Medicare Documentation Requirements for Physical Therapy: The Complete Compliance Guide

Medicare Part B documentation rules aren't suggestions—they're billing requirements. Missing a progress report, inadequate treatment notes, or unsigned plans of care can trigger denials, audits, and repayment demands. For outpatient physical therapy clinics, understanding exactly what Medicare expects isn't just good practice—it's financial protection.

This guide breaks down the five core documentation requirements every PT clinic must maintain to demonstrate medical necessity and stay compliant with Medicare Administrative Contractor (MAC) audits.

What Makes Documentation "Medicare-Compliant"?

Medicare pays for therapy services only when documentation proves medical necessity. That means your records must show that treatment is reasonable, necessary, and skilled for the patient's specific condition. All documentation lives in the patient's medical record and must be available upon MAC request—not submitted with claims, but ready for audit at any time.

The Centers for Medicare & Medicaid Services (CMS) outlines baseline requirements in the Medicare Benefit Policy Manual Chapter 15, Section 220.3. Your MAC may add local coverage determination (LCD) requirements on top of that.

The Five Essential Medicare Documentation Requirements for Physical Therapy

1. Initial Evaluation

Your initial evaluation establishes why therapy is medically necessary. It must include objective findings—not just clinical impressions—and subjective patient reports.

Required components:

• Diagnosis: Both medical diagnosis (from the referring physician) and impairment-based treatment diagnosis

• Conditions and complexities: List everything affecting treatment, and explain how these factors impact prognosis and your plan of care

• Measurable physical function: Medicare recommends (but doesn't require) standardized instruments like FOTO or OPTIMAL. If you don't use these, document objective functional assessments using validated tests appropriate for the condition being measured

• Prognosis and determination: State whether treatment is needed, expected timeframe for improvement, and maximum expected functional outcome

When evaluation is the only service provided—say, for a one-time consult—it serves as the plan of care if it contains a diagnosis. The physician order certifies the need for evaluation.

2. Plan of Care (POC)

The plan of care must exist before treatment begins. If you start treatment before documenting the POC, you must be the same clinician who establishes it.

Minimum POC requirements:

• Diagnoses

• Long-term treatment goals (measurable, tied to functional impairments)

• Type of therapy (e.g., PT, OT)

• Amount: Number of sessions per day (defaults to once/day if unspecified)

• Frequency: Number of sessions per week (defaults to once/week if unspecified)

• Duration: Number of weeks or total treatment sessions

Each therapy discipline treating the same patient needs its own separate plan of care.

Modifications to the POC must be documented in writing. Minor changes—adjusting frequency due to illness or tweaking short-term goals—don't require new physician approval. Significant changes, like altering long-term goals, do require documented physician or NPP approval within 30 days.

3. Physician Certification and Recertification

Medicare requires physician or non-physician practitioner (NPP) certification of the POC within 30 calendar days of the initial evaluation. The initial certification covers the stated POC duration, up to 90 days maximum.

Starting January 1, 2025, initial certification can be satisfied by:

• A signed physician/NPP order, plus

• POC transmission to the physician/NPP within 30 days of initial treatment

Recertification is required:

• Every 90 days from the initial evaluation, or

• At the end of the initial certification period (whichever is less), or

• Whenever you significantly modify the POC

Delayed certifications are acceptable if they include a reason for the delay. CMS accepts certifications without justification for up to 30 days after they're due. The goal is to avoid stopping medically necessary therapy due to administrative delays—but you still need that signature.

4. Daily Treatment Notes

Every treatment session requires documentation. These notes justify the billing codes you submit and create a record of all skilled interventions.

Each treatment note must include:

• All skilled services provided

• Treatment time (to support time-based billing codes)

• Progress toward goals

• Any changes to treatment between progress report intervals, with justification

If a patient isn't improving, explain why: setbacks, new conditions, social factors—and why you still expect progress is attainable. Frequent clinical judgments and activity upgrades demonstrate skilled care.

5. Progress Reports

A physical therapist must write a progress report at least once every 10 treatment visits. PTAs cannot write these reports. The 10-visit count begins on the first day of the episode—whether that's an evaluation, re-evaluation, or treatment session.

Required progress report elements:

• Beginning and end dates of the reporting period

• Date the report was written

• Patient's subjective statements (objective reporting of what they say)

• Objective measurements showing functional changes

• Status changes relative to each current goal

• Assessment of progress (or lack thereof) toward goals

• Updated treatment plan, goal modifications, or discharge planning

• Clinician signature with credentials

Time spent writing progress reports is not separately billable—it's included in treatment charges.

Progress reports are your primary tool for demonstrating ongoing medical necessity. For rehabilitative therapy, you must show the patient is improving (or has potential to improve) in a reasonable, predictable timeframe. For maintenance therapy, you must show your skilled care is necessary to prevent functional decline and can't be safely performed by the patient, family, or unskilled personnel.

The Discharge Note

Your discharge note is a progress report covering the period from the last progress report to discharge. It must summarize outcomes and indicate the therapist reviewed all notes and agrees with the discharge decision.

For unanticipated discharges, the clinician may base the report on treatment notes and verbal reports from assistants or qualified personnel.

What Happens When Documentation Falls Short

MAC audits focus on whether your documentation supports medical necessity. Missing progress reports, incomplete POCs, or unsigned certifications can result in determinations that services were unnecessary. Medicare will demand repayment—often with penalties and interest—and may expand the audit to more patient records.

Strong documentation protects against denials, liability claims, and payment clawbacks. It also supports care coordination and continuity when patients transfer between settings or providers.

Building Compliance Into Your Workflow

Manual tracking of 10-visit intervals, certification deadlines, and progress report requirements creates administrative burden and compliance risk. Modern practice management systems can automate these reminders, flag missing documentation, and ensure every Medicare patient file stays audit-ready.

Your documentation is more than a billing requirement—it's the clinical record proving your patients need skilled physical therapy. When that record is complete, measurable, and defensible, you protect both your revenue and your patients' access to necessary care. Need more help with Medicare Documentation Requirements for Physical Therapy? See how PatientStudio can help. Schedule a demo now.