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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 physical therapy evaluation 
Occupational therapy evaluation 
The initial evaluation should document the necessity of a course of therapy through objective findings and 
subjective patient/caregiver self-reporting. Initial evaluations must be completed by the therapist or 
physician/NPP that will be providing the therapy services. Initial evaluations are completed to determine the 
medical necessity of initiating rehabilitative therapy or skilled instruction in maintenance activities that the 
patient and/or caregiver can perform at home. 
 
Initial evaluation may be warranted when there is a change in functional ability. The evaluation should clearly 
describe the presenting complaint or problem for which the patient is seeking services of the physical or 
occupational therapist. 
 
The evaluation process assesses, for example, the severity and impact of the current problem, the possibility of 
multi-site or multi-system involvement, the presence of pre-existing systemic conditions (e.g., diseases), and 
the stability of the condition. If the patient presents with multi-system involvement and/or multiple site 
involvement, all pertinent areas/conditions should be assessed at the initial evaluation (i.e., cervical pain and 
knee pain; low back pain and rotator cuff irritation; cervical pain and low back pain). Only one initial 
evaluation code should be used, reflecting the level of complexity of the evaluation, and all presenting 
complaints and problems evaluated. If over the course of an episode of treatment, a new, unrelated diagnosis 
occurs, another initial evaluation may be covered. 
 
Initial evaluations may be covered when the documentation justifies the need for a skilled therapy evaluation, 
even if it is determined that the patient does not require a skilled level of treatment. 
 
Screening may be more appropriate than evaluation in some circumstances. For example, a patient develops an 
acute lateral epicondylitis from painting. The patient seeks physician attention who subsequently recommends 
that the patient see an occupational therapist. By the time the patient sees the OT, she presents without any pain 
and has resumed all normal functional activities. Completing a screening interview of this patient should lead 
the therapist to determine that an OT evaluation and treatment would not be medically necessary. 
 
     A screening is the gathering of information to determine the need for further evaluation by the clinician. The 
screening process may include a review of the patients medical record, a patient interview and observation of 
the patient. 
    Routine screening is not a billable service. Although some regulations and state practice acts require 
screening evaluations at specific intervals (such as at admission to a nursing home, or quarterly during the 
patients stay), for Medicare payment, evaluations must meet Medicare coverage guidelines. 
 
Initial evaluations from other therapy disciplines performed on the same beneficiary may also be covered, 
provided the evaluation and plan of care are not duplicative. 
 
Consider the following points when billing for an evaluation. 
 
    Evaluations for deconditioning after hospitalization where it is anticipated that prior functional abilities 
would spontaneously return through patient, caregiver and/or nursing activities are not considered medically 
necessary and are not covered. 
    Pre-operative evaluations performed routinely to ascertain the patients post-surgical needs and/or to explain 
the services that will be provided post-operatively are non-covered. The patients post-op experience and 
functional limitations are unknown prior to the surgery and will at that time require a new evaluation of the 
situation when medically necessary. 
    Driving assessments provided under an occupational therapy plan of care are covered only when there is a 
reasonable expectation that the patients ability to drive will be restored or improved. The need for the 
assessment must be related to the presence of, or recovery from, a specific injury or illness. Generalized aging, 
weakness or debility do not qualify as Medicare covered conditions for assessment or therapy services. 
Assessment for the sole purpose of disqualifying a patient from driving is not a covered benefit. 
 
Physical therapy reevaluation 
Occupational therapy reevaluation 
Reevaluation provides additional objective information not included in other documentation, such as treatment 
or progress notes. 
 
Reevaluations are distinct from therapy assessments. Assessments are considered a routine aspect of 
intervention and are not billed separately from the intervention. For example, a patient is being seen in physical 
or occupational therapy for shoulder pain and limited shoulder functional range of motion due to capsular 
tightness. Prior to performing shoulder joint mobilizations, the therapist assesses the patients ROM and pain 
level/pattern to determine the effect of prior treatment and, if further mobilization is warranted, to determine 
the appropriate mobilizations. After the mobilizations are completed, the ROM is assessed again to determine 
the effects of the treatment just performed. The time required to assess the patient before and after the 
intervention is added to the minutes of the treatment intervention. 
 
Consider the following points when billing for a reevaluation. 
 
    When reevaluations are done for a significant change in condition, documentation must show a significant 
improvement, decline or change in the patients diagnosis, condition or functional status that was not 
anticipated in the current plan of care. When a patient exhibits a demonstrable change in functional ability, a 
reevaluation may be necessary to revise long term goals and interventions. The plan of care may need to be 
revised and recertified if significant changes are made, such as a change in the long-term goals. 
    If a patient is hospitalized during the therapy interval, a reevaluation may be medically necessary if there has 
been a significant change in the patients condition which has caused a change in function, long term goals, 
and/or treatment plan. 
    Reevaluations may be appropriate at a planned discharge when documentation supports the medical 
necessity for the reevaluation service. 
 
You can find this information in Medicare's Local Coverage Determination (LCD): Outpatient Physical and 
Occupational Therapy Services (L33631). 
 
If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.