OIG: More Than 60% of Therapy Claims Don’t Meet Medicare Requirements

More than 60% of outpatient therapy claims filed over a six-month period didn’t meet Medicare’s requirements — a figure that has a key government watchdog agency concerned.

The Department of Health and Human Services (HHS) Office of the Inspector General (OIG) looked at a representative sample of 300 Medicare therapy claims filed in the final six months of 2013, and found that only 116 — or about 38.7% — actually met the requirements for reimbursement. The other 61.3% represented medically unnecessary therapy services, as well as those with coding and documentation errors.

Based on that sample, the OIG determined that the government spent more than $367 million on therapy services that didn’t comply with Centers for Medicare & Medicaid Services (CMS) rules between July and December 2013, which the HHS enforcement arm blames squarely on CMS.


“These overpayments occurred because CMS’s controls were not effective in preventing improper payments for outpatient physical therapy services,” the OIG wrote in its report.

To put that number in perspective, Medicare Part B paid out $1.6 billion in therapy reimbursements in calendar 2013.

Of the 184 offending claims, 145 had coding errors, including mismatches between reported and recommended services and simple coding errors. In addition, 112 lacked supporting documentation, while 91 were deemed medically unnecessary; the numbers do not add up to 184 because individual claims could have multiple issues.


Among those medically unnecessary services were treatments that providers could not prove would be effective.

“For example, a Medicare beneficiary was receiving therapy for lumbago and spinal stenosis,” the OIG wrote of one case. “However, the medical review determined that the patient had already reached a functional plateau before the date of the service reviewed.”

Providing therapy services has long been positioned as a potential ancillary revenue stream for skilled nursing operators, particularly as demand grows for higher-acuity services in settings such as assisted and independent living. But the government has kept a keen eye out for fraud. For instance, just last week, the Department of Justice reached a $6 million settlement with skilled nursing providers and consultants for fraudulently billing Medicare for therapy services.

Suggestions moving forward

The OIG made three suggestions to CMS:

  • Instruct Medicare Administrative Contractors (MACs) to flag potential overpayments, giving providers an opportunity to repay the overage
  • Roll out new oversight programs for therapy reimbursements
  • Review and potentially expand CMS’s existing educational programs about therapy claims

CMS responded by agreeing with the final two suggestions, noting that the agency is already working on new processes for monitoring therapy reimbursements and defending its current educational processes. But it rejected the OIG’s first recommendation.

“CMS does not concur with the determination made by the OIG’s independent medical review contractor that the sample of physical therapy claims reviewed did not comply with Medicare coverage and payment requirements,” CMS administrator Seema Verma wrote in a memo to the OIG about a draft version of the report in October.

Verma continued: “CMS will review a sample of medical records from the OIG before determining whether potential overpayments need to be investigated and returned.”

The administrator also noted that the deficient claims “are likely attributable to” human errors and not fraud.

Written by Alex Spanko

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