Physical Therapy Billing Guidelines 2026: Complete Compliance Guide

2026 is a transformative year for physical therapy billing. Medicare reimbursement rates are shifting, documentation standards are stricter, audits are increasing, and prior authorization rules are evolving.

Even with a proposed 3.3% increase in the Medicare conversion factor to $33.42, most practices may face a net revenue loss of around 1% due to RVU adjustments. Mistakes in coding, timing, or documentation can trigger denials, clawbacks, or costly audits, making precision more critical than ever.

For physical therapy practices, understanding the financial, regulatory, and operational stakes is no longer optional; it’s essential for survival and sustainable growth.

Medicare Reimbursement Updates for 2026

Understanding how Medicare reimbursement updates affect your practice is essential, as even a modest change in the conversion factor can have varying impacts across different CPT codes.

Conversion Factor Changes

The Centers for Medicare & Medicaid Services (CMS) has proposed increasing the conversion factor from $32.35 to $33.42 for 2026, representing a 3.3% nominal increase. However, the financial reality is more complex than this figure suggests.

Key Financial Impact:

Net Impact: Estimated -1% due to RVU adjustments
Code-Specific Variations: Most PT codes see increases of only 0-3%, while some remain stagnant or decrease
Dual Conversion Factors: CMS proposes two separate conversion factors for different service types
Efficiency Adjustment: A -2.5% efficiency reduction on the intraservice portion of non-time-based codes

Understanding the Revenue Impact

Physical therapy practices should not assume that an increase in the conversion factor translates directly into increased revenue. The combination of RVU adjustments, efficiency reductions, and compliance costs creates net revenue pressure for most clinics.

Financial Planning Recommendations:

Conduct a CPT impact analysis to identify which codes will see increased or decreased reimbursement
Review your payer mix and contract negotiations in light of 2026 rate updates
Factor Medicare rate changes into annual budgeting and revenue projections
Monitor remittance records closely to track actual vs. expected reimbursement rates

Medicare Part B Premium Impact

The standard monthly Part B premium increased to $185.00 in 2025, up $10.30 from the previous year’s $174.70. This increase directly affects patient copayments and treatment accessibility, potentially impacting patient volume and treatment compliance.

The 8-Minute Rule: Foundation of PT Billing

The Medicare 8-minute rule serves as the foundation for determining how many units can be billed per session.

Understanding the 8-Minute Rule

The Medicare 8-minute rule, implemented in 2000, is the cornerstone of physical therapy billing for time-based services. This rule requires therapists to provide at least 8 minutes of direct, one-on-one treatment to bill one unit of a time-based CPT code.

How It Works:

8-22 minutes = 1 billable unit
23-37 minutes = 2 billable units
38-52 minutes = 3 billable units
53-67 minutes = 4 billable units

Time-Based vs. Service-Based Codes

Time-Based Codes (subject to 8-minute rule):

97110: Therapeutic Exercise
97112: Neuromuscular Re-education
97116: Gait Training
97140: Manual Therapy
97530: Therapeutic Activities
97535: Self-Care/Home Management Training

Service-Based Codes (billed once per session):

97161-97163: Physical Therapy Evaluations (tiered by complexity)
97164: Physical Therapy Re-evaluation
97012: Mechanical Traction
97014: Electrical Stimulation (unattended)
G0283: Electrical Stimulation (unattended, Medicare)

Combining Remainder Minutes

One of the most valuable and misunderstood aspects of the 8-minute rule is the ability to combine remaining minutes across multiple timed codes. When total timed services are divided by 15, if the remaining minutes from multiple services add up to at least 8 minutes, you can bill one additional unit for the service with the greatest time total.

Example:

Therapeutic Exercise: 30 minutes (2 units)
Manual Therapy: 11 minutes (0 units individually)
Total time: 41 minutes

Calculation:

First 30 minutes = 2 units (Therapeutic Exercise)
The remaining 11 minutes support 1 additional unit (Manual Therapy)
Total billable: 2 units of 97110 + 1 unit of 97140

Essential CPT Codes for Physical Therapy 2026

Selecting the correct CPT codes is fundamental to accurate billing and documentation. In 2026, practices must ensure code selection aligns with both clinical complexity and updated CMS expectations.

Evaluation Codes (Tiered by Complexity)

97161: PT Evaluation: Low Complexity

Typical conditions: Ankle sprain, simple back pain, routine post-op recovery
Average reimbursement: $85-$120
Documentation requirements: Brief history, basic functional tests, simple plan of care

97162: PT Evaluation: Moderate Complexity

Typical conditions: Multiple joint issues, chronic conditions, vestibular disorders
Average reimbursement: $110-$155
Documentation requirements: Comprehensive history, standardized outcome measures

97163: PT Evaluation: High Complexity

Typical conditions: Complex neurological conditions, multiple comorbidities, unstable presentations
Average reimbursement: $140-$200
Documentation requirements: Extensive testing, multiple outcome measures, comprehensive analysis

97164: PT Re-evaluation

When to use: Significant status change, new complications, 30-day review
Average reimbursement: $75-$110
Documentation requirements: Progress analysis, plan of care modifications

Treatment Codes

Most Commonly Used PT CPT Codes:

97110: Therapeutic Exercise (most frequently billed PT code)
97140: Manual Therapy
97112: Neuromuscular Re-education
97530: Therapeutic Activities
97116: Gait Training
97535: Self-Care Training
97124: Massage Therapy
97035: Ultrasound

Remote Therapeutic Monitoring (RTM) Codes 2026

RTM represents a growing revenue opportunity for physical therapy practices. The 2026 updates make RTM more accessible and profitable with lower billing thresholds.

Key RTM Codes:

98975: RTM device supply (now minimum 2 days vs. previous higher thresholds)
98976: RTM device supply for data access
98977: RTM device supply with musculoskeletal component
98980: RTM treatment management (first 20 minutes, now 10 minutes minimum for 2026)
98981: RTM treatment management (additional 20 minutes)

2026 Changes:

Minimum device use has been reduced from 16 days to 2 days
Management time reduced from 20 minutes to 10 minutes for initial billing
Prorated billing options for mid-month starts
All RTM services require the GP/GO/GN modifier
Codes 98975, 98979, 98980, and 98981 are subject to the de minimis policy and CQ/CO modifiers when provided by PTAs/OTAs

Critical Modifiers for Physical Therapy Billing

Modifiers communicate essential information to payers and directly affect claim processing and payment. In 2026, incorrect or missing modifiers remain a leading cause of denials and recoupments.

Therapy Discipline Modifiers (Required for All PT Services)

GP Modifier: Services provided under the Physical Therapy plan of care

Required on all PT services
Differentiates PT from OT (GO) and SLP (GN) services
Example: 97110-GP (Therapeutic Exercise provided by PT)

GO Modifier: Occupational Therapy services

GN Modifier: Speech-Language Pathology services

Physical Therapy Assistant (PTA) Modifiers

CQ Modifier: Services furnished in whole or in part by Physical Therapy Assistant

Required when PTA provides more than 10% of a service independent of the PT
Must be paired with GP modifier (e.g., 97110-GP-CQ)
Payment reduction of 15% applies to services billed with the CQ modifier (effective January 1, 2022)

De Minimis Standard:

Services where PTA provides 10% or less of the service do NOT require the CQ modifier
Portions of services provided by PTA, together with PT, are counted as PT services
For timed codes: Determine total billable units first, then assess if the PTA exceeded 10% of each unit

Special Cases: When two remaining units exist and PT/PTA each provide 9-14 minutes of the same service (total 23-28 minutes):

One unit billed WITH CQ modifier (PTA portion)
One unit billed WITHOUT CQ modifier (PT portion)

Medicare Threshold Modifiers

KX Modifier: Medical necessity requirement met for services exceeding therapy threshold

Required when total PT and speech therapy billing exceeds $2,410 (2025 threshold)
Demonstrates continued medical necessity beyond the threshold
No KX modifier needed below threshold
Targeted medical review triggered at $3,000

Other Important Modifiers

59 Modifier: Distinct Procedural Service

Indicates a separate service not normally reported together
Use when billing codes that might otherwise be bundled
Common with 97140 (Manual Therapy) and 97530 (Therapeutic Activities)

AT Modifier: Acute Treatment (for chiropractors, also applies to some PT scenarios)

GA Modifier: Advanced Beneficiary Notice (ABN) on file for non-covered service

GY Modifier: Statutorily excluded service (no ABN collected)

95 Modifier: Telehealth services (when applicable)

96/97 Modifiers: Habilitative (96) vs. Rehabilitative (97) services

Documentation Requirements and Medical Necessity

Documentation is the primary defense in audits and medical reviews. In 2026, CMS places greater emphasis on objective data, justification for skilled intervention, and outcome-driven care.

2026 Enhanced Documentation Standards

CMS has implemented enhanced documentation standards effective January 1, 2026, significantly raising the bar for what constitutes acceptable medical record documentation.

Three Critical Enhancements:

1. Patient-Reported Outcome Measures (PROMs)

MANDATORY for episodes exceeding 10 visits
Must include standardized, validated outcome tools
Examples: LEFS (Lower Extremity Functional Scale), DASH (Disabilities of Arm, Shoulder and Hand), ODI (Oswestry Disability Index)
Must demonstrate correlation between interventions and functional outcomes

2. Objective Functional Deficit Measurements

Required at initial evaluation
Quantifiable baseline measurements essential
Example: “Increase shoulder flexion from 90° to 140° within 6 weeks” (specific, measurable, time-bound)
Cannot use vague statements like “improve range of motion.”

3. Skilled Intervention Justification

Must document WHY skilled PT intervention is necessary for each CPT code billed
Explain what is “skilled” vs. what the patient/caregiver could do independently
Link each intervention to specific functional goals

Core Documentation Elements

Every physical therapy documentation must include:

1. Medical Necessity

Clear explanation of why each service is necessary
How does intervention relate to the established plan of care
Justification for skilled PT services vs. non-skilled care

2. Functional Status and Goals

Baseline functional deficits (objective, measurable)
Specific, time-bound goals
Progress toward goals with each visit

3. Skilled Intervention Details

Exact time spent on each timed service (e.g., “97140 from 10:05-10:20 AM”)
Description of skilled techniques used
Patient response to interventions

4. Clinical Reasoning

Clinical decision-making process
Why were specific interventions chosen
Modifications based on patient response

5. Provider Signature and Credentials

Signature of a qualified provider who furnished or supervised services
List of each person who contributed to the treatment
For PTA services: notation of PT supervisor and phone consultation if applicable

Prior Authorization Requirements 2026

Prior authorization policies continue to evolve across Medicare Advantage, commercial payers, and state regulations. Failure to track and comply with these requirements can result in non-payable claims.

Medicare Advantage Prior Authorization

As of January 13, 2025, UnitedHealthcare allows up to 6 follow-up visits after initial evaluation without clinical review for office and outpatient hospital settings. Previously, clinical review was required before ANY follow-up visits.

Key Requirements:

Initial evaluation does NOT require prior authorization
Prior authorization is required for services beyond the initial 6 visits
Submit authorization within 10 business days (14 calendar days) of starting service
Failure to obtain authorization = claim denial (cannot balance bill members)
Medical necessity reviews conducted by licensed PT/OT/SLP professionals
Uses CMS Chapter 15 criteria, LCDs, and InterQual® criteria

UnitedHealthcare Expansion Timeline:

September 1, 2024: National implementation (excluding Dual Complete SNPs)
February 1, 2026: Additional plans in Arizona and California

Commercial Payer Changes

Major Insurers Reducing Prior Authorization:

UnitedHealthcare: Eliminated nearly 20% of prior authorization requirements (September 2023)
Aetna: Eliminated pre-certification for PT in certain states
Humana: Removed barriers for certain services

Medicare Traditional (Fee-for-Service)

WISeR Model (Wasteful and Inappropriate Service Reduction):

Voluntary prior authorization model launching in 2026
Runs for 6 years in select regions
Physical therapist services are currently NOT included in targeted services
Targeted services: skin/tissue substitutes, electrical nerve stimulator implants, knee arthroscopy for osteoarthritis

State-Specific Regulations

California AB 574 (Effective January 1, 2027):

Prohibits prior authorization for the initial 12 visits for a NEW episode of care
“New episode” = treatment for a condition not treated within the previous 90 days
For recurring conditions (within 180 days of last intervention), plans MAY impose prior authorization
Requires PTs to verify coverage and disclose cost-sharing before treatment
Written consent required for costs potentially not covered

Key Thresholds and Triggers

Medicare Therapy Caps (Threshold System):

$2,410: KX modifier required for continued care (PT + SLP combined)
$3,000: Targeted medical review threshold, expect aggressive oversight
Must document continued improvement (not just “maintenance”)
Objective data required to satisfy efficiency standards

2026 Prior Authorization Triggers: Seven situations requiring new authorizations:

Services exceeding the $2,480 threshold
Vestibular rehabilitation after the first 3 visits
Neurological rehabilitation (every 30 days)
Post-surgical therapy beyond the acute phase
Pediatric therapy reassessments
Complex chronic conditions
Specialty services (aquatic therapy, etc.)

Compliance and Audit Preparedness

Audit activity is increasing as CMS and payers intensify oversight of therapy services. Proactive compliance efforts are essential to minimize financial and operational risk.

Physical therapy billing audit in 2026

Physical therapy billing audit frequency is projected to increase dramatically in 2026:

Audit Probability:

General practices: 12-15% (up from 8%)
High-volume practices (>$500K Medicare annually): 25%
Audit increase: 40% overall compared to previous years

High-Risk Audit Triggers

Office of Inspector General (OIG) Focus Areas:

Inappropriate use of high-complexity evaluation codes (97163)
Excessive units per visit without clear documentation
Consistent billing patterns suggesting upcoding
Missing or inadequate medical necessity documentation
Improper modifier usage (especially 59, CQ, KX)
Services exceeding therapy thresholds without proper justification

Audit-Ready Documentation Checklist

✓ Essential Elements:

Medical necessity is clearly documented for each service
Specific time logs for all timed codes
Patient-Reported Outcome Measures (PROMs) for episodes >10 visits
Objective functional measurements at baseline
Progress correlation between interventions and outcomes
Skilled intervention justification for each CPT code
Proper modifier usage with supporting documentation
Provider signatures and credentials
Plan of care updates showing clinical decision-making

Compliance Strategies

Conduct Internal Audits

Review a random sample of charts quarterly
Analyze billing patterns against national benchmarks
Identify documentation gaps before the external audit

Develop Audit-Ready Templates

Create standardized documentation templates
Include required elements as prompts
Ensure templates allow for patient-specific customization

Staff Training

Regular coding and documentation training
Updates on regulatory changes
Mock audit scenarios

Risk Assessment

Analyze your practice’s billing patterns
Compare to Medicare benchmarks
Address outliers proactively

Technology Solutions

Practice management software with compliance features
Automated time tracking for the 8-minute rule
Built-in documentation requirement prompts

Co-Treatment and Group Therapy Billing

Co-treatment and group therapy offer clinical benefits but require strict adherence to billing rules. Improper billing in these scenarios is a common audit finding.

Co-Treatment Guidelines

The American Speech-Language-Hearing Association (ASHA), the American Occupational Therapy Association (AOTA), and the American Physical Therapy Association (APTA) developed joint guidelines stating that therapists should co-treat only when it directly benefits the patient.

Requirements for Co-Treatment:

Valid clinical rationale documented
Each provider must have an approved Plan of Care, including co-treatment
Each provider must have approved Prior Authorization, including co-treatment documentation
Each provider bills only for time spent in direct, one-on-one treatment
Direct treatment means active interaction, not observation

Billing Rules:

A therapist of one discipline may bill for the entire service, OR
Co-treating therapists of different disciplines may divide service units
Cannot bill twice for the same time increments
Example: PT/OT co-treat for 30 minutes
- OPTION 1: One discipline bills the entire 30 minutes
- OPTION 2: PT bills 15 minutes, OT bills 15 minutes

SLP Co-Treatment Special Rules:

SLPs typically bill untimed session codes (no minimum/maximum session length)
SLP bills one unit for their session
PT/OT bills timed codes for their portion of therapy

Group Therapy

Medicare Definition:

Simultaneous treatment of 2-6 patients
All are performing the same or similar activities
Constant attendance by a qualified provider

Billing:

Each patient is billed individually for their portion
Must meet all documentation requirements for each patient
Time must be clearly documented for each patient

Telehealth and Digital Health Billing 2026

Digital health services continue to reshape the delivery of physical therapy. However, telehealth billing remains highly regulated and payer-specific.

Telehealth Policy Updates

Medicare Telehealth Coverage:

Extended through March 31, 2025, for non-behavioral health services in the patient’s home
Post-March 2025 coverage depends on new CMS guidance (expected late 2025)
Enhanced consent documentation is mandatory

Required Telehealth Consent Documentation:

Patient understanding of the telehealth format
Acknowledgment of limitations vs. in-person care
HIPAA privacy acknowledgment
Patient signature and date

Telehealth Modifier:

95 Modifier: Applied to telehealth services
Not all PT codes are approved for telehealth; verify payer policies
Documentation must justify the appropriateness of telehealth delivery

Remote Therapeutic Monitoring (RTM) 2026

RTM represents a significant opportunity for physical therapy practices to provide continuous care and generate additional revenue.

2026 RTM Improvements:

Lower barriers: 2-day minimum vs. previous 16-day requirement
Reduced time threshold: 10 minutes vs. 20 minutes for initial management billing
Mid-month starts: Prorated billing options
Better compliance: Clearer guidelines, reduced documentation burden

RTM Revenue Potential:

Creates new revenue stream
Improves patient engagement and adherence
Enables data-driven treatment optimization
Positions practice for value-based care contracts

Billing Requirements:

All RTM services require the GP/GO/GN modifier
Codes are subject to the de minimis policy when provided by assistants
The device must transmit data digitally
At least one real-time interactive communication is required monthly

Stay Compliant and Maximize Revenue in 2026

2026 brings significant challenges to physical therapy billing, including Medicare rate updates, stricter documentation requirements, expanded audits, and evolving prior authorization rules. Accurate CPT coding, proper modifier use, and the proper application of the 8-minute rule are essential to protecting revenue and staying audit-ready. Managing these complexities internally can be time-consuming and risky.

Our Medical Billing Consulting Services in Kansas provide expert physical therapy billing support, including documentation review, prior authorization management, RTM, and telehealth billing. Ensure your practice remains compliant, reduces denials, and maximizes reimbursement. Contact us today!

Frequently Asked Questions

1. How does California AB 574 affect PT prior auth?

Effective January 1, 2027, prohibits prior authorization for the first 12 visits of NEW episodes. “New episode” = condition untreated in prior 90 days. Recurring conditions may still require auth after 180 days.

2. What’s the WISeR model’s impact on PT billing?

Voluntary CMS program (2026-2031) targets wasteful services. PT services are currently EXCLUDED from prior auth targets. Monitor for future inclusion as the model expands.

3. Can PTs bill group therapy with Medicare 2026?

Yes, 2-6 patients performing similar activities under constant supervision. Bill each patient individually with a GP modifier. Document individualized progress for each participant.

4. What’s the SLP co-treatment billing rule?

SLPs bill untimed session codes while PT/OT bill timed codes. Cannot double-bill same time increment. PT/OT bills only for their direct intervention.

5. Do all PT telehealth codes need consent in 2026?

Yes, mandatory enhanced consent for ALL telehealth. Must document patient understanding of limitations vs. in-person care. Include HIPAA acknowledgment and signature.