On March 14, 2018, the Office of the Inspector General (OIG) for the United States Department of Health and Human Services, issued an audit report addressing significant regulatory non-compliance regarding Medicare reimbursement relating to outpatient physical therapy (“PT”) services. The OIG concluded that sixty-one percent of claims analyzed in its random sample failed to comply with regulations applicable to medical necessity, coding, or documentation requirements. The OIG then extrapolated its findings to the six-month time period covered by the audit (July 1, 2013 - December 31, 2013) and concluded that that the Centers for Medicare & Medicaid Services (CMS) likely paid $367 million in improper payments.

In the report, titled Many Medicare Claims for Outpatient Physical Therapy Services Did Not Comply With Medicare Requirements, the OIG stated that 184 of 300 claims failed to comply with the governing regulations. The OIG found that the most frequent problems were: (1) claims that were not reasonable because the amount, frequency, and duration of the PT services were inconsistent with standards of practice; (2) the number of timed units billed did not match the number of timed units documented in the treatment notes; (3) plans of care that were vague, not signed by a physician or a non-physician practitioner, or failed to identify the duration and frequency of the therapies; and (4) the routine use of improper modifiers or CPT codes.

The OIG concluded that the primary cause of the improper payments was CMS’s lack of effective controls in preventing payments that did not comply with Medicare medical necessity, coding, or documentation requirements. The OIG recommended that CMS take specific action to improve its controls to prevent future overpayments, including:

  • Instruct Medicare Administrative Contractors (MACs) to notify providers of possible overpayments, so those providers can exercise reasonable diligence to investigate and return any identified overpayments;
  • Establish mechanisms to better monitor the appropriateness of outpatient physical therapy claims; and
  • Educate providers about Medicare requirements for submitting outpatient physical therapy claims for reimbursement.

While the audit only examined services provided in an office setting, the findings are applicable to the majority of providers rendering PT, because the same coverage and coding requirements apply in all outpatient settings.

CMS’s Response

CMS generally disagreed with the OIG’s findings. It argued that further analysis of the OIG’s sampled claims was needed to determine whether the claims actually met Medicare requirements, and it argued that the OIG misunderstood Medicare coverage policy. CMS also stated that “most of the findings identified by OIG are likely attributable to documentation errors as opposed to fraudulent activity.” Despite the general disagreement over the report’s findings, CMS did agree to establish mechanisms to better monitor the appropriateness of outpatient PT claims and improve its educational outreach regarding outpatient PT reimbursement requirements.

Takeaways

Physical therapy providers should take note of the common types of regulatory non-compliance identified by the OIG. This notice serves two purposes. First, compliance efforts should focus on these common problems. Physical therapy providers should conduct an internal compliance review to ensure that: (1) all services submitted for reimbursement are medically necessary; (2) all claims meet Medicare coding requirements; and (3) therapists are maintaining complete and accurate documentation that complies with Medicare requirements—meaning, among other things, that services are provided in accordance with a written plan that is established before treatment begins. Providers should implement corrective action that is tailored to the identified problems.

Second, physical therapy providers should be on notice that regulators may increase enforcement focusing on these areas of non-compliance. Physical therapy fraud has long been an OIG enforcement priority, and the identification of $367 million in improper payments made over a six-month period is unlikely to change that priority status. You don't need to look any further than the OIG's exclusion of eleven physical therapist/therapy providers that occurred between January 1, 2018 through March 31, 2018, to see the federal and state commitment to combating physical therapy fraud.

Physical therapy providers should stay current on OIG enforcement actions to increase their understanding of Medicare coverage policy and identify enforcement trends impacting their practice area. Please contact David Blank, Cory J. Kopitzke, or your local Quarles & Brady attorney for additional information on the OIG’s audit report, the OIG's historical enforcement in the physical therapy space, or specific compliance measures applicable to the practice of physical therapy.

Read more OIG Monitor insights from Jan-March 2018:

Second Acts: Exclusion, Reinstatement, and Revocation Oh My!