According to a March 2018 report from the Office of Inspector General (OIG), many Medicare claims for outpatient physical therapy (PT) services did not comply with Medicare requirements. The study’s findings are a wakeup call for physical therapists and medical billing and coding companies.

Compliance Issues in Claims for Outpatient Physical Therapy Services

The OIG study covered Medicare outpatient claims for physical therapy services, totaling $635.8 million, provided by therapists from July 1 through December 31, 2013. The review, which involved a sample of 300 claims, found that:

  • Up to 61 percent of Medicare claims (184 claims) did not comply with Medicare requirements for medical necessity, coding, or documentation requirements.
  • Therapists claimed $12,741 in Medicare reimbursement on 184 claims that did not comply with Medicare requirements.
  • Therapists properly claimed Medicare reimbursement on the remaining 116 claims.
  • Medicare is estimated to have overpaid $367 million on services provided by outpatient PT from July 1 through December 31, 2013 (during the 6-month audit period).

Past OIG reviews of individual physical therapy providers had identified claims for outpatient physical therapy services that were not reasonable, medically necessary, or properly documented. According to the OIG, for calendar year (CY) 2013, the Medicare Part B program paid about $1.6 billion for outpatient physical therapy services provided to Medicare beneficiaries. This prompted the OIG to conduct this review to assess the extent to which these issues occurred nationwide.

Physical therapists evaluate and treat disorders of the musculoskeletal, lymphatic, and cardiovascular/pulmonary systems with the goal to restore maximum functional independence by restoring function, improving mobility, and relieving pain. Physical therapy services are also aim to prevent or slow decline in functionality. Physical therapy procedures include manual therapy, therapeutic exercise, neuromuscular re-education, and physical modalities such as electrical stimulation and ultrasound.

    For outpatient physical therapy services to be considered reasonable and necessary, Medicare requires that the following conditions are met:

  • The services shall be considered under accepted standards of medical practice to be a specific and effective treatment for the patient’s condition.
  • The services shall be of such a level of complexity and sophistication or the condition of the patient shall be such that the services required can be safely and effectively performed only by a therapist, or under the supervision of a therapist.
  • There must be an expectation that the patient’s condition will improve significantly in a reasonable (and generally predictable) period of time, or the services must be necessary for the establishment of a safe and effective maintenance program required in connection with a specific disease state.
  • The amount, frequency, and duration of the services must be reasonable under acceptable standards of practice.

The new OIG report found that:

  • PT services provided were not medically necessary:
    According to the report, for 91 claims, 16 therapists received Medicare reimbursement when the beneficiaries’ medical records did not support the medical necessity of the services.
  • Services were not reasonable:
    For 89 claims, the study determined that the amount, frequency, and duration of the PT services were not reasonable and consistent with standards of practice.
  • There was no evidence services would be effective:
    For 30 claims, the medical reviewers did not find any evidence in the medical records that the services provided would have been effective.
  • Services did not require the skills of a therapist:
    For 28 claims, the therapy services did not require the skills of a therapist. For example, a Medicare beneficiary’s medical record failed to provide evidence that skilled intervention by a physical therapist was necessary.
  • No expectation of significant improvement:
    In the case of 26 claims (for beneficiaries who were on rehabilitative programs), the study determined that the expected rehabilitation potential was insignificant in relation to the extent and duration of the physical therapy services required to achieve that potential.
  • Physical therapy coding did not meet Medicare requirements:
    Outpatient therapy services are payable only when the medical record and information on the provider’s claim form consistently and accurately report covered services. The OIG found that for 145 claims,18 therapists received Medicare reimbursement for claims that did not meet Medicare coding requirements. The types of coding errors identified were:

    • Timed units in claims did not match units in treatment notes
    • Missing modifiers
    • Incorrect codes
  • Documentation did not meet Medicare requirements

According to Medicare documentation requirements, outpatient PT services must be provided in accordance with a written plan established before treatment begins. The plan must specify the type, amount, frequency, and duration of the PT services to be furnished and must signify the diagnosis and anticipated goals. Goals should be measurable and relate to identified functional impairments. In addition, the plan should also include the signature and professional identity of the person who developed the plan and the date it was established. The OIG report states that, for 112 claims, 21 therapists received Medicare reimbursement for services that were not provided in accordance with one or more Medicare documentation requirements.

The OIG concluded that the overpayments occurred because the Centers for Medicare & Medicaid Services’ controls were not effective in preventing improper payments for outpatient PT services. The OIG has recommended that CMS recover overpayments, establish better supervision of outpatient therapy claims, and improve provider education.

The report also states that CMS disagreed with the OIG’s findings as they were not in agreement with the OIG’s interpretation of the CMS policies. CMS has pointed out that a major portion of the errors were likely to be related to coding errors. However, CMS has agreed with OIG that improvements can be made in monitoring and provider education.

It is clear that physical therapists will be under increasing pressure to ensure compliance with coverage, payment, coding, documentation, and billing requirements. The best way to avoid audits and ensure compliance is to partner with an experienced medical billing and coding company that specializes in handling Medicare claims for physical therapy. Physical therapists should also focus on maintaining complete and accurate documentation to reflect services provided.