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The rules say that plans must pay for a medical service or item if regular Medicare would pay for it in this case. 
You can find this rule at 42 Code of Federal Regulations (CFR) Section 422.101. 
 
The rules say that physical therapy (PT), occupational therapy (OT), and speech therapy (ST) services are 
covered only when they are medically reasonable and necessary. Therapy services are considered reasonable 
and necessary when: 
 
1. The services are specific and effective treatment for the patient's condition, 
 
2. The services require the skills or direct supervision of a therapist,  
 
3. The amount, frequency, and duration of the services is reasonable under accepted standards of practice, and   
 
4. The services are needed to address recovery of or improvement in function OR to establish, design, deliver, 
or carry out a maintenance program.  
 
Medicare coverage is based not on a patient's potential for improvement, but rather on the patient's need for 
skilled care. You can find these rules in the Medicare Benefit Policy Manual, Chapter 15, Section 220.2. 
 
The rules say that Evaluation is a comprehensive service that requires professional skills to make clinical 
judgments about conditions for which services are indicated based on objective measurements and subjective 
evaluations of patient performance and functional abilities. Evaluation is warranted e.g., for a new diagnosis or 
when a condition is treated in a new setting. These evaluative judgments are essential to development of the 
POC, including goals and the selection of interventions. The time spent in evaluation does not count as 
treatment time. 
 
1. The initial examination has three components: 
 
a. The patient history to include prior level of function 
 
b. Relevant systems reviews 
 
c. Tests and measures 
 
d. Current functional status (abilities and deficits). 
 
2. Factors that influence the complexity of the examination and evaluation process include the clinical findings, 
extent of loss of function, social considerations, and the patient's overall physical function and health status. 
Thus, the evaluation reflects the chronicity or severity of the current problem, the possibility of multi-site or 
multi-system involvement, the presence of preexisting systemic conditions or diseases, and the stability of the 
condition. Physical therapists also consider the level of the current impairments and the probability of 
 
 
prolonged impairment, functional limitation, disability, the living environment, and the social supports. 
 
3. Initial evaluations or re-evaluations may be determined reasonable and necessary even when the evaluation 
determines that skilled rehabilitation is not required if the patient's condition showed a need for an evaluation, 
or even if the goals established by the plan of treatment are not realized. 
 
4. Re-evaluation is periodically indicated during an episode of care when the professional assessment indicates 
a significant improvement or decline in the patient's condition or functional status. Some regulations and state 
practice acts require re-evaluation at specific intervals. A re-evaluation is focused on evaluation of progress 
toward current goals and making a professional judgment about continued care, modifying goals, and/or 
treatment or terminating services. 
 
5. A re-evaluation may be appropriate prior to a planned discharge for the purposes of determining whether 
goals have been met, or for the use of the physician or the treatment setting at which treatment will be 
continued. 
 
You can find this information in Medicare's Local Coverage Determination (LCD): Outpatient Physical 
Therapy (L34428). 
 
If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.