues are further heightened if your business is in a rural location, as transportation is often a bigger hurdle for patients. 

With practice overhead prices increasing and Medicare reimbursement rates decreasing, it can be challenging to run a practice. Therefore, you may have to get creative. Are there ways you can streamline operations? Probably! 

For instance, a solid electronic medical record (EMR), can automate billing workflows, ensure claims comply with Medicare and local payer rules, and identify ways to optimize reimbursement. 

You could also consider adding a new service line, like concierge physical therapy. Patients using those services would pay out of pocket, which might help you offset those decreased Medicare payments. 

Positive Budget Neutrality Adjustment 

Surprisingly, CMS includes a positive budget neutrality adjustment of 0.05% in the proposed regulation. This “positive” is shocking, as the last several years have shown negative budget neutrality adjustments, with even 2024 being -2.18%. But don’t get too excited about the word positive. 

Under current law, all adjustments to the physician fee schedule must be budget-neutral, meaning those proposed changes cannot increase total Medicare spending by more than $20 million in a given year. The positive budget neutrality we see for 2025 is possibly due to CMS’s proposed global surgical policy. If finalized, it would lead to an extensive reduction in payments and counteract the increases in payments from new and modified codes. 

Ultimately, while it says “positive,” physical therapists should still brace themselves for future reductions. 

The KX Modifier Threshold is Increasing 

The CMS Proposed Rule 2025 also reveals some updates to the KX modifier. Just in case you’re unfamiliar with this term, a KX modifier is used on claims to indicate that a patient’s services have met the threshold of the amount allowed, but the provider believes it’s medically necessary to continue. 

The 2024 KX modifier threshold amount was $2,330. To figure out the cap for 2025, CMS multiplied the 2024 KX modifier by the increased MEI of 3.6% and then rounded to the nearest $10.00. This resulted in the proposed 2025 KX modifier threshold of $2,410 for physical therapy and speech-language pathology services combined and $2,410 for occupational therapy services. 

So, does that mean you must stop providing services once you reach $2,410? Not exactly. Try to think of this number more like a marker rather than a cap on services. Just make sure you add the KX modifier to any additional services you complete once you reach that threshold, and document why you believe continued treatment is medically necessary.     

Targeted Medical Review Threshold is Stabilized 

The 2025 proposal didn’t reveal any updates to the targeted medical review (MR), which you can think of as an audit. Right now, and through 2027, the targeted MR remains at $3,000. Keep in mind that this doesn’t mean that a physical therapist who exceeds this amount will be automatically audited, though. The proposal states that claims won’t be reviewed unless a provider meets the criteria for review. On page 369, they give examples of something that might be a red flag for CMS, with one being unusual billing patterns that are “aberrant” compared to peers. Therefore, physical therapists should practice excellent documentation to avoid these hiccups. 

Physical Therapy Assistant Supervision Guidelines 

This has been an ongoing battle that should make physical therapy practice owners rejoice! 

In the proposal (page 359), CMS mentioned: “We believe that the direct supervision requirement for [Occupational Therapists in Private Practices] OTPPs and PTPPs [Physical Therapists in Private Practices] of [Occupational Therapy Assistants] OTAs and [Physical Therapy Assistants] PTAs, respectively, may have had an unintended consequence of limiting access to needed therapy services.” 

The current policy requires direct supervision for Medicare Part B outpatient services, although all other settings only require general supervision. However, CMS has now proposed a change to “allow for general supervision of OTAs and PTAs by OTPPs and PTPPs, when the OTAs and PTAs are furnishing outpatient occupational and physical therapy services.” In other words, the physical therapists must be immediately accessible but not physically onsite with the PTA. 

This proposal aligns with the 44 states that already allow general supervision of PTAs. For practice owners, especially in rural areas, this change is enormous, as you’ll be able to better meet the needs of your Medicare Part B patient population. 

But What About Virtual Care Supervision?

At this time, CMS proposes that they will “continue to define direct supervision to permit the presence and “immediate availability” of the supervising practitioner through real-time audio and visual interactive telecommunications through December 31, 2025.” In short, the provision of virtual care supervision will remain in place, but its future is still up in the air. 

Physical Therapy and Telehealth Privileges

Telehealth is another way physical therapy practices can reach patients, but are there finally permanent telehealth privileges for rehab? Unfortunately, no. 

Despite CMS receiving numerous requests for PT, OT, and speech CPT codes to be added to the permanent list, it hasn’t been done yet. At this time, they’d like to “complete a comprehensive analysis of all provisional codes” before making a final decision. For now, you can see which PT codes have been requested for permanent addition to the Medicare Telehealth Services List on page 83 of the proposal. 

Does Audio-Only Communication Qualify for Medicare Reimbursement? 

Yes, but there are some caveats. In the CMS proposed rule 2025, they suggest that audio-only communication is included as an interactive telecommunications system eligible for telehealth payment. However, the technology has to be two-way, real-time, and can only be used when the patient is incapable of or doesn’t consent to video technology. 

Unfortunately, physical therapists aren’t eligible for this service as  they’ve not yet been added to the approved provider list. The American Physical Therapy Association (APTA) pointed out that “most physical therapy codes require the PT to have visual contact with the patient; use of audio-only telecommunication may be limited.” In the meantime, and where applicable, providers should include the 93 modifier when using audio-only communication. 

Revised Plan of Care Requirements 

Waiting for a physician or NPP (non-physician practitioner) to sign the initial certification for a patient’s plan of care can be overwhelming. After all, physical therapists need this done within 30 days of the first treatment to receive payment for their services. Thankfully, CMS is now addressing these concerns. 

They propose changing this regulation to allow for a signed and dated order/referral from a physician or NPP (including nurse practitioners, physician assistants, and clinical nurse specialists) to count toward certification requirements. 

For Medicare to consider it sufficient, there must be a signed and dated order/referral from a physician or NPP and documentation of the order/referral in the patient’s medical record. The patient’s medical record must also include additional evidence that the therapy plan of treatment was transmitted or submitted to the ordering physician or NPP within 30 days of the initial evaluation. 

However, here’s what you should know. This is only applicable when a patient comes to your practice with a signed and dated order or referral from a physician indicating the type of service to be ordered. 

CMS also states that they’re not, and do not intend to propose, an exception to the signature requirement for recertification of a therapy plan of treatment. 

Changes to Practice Expense Values

Thanks to the support of the APTA, CMS aims to boost the practice expense for 16 CPT codes within the Physical Medicine and Rehabilitation (PM&R) family, which are the codes most often used by physical therapists. However, they recommend a decrease for three PM&R codes. 

To give you some backstory, there are 19 PM&R codes in total. The APTA found that the practice expense value for the codes was undervalued by the Relative Value Update Committee (RUC). Then, those codes faced even more deductions due to the Multiple Procedure Payment Reduction (MPPR) system. In short, these codes were heavily misvalued.  

CMS acknowledged in the proposed rule that MPPR was incorrectly applied more than once in some instances. However, they’re going to utilize the increased direct practice expense (PE) inputs suggested by the Healthcare Common Procedure Coding System (HCPAC). Unfortunately, the HCPAC’s recommendation is less than those indicated by APTA and the American Occupational Therapist Association (AOTA). 

While it’s a slight step in the right direction, APTA and AOTO plan to continue finding ways to address the practice expense values and their effects. 

Quality Payment Program Updates

CMS introduced the Rehabilitative Support for Musculoskeletal Care MVP in 2024. It’s the first MIPS Value Pathway that physical therapists can participate in. 

In the 2025 proposal, CMS suggested modifications for the 2025 performance period/2027 MIPS payment year. They’d like to include the following new quality measures.

• Q050: Urinary Incontinence: Plan of Care for Urinary Incontinence in Women Aged 65 Years and Older
• MSK6: Patients Suffering from a Neck Injury Who Improve Pain

• MSK7: Patients Suffering from an Upper Extremity Injury Who Improve Pain
• MSK8: Patients Suffering from a Back Injury Who Improve Pain
• MSK9: Patients Suffering from a Lower Extremity Injury Who Improve Pain

CMS would also like to eliminate the weighting for the Improvement Activities category (on page 2243) and update the MVP scoring to allow providers to select one improvement activity that would earn 40 points. 

The proposed new reweighting policy could be beneficial for physical therapists. It would permit them to ask about reweighting for quality, promoting interoperability, and improvement activities categories if they can’t submit data for scenarios outside of their control. An example would be if a third-party contracted intermediary didn’t submit data on time.

Expected Transition from MIPS to MVPs 

Lastly, CMS intends to fully transition to MVPs and retire traditional MIPS, but it’s been somewhat up in the air regarding when that may happen. In the 2025 proposed rule, though, they stated, “We may be ready to fully transition CY 2029 performance period/2031 MIPS payment year.” 

The CMS Proposed Rule 2025 Presents Some Wins for Physical Therapists 

It’s clear that CMS is making strides to address the needs of the physical therapy community serving Medicare Part B patients, from addressing KX modifier thresholds to practice expense values to loosened physical therapy assistant supervision privileges. These changes, and more, align with improved patient access and quality of care. 

While some of these proposed adjustments can impact your practice’s financial stability, being informed can help you pivot in a positive direction. Implementing technical tools that promote efficiency and adding new service lines will help protect your bottom line and ultimately improve patient outcomes.