For the first time in five consecutive years, the Medicare conversion factor has increased, rising from $32.35 in 2025 to $33.40 for the vast majority of outpatient physical therapy practices.
On paper, that sounds like a meaningful win after half a decade of flat or declining payments. The reality is more complicated.
After CMS applied a permanent 2.5% efficiency adjustment to the relative value units (RVUs) of non-time-based services, most PT practices will see a net reimbursement increase of only approximately 1.75%.
This guide consolidates everything PT clinic owners and billing teams need to navigate 2026, including:
- updated rates by CPT code,
- the revised KX modifier threshold,
- the new PTA supervision standard,
- two new remote therapeutic monitoring codes,
- the current state of Medicare telehealth for PT,
- and the most common billing mistakes that quietly drain practice revenue.
What Medicare Covers for Physical Therapy Services
Medicare physical therapy coverage operates across several program structures, and the rules that apply to your clinic depend on which part — or combination of parts — your patients carry.
Medicare Part A
Part A covers inpatient PT services delivered in hospitals, skilled nursing facilities, and inpatient rehabilitation centers when medically necessary. For the vast majority of private practice PT owners, Part A is not the relevant coverage type — but understanding it clarifies why some patients transitioning from inpatient care arrive with different documentation expectations.
Medicare Part B
Part B is the coverage type most relevant to outpatient PT clinic owners. It covers medically necessary outpatient physical therapy services, paying 80% of the Medicare-approved amount after the annual Part B deductible is met. The patient is responsible for the remaining 20% coinsurance, unless a supplemental policy applies.
One common misconception worth correcting: Medicare Part B does not require a physician referral for a patient to begin physical therapy under direct access. However, a physician or non-physician practitioner must certify the plan of care (POC).
Under a 2025 CMS update, this certification requirement is now fulfilled when the physical therapist submits the signed and dated plan of care to the referring physician within 30 days of the initial evaluation — eliminating the previous burden of obtaining a wet signature on the evaluation itself before treatment begins. The referral or physician order can satisfy the signature requirement as long as the submission is documented.
Medicare Part C (Medicare Advantage)
Medicare Advantage plans cover everything included under Parts A and B, but they are administered by private insurers — and that distinction matters significantly for billing teams. Reimbursement rates, prior authorization requirements, and coverage rules vary by individual plan contract. Never assume traditional Medicare Part B rules apply to a Medicare Advantage patient. Verify coverage and contracted rates per plan before rendering services.
Medicare Part D and Medigap
Part D covers prescription drugs and does not directly cover PT services, though some medications prescribed as part of a treatment plan may fall under Part D benefits. Medigap (Medicare Supplement) policies may cover Part B deductibles or coinsurance amounts associated with PT visits, but they do not provide independent PT reimbursement.
What Medicare Does Not Cover
Medicare will not reimburse for maintenance therapy when skilled care is no longer required — even if the patient benefits from continued exercise. Wellness programs, fitness training, and services that do not meet CMS’s medical necessity criteria are also excluded. When a service may not be covered, an Advance Beneficiary Notice of Noncoverage (ABN) must be signed by the patient before the service is rendered.
How Medicare Determines PT Reimbursement Rates
PT reimbursement rates under Medicare are not arbitrary — they follow a formula that CMS updates annually through the Physician Fee Schedule (PFS) Final Rule.
The Medicare payment formula works like this:
Payment = Relative Value Units (RVUs) × Conversion Factor × Geographic Practice Cost Index (GPCI).
Each component affects the final payment amount, and changes to any one of them ripple through to your revenue.
- RVUs represent the relative resources required to deliver a service — factoring in clinician work, practice expense, and malpractice cost. CMS assigns RVU values to every CPT code and reviews them annually.
- The conversion factor is a dollar multiplier applied to total RVUs — the number that translates a code’s relative value into an actual payment amount.
- GPCI adjustments account for regional cost differences; a practice in Manhattan and a practice in rural Mississippi bill the same CPT codes but receive different payments because their geographic indices differ.
This is why 2026 requires careful interpretation. The conversion factor increased — that’s a positive signal. But CMS simultaneously reduced the work RVUs on non-time-based services through a permanent 2.5% efficiency adjustment.
For evaluation codes, especially, the RVU reduction partially offsets the conversion factor gain. The net result for most practices is not a 3.26% raise — it’s closer to 1.75%, according to APTA’s analysis of the 2026 Medicare Physician Fee Schedule Final Rule.
2026 Medicare PT Reimbursement Rates by CPT Code
The 2026 Conversion Factor — What It Really Means for Your Practice
Effective January 1, 2026, CMS implemented two separate conversion factors for the first time under the current statute. Qualifying Advanced Alternative Payment Model (APM) participants receive a conversion factor of $33.5675 — a 3.77% increase from 2025.
Non-qualifying APM participants, which include the overwhelming majority of outpatient PT clinics, operate under a conversion factor of $33.4009, representing a 3.26% increase from last year’s $32.3465.
Qualifying APMs include risk-sharing arrangements such as Comprehensive Care for Joint Replacement and Bundled Payments for Care Improvement. Most small and mid-sized PT practices have not entered these models due to the complexity of the risk-sharing requirements, which means most PT owners are working under the $33.40 rate.
| One notable exception: CMS removed CPT 97140 (manual therapy) from the efficiency adjustment list for 2026, resulting in a better-than-average year-over-year outcome for that specific code — important for clinics where manual therapy is a high-volume service. |
2026 vs. 2025 Reimbursement Rates for the Most Common PT CPT Codes
The table below reflects national non-facility payment amounts based on the 2026 Medicare Physician Fee Schedule. Rates reflect the non-qualifying APM conversion factor applicable to most outpatient PT practices.
Note that actual payments vary by MAC locality — use the CMS Physician Fee Schedule search tool to verify rates for your specific region.
| CPT Code | Description | 2025 Rate (Non-Facility) | 2026 Rate (Non-Facility) |
|---|---|---|---|
| 97110 | Therapeutic exercises | $28.79 | $29.73 |
| 97112 | Neuromuscular reeducation | $32.02 | $33.06 |
| 97116 | Gait training therapy | $28.79 | $29.73 |
| 97140 | Manual therapy | $27.17 | $28.05 |
| 97530 | Therapeutic activities | $34.61 | $35.74 |
| 97150 | Group therapeutic procedures | $17.47 | $18.04 |
| 97161 | PT eval — low complexity | $98.01 | $101.19 |
| 97162 | PT eval — moderate complexity | $98.01 | $101.19 |
| 97163 | PT eval — high complexity | $98.01 | $101.19 |
| 97164 | PT re-eval — established plan of care | $67.60 | $69.80 |
Source: APTQI 2026 Medicare Physician Fee Schedule analysis.
The KX Modifier, Therapy Threshold, and Medical Necessity Documentation
The Medicare therapy cap was permanently eliminated in 2018, but the elimination of the cap did not mean unlimited, undocumented billing. What replaced the cap is a threshold-based system that triggers additional documentation requirements and a specific modifier whenever a patient’s charges reach a defined annual limit.
For 2026, the therapy threshold for combined physical therapy and speech-language pathology services is $2,480, up from $2,410 in 2025. The occupational therapy threshold is also $2,480.
What the KX Modifier Requires
Once a patient’s combined PT and SLP charges reach $2,480, the KX modifier must be appended to every subsequent claim. Applying the KX modifier is the billing team’s attestation that the services are medically necessary and that the patient’s record contains documentation to prove it. CMS treats an omitted KX modifier as an automatic denial trigger for those units — not a documentation gap to be resolved on appeal.
Use this checklist to verify KX modifier compliance on every claim filed beyond the threshold:
- The patient’s total combined PT/SLP charges have reached or exceeded $2,480
- Medical necessity is clearly documented in the current, active plan of care
- The KX modifier is appended to each claim unit billed beyond the threshold
- Documentation is specific, objective, and directly tied to the patient’s measurable functional progress
- Progress notes reflect skilled intervention — not maintenance or supervised exercise alone
Documentation that says a patient “tolerated treatment well” does not satisfy the medical necessity standard. Notes must show what skilled clinical judgment was applied, what progress was made, and why continued PT is required to achieve functional goals.
PTA Supervision Under Medicare in 2026
One of the most practically significant policy changes of the past two years — and one that remains improperly documented in many clinic protocols — is the updated Medicare Part B supervision standard for physical therapist assistants (PTAs).
Effective 2025 and continuing in full force through 2026, CMS changed the outpatient Medicare Part B supervision requirement for PTAs from direct supervision to general supervision.
Under the previous direct supervision standard, the supervising physical therapist (PT) was required to be physically present in the office during PTA-delivered services. Under general supervision, the supervising PT no longer needs to be physically present — they must be available by telecommunication and appropriately accessible, but they can be off-site.
Action step for practice owners: Review your internal supervision protocols and staff training documentation. Ensure that scheduling practices, documentation templates, and staff orientation materials reflect the general supervision standard — not the outdated direct supervision requirement that may still be embedded in older compliance manuals.
New in 2026 — Remote Therapeutic Monitoring Billing Codes for Physical Therapy
CMS introduced two new remote therapeutic monitoring (RTM) CPT codes effective January 1, 2026, that lower the billing thresholds for remote monitoring and expand RTM eligibility to a significantly broader patient population. For PT clinics already set up with digital home exercise or adherence tools, this represents a legitimate new revenue opportunity under existing Medicare Part B.
The two new codes are:
- CPT 98985 — Device supply for musculoskeletal monitoring, 2–15 days of data transmission (the prior code required 16 or more days). Approximate reimbursement: $51.00.
- CPT 98979 — Treatment management services, 10–19 minutes of clinician time (the prior code required 20 or more minutes). Approximate reimbursement: $26.00.
For PT owners unfamiliar with RTM: Remote Therapeutic Monitoring uses digital tools to track a patient’s musculoskeletal health between clinic visits — measuring adherence to home exercise programs, self-reported pain levels, and functional milestones. RTM is distinct from Remote Patient Monitoring (RPM), which is physician-billed and covers physiologic data like blood pressure and glucose. RTM is billed by the therapist and specifically covers musculoskeletal and respiratory monitoring.
The 2026 threshold reductions matter because shorter-term PT patients — those who complete a plan of care in eight to 10 visits — previously could not generate enough monitoring days or clinician review time to meet the old billing thresholds. The new codes make RTM viable for a much wider share of a typical PT caseload.
What You Need Before Billing RTM Codes
RTM billing requires documentation of medical necessity, monitoring device setup, and time spent on clinical review. Before billing 98985 or 98979, review the applicable Local Coverage Determination (LCD) published by your Medicare Administrative Contractor (MAC) jurisdiction — coverage requirements are not uniform nationally.
Common ICD-10 diagnosis codes used in RTM claims include M54.5x (low back pain), M17.1x (primary osteoarthritis of the knee), and M25.5x (pain in the shoulder). Pair diagnosis codes to the service rendered with the same specificity you would apply to any Medicare outpatient claim.
Medicare Telehealth and Physical Therapy in 2026
Following the passage of the Consolidated Appropriations Act of 2026 (signed into law in early February), Medicare telehealth flexibilities for physical therapists, occupational therapists, and speech-language pathologists have been retroactively reinstated and extended through December 31, 2027.
This means that for the remainder of 2026, therapy providers remain fully eligible to bill for Medicare telehealth services, and critical waivers—such as the ability for patients to receive care in their homes and the elimination of geographic restrictions—remain in full force.
The Most Common Medicare Billing Mistakes PT Clinics Make
Most outpatient PT billing denials are not the result of incorrect treatment decisions — they result from documentation gaps, modifier errors, and procedural oversights that are entirely preventable. These are the billing mistakes that appear most consistently across Medicare outpatient PT audits.
1. Not applying the KX modifier when billing exceeds the therapy threshold.
Once Medicare outpatient PT/SLP services exceed the annual threshold, claims for medically necessary therapy should include the KX modifier. For 2026, that threshold is $2,480. If the modifier is omitted, the claim may be denied or require correction.
2. Missing or incomplete plan of care certification.
Medicare requires a plan of care and documentation that supports medical necessity. Even when a physician’s signature is not required in the way many clinics assume, the PT record still needs to show that certification-related requirements were met and documented correctly.
3. Incorrect use of the 8-minute rule for timed codes.
For timed codes such as 97110, 97112, and 97140, Medicare uses the 8-minute rule. One unit is billed for 8 through 22 minutes, and two units require at least 23 minutes of timed treatment. Errors in applying the rule are a common source of underbilling and audit risk.
4. Omitting the GP modifier.
The GP modifier (“services delivered under an outpatient physical therapy plan of care”) is required on every Medicare outpatient PT claim. Missing it can delay processing or trigger claim errors that must be corrected.
5. Billing non-covered services without an ABN on file.
When a service may not be covered by Medicare — including maintenance therapy or services that have reached the end of their medically necessary scope — an Advance Beneficiary Notice of Noncoverage must be signed by the patient before the service is rendered. Without a signed ABN on file, you cannot bill the patient if Medicare denies the claim.
6. Using unspecified ICD-10 diagnosis codes.
The diagnosis code must clearly support the services billed. Unspecified codes — M54.9 (back pain, unspecified) is a common example — are more likely to trigger scrutiny than laterality-specific, clinically precise codes. Pair ICD-10 codes precisely with the treatment rendered and the documentation in the patient’s progress note.
7. Submitting claims outside the 12-month filing deadline.
Medicare claims generally must be filed within 12 months of the date of service. Claims filed after that deadline are typically denied, with very limited exceptions.
How Declining PT Reimbursement Affects Your Practice — And What You Can Control
Medicare is the largest single payer of physical therapy services in the United States. That makes CMS’s annual rate decisions one of the most powerful external forces on PT practice revenue — and one of the few that clinic owners cannot negotiate, opt out of, or influence directly.
The strategic implication is straightforward: PT practices that are structurally dependent on Medicare volume are exposed to decisions made annually in Washington. Practices that have deliberately diversified their payer mix — attracting commercially insured patients, developing cash-pay service lines, and building referral pipelines through direct access rather than physician gatekeepers — have significantly more control over their revenue trajectory.
The reimbursement pressure from insurance doesn’t disappear, but its share of total practice revenue shrinks.
This is where your marketing infrastructure becomes a revenue protection tool. A clinic that ranks first in local search for “physical therapy near me” or “knee pain PT in [your city]” attracts patients across all payer categories — not only Medicare referrals routed through a physician’s office.
| The Market2Grow™ system is built specifically to help PT clinic owners grow new patient volume through owned digital channels — local SEO, Google Ads, and a website built to convert — so that practice revenue is not contingent on what CMS decides to do with the conversion factor next November. |
Frequently Asked Questions About Medicare Physical Therapy Coverage
Conclusion — What PT Owners Need to Know in 2026 and Beyond
The longer-term picture is hard to ignore: 29% of inflation-adjusted Medicare PT reimbursement has been eroded since 2001. The 2026 increase is welcome, but it does not reverse that trajectory. The PT practices that will be financially strongest three to five years from now are the ones already reducing their dependence on any single payer — building patient volume across payer types through PT-specific digital marketing, direct access growth strategies, and a marketing infrastructure that works independently of physician referral patterns.
Growing beyond Medicare dependency starts with controlling your patient pipeline. Book a complimentary strategy call with a Practice Promotions expert — get a live competitor audit, a diagnosis of your growth blockers, and a custom Market2Grow™ plan for your clinic.
Resources:
1. The. “CMS Finalizes Payment Policies for 2026 – American College of Gastroenterology.” American College of Gastroenterology, 4 Nov. 2025, gi.org/journals-publications/acg-blog/cms-finalizes-payment-policies-for-2026/ Accessed 14 May 2026.
2. “CMS Finalizes Fee Schedule Pay Bump for the First Time in 5 Years.” Apta.org, 18 Nov. 2025, www.apta.org/article/2025/11/18/cms-finalizes-fee-schedule-pay-bump-for-the-first-time-in-5-years.
3. “Medicare’s New Exception to the Plan of Care Certification Requirement.” Apta.org, 23 Dec. 2024, www.apta.org/your-practice/payment/medicare-payment/coding-billing/medicares-new-exception-plan-of-care-certification-requirement.
4. “Physician Fee Schedule | CMS.” Www.cms.gov, www.cms.gov/medicare/payment/fee-schedules/physician.
5. “Medicare Physician Fee Schedule Final Rule for 2026 Conversion Factor.” Society of Interventional Radiology, 2026, www.sirweb.org/publications/news/medicare-physician-fee-schedule-final-rule-for-2026-conversion-factor/ Accessed 14 May 2026.
6. Johnsmith, Danny. 247medicalbillingservices.com, 24/7 Medical Billing Services, 12 Mar. 2026, www.247medicalbillingservices.com/blog/2026-speech-therapy-billing-changes-cpt-updates-modifiers-compliance-rules . Accessed 14 May 2026.
7. Hellonote.com, 2026, hellonote.com/medicare-telehealth-extension-2026-compliance-guide/. Accessed 14 May 2026.
