Many Medicare Claims for Outpatient Physical Therapy Services Did Not Comply With Medicare Requirements

Sixty-one percent of Medicare claims for outpatient physical therapy services that we reviewed did not comply with Medicare medical necessity, coding, or documentation requirements. Specifically, of the 300 claims in our stratified random sample, 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. On the basis of our sample results, we estimated that during the 6-month audit period, Medicare paid $367 million for outpatient physical therapy services that did not comply with Medicare requirements. These overpayments occurred because the Centers for Medicare & Medicaid Services' controls were not effective in preventing unallowable payments for outpatient physical therapy services.

By eliminating improper payments, Medicare could have saved an estimated $367 million on services provided by outpatient physical therapists from July 1 through December 31, 2013. Therefore, we recommended that CMS (1) instruct the Medicare Administrative Contractors to notify providers of potential overpayments so that those providers can exercise reasonable diligence to investigate and return any identified overpayments, in accordance with Medicare guidelines, (2) establish mechanisms to better monitor the appropriateness of outpatient physical therapy claims, and (3) educate providers about Medicare requirements for submitting outpatient physical therapy claims for reimbursement.

In written comments on our draft report, CMS generally disagreed with our findings and our first recommendation. CMS stated that it disagrees with some of the policy interpretations and believes further analysis of the sampled claims is warranted to determine whether the claims met Medicare requirements. CMS agreed with our second and third recommendations. However, we maintain that the error determinations by our medical reviewer were correct and that all of our associated recommendations are valid.