Physical Therapy Medical Billing Company: The 8-Minute Rule, Therapy Caps, and Everything Else Your Billing Partner Needs to Get Right

By Medtransic | February 11, 2026 | 14 min read | Updated: February 15, 2026

Quick Summary: Physical therapy billing operates under rules that don't exist in any other medical specialty. The 8-minute rule dictates how many units you can bill. Timed and untimed codes follow completely different logic. Medicare's therapy cap threshold requires a KX modifier or your claims get auto-denied. And your evaluation codes (97161–97163) must match the complexity documented in the chart. A billing company that doesn't live in these rules every day will cost you more than they save. This guide breaks down what makes PT billing different and exactly what to demand from any company that wants to handle it.

Why Physical Therapy Billing Is Its Own Animal

Physical therapy billing shares almost nothing with standard physician billing. Most medical specialties bill by encounter or by procedure — you do the service, you code it, you submit the claim. In PT, billing is time-based. Every billable unit of a timed service code is tied to the number of minutes you spent delivering that specific treatment, and a set of rules determines how those minutes convert into units.

On top of that, Medicare and most commercial payers impose annual spending thresholds on therapy services. When a patient's charges cross that line, every subsequent claim requires a modifier certifying that continued treatment is medically necessary — and the documentation to back it up. Miss the modifier, and the claim is dead on arrival.

Then there's the documentation burden. PT claims require more than a procedure code and a diagnosis. They require treatment goals, functional outcome measures, progress notes tied to those goals, and a clear narrative of medical necessity that justifies every visit. Payers audit PT claims more aggressively than most specialties — similar to the scrutiny faced by chiropractic billing — because of the time-based billing model and the perception of overutilization. Strong compliance practices are essential to avoid costly recoupments.

All of this means that a general medical billing company — one that handles family medicine, cardiology, or dermatology — will consistently underperform on PT billing, just as generalist billers struggle with orthopedic billing complexity. The rules are too different, the coding logic is too specialized, and the documentation requirements are too specific for a generalist team to manage without errors.

The 8-Minute Rule: How It Works and Where Billing Companies Get It Wrong

The 8-minute rule is Medicare's method for converting treatment time into billable units for timed CPT codes used in medical coding. It's the single most important billing rule in physical therapy, and it's the one that causes the most revenue loss when applied incorrectly.

How It Works

Each timed PT code represents a 15-minute treatment unit. But you don't need a full 15 minutes to bill one unit — you need at least 8 minutes. The rule works on a cumulative basis across all timed codes performed during a session.

The pattern continues in 15-minute increments. The critical threshold is always 8 minutes past the previous unit boundary. Seven minutes of a timed service gets you zero billable units. Eight minutes gets you one.

Where Billing Companies Get It Wrong

The most common mistake is calculating units per code instead of across codes. The 8-minute rule requires you to total all timed minutes from all timed codes, then determine total billable units, then distribute those units across the codes — giving the most units to the code with the most minutes.

The second common error is including untimed code minutes in the 8-minute calculation. Untimed services like hot packs (97010) or unattended electrical stimulation (97014) are billed per encounter, not per time. Their minutes should never be included in the timed code total. Including them inflates your unit count, which is both incorrect and a compliance risk.

Timed vs. Untimed Codes: The Distinction That Makes or Breaks Your Claims

Every PT CPT code falls into one of two categories, and your billing team needs to know the difference cold.

When your billing team blurs this line — counting hot pack time toward timed code totals, or billing an evaluation by units instead of per encounter — the result is either overbilling (which triggers audits) or underbilling (which costs you revenue). A PT-specialized billing company codes these correctly every single time because it's the foundation of everything they do.

Therapy Caps and the KX Modifier

Medicare sets annual spending thresholds on outpatient therapy services. Physical therapy and speech-language pathology share a combined threshold. In recent years, this threshold has been in the $2,200 to $2,400 range (adjusted annually). Once a patient's charges exceed this amount, the practice must append the KX modifier to every claim line going forward — certifying that the services are medically necessary and that the documentation in the medical record supports continued treatment.

Without the KX modifier on claims that exceed the threshold, Medicare automatically denies them. There's no appeal. There's no workaround. The modifier either is or isn't on the claim.

There's also a higher dollar amount — the targeted medical review threshold — above which claims may be selected for manual review by a Medicare Administrative Contractor (MAC). At this level, your documentation must be airtight: clear treatment goals, measurable functional progress, and a plan of care that justifies ongoing treatment.

Evaluation Codes (97161–97163): The Complexity Trap

PT evaluations are billed using three tiered codes based on clinical complexity — 97161 (low), 97162 (moderate), and 97163 (high). The reimbursement difference between a 97161 and a 97163 can be $40 to $70 per evaluation, which adds up fast across a busy practice.

The complexity level is determined by three factors: the patient's history and comorbidities, the number of body systems examined, and the clinical decision-making required to develop the plan of care.

Here's where practices lose money in two directions. Some PTs consistently document high-complexity evaluations but their notes don't support it — the history is thin, the exam findings don't reflect multiple systems, or the clinical reasoning isn't articulated. This leads to downcoding on audit or denial on review. Other PTs undercode, billing 97161 for evaluations that clearly involved moderate or high complexity, simply because they didn't know how the payer determines the tier.

A specialized PT billing company reviews your evaluation documentation and matches it to the correct complexity level before the claim goes out. They know what each MAC and commercial payer looks for when validating the tier, and they'll flag evaluations that are either overcoded or undercoded — protecting you from audit risk on one side and lost revenue on the other.

6 Costly PT Billing Mistakes and How a Specialist Prevents Them

1. Miscalculating units under the 8-minute rule. This is the most common PT billing error. Overcounting units triggers audit exposure and potential recoupment. Undercounting means you're leaving reimbursement behind on every session. A specialized billing team calculates units from the documented treatment times using the correct cumulative method — every time, without exception.

2. Billing group therapy at individual rates. Group therapy (97150) is reimbursed at a lower rate than individual treatment codes. If your therapist is treating two or more patients simultaneously and the claim goes out under individual timed codes, that's a compliance violation. Your billing company should verify the treatment setting from the documentation and code accordingly.

3. Missing the KX modifier when therapy charges exceed the cap. This results in an automatic denial with no appeal path. A PT billing company that tracks patient spend against the annual threshold in real time prevents this entirely.

4. Selecting the wrong evaluation complexity level. Upcoding a 97161 to a 97163 without supporting documentation puts you at audit risk. Downcoding costs you $40 to $70 per evaluation. Neither is acceptable. Your billing team should be reviewing evaluation notes against the complexity criteria before submission.

5. Failing to track eligibility verification and prior authorization expirations. Many commercial payers require prior authorization for PT services, often in blocks of 6 to 12 visits. When the authorized visits run out and nobody requests an extension, the next claim gets denied. A specialized billing company tracks authorizations by patient, payer, and visit count, and alerts you before they expire.

6. Insufficient documentation of medical necessity. Medicare and commercial payers deny PT claims when the documentation doesn't clearly justify why the treatment is needed — a root cause that effective denial management can address, what functional improvements are being targeted, and how the patient is progressing toward measurable goals. Your billing team can't fix bad documentation after the fact — but they can flag notes that are incomplete before claims go out, giving your therapists a chance to strengthen the record.

How to Evaluate a Physical Therapy Billing Company

The PT billing market is full of companies that list "physical therapy" on their specialty page without the operational depth to handle it. Here's how to separate the real ones from the rest.

Ask them to explain the 8-minute rule. If they can't walk you through a multi-code calculation on the spot — total timed minutes, total units, distribution logic — they don't know PT billing well enough to manage your claims.

Ask how they handle therapy cap tracking. You want a system-level answer, not a vague promise. Do they track each patient's year-to-date charges against the threshold? Do they alert you before patients cross the cap? Do they auto-append the KX modifier? If this isn't built into their workflow, claims will get denied.

Ask about their EMR compatibility. PT practices use specialized EMRs — WebPT, Prompt, Clinicient, Raintree, Kareo, TheraOffice, and others. Your billing company needs to either integrate directly or have an efficient process for importing charge and documentation data from your system. A mismatch here creates data entry errors and delays.

Ask for their denial rate on PT claims specifically. A blended denial rate across all specialties is meaningless. You need to know how their PT clients are performing. A well-run PT billing operation keeps denial rates under 5%.

Ask how they handle prior authorization tracking. For PT, this is non-negotiable. You need a partner who tracks authorized visit counts by patient and payer, initiates re-authorization requests before visits run out, and flags patients who are approaching their limit.

Ask about their documentation review process. The best PT billing companies don't just submit whatever comes through. They review treatment notes for completeness, flag sessions with missing goals or progress measures, and ensure that the documentation supports both the codes being billed and the medical necessity of continued care.

Ask about their contract terms. Month-to-month with 30-day notice is the standard for companies that earn your business through results. Long-term contracts with termination penalties are a red flag.

What Results Should You Expect?

A competent PT billing company should deliver measurable results within the first 60 to 90 days, improving your overall revenue cycle management.

Clean claim rate above 95%. Claims submitted correctly the first time, with proper codes, modifiers, and documentation attached.

Denial rate below 5%. For PT specifically, this means the team is applying the 8-minute rule correctly, appending KX modifiers when required, and matching evaluation complexity to documentation.

Average days in AR under 35. PT AR can run slightly longer than some specialties due to prior authorization and therapy cap processing. Under 35 is solid; under 30 is excellent.

Net collection ratio above 96%. After contractual adjustments, you should be collecting at least 96% of what you're owed. The best PT billing teams push this above 98%.

Zero KX modifier misses. This is binary — either the modifier is there or the claim is denied. There's no acceptable miss rate.

Proactive authorization management. No patient should ever be denied because their authorized visits ran out without someone requesting an extension. This is a process failure, not a payer problem.