Medicare Part B technical policies impacting occupational therapy reimbursement

For more than 20 years, occupational therapy has been subject to Medicare payment policies that no longer reflect how care is delivered or the costs to provide it. These outdated policies affect not only reimbursement rates, but also practice sustainability, workforce stability, and client access to occupational therapy services under Medicare Part B.

Through sustained advocacy with both the Centers for Medicare & Medicaid Services (CMS) and Congress, AOTA has worked to identify structural problems, press for corrections, and protect the long‑term viability of occupational therapy services under this fee-for-service system. While recent advocacy has led to important engagement and recognition of long‑standing issues, significant technical challenges remain as CMS looks ahead to future Medicare Physician Fee Schedule (MPFS) updates, including the anticipated Calendar Year (CY) 2027 proposed rule.

Persistent Payment Challenges Under the MPFS

For many years, AOTA has raised concerns about persistent payment instability for occupational therapy under the Medicare Physician Fee Schedule, which governs payment for Medicare Part B services. Through formal comments on proposed rules, data analysis, meetings with CMS officials, and collaboration with therapy and provider partners, AOTA has repeatedly highlighted how Medicare payment policies fail to account for the realities of occupational therapy practice.

In comments on the CY 2026 MPFS proposed rule, AOTA detailed multiple areas where CMS policies were cutting code-level occupational therapy reimbursement—despite CMS’s stated goals which should have increased occupational therapy code values or at least had minimal effect. Those comments, along with follow-up meetings, led to CMS fixing errors in the proposed rule, which would have inappropriately cut certain billing codes. Additional meetings with CMS in late 2025 and spring of 2026 have elevated key concerns impacting reimbursement, opening the door to deeper policy discussions. At press time, AOTA is anxiously awaiting the release of the CY 2027 MPFS proposed rule, in the hope that the technical issues outlined below will be addressed.

CY 2026: Technical Policies to Help Had the Opposite Effect

In the CY 2026 MPFS proposed rule, CMS implemented several changes that redistributed payment in ways the agency indicated should benefit timed, non‑facility services. Yet while all occupational therapy services are considered non-facility, regardless of the setting in which they are provided, these services faced reductions in code level values outside of the 1‑year congressional payment increase.

As AOTA analyzed the final rule more closely, we identified several technical but consequential policies that are contributing to reduced occupational therapy reimbursement—often as an unintended consequence of broader payment policies. Two issues stood out: how CMS calculates the Indirect Practice Cost Index (IPCI), and how an outdated utilization crosswalk policy continues to affect therapy services.

Understanding the IPCI: A Scale That Shapes Payment

One of the key drivers of occupational therapy underpayment is the Indirect Practice Cost Index (IPCI), one of several calculations that CMS uses to determine each specialty’s indirect practice expense (PE). Indirect PE includes costs such as rent, administrative staff, billing systems, and other overhead costs. Each specialty has its own IPCI, and these values can differ substantially. For therapy disciplines, the IPCIs for CY 2026 are as follows:

• Physical therapy (PT): 0.6765
• Occupational therapy: 0.8158
• Speech‑language pathology (SLP): 1.3968

The IPCI functions as a relative scaling factor within the MPFS. An IPCI of 1.0 represents the national average for indirect practice expenses. Specialties with an IPCI above 1.0 receive higher‑than‑average indirect PE payments. Specialties below 1.0 receive lower than average payments.

Importantly, the IPCI does not exist in isolation. Because it operates as a relative scale, when one specialty’s IPCI increases, it shifts how indirect PE dollars are distributed across the entire fee schedule. Because practice expense makes up a significant share of payment for therapy services, even small IPCI changes can have meaningful impacts on code‑level reimbursement for occupational therapy services.

In CY 2026, CMS made changes to how facility practice expenses were redistributed across specialties. Under this approach, PE valuation for facility services was reduced and redistributed to non‑facility services. For many physician and procedural specialties, this resulted in higher IPCIs for their non‑facility services, because those specialties bill Medicare in both settings.

However, this policy had an unintended and disproportionate effect on specialties like occupational therapy, where there are no facility payments to redistribute. Occupational therapy services are paid at the non‑facility rate because occupational therapy practitioners (OTPs) do not bill Medicare under facility payment classifications. As a result, when CMS rebalanced facility and non‑facility PE across the fee schedule, specialties that bill in both settings benefited from the redistribution, and specialties that are entirely non‑facility, like occupational therapy, experienced a relative decline.

Because the IPCI is a comparative scale, CMS’s increases to other specialties’ indices because of the facility PE redistribution effectively pushed occupational therapy’s IPCI downward, even though nothing changed about how occupational therapy services are delivered, staffed, or supported. This decline does not reflect lower overhead costs for occupational therapy; it reflects how the redistribution interacts with a payment system that was not designed for specialties that practice exclusively in non‑facility settings.

This dynamic helps explain why occupational therapy experienced declining IPCIs and payment reductions at the same time CMS publicly stated that timed services and non‑facility care should benefit under newer policies. AOTA has shared with CMS how their policies had an unintended, unacknowledged negative consequence for occupational therapy.

Outdated Crosswalk Policy Creates Long-Standing Undervaluation

A second major factor affecting occupational therapy payment is an outdated therapy utilization crosswalk, used to determine which IPCI should be applied to a code, dating back to 2007. When PT and occupational therapy were initially grouped together, CMS routed therapy code billing into a shared pool. Between 2003 and 2007, PT and occupational therapy received separate cost data and ultimately separate overhead rates. Despite these changes, in 2007, CMS began applying the crosswalk in a way that assigns all always therapy treatment code utilization to PT, regardless of the mix of professions that furnish the service.

For nearly every other service on the MPFS, CMS applies a utilization‑weighted blend of IPCIs based on the specialties who bill the code. Because PT has the lowest IPCI among the therapy disciplines, the therapy utilization crosswalk results in systematic undervaluation of occupational therapy services due solely to an outdated administrative convention.

In meetings held during the winter and in follow‑up discussions this spring, AOTA, alongside American Physical Therapy Association (APTA) and other provider organizations, urged CMS to discontinue the crosswalk and apply consistent, utilization‑based methodology. This would increase the code-level values for services with a high percentage of services delivered by OTPs or SLPs.

Caregiver Training Services (CTS): Technical Billing Barriers

CTS codes were created to support training caregivers—an essential component of patient‑centered, effective care. Yet in January 2025, CMS implemented a new billing restriction (Disposition 11) through sub‑regulatory guidance that directly affected therapy practitioners’ ability to supply these services. This change requires the full time listed in the code descriptor to be delivered for CTS codes to be billable, departing from standard Medicare timed‑code reporting rules such as the midpoint or 8‑minute rule. Providers report that this change has limited the provision of this service due to compliance concerns.

AOTA, APTA, and the American Speech-Language-Hearing Association, met with CMS in 2025 and spring 2026 to urge removal of the billing edit, allowing CTS codes to follow standard timed code conventions, thereby reducing burden and supporting appropriate use of these clinically valuable services.

Why Technical Issues Matter

Payment methodology may seem abstract, but its effects are tangible. The IPCI and therapy utilization crosswalk do not reflect differences in care quality, efficiency, or demand; instead, they introduce structural distortions that compound over time. Similarly, the CTS disposition billing requirement turns otherwise appropriate, clinically valuable caregiver training into non‑billable services, undermining both payment stability and beneficiary access. Because occupational therapy services are already among the lowest valued on the fee schedule, even small methodological changes can have outsized effects, threatening workforce sustainability and access to care. While broader system reform will take time, addressing discrete technical issues can improve payment in the near term as AOTA and its partners pursue longer‑term solutions with CMS and Congress.

Call to Action

At press time, the CY 2027 MPFS proposed rule is expected to have been released. As we look at whether CMS has addressed the technical issues outlined above within the policy proposals, it is important for OTPs to understand and help amplify AOTA’s policy advocacy.

Member engagement is critical to reinforcing the need for technical Medicare payment policy changes that support adequate reimbursement, workforce stability, and beneficiary access to occupational therapy services. Practitioner voices help demonstrate the real‑world impact of these policies and strengthen AOTA’s advocacy with CMS and Congress.

• Stay engaged with AOTA advocacy alerts.
• Review AOTA’s analysis of the CY 2027 MPFS proposed rule.
• Submit your comments to CMS on how their policies affect your practice.

Your engagement matters—now and for the future of occupational therapy reimbursement.

Kim Karr, OTR/L, is AOTA’s Coding and Payment Policy Manager.

Heather Parsons, MSOT, is AOTA’s Vice President of Federal Affairs.