Medicare claims for outpatient physical therapy services often fail to comply with requirements

April 4, 2018

Alert

The Office of Inspector General (OIG) issued a report in March titled “Many Medicare Claims for Outpatient Physical Therapy Services Did Not Comply with Medicare Requirements.” In the report, OIG found that 61 percent of the Medicare claims it reviewed for outpatient physical therapy did not comply with Medicare requirements for medical necessity, coding or documentation. OIG estimated that during the 6-month audit period, Medicare paid $367 million for these claims. It concluded that these payments were made because the Centers for Medicare and Medicaid Services (CMS) did not effectively prevent the improper payments for these services.

OIG made the following recommendations to CMS:

Instruct the Medicare administrative contractors (MACs) to notify providers of potential overpayments so the providers can follow the requirements under the 60 Day Rule (also known as Reverse False Claims).
Establish mechanisms to better monitor the appropriateness of outpatient physical therapy claims.
Review current educational efforts about the requirements for submitting outpatient physical therapy claims for reimbursement.

CMS made comments on the OIG’s draft report. Although CMS agreed with the second and third recommendation, it generally disagreed with the OIG’s findings used to support its first recommendation. Surprisingly, the basis for this disagreement is that CMS disagreed with the OIG’s interpretations of the independent medical review contractors’ policy and felt that further review of those claims was required (as of February 2018, the OIG stated that CMS had not concluded its further review). After reviewing CMS’s comments, the OIG made some amendments to the report but maintained that the error determinations its medical reviewer made were correct.

This report could lead to MACs issuing medical records requests and subsequent overpayment demands focused on outpatient physical therapy services. It also arguably puts outpatient physical therapy providers on notice of credible information about potential overpayments, triggering the provider’s obligations under the 60 Day Rule.

For further information regarding the report or a provider’s obligations under the 60 Day Rule, please contact one of the attorneys below.

Over the past 24 months, the U.S. Department of Health and Human Services Office for Civil Rights has brought notable enforcement efforts against several non-profit covered entities and business associates, resulting in instances of six and seven-figure penalties against providers across the county for incidents involving breaches of protected health information.

A new amendment to New York state law, which would have required all healthcare providers to obtain separate consents from patients for treatment and payment is on hold until further guidance is released, according to the New York Department of Health.

On November 1, 2024, the Centers for Medicare & Medicaid Services issued the Medicare Physician Fee Schedule 2025 final rule, which establishes new advanced primary care management billing codes that will expand opportunities for physician practices, federally qualified health centers, rural health clinics and other health care providers to get paid for services provided by clinical staff under the direction of a physician, nurse practitioner or physician assistant beginning January 1, 2025.

Medicare claims for outpatient physical therapy services often fail to comply with requirements

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