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 OIG Report Discovers Office-Based PT Overpayments, Not Tied to SNFs

In a new Department of Health and Human Services Office of Inspector General (OIG) audit report on Medicare program reimbursement for outpatient physical therapy (PT) services, investigators discovered what they said was the likely overpayment of $367 million to providers over a six-month period.

The alleged overpayments, which were disputed by the Centers for Medicare & Medicaid Services (CMS), were not tied to skilled nursing facility (SNF) outpatient therapy services but only involved PT provided in an office setting.

But, long term and post-acute care payment experts at the American Health Care Association (AHCA) said SNFs should be aware of where OIG and CMS are focusing their audit efforts since the same coverage and coding requirements apply to all outpatient therapy providers. AHCA recommended that providers share the OIG report and the CMS response with therapy and billing personnel so they are up to date on the issues involved.

As to the specifics of the OIG findings, the details are important to dissect, according to Daniel Ciolek, associate vice president, therapy advocacy, AHCA.

“We believe that the OIG audit findings should be considered in the appropriate context,” he says. “For example, while outpatient PT services are furnished in a variety of office- and facility-based settings, the OIG audit only included claims from office-based PTs in private practice.”


In the OIG report from March 14, titled “Many Medicare Claims for Outpatient Physical Therapy Services Did Not Comply With Medicare Requirements,” the agency said 61 percent of Medicare claims for outpatient physical therapy services that they reviewed did not comply with Medicare medical necessity, coding, or documentation requirements.

OIG recommended that CMS recover overpayments, establish better oversight of outpatient therapy claims, and improve provider education.

In response, CMS said OIG misinterpreted Medicare coverage policy, particularly related to the definition of skilled services as clarified subsequent to the January 2013 Jimmo settlement, and disagreed that the error rate was as high as reported. The Jimmo Settlement Agreement clarified that the Medicare program covers skilled nursing care and skilled therapy services under Medicare’s SNF, home health, and outpatient therapy benefits when a beneficiary needs skilled care in order to maintain function or to prevent or slow decline or deterioration (provided all other coverage criteria are met).

Specifically, Jimmo required manual revisions to restate a “maintenance coverage standard” for both skilled nursing and therapy services under these benefits.

CMS also said a significant portion of the errors were likely more related to coding errors.

“The significant disagreement between OIG and CMS regarding the interpretation of outpatient therapy coverage policy described in the report just serves to highlight the challenges providers have in complying with myriad and complex policies,” Ciolek says. “If two government agencies cannot agree on how to interpret the policy, where does that leave the provider?”

CMS agreed with OIG that improvements can be made in monitoring and provider education.

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