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OIG Issues Report on Outpatient PT Overpayments

In March of 2018, the Department of Health and Human Services Office of the Inspector General (OIG) issued a report titled “Many Medicare Claims for Outpatient Physical Therapy Services Did Not Comply With Medicare Requirements[summary] (the “Report”) identifying millions of dollars of overpayments for outpatient physical therapy services and signaling potential for increased governmental scrutiny to practitioners within the discipline.

The Report revealed that an audit found $367 million in improper payments for outpatient physical therapy services between July 1 and December 31, 2013. The finding was based upon data extrapolation, in which the OIG reviewed 300 sample claims and determined that 184 of the claims (61.33%) did not comply with Medicare requirements for medical necessity, documentation, or coding.

The OIG directly faulted the Centers for Medicare and Medicaid (CMS) for the overpayments, finding that the current controls in place are insufficient to prevent improper payments to providers. The OIG issued three recommendations to CMS in order to prevent future incorrect expenditures:

  1. Instruct Medicare Administrative Contractors (MACs) to notify providers of potential overpayments so that the providers can exercise due diligence in order to self-identify and return any identified overpayments;
  2. Establish better mechanisms to monitor the reasonableness and necessity of outpatient physical therapy claims; and
  3. Educate providers about Medicare requirements for outpatient physical therapy claims.

In written comments, as noted in the Report, CMS disagreed with some of the findings and argued that the sampled claims would need to be analyzed further to determine whether Medicare requirements were actually met. CMS also rejected the Report’s first recommendation, but did accept the other two strategies. The OIG responded by making certain changes to the Report, but maintained that its recommendations were valid and that the medical review of the 300 sample claims was done appropriately.

In any case, despite some disagreement between the agencies, the Report is likely to signal a certain level of increased scrutiny for outpatient physical therapy services. It is now more important than ever for outpatient physical therapy providers to assure they have a compliance program in place, and that all employees are informed on Medicare’s medical necessity, documentation, and coding requirements.

Wachler & Associates will continue to monitor CMS’ response to the Report, as well as other current healthcare topics.  If you or your healthcare entity have any questions pertaining to healthcare compliance, please contact an experienced healthcare attorney at (248) 544-0888, or via email at You may also subscribe to our health law blog by adding your email at the top right of this page.

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