Department of Health and Human Services
OFFICE OF 
   
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
QUEST  IONABLE BILLING FOR 
 
M O
EDICARE  UTPATIENT 
 
 
T S  
HERAPY  ERVICES
 
 
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
December 2010 
OEI-04-09-00540   
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVE
 
To identify questionable billing for Medicare outpatient therapy 
services in 2009.  
BACKGROUND 
Outpatient therapy is designed to improve, restore, and/or compensate 
for loss of functioning following illness or injury.  Medicare expenditures 
for outpatient therapy increased 133 percent between 2000 and 2009, 
from $2.1 billion to $4.9 billion, while the number of Medicare 
beneficiaries receiving outpatient therapy increased only 26 percent, 
from 3.6 million to 4.5 million.   
Medicare limits (i.e., caps) its annual per-beneficiary outpatient therapy 
expenditures.  Providers may exceed a beneficiarys cap if the services 
are medically necessary and are supported by medical record 
documentation.  If services are expected to exceed an annual cap, 
providers must indicate this when submitting the claim to Medicare.   
We identified 20 counties that had in 2009 (1) the highest average 
Medicare payment per beneficiary and (2) more than $1 million in total 
Medicare payments for outpatient therapy (i.e., high-utilization 
counties).  We analyzed Miami-Dade County, Florida, separately 
because it had the highest average Medicare payments per beneficiary 
among the high-utilization counties and the highest total Medicare 
payments for outpatient therapy in 2009.  Additionally, prior Office of 
Inspector General work has demonstrated that Miami-Dade County is a 
high-risk area for Medicare fraud.   
We then determined the extent to which levels of outpatient therapy 
billing characteristics in the 20 high-utilization counties differed from 
national levels.  These included the following six questionable billing 
characteristics that may indicate fraud:  (1) services for which providers 
indicated that an annual cap would be exceeded, (2) beneficiaries whose 
providers indicated that an annual therapy cap would be exceeded on 
the beneficiaries first date of service, (3) payments for beneficiaries who 
received outpatient therapy from multiple providers, (4) payments for 
therapy services provided throughout the year, (5) payments for services 
that exceeded an annual cap, and (6) providers who were paid for more 
than 8 hours of outpatient therapy provided in a single day.  We did not 
assess the medical necessity of outpatient therapy services. 
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  i   
   
E X E C U T I V E   S U M M A R Y  
FINDINGS 
Medicare per-beneficiary spending on outpatient therapy services in 
Miami-Dade County was three times the national average in 2009.  
Medicare paid an average of $3,459 per Miami-Dade beneficiary for 
outpatient therapy, compared to an average of $1,078 nationally.  Each 
therapy beneficiary in Miami-Dade County received an average of 158 
services during 2009, while the national average was 49 services per 
beneficiary.  Medicare also paid therapy providers that served Miami-
Dade beneficiaries an average of $83,867, eight times the average 
amount it paid providers that served beneficiaries in other counties 
nationally ($10,131).  Providers that served Miami-Dade beneficiaries 
provided an average of 3,828 outpatient therapy services, eight times 
the average number of services by providers that served beneficiaries in 
other counties nationally (458). 
Miami-Dade County had at least three times the national levels for 
five of the six questionable billing characteristics in Medicare 
outpatient therapy services.  Five of the six questionable billing 
characteristics occurred in Miami-Dade County at three to four times 
the national levels.  Specifically, (1) providers serving beneficiaries in 
Miami-Dade County indicated that outpatient therapy services would 
exceed an annual cap four times as often as providers nationally,         
(2) providers serving Miami-Dade beneficiaries indicated on claims that 
an annual cap would be exceeded on the beneficiaries first date of 
service four times as often as providers nationally, (3) the average 
Medicare payment for Miami-Dade beneficiaries who received 
outpatient therapy from multiple providers was three times the national 
average, (4) Miami-Dade beneficiaries were three times as likely to 
receive outpatient therapy throughout the year as beneficiaries 
nationally, and (5) Miami-Dade beneficiaries were three times as likely 
to exceed an annual cap as beneficiaries nationally.   
Medicare per-beneficiary spending on outpatient therapy in the 
other high-utilization counties was 72 percent greater than the 
national average; these counties also exhibited questionable billing 
but to a lesser extent than Miami-Dade County.  Medicare paid an 
average of $1,852 per beneficiary in 19 other high-utilization counties, 
72 percent greater than the national average of $1,078.  Additionally, as 
a group, these counties had at least twice the national level for five of 
the six questionable billing characteristics in Medicare outpatient 
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  ii   
   
E X E C U T I V E   S U M M A R Y  
therapy services we reviewed.  Further, each of these counties had at 
least twice the national level for 1 or more of the 6 characteristics.   
RECOMMENDATIONS 
We found that high-utilization counties had high levels of                   
per-beneficiary spending and questionable billing characteristics 
compared to national levels.  Our findings demonstrate that outpatient 
therapy services in Miami-Dade County, as well as 19 other high-
utilization counties nationwide, warrant additional review as part of 
ongoing Medicare antifraud activities.     
We recommend that the Centers for Medicare & Medicaid Services 
(CMS):   
Target outpatient therapy claims in high-utilization areas for further 
review.  CMS should monitor utilization trends and use this information 
to target providers in geographic areas that may be susceptible to fraud.   
Target outpatient therapy claims with questionable billing 
characteristics for further review.  CMS should use the questionable 
billing characteristics we identified to analyze and monitor claims data 
to detect and deter fraud and abuse.     
Review geographic areas and providers with questionable billing 
and take appropriate action based on results.  Prior to payment, CMS 
should review claims submitted by providers with high levels of 
questionable billing and in geographic areas with high utilization to 
ensure that they are legitimate.  If CMS determines that fraudulent 
claims have been submitted, it should take steps to suspend payments 
to these providers and recover overpayments to them. 
Revise the current therapy cap exception process.  We found that 
providers in high-utilization counties used the KX modifier and exceeded 
annual therapy caps at levels much higher than the national average.  
The current therapy cap exception process does not ensure appropriate 
utilization of Medicare outpatient therapy services.  CMS should consider 
developing per-beneficiary edits and maximum payment amounts to 
control overutilization of outpatient therapy services.   
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  iii   
   
E X E C U T I V E   S U M M A R Y  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
In its written comments on this report, CMS concurred with all four of 
our recommendations and described actions it would take to address 
them.  We support CMSs efforts to address these issues and encourage 
it to continue making progress in these areas.  We did not make changes 
to the report based on CMSs comments.   
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  iv   
   
  T A B L E   O F   C O N T E N T S  
 
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
  
 
 
   
I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1 
  
 
 
 
 
F I N D  IN G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12 
  
Medicare per-beneficiary spending on outpatient therapy  

 
services in Miami-Dade County was three times the national 

  average in 2009  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12 
  
   
 
Miami-Dade County had at least three times the national levels 

 
for five of the six questionable billing characteristics in Medicare 

  outpatient therapy services  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14 
  
   
 
  Medicare per-beneficiary spending on outpatient therapy  

   
services in the other high-utilization counties was 72 percent 
    
greater than the national average; these counties also exhibited 

 
questionable billing but to a lesser extent than Miami-Dade  

  County. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16 
  
   
 
R E C O MMEN D A T ION S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19 
  
 
  Agency Comments and Inspector General Response. . . . . . . . . . .  20 
  
   
 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22 
  
   
  A: 	HCPCS Codes for Medicare Outpatient Therapy Services,  

       Fee Schedule Amounts, and Medicare Payments, 2009 . . . . . .  22 
  
 
   
  B: 	Questionable Billing Characteristic for 20 High-Utilization    
  
Counties, Compared to National Levels. . . . . . . . . . . . . . . . . .  24 
  
     
C:  	Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25 
  
 
 
   
 
A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28 
  
 
 
     
   
I IN NIT TNR RTOORD DOU UCDCTUTICIOTONIN O  N  
OOBBJJEECCTTIIVVEE  
To identify questionable billing for Medicare outpatient therapy 
services in 2009.  
BACKGROUND 
Outpatient therapy is designed to improve, restore, and/or compensate 
for loss of functioning following illness or injury.  Medicare expenditures 
for outpatient therapy increased 133 percent between 2000 and 2009, 
from $2.1 billion to $4.9 billion, while the number of Medicare 
beneficiaries receiving outpatient therapy increased only 26 percent, 
from 3.6 million to 4.5 million.1, 2, 3      
Medicare beneficiaries are eligible to receive outpatient therapy under 
Medicare Part B.  Medicare covers three types of outpatient therapy: 
 physical therapy (PT):  diagnosis and treatment of impairments, 
functional limitations, disabilities, or changes in physical function 
and health status;4 
 occupational therapy (OT):  treatment to improve or restore 
functions that have been impaired (or permanently lost or reduced) 
because of illness or injury, to improve the individuals ability to 
perform tasks required for independent functioning;5 and 
 speech language pathology (SLP):  diagnosis and treatment of 
speech and language disorders, that result in communication 
disabilities or swallowing disorders.6 
PT services account for the majority of Medicare payments for 
outpatient therapy.  In 2009, PT services represented approximately  
74 percent ($3.6 billion) of Medicare expenditures for outpatient therapy 
 
1 Computer Sciences Corporation (CSC), CY 2006 Outpatient Therapy Services 
Utilization Report, February 2008.  Accessed at 
http://www.cms.hhs.gov/TherapyServices/downloads/2_CY2006OutpatientTherapyUtilizatio
nReport_PDF_Final.pdf on June 17, 2009.   
2 Office of Inspector General (OIG) analysis of Centers for Medicare & Medicaid Services 
(CMS) claims data, April 2010.  The percentage increase is based on unrounded figures. 
3 Expenditures describes the amount paid by Medicare after the Part B coinsurance.  
This represents approximately 80 percent of the amount allowed by Medicare. 
4 CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15,  230.1.     
5 Ibid.,  230.2. 
6 Ibid.,  230.3. 
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  1   
   
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services.7  OT services accounted for 19 percent ($945 million) and SLP 
services accounted for 7 percent ($328 million) of all Medicare 
expenditures for outpatient therapy.8   
Each type of outpatient therapy service must be provided in accordance 
with a written plan of care established by an appropriate medical 
professional, such as a physician or physical therapist.9  The service 
must be appropriate for the beneficiarys condition and reasonable in 
terms of frequency and duration under accepted standards of practice.  
Further, outpatient therapy must be provided to improve a beneficiarys 
functioning level.10  Therefore, Medicare does not typically cover 
services provided to maintain a beneficiarys existing level of 
functioning.11   
Outpatient therapy may be provided in a variety of settings.  In addition 
to covering services provided in physicians and therapists offices, 
Medicare covers outpatient therapy provided by hospitals, skilled 
nursing facilities, outpatient rehabilitation facilities, comprehensive 
outpatient rehabilitation facilities, and home health agencies.12   
Medicare Payment for Outpatient Therapy Services 
Medicare pays for most outpatient therapy services according to the 
Medicare Physician Fee Schedule (fee schedule).13  Medicare reimburses 
the provider 80 percent of either the fee schedule amount or the actual 
 
7 OIG analysis of CMS claims data, April 2010. 
8 Ibid.   
9 42 CFR  410.61(a) and (b).  See also 42 CFR  410.59(a)(2),  410.60(a)(2), and              
 410.62(a)(2).      
10 CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15,  220.2.   
11 CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15,  220.2.D.  The 
services of a therapy provider are not necessary to carry out maintenance treatment and 
are not covered under ordinary circumstances.  However, if the patients safety is at risk 
and the functional maintenance services involve complex and sophisticated therapy 
procedures, the judgment and skill of a therapist may be necessary for the safe and effective 
 
delivery of such services.  
12 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 5,  10.  Accessed at  
http://www.cms.hhs.gov/manuals/downloads/clm104c05.pdf on June 17, 2009.  Hospitals 
may provide outpatient therapy to outpatients and to inpatients when they are not covered 
under Part A.  Skilled nursing facilities may provide outpatient therapy to residents and 
nonresidents when they are not covered under Part A.  Home health agencies may provide 
outpatient therapy only to individuals who are not homebound or are not receiving services 
under home health plans of care.  For beneficiaries who are under home health plans of 
care, Medicare pays for rehabilitation therapy services provided by home health agencies at 
the home health prospective payment system rate.   
13 Ibid.  Applies to all settings except Critical Access Hospitals, which are paid on a 
reasonable cost basis. 
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  2   
   
I N T R O D U C T I O N  
charge (whichever is lower), and the beneficiary is responsible for the 
remaining 20 percent.14   
All outpatient therapy services are reported to Medicare using 
Healthcare Common Procedure Coding System (HCPCS) codes.15  In 
2009, Medicare covered outpatient therapy under 75 HCPCS codes.  
Some of the services billed using these codes are considered outpatient 
therapy services only when billed by a therapist.16  To indicate that the 
claim is for outpatient therapy, a provider must add a modifier to the 
code on the claim.17  The modifier also indicates whether the service 
was PT, OT, or SLP.18  The 2009 fee schedule amounts for these 
services ranged from $5.05 for hot- or cold-pack therapy (HCPCS 97010) 
and infrared therapy (HCPCS 97026) to $182.86 for a test involving the 
beneficiarys vocal cords (HCPCS 92616).19  Appendix A provides a list 
of the 75 HCPCS codes, the associated fee schedule amounts, and total 
Medicare payments in 2009. 
Medicare reimburses providers at different rates based on the setting in 
which the service is provided.  Physicians and therapists in private 
practice who serve beneficiaries in their offices may be paid at the 
nonfacility rate, which includes additional reimbursement for some 
services to account for additional overhead expenses.20  
Medicare per-beneficiary payment limits.  Medicare limits (i.e., caps) its 
annual per-beneficiary outpatient therapy services expenditures unless 
the services are furnished by or under arrangement with a hospital.  
The Balanced Budget Act of 1997 added the caps as a way to control 
increasing therapy costs.21  The caps have been updated annually since 
2002 using the Medicare Economic Index.22   
 
14 Ibid. 
15 Ibid. 
16 Ibid.,  20.   
17 Ibid.,  20.  Modifiers are two-digit codes appended to HCPCS codes to provide 
additional information about the billed service.  In some cases, addition of a modifier may 
directly affect payment.   
18 Billing providers use the modifier GP to indicate PT services, GO to indicate OT 
services, and GN to indicate SLP services.  These three modifiers are for informational 
purposes only and do not affect payment. 
19 HCPCS 92616 is described in the Medicare Physician Fee Schedule as a laryngeal 
sense test. 
20 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 5,  10. 
21 Ibid. 
22 Ibid.,  10.2.   
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  3   
   
I N T R O D U C T I O N  
In 2009, a beneficiary could receive a combination of PT and SLP 
services for which Medicare allowed up to $1,840 before exceeding the 
cap; the cap for OT services was also $1,840.23, 24  The caps are 
determined on a calendar-year basis, meaning that beneficiaries 
services begin counting toward the cap on January 1 of each year. 
The beneficiary may qualify for use of the cap exceptions process when 
documented, medically necessary services exceed an annual cap.25  By 
adding a modifier (KX) to the HCPCS code on the claim, the provider 
attests that the services are reasonable and necessary, and are 
supported by documentation in the medical record indicating that the 
beneficiary requires continued outpatient therapy and qualifies for an 
exception.  Providers should use the KX modifier only when services are 
expected to exceed an annual cap.  According to the Medicare Claims 
Processing Manual, [u]se of the KX modifier when there is no 
indication that the cap is likely to be exceeded is abusive. 26        
Fraud in Medicare Outpatient Therapy Services  
Outpatient therapy service providers have been prosecuted for 
defrauding the Medicare program in recent years.  For example, OIG 
and the Department of Justice (DOJ) investigated a Detroit-area 
provider who pled guilty in 2009 to an $18 million fraud scheme.  This 
provider paid kickbacks to hundreds of Medicare beneficiaries in 
exchange for their Medicare identification numbers.  The numbers were 
used to bill for PT and OT services that were never provided to the 
beneficiaries.27  In 2004, an OIG investigation resulted in a $325 million 
settlement with one therapy provider for alleged fraud.28  The types of 
alleged fraud included services that lacked a certified plan of care and 
 
23 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, Transmittal No. 1678, 
Change Request 6321 (February 13, 2009). 
24 In 2010, caps were increased to $1,860. 
25 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 5,  10.2. 
26 Ibid. 
27 DOJ, Detroit-Area Rehabilitation Facility Executive Pleads Guilty To $18.2 Million 
Medicare Fraud Scheme, September 28, 2009.  Accessed at 
http://www.justice.gov/opa/pr/2009/September/09-crm-1040.html on February 23, 2010. 
28 DOJ, HealthSouth To Pay United States $325 Million To Resolve Medicare Fraud 
Allegations, December 30, 2004.  Accessed at 
http://www.usdoj.gov/opa/pr/2004/December/04_civ_807.htm on June 17, 2009.  
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  4   
   
I N T R O D U C T I O N  
services provided by inappropriate personnel.29  In this case, services 
were not performed by licensed physical therapists, as required. 
Medicare Fraud in Miami-Dade County  
Miami-Dade County, Florida, has been a focus area of efforts to combat 
Medicare fraud, waste, and abuse in recent years.  OIG has published 
reports indicating that Miami-Dade County is at high risk for 
fraudulent Medicare claims, including infusion therapy services for 
beneficiaries with HIV/AIDS, home health services, inhalation drugs, 
and ultrasound services.30  Additionally, in 2007, HHS and DOJ 
established a joint Medicare Fraud Strike Force (Strike Force) team in 
South Florida to combat Medicare fraud.  Strike Forces are teams of 
Federal, State, and local investigators that combat fraud in certain 
areas of the country by analyzing current Medicare claims data.31  In 
July 2010, the Strike Force in South Florida charged 24 defendants in 
Miami for allegedly participating in various schemes that resulted in 
approximately $103 million in false billing.32   
These schemes involved fraudulent billing for physical therapy services, 
as well as other types of services.  HHS and DOJ also created the 
Health Care Fraud Prevention and Enforcement Action Team (HEAT) 
 
29 CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15,  230.1, 230.2, and     
230.3.  In addition to covering services provided by therapists and physicians, Medicare 
covers therapy provided by physician assistants, nurse practitioners, and clinical nurse 
specialists if permitted by the States in which they practice.  Qualified physical and 
occupational assistants are also covered if they are supervised.  All therapy providers must 
be licensed, certified, or registered to practice in the States in which they provide services 
and have passed a national examination.  However, some outpatient therapy services must 
be provided only by therapists.  CMS, Medicare Claims Processing Manual,                     
Pub. No. 100-04, ch. 5,  20. 
30 The Department of Health & Human Services (HHS) OIG, Aberrant Billing in South 
Florida for Beneficiaries With HIV/AIDS, OEI-09-07-00030, September 2007; HHS OIG, 
Aberrant Medicare Home Health Outlier Payment Patterns in Miami-Dade County and 
Other Geographic Areas in 2008, OEI-04-08-00570, November 2009; HHS OIG, Aberrant 
Claim Patterns for Inhalation Drugs in Miami-Dade County, OEI-03-08-00290, April 2009; 
and HHS OIG, Medicare Part B Billing for Ultrasound, OEI-01-08-00100, July 2009.   
31 HHS News Release, Strike Force Formed To Target Fraudulent Billing of Medicare 
Program by Health Care Companies.  Accessed at 
http://www.hhs.gov/news/press/2007pres/05/20070509c.html on February 23, 2010. 
32 Nationwide Strike Force operations in July 2010 resulted in charges against              
94 doctors and over $251 million in alleged false billing.  HHS and DOJ, Medicare Fraud 
Strike Force Charges 94 Doctors, Health Care Company Owners, Executives and Others for 
More Than $251 Million in Alleged False Billing.  Accessed at 
http://www.stopmedicarefraud.gov/innews/dc.html#july-16-2010 on July 28, 2010. 
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I N T R O D U C T I O N  
to strengthen and expand efforts to combat health care fraud, waste, 
and abuse.33 
Medicare Program Integrity  
CMS uses program safeguard contractors (PSC) and Zone Program 
Integrity Contractors (ZPIC) to perform program integrity 
responsibilities, including data analysis; investigations; and other 
activities to reduce fraud, waste, and abuse.34  PSCs and ZPICs identify 
overpayments associated with their investigations and notify the 
appropriate claims-processing contractor to collect the overpayments.   
CMS is authorized to suspend Medicare payments to providers 
suspected of committing fraud.35  Additionally, the Social Security Act 
specifies circumstances under which the Secretary of HHS must exclude 
certain entities from Medicare and other circumstances under which the 
Secretary may, at his or her discretion, exclude entities.36 
METHODOLOGY 
Scope  
We reviewed national Part B Medicare outpatient therapy claims from 
2009.  Our population consisted of claims from the 100-percent paid 
claims data from the National Claims History (NCH) File and includes 
claims processed by fiscal intermediaries, carriers, and Medicare 
Administrative Contractors (MAC).37, 38   
 
33 HHS, Attorney General Holder and HHS Secretary Sebelius Announce New 
Interagency Health Care Fraud Prevention and Enforcement Action Team.  Accessed at 
http://www.hhs.gov/news/press/2009pres/05/20090520a.html on February 23, 2010. 
34 CMS is replacing PSCs with ZPICs. 
35 42 CFR  405.371.  CMS may suspend approved payments if it suspects overpayment 
to a provider or if a provider has engaged in fraud or willful misrepresentation of claims. 
36 Social Security Act  1128.  The Secretary of HHS has delegated the exclusion 
authority to OIG. 
37 In 2009, Medicare contracted with fiscal intermediaries, carriers, and MACs to process 
outpatient therapy claims.  Generally, fiscal intermediaries processed claims from 
institutions and carriers processed claims from physicians, certain nonphysician 
practitioners, and physical and occupational therapists in private practice.  CMS began the 
process of replacing its fiscal intermediaries and carriers with MACs in October 2005.  
MACs assumed claims processing from both fiscal intermediaries and carriers as the 
transitions occurred. 
38 We used the files with claims processed through December 31, 2009, for our analysis.  
These files are estimated to be 88 percent complete; that is, they included approximately   
88 percent of all claims for outpatient therapy services provided during 2009.     
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I N T R O D U C T I O N  
We defined outpatient therapy claims as those billed under one of the  
75 outpatient therapy HCPCS codes with one of the three modifiers that 
specify whether the service was PT, OT, or SLP.  We did not assess the 
medical necessity of outpatient therapy or compliance with Medicare 
billing requirements. 
Identification of High-Utilization Counties 
To identify high-utilization counties, we assigned each Medicare 
outpatient therapy claim in our population to a county based on the 
beneficiarys residence.39  We determined the total Medicare payments 
for outpatient therapy in each county.  We also calculated the average 
payment for outpatient therapy services per therapy beneficiary in each 
county.40  We then identified 20 counties that had (1) the highest 
average Medicare payment per beneficiary and (2) more than $1 million 
in total Medicare payments for outpatient therapy services.41  We refer 
to these counties as high-utilization counties.  See Figure 1 for a map 
showing their locations. 
 
 
 
 
 
 
 
 
 
39 We used the Social Security Administration standard county code of a beneficiarys 
residence.  Our population included 3,721 county codes; however, some of the county codes 
may have been inaccurately reported.  The U.S. Census Bureau estimates there are       
3,141 counties and county equivalents in the United States.  U.S. Census Bureau, Census 
Bureau Tip Sheet, January 16, 2009.  Accessed at 
http://www.census.gov/newsroom/releases/archives/tip_sheets/tp09-02.html on                 
May 24, 2010.  
40 We calculated numbers of therapy services based on the units of service on each claim 
line with a therapy HCPCS code.  That is, we considered a claim line with a unit count of 
2 (for example, the beneficiary received two 15-minute increments of a timed service) as 
having two services. 
41 Nationally, the average of total payments within a county was $1.3 million.  Counties 
with less than $1 million accounted for 16 percent of all Medicare payments for outpatient 
therapy services nationally. 
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I N T R O D U C T I O N  
  Figure 1:  Counties With Highest Utilization of Medicare Outpatient  
Therapy Services, 2009 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Analysis of Billing in High-Utilization Counties and Nationally 
We categorized the claims into three groups:  (1) Miami-Dade County,    
(2) the other 19 high-utilization counties combined, and (3) national.  
We analyzed Miami-Dade County separately because it had the highest 
average Medicare payments per beneficiary among the high-utilization 
counties and the highest total Medicare payments for outpatient 
therapy in 2009.42   
To determine how billing for outpatient therapy in high-utilization 
counties compared to national billing, we calculated the average 
Medicare payments and number of services per beneficiary in Miami-
Dade County, in the other 19 high-utilization counties combined, and 
nationally.  We also calculated the average payment and number of 
services per provider serving beneficiaries in a county.  We compared 
 
42 Fifteen of the 3,721 counties had a higher average payment per beneficiary than 
Miami-Dade County.  Medicare paid a total of less than $1 million for outpatient therapy in 
these 15 counties, combined.  All but 1 of these 15 counties was reported with an inaccurate 
county code. 
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I N T R O D U C T I O N  
both averages for Miami-Dade County and the other 19 high-utilization 
counties combined to national averages.43   
We used the National Provider Identifier Directory to identify providers 
that received over $1 million in total Medicare payments for outpatient 
therapy.  We calculated these providers total payments for outpatient 
therapy.  We then determined how many of these providers were located 
in Miami-Dade County and the other 19 high-utilization counties.     
Questionable billing characteristics.  By using past OIG work on Medicare 
billing and in consultation with representatives of the Medicare PSCs, 
we identified six billing characteristics that may indicate fraud in 
outpatient therapy services.  For example, a high prevalence of these 
characteristics may indicate inappropriate billing, such as providers 
billing for services that were unnecessary or not provided.  These 
characteristics were:  
 Average number of outpatient therapy services per beneficiary that 
providers indicated would exceed an annual cap.  According to 
therapy fraud experts within the PSCs, the KX modifier is often 
overused and/or used inappropriately.  We calculated the average 
number of services per beneficiary that had the KX modifier.   
 Percentage of outpatient therapy beneficiaries whose providers 
indicated that an annual cap would be exceeded on the beneficiaries 
first date of service in 2009.  Providers should use the KX modifier 
only when providing services that are expected to exceed an annual 
cap.  This is unlikely to occur on the beneficiarys first date of 
service in a new calendar year.  We identified beneficiaries whose 
providers billed Medicare using the KX modifier on the 
beneficiaries first date of service in calendar year 2009. 
 Average Medicare payment per beneficiary who received outpatient 
therapy from multiple providers.  This characteristic raises concerns 
about stolen Medicare identification numbers or professional 
beneficiaries who exchange their identification numbers for 
kickbacks from providers.  We identified beneficiaries who received 
 
43 Beneficiaries who received services in more than one county and providers that served 
beneficiaries in more than one county during 2009 are included in multiple counties in the 
national averages.  In 2009, 4,531,609 beneficiaries received outpatient therapy from   
81,170 providers.  Less than 1 percent of these beneficiaries lived in more than one county.  
Providers served outpatient therapy beneficiaries in an average of six counties. 
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I N T R O D U C T I O N  
outpatient therapy from more than one provider in 2009 and 
calculated the average reimbursement per beneficiary in 2009.  
 Percentage of outpatient therapy beneficiaries whose providers were 
paid for services provided throughout the year.  Therapy services 
are appropriate for improving the beneficiarys functioning level, 
but not for maintaining an existing level of functioning.  We 
identified beneficiaries who received outpatient therapy during all 
four quarters of 2009.   
 Percentage of outpatient therapy beneficiaries whose providers were 
paid for services that exceeded one of the annual caps.  We 
identified beneficiaries who received either a combination of PT and 
SLP services or OT services, excluding those provided in hospitals, 
for which Medicare allowed more than $1,840.   
 Percentage of outpatient therapy beneficiaries whose providers were 
paid for more than 8 hours of outpatient therapy provided in a 
single day.  According to PSC representatives, providing more than 
8 hours of therapy to a beneficiary in a single day is usually 
medically unnecessary and/or infeasible because of the 
characteristics of the Medicare population and the nature of 
services provided.  We identified HCPCS codes for which the unit of 
service represents a specific amount of time (typically, 15 minutes) 
spent in direct contact with the beneficiary on any single calendar 
day.  We then determined how many of these services a beneficiary 
received on the same day.   
We determined the incidence of the 6 characteristics in Miami-Dade 
County, in the other 19 high-utilization counties combined, and 
nationally.  We calculated the levels of the characteristics nationally 
and for the 19 high-utilization counties by combining all outpatient 
therapy claims in each of these two groups.  For example, to determine 
the average number of services per beneficiary billed with the KX 
modifier, we identified the total number of services billed with the KX 
modifier in each group and divided these sums by the total number of 
outpatient therapy beneficiaries in each group.  The approach we used 
resulted in weighted averages based on county size.  See Appendix B for 
the incidence of the six characteristics within each high-utilization 
county.  
Limitations 
The six characteristics are not intended to be a comprehensive set of 
characteristics for identifying questionable billing.  Also, although the 
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  10   
   
I N T R O D U C T I O N  
presence of such characteristics raises questions about the 
appropriateness of outpatient therapy claims, it does not necessarily 
mean that such claims are inappropriate or fraudulent.   
The findings in this report are based on Medicare claims for services 
provided in 2009 and cannot be generalized to any other time period.   
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspections approved by the Council of the Inspectors General on 
Integrity and Efficiency. 
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  11   
   
F I NFDI INN DG I SN  G S  
Medicare paid $159 million for 
Medicare per-beneficiary spending on outpatient 
outpatient therapy services provided 
therapy services in Miami-Dade County was 
to Miami-Dade beneficiaries, the 
three times the national average in 2009 
highest of any county in 2009.  On 
average, per-beneficiary spending on 
outpatient therapy services in Miami-Dade County was three times the 
national average in 2009.  Miami-Dade beneficiaries also received three 
times as many services as beneficiaries nationally.  Providers serving 
Miami-Dade beneficiaries received eight times the average payment and 
provided eight times the average number of services as providers that 
served beneficiaries elsewhere.  Table 1 compares these averages in 
Miami-Dade County with national averages.  
 
 
Table 1.  Medicare Outpatient Therapy Services in Miami-Dade County 
 Compared to National Levels, 2009  
  Ratio of Miami-
Miami-Dade  Dade County 
  County  National  Average to 
 Outpatient Therapy Utilization  Average  Average*  National Average 
 
  Medicare payments per beneficiary  $3,459  $1,078  3:1 
 
Number of services per beneficiary  158  49  3:1 
 
  Medicare payments per provider serving 
  beneficiaries in a county   $83,867  $10,131    8:1 
 
Number of services per  provider serving 
 
beneficiaries in a county   3,828  458  8:1 
 
   * Beneficiaries who received services in more than one county and providers that served beneficiaries in more 
 than one county during 2009 are included in multiple counties in the national averages.  In 2009, 4,531,609 
beneficiaries received outpatient therapy from 81,170 providers.  Less than 1 percent of these beneficiaries 
lived in more than one county.  Providers served outpatient therapy beneficiaries in an average of six 
 
counties. 
Note:  All figures have been rounded to nearest whole number. 
 Source:  OIG analysis of 2009 Medicare outpatient therapy claims, 2010. 
These outpatient therapy utilization levels did not occur in all counties 
with high Medicare outpatient therapy payments.  For example, Los 
Angeles County, California, the county with the second-highest total 
payments ($125 million in 2009), was home to more than twice as many 
outpatient therapy beneficiaries as Miami-Dade County.  However, the 
average per-beneficiary payment and average payment per provider 
that served beneficiaries in Los Angeles County more closely resembled 
the national averages than did Miami-Dade County.  The ratios of Los 
Angeles County to national averages for payments per beneficiary and 
per provider were 1:1 and 3:1, respectively.   
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  12   
   
F I N D I N G S  
Medicare paid an average of $3,459 per Miami-Dade beneficiary for 
outpatient therapy services, compared to an average of $1,078 nationally 
Medicare paid an average of $3,459 per Miami-Dade beneficiary for 
outpatient therapy in 2009.  This was the second-highest of all counties 
nationally and was over three times the national average of $1,078 per 
beneficiary.44  In contrast, Medicare paid an average of $1,294 per Los 
Angeles beneficiary.  For 10 Miami-Dade beneficiaries, Medicare paid 
over $278,000 for outpatient therapy in 2009, an average of $27,810 per 
beneficiary.   
Outpatient therapy beneficiaries in Miami-Dade County received an average 
of 158 services, compared to an average of 49 services nationally 
Miami-Dade beneficiaries received an average of 158 outpatient therapy 
services in 2009.  The average number of services per Miami-Dade 
beneficiary was the highest of all high-utilization counties and was 
three times the national average of 49 services.  In contrast, 
beneficiaries in Los Angeles County received an average of                    
54 outpatient therapy services.   
Medicare paid providers serving Miami-Dade beneficiaries an average of 
$83,867 for outpatient therapy, compared to an average of $10,131 nationally 
Medicare paid outpatient therapy providers that served Miami-Dade 
beneficiaries an average of $83,867 in 2009, eight times the average 
amount it paid providers that served beneficiaries in other counties 
nationally ($10,131).  In contrast, Medicare paid providers that served 
beneficiaries in Los Angeles County an average of $26,814.  
Additionally, 52 of the 235 providers that received over $1 million in 
Medicare payments for outpatient therapy services in 2009 were located 
in Miami-Dade County.  These Miami-Dade providers received a total of 
$88 million, with payments ranging from $1 million to $4 million. 
Providers serving Miami-Dade beneficiaries provided an average of  
3,828 services, compared to an average of 458 services nationally 
Providers that served Miami-Dade beneficiaries provided an average of 
3,828 outpatient therapy services in 2009, eight times the average 
number of services by providers that served beneficiaries in other 
counties nationally (458).  In contrast, providers that served 
beneficiaries in Los Angeles County provided an average of              
1,124 services.   
 
44 The highest Medicare payment per beneficiary in counties reported with accurate 
codes was $4,452.  Payments in this county for outpatient therapy totaled $623,000. 
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F I N D I N G S  
Miami-Dade County had at least three times the  Miami-Dade County exceeded the 
national levels for five of the six questionable  national level for five of the six 
questionable billing characteristics 
billing characteristics in Medicare outpatient 
in Medicare outpatient therapy 
therapy services  
services we reviewed by at least a 
factor of three.  Table 2 compares, for each characteristic, levels in 
Miami-Dade County to the national levels.      
Table 2.  Questionable Outpatient Therapy Billing in Miami-Dade County Compared to 
National Levels, 2009  
Miami-Dade  Ratio of Miami-Dade 
Characteristic   County    National  County to National 
Average number of outpatient therapy services per 
beneficiary that providers indicated would exceed an 
annual cap  60  14  4:1 
Percentage of outpatient therapy beneficiaries whose 
providers indicated that an annual cap would be exceeded 
on the beneficiaries first date of service in 2009  20%  5%  4:1 
Average Medicare payment per beneficiary who received 
outpatient therapy from multiple providers  $5,664  $1,670    3:1 
Percentage of outpatient therapy beneficiaries whose 
providers were paid for services provided throughout the 
year  10%  3%  3:1 
Percentage of outpatient therapy beneficiaries whose 
providers were paid for services that exceeded an annual 
cap  63%  22%  3:1 
Percentage of outpatient therapy beneficiaries whose 
providers were paid for more than 8 hours of outpatient 
therapy provided in a single day  0.3%  0.7%  <1:1 
Note:  All figures have been rounded to nearest whole number. 
Source:  OIG analysis of 2009 Medicare outpatient therapy claims, 2010. 
 
Providers serving beneficiaries in Miami-Dade County indicated that 
outpatient therapy services would exceed an annual cap four times as 
often as providers nationally  
Providers serving Miami-Dade beneficiaries were paid for an average of                
60 outpatient therapy services per beneficiary for which they billed 
Medicare using the KX modifier in 2009.  Services billed with the KX 
modifier represented an average of 38 percent of each Miami-Dade 
beneficiarys total number of outpatient therapy services.  Nationally, 
providers were paid for an average of 14 services with the KX modifier 
per beneficiary, representing an average of 29 percent of all outpatient 
therapy services.   
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F I N D I N G S  
Providers serving Miami-Dade beneficiaries indicated that an annual cap 
would be exceeded on the beneficiaries first date of service four times 
more often than providers nationally  
For 20 percent of therapy beneficiaries in Miami-Dade County, 
providers used the KX modifier on their first date of service in 2009.  
Nationally, providers used the KX modifier on beneficiaries first date of 
service in 2009 for 5 percent of therapy beneficiaries.  Payments for 
these claims in Miami-Dade County totaled nearly $3 million.  
According to the Medicare Claims Processing Manual, this practice may 
be abusive.45 
This characteristic was not prevalent in all counties with high Medicare 
therapy payments.  For example, providers serving beneficiaries in Cook 
County, Illinois, the county with the third-highest Medicare outpatient 
therapy payments ($92 million in 2009), used the KX modifier on the 
beneficiaries first date of service only 5 percent of the time.   
The average Medicare payment for Miami-Dade beneficiaries who received 
outpatient therapy from multiple providers was three times the national 
average 
Twenty-nine percent of outpatient therapy beneficiaries in Miami-Dade 
County were served by more than one provider in 2009.  Medicare paid 
an average of $5,664 for these beneficiaries.  Nationally, 18 percent of 
outpatient therapy beneficiaries were served by more than one provider.  
Medicare paid an average of $1,670 for each of these beneficiaries.   
Miami-Dade beneficiaries were three times as likely to receive outpatient 
therapy throughout the year as beneficiaries nationally  
Ten percent of Miami-Dade beneficiaries received outpatient therapy 
during all four quarters of 2009.  In contrast, 3 percent of outpatient 
therapy beneficiaries nationally received services during all four 
quarters.   
Miami-Dade beneficiaries were three times as likely to exceed an annual cap 
as beneficiaries nationally  
Medicare allowed payment above an annual cap for 63 percent of 
outpatient therapy beneficiaries in Miami-Dade County in 2009.  That 
is, these beneficiaries received either a combination of PT and SLP 
services or OT services, excluding those provided in hospitals, that cost 
 
45 CMS, Medicare Claims Processing Manual , Pub. No. 100-04, ch. 5,  10.2. 
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F I N D I N G S  
more than $1,840.  Nationally, 22 percent of beneficiaries exceeded an 
annual cap.   
Ninety-four percent of Medicare payments to providers serving beneficiaries in 
Miami-Dade County were attributed to beneficiaries who exceeded an annual 
cap.  Medicare paid providers that served Miami-Dade beneficiaries who 
exceeded an annual cap $150 million in 2009, accounting for 94 percent 
of all payments to providers serving Miami-Dade beneficiaries.  
Medicare paid an average of $5,162 for outpatient therapy provided to 
each of these beneficiaries, almost three times the cap amount of $1,840.  
Nationally, 63 percent of payments were for beneficiaries who exceeded 
an annual cap.  Medicare paid an average of $3,169 nationally for 
beneficiaries who exceeded an annual cap. 
 
Medicare per-beneficiary spending on outpatient  As a group, the 19 other high-
therapy in the other high-utilization counties was  utilization counties accounted for a 
total of $162 million in Medicare 
72 percent greater than the national average; these 
payments for outpatient therapy in 
counties also exhibited questionable billing but to 
2009.  Medicare paid an average of 
a lesser extent than Miami-Dade County 
$1,852 per beneficiary in these 
  counties, 72 percent greater than the 
national average of $1,078.  
Beneficiaries who received outpatient therapy in these counties received 
an average of 83 services in 2009, compared to the national average of 
49 services per beneficiary.  Medicare paid an average of $21,131 per 
provider for outpatient therapy provided to beneficiaries in these 
counties, compared to the national average of $10,131 per provider.  
Additionally, 12 of the 243 providers that received over $1 million in 
Medicare payments for outpatient therapy in 2009 were located in these 
19 counties and received a total of $19 million. 
The 19 high-utilization counties combined had at least twice the national 
level for 5 of the 6 questionable billing characteristics  
As a group, these 19 high-utilization counties had at least twice the 
national level for 5 of the 6 questionable billing characteristics in Medicare 
outpatient therapy services we reviewed.  Table 3 compares these high-
utilization counties to Miami-Dade County and national levels of the six 
characteristics.   
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F I N D I N G S  
 
 
  Table 3.  Questionable Outpatient Therapy Billing Characteristics in Miami-Dade County and 
  19 High-Utilization Counties Combined Compared to National Levels, 2009 
 
  19 Other  Ratio of the 19 
  Miami- High- High-Utilization 
  Dade  Utilization  Counties to 
  Characteristic   County  Counties    National  National 
 
Average number of outpatient therapy services per 
 
beneficiary that providers indicated would exceed an annual 
 
cap  60  37  14  3:1 
 
  Percentage of outpatient therapy beneficiaries whose 
  providers indicated that an annual cap would be exceeded on 
  the beneficiaries first date of service in 2009  20%  9%  5%  2:1 
 
  Average Medicare payment per beneficiary who received 
  outpatient therapy from multiple providers  $5,664  $3,152  $1,670  2:1 
 
Percentage of outpatient therapy beneficiaries whose 
 
providers were paid for services provided throughout the year  10%  14%  3%  4:1 
 
  Percentage of outpatient therapy beneficiaries whose 
  providers were paid for services that exceeded an annual cap  63%  38%  22%  2:1 
 
Percentage of outpatient therapy beneficiaries whose 
 
providers were paid for more than 8 hours of outpatient 
 
  therapy provided in a single day  0.3%  1.0%  0.7%  1:1 
 
Note:  All figures have been rounded to nearest whole number. 
Source:  OIG analysis of 2009 Medicare outpatient therapy claims, 2010. 
 
The 19 high-utilization counties combined had lower levels than Miami-
Dade County for 4 of the 6 characteristics.  The characteristics that 
were more prevalent in these 19 counties than in Miami-Dade County 
were the percentages of beneficiaries who (1) received outpatient 
therapy throughout the year and (2) received over 8 hours of outpatient 
therapy in 1 day.  Fourteen percent of beneficiaries in these counties 
received outpatient therapy throughout the year.  In contrast, 3 percent 
of outpatient therapy beneficiaries nationally and 10 percent of Miami-
Dade beneficiaries received services throughout the year.  Additionally, 
the percentage of beneficiaries who received over 8 hours of outpatient 
therapy in 1 day was slightly greater in these 19 high-utilization 
counties than nationally and in Miami-Dade County. 
Each of the 19 high-utilization counties had at least twice the national level 
for 1 or more of the 6 questionable billing characteristics  
Individually, each high-utilization county had at least twice the 
national level for one or more of the six questionable billing 
characteristics.  Four of the 19 counties had at least twice the national 
level for at least 3 of the 6 characteristics.   
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F I N D I N G S  
The levels of some characteristics were high in many of these               
19 counties.  For example, in 11 high-utilization counties, the 
percentages of beneficiaries that received more than 8 hours of 
outpatient therapy in 1 day were at least twice the national average.  
Additionally, in 8 of these 11 counties, at least 5 percent of therapy 
beneficiaries received over 8 hours of outpatient therapy in 1 day, over  
7 times the national average.  See Appendix B for each high-utilization 
countys questionable billing levels. 
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  R E C O M M E N D A T I O N S  
 R E C O M M E N D A T I O N S  
 
Miami-Dade County, Florida, had the highest total Medicare payments 
for outpatient therapy in 2009.  We found that per-beneficiary spending 
on outpatient therapy in Miami-Dade County was three times the 
national average in 2009.  We also found that Miami-Dade County had 
high levels of questionable billing for outpatient therapy.  Miami-Dade 
County exceeded the national levels for five of the six questionable 
billing characteristics we reviewed by at least a factor of three.  
Nineteen other high-utilization counties exhibited questionable 
characteristics in billings for Medicare outpatient therapy services in 
2009, but to a lesser extent than Miami-Dade County.  The presence of 
these characteristics raises questions about the appropriateness of 
outpatient therapy claims but does not necessarily mean that such 
claims are inappropriate or fraudulent.   
South Florida, and Miami-Dade County in particular, has been the 
focus of efforts to combat Medicare fraud, waste, and abuse in recent 
years.  In May 2009, HHS and DOJ established an interagency team to 
combat health care fraud nationwide focusing on South Florida and 
several other geographic areas.  Our findings demonstrate that 
outpatient therapy services in Miami-Dade County and other high-
utilization counties warrant additional review as part of ongoing 
Medicare antifraud activities. 
We recommend that CMS: 
Target outpatient therapy claims in high-utilization areas for further review 
We found that high-utilization counties have high levels of questionable 
billing characteristics compared to national levels.  CMS should monitor 
utilization trends, such as therapy expenditures per provider and per 
beneficiary, and use this information to target providers in geographic 
areas that may be susceptible to fraud.   
Target outpatient therapy claims with questionable billing characteristics 
for further review 
CMS should use the questionable billing characteristics we identified to 
analyze and monitor claims data to detect and deter fraud and abuse.  
As part of its analysis, CMS should examine claims for characteristics 
that are readily identifiable, such as providers that frequently bill for 
services using the KX modifier on the beneficiarys first date of service 
in the calendar year and those that become evident across beneficiaries 
and providers claims over time.  For example, CMS could identify 
providers that bill for high numbers of services per beneficiary using the 
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R  E C O M M E N D A T I O N S  
KX modifier, relative to the national or surrounding geographic areas 
levels. 
Review geographic areas and providers with questionable billing and take 
appropriate action based on results 
When geographic areas are found to have high or increasing utilization 
of outpatient therapy or when monitoring identifies providers with high 
levels of questionable billing, CMS should review selected claims prior 
to payment to ensure that they are legitimate.  If CMS determines that 
fraudulent claims have been submitted, it should take steps to suspend 
payments to these providers and recover overpayments to them.  To 
assist CMS, we will provide a list of additional high-utilization counties 
and non-high-utilization counties with high levels of questionable billing 
characteristics under separate cover.  Additionally, we will consider 
providers with high levels of questionable billing for investigation. 
Revise the current therapy cap exception process  
We found that providers in high-utilization counties used the KX 
modifier and exceeded annual therapy caps at levels much higher than 
the national average.  The current therapy cap exception process does 
not ensure appropriate utilization of Medicare outpatient therapy 
services.  CMS should consider developing per-beneficiary edits and 
maximum payment amounts to control overutilization of outpatient 
therapy services.  Unless CMS claims-processing contractors use edits 
or review claims prior to payment, the current therapy cap exceptions 
process does not identify or limit unusually high annual per-beneficiary 
utilization.  CMS could determine payment amounts that only a small 
percentage of beneficiaries would surpass in a single year.  Claims that 
exceed these maximum amounts would automatically be subject to 
medical review prior to payment. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with all four recommendations.  Through several of its 
PSCs and ZPICs, CMS is engaged in data analysis of outpatient therapy 
services.  For example, CMS is monitoring specific geographic areas and 
has already identified claim characteristics and utilization patterns that 
may detect and deter fraud and abuse in certain designated high-risk 
areas.  CMSs analyses have already resulted in investigations and 
referrals to law enforcement, which subsequently led to criminal 
indictments and arrests.  In addition, the MAC in Miami, Florida, 
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R E C O M M E N D A T I O N S  
instituted a prepayment edit to lower the utilization rate for outpatient 
therapy services. 
CMS also stated that when PSCs and ZPICs identify geographic areas 
with high or increasing outpatient therapy utilization, it takes 
corrective actions, such as onsite reviews, prepayment edits, and 
postpayment reviews. 
Regarding the last recommendation, CMS concurs with the need to 
address the limitations of the current therapy cap exceptions process 
and is developing both short-term and long-term options.  CMS included 
the following short-term options in the 2011 Physician Fee Schedule 
Proposed Rule: 
  requiring the reporting of new patient function-related Level II 
HCPCS codes and severity modifiers, 
  applying medical necessity edits when per-beneficiary expenditures 
reach a predetermined value, and 
  introducing per-session codes to bundle payment for groups of 
current therapy codes into a single per-session payment. 
For the long term, CMS is developing a therapy-related data collection 
instrument that includes measurement items relevant to payment. 
We support CMSs efforts to address these issues and encourage it to 
continue making progress in these areas.  We will consider providers 
with high levels of questionable billing for investigation.  We will also 
share a list of these providers with CMS so it may take appropriate 
action.  We did not make changes to the report based on CMSs 
comments.  For the full text of CMSs comments, see Appendix C.   
 
 
 
 
 
 
 
 
 
 
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 A P P E N D I X ~ A  
 
HCPCS Codes for Medicare Outpatient Therapy Services, Fee Schedule Amounts, and Medicare 
Payments, 2009* 
Nonfacility 
Fee  Facility Fee  Number of 
HCPCS  Schedule  Schedule  Medicare  Total Medicare 
Code  Description  Amount  Amount  Claims  Payments 
97110  Therapeutic exercises  $28.49  $28.49  49,229,880  $1,994,469,190 
97530  Therapeutic activities  $29.94  $29.94  16,920,929  $604,742,625 
97140  Manual therapy  $26.33  $26.33  18,279,063  $502,444,717 
97112  Neuromuscular reeducation  $29.21  $29.21  12,435,150  $375,879,132 
97001  Physical therapy evaluation  $69.25  $69.25  4,199,233  $227,015,902 
97116  Gait training therapy  $24.89  $24.89  8,951,914  $205,988,238 
92526  Oral function therapy  $77.54  $26.69  2,902,618  $177,572,847 
97535  Self care management training  $30.30  $30.30  4,646,094  $172,681,674 
G0283  Electrical stimulation other than wound  $11.90  $11.90  9,585,421  $89,965,073 
97113  Aquatic therapy/exercises  $35.35  $35.35  1,165,459  $83,420,907 
92507  Speech/hearing therapy  $61.67  $25.25  1,604,393  $76,822,378 
97035  Ultrasound therapy  $11.54  $11.54  6,746,273  $65,794,786 
97003  Occupational therapy evaluation  $73.22  $73.22  1,003,691  $58,465,572 
97032  Electrical stimulation  $16.59  $16.59  2,695,018  $43,038,732 
97532  Cognitive skills development  $24.16  $24.16  698,410  $27,702,946 
97150  Group therapeutic procedures  $18.03  $18.03  1,782,119  $25,539,949 
97124  Massage therapy  $22.72  $22.72  1,134,287  $24,108,635 
97542  Wheelchair management training  $27.05  $27.05  604,481  $22,473,139 
92610  Swallowing function evaluation  $61.67  $61.67  309,513  $18,705,280 
92506  Speech/hearing evaluation  $154.00  $42.56  160,331  $17,864,825 
97760  Orthotic management and training  $32.82  $32.82  459,094  $17,180,166 
97002  Physical therapy reevaluation  $37.15  $37.15  557,614  $16,760,845 
97597  Active wound care:  20 cm or less  $62.03  $27.41  239,873  $10,640,377 
97012  Mechanical traction therapy  $14.43  $14.43  846,893  $9,761,844 
92611  Motion fluoroscopy/swallowing  $70.69  $70.69  109,937  $7,643,271 
97033  Electric current therapy  $25.61  $25.61  323,713  $6,694,468 
97022  Whirlpool therapy  $18.39  $18.39  401,468  $5,551,642 
97750  Physical performance test  $28.85  $28.85  135,518  $4,428,371 
97016  Vasopneumatic device therapy  $15.51  $15.51  354,614  $4,193,393 
97024  Diathermy, e.g., microwave  $5.41  $5.41  639,190  $2,734,629 
97598  Active wound care:  greater than 20 cm  $76.46  $37.15  42,363  $2,434,433 
97004  Occupational therapy reevaluation  $41.84  $41.84  54,982  $1,911,344 
97018  Paraffin bath therapy  $8.30  $8.30  261,651  $1,734,700 
97761  Prosthetic training  $28.85  $28.85  39,514  $1,666,576 
97762  Checkout for orthotic/prosthetic use  $36.07  $36.07  46,457  $1,605,450 
92508  Speech/hearing therapy  $29.57  $12.98  60,355  $1,393,711 
97533  Sensory integration  $25.97  $25.97  37,384  $1,129,882 
* Healthcare Common Procedure Coding System (HCPCS) codes provide a standardized coding system used by Medicare to describe specific items 
and services. 
Sources:  Medicare Physician Fee Schedule (2009) and Office of Inspector General analysis of 2009 Medicare outpatient therapy claims. 
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A P  P E N D  I X   A  
Continued:   HCPCS Codes for Medicare Outpatient Therapy Services, Fee Schedule Amounts, and 
Medicare Payments, 2009* 
Nonfacility 
Fee  Facility Fee  Number of 
HCPCS  Schedule  Schedule  Medicare  Total Medicare 
Code  Description  Amount  Amount  Claims  Payments 
97026  Infrared therapy  $5.05  $5.05  237,206  $1,000,552 
G0281  Unattended electrical stimulation  $11.90  $11.90  98,928  $982,243 
97537  Community/work reintegration  $26.69  $26.69  21,681  $952,940 
92609  Use of speech device service  $86.92  $86.92  11,348  $718,044 
97034  Contrast bath therapy  $15.15  $15.15  48,020  $587,001 
92612  Endoscopy swallowing test (fees)  $152.92  $63.48  5,013  $579,374 
92597  Oral speech device evaluation  $102.79  $42.92  6,329  $526,915 
95831  Limb muscle testing, manual  $24.89  $13.71  22,587  $472,713 
95851  Range of motion measurements  $15.15  $7.57  32,043  $441,859 
97605  Negative pressure wound treatment, < 50 cm  $35.35  $25.25  14,514  $431,545 
64550  Application of neurostimulator  $13.71  $8.66  35,634  $429,507 
90901  Biofeedback training, any method  $31.74  $19.48  12,368  $411,492 
96125  Cognitive test by health care professional  $94.86  $80.79  4,259  $386,866 
0183T**  Wound ultrasound  $0.00  $0.00  4,115  $357,281 
97036  Hydrotherapy  $26.33  $26.33  10,401  $261,857 
97039**  Physical therapy treatment  $0.00  $0.00  10,609  $244,501 
97755  Assistive technology assessment  $33.18  $33.18  2,755  $237,770 
92607  Exam for speech device treatment, 1 hour  $162.30  $162.30  2,071  $236,062 
96105  Assessment of aphasia  $74.66  $74.66  2,484  $188,254 
G0329  Electromagnetic treatment for ulcers  $7.93  $7.93  18,724  $134,480 
97139**  Physical medicine procedure  $0.00  $0.00  5,543  $105,235 
97606  Negative pressure wound treatment, > 50 cm  $37.87  $27.77  2,613  $92,541 
92616  Laryngeal sense test  $182.86  $93.05  529  $80,436 
95852  Range of motion measurements  $12.26  $5.77  6,060  $58,720 
97799**  Physical medicine procedure  $0.00  $0.00  555  $56,642 
97028  Ultraviolet therapy  $6.49  $6.49  10,764  $55,970 
97010  Hot or cold pack therapy  $5.05  $5.05  220,633  $28,655 
92608  Exam for speech device treatment additional  $31.74  $31.74  671  $28,006 
95832  Hand muscle testing, manual  $24.16  $14.79  1,167  $21,076 
97602***  Wound(s) care, nonselective  $0.00  $0.00  16,422  $19,433 
95833  Body muscle testing, manual  $33.90  $22.36  671  $17,408 
95834  Body muscle testing, manual  $40.39  $28.49  319  $9,849 
96111  Developmental test, extended  $127.68  $123.35  68  $6,189 
92614  Laryngoscopic sensory test  $133.81  $63.48  36  $3,797 
95992  Canalith repositioning procedure  $40.76  $36.79  968  $1,125 
96110  Developmental test, limited  $12.62  $12.62  22  $404 
92605***  Evaluation for nonspeech device prescription  $0.00  $0.00  60  $24 
92606***  Nonspeech device service  $0.00  $0.00  118  $0 
* Healthcare Common Procedure Coding System (HCPCS) codes provide a standardized coding system used by Medicare to describe specific items 
and services. 
** No fee schedule amount exists for this code; the local carrier (or A/B Medicare Administrative Contractor) determines the coverage and pricing for 
this code. 
*** This code is a bundled service under the fee schedule.  
Sources:  Medicare Physician Fee Schedule (2009) and Office of Inspector General analysis of 2009 Medicare outpatient therapy claims. 
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES  23   
   A P P E N D I X ~ B  
Questionable Billing Characteristics for 20 High-Utilization Counties, Compared to National Levels 
Questionable Billing Characteristics 
    
Number of 
Average  Percentage of  Average Payment  Percentage of  Percentage of  Questionable 
Number of  Services Billed  for Beneficiaries  Beneficiaries  Beneficiaries  Billing 
Average  Services  With KX Modifier  Who Received  Receiving  Percentage of  With More Than  Characteristics 
Payment  Billed With KX  on First Date of  Services From  Services  Beneficiaries  8 Hours of  at Least Twice 
per  Total Medicare  Modifier per  Service per  More Than One  Throughout the  Exceeding  Service in a  the National 
County/Parish  Beneficiary  Payments  Beneficiary  Beneficiary  Provider  Year  Annual Cap  Single Day  Level* 
National  $1,078  $4,922,328,414 14  4.9%  $1,670  3.1%  21.6%  0.7% NA 
Miami-Dade, FL  $3,459  $159,180,288 60  20.2%  $5,664  9.7%  63.0%  0.3% 5 
St. Mary, LA  $2,343  $1,571,955 48  7.2%  $2,365  2.7%  35.3%  6.1% 2 
Avoyelles, LA  $2,054  $1,244,468 43  10.2%  $2,103  2.6%  39.1%  0.5% 2 
Leflore, MS  $2,031  $1,062,159 45  6.9%  $1,773  3.4%  29.6%  0.6% 1 
Okeechobee, FL  $2,026  $1,616,424 17  4.9%  $4,301  4.0%  38.2%  0.3% 1 
Kings, NY  $1,972  $79,973,326 41  9.8%  $3,361  16.8%  40.7%  0.3% 4 
Rusk, TX  $1,890  $1,124,662 52  16.6%  $1,785  3.4%  30.1%  6.2% 3 
Lauderdale, MS  $1,814  $2,368,575 39  15.0%  $2,883  2.7%  27.9%  5.8% 3 
Liberty, TX  $1,807  $1,442,333 51  15.0%  $2,394  2.6%  27.8%  5.8% 3 
Warren, MS  $1,791  $1,296,449 37  4.3%  $3,201  3.7%  38.0%  1.0% 1 
Ouachita, LA  $1,749  $3,255,832 32  6.9%  $2,307  3.3%  31.8%  5.0% 2 
Thomas, GA  $1,747  $1,864,483 45  7.6%  $2,024  2.2%  36.7%  0.7% 1 
Lincoln, LA  $1,747  $1,109,029 39  8.7%  $2,493  2.7%  29.6%  5.2% 2 
San Patricio, TX  $1,744  $1,641,316 33  5.2%  $2,821  3.1%  35.0%  4.0% 2 
Acadia, LA  $1,742  $1,332,625 34  3.3%  $1,836  2.4%  31.5%  1.7% 2 
Iberia, LA  $1,742  $1,929,809 27  7.4%  $1,506  2.1%  30.4%  2.9% 1 
De Kalb, IN  $1,739  $1,038,248 48  8.0%  $1,973  2.7%  27.5%  8.4% 2 
Angelina, TX  $1,718  $2,283,187 30  10.0%  $2,696  2.6%  34.6%  1.4% 2 
Queens, NY  $1,714  $53,872,258 33  8.0%  $3,007  14.6%  37.3%  0.5% 2 
Dubois, IN  $1,676  $1,670,940 36  7.9%  $1,753  2.8%  27.2%  5.0% 2 
Note:  Bolded figures indicate levels that are at least twice the national level. 
* Figures are based on rounded questionable billing levels.  
Source:  Office of Inspector General analysis of 2009 Medicare outpatient therapy services claims. 
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES          24  A  P  PEN  D  x  c 
Agency Comments:  Centers for Medicare & Medicaid Services 
(/$ oP....tqf,,.,.. 	
DEPARTMENT OF HEALTH & HUMAN SERVICES  Centers for Medicare & Medicaid Services 
,~,!-
AdminilJtrator 
Washington, DC 20201 
OCT  1 2 2010 
DATE: 	
TO: 	 Daniel R. Levinson 

Inspector General 

FROM: 	 Donald M. Berwick, M.D. 

Administrator 

SUBJECT: 	 Office ofInspector General (OIG) Draft Report: "Questionable Billing for 
Medicare Outpatient Therapy Services" (OEI-04-09-00540) 
Thank you for the opportunity to review and comment on the subject OIG draft report. The 
Office of Inspector General (OIG) study found that counties with high-utilization of outpatient 
therapies had high levels ofper beneficiary spending and questionable billing characteristics 
compared to national levels.  During this study, OIG's findings demonstrated that outpatient 
therapy services in Miami-Dade Cotmty and other high-utilization counties warrant additional 
review as part ofongoing Medicare antifraud activities. 
In its report, OIG made several recommendations to the Secretary ofthe Department ofHealth 
and Human Services and the Administrator ofthe Centers for Medicare & Medicaid Services 
(CMS). CMS responded to each of these recommendations for OIG's review and consideration. 
OIG Recommendation 
Target outpatient therapy claims in high-utilization areas for further review. 
CMS Response 
The CMS concurs with OIG's recommendation. CMS, through several ofits Program Safeguard 
Contractors (PSCs) and Zone Program Integrity Contractors (ZPICs) in certain designated high 
risk areas, is already engaged in extensive data analysis ofoutpatient therapy services. CMS is 
monitoring specific geographic areas by comparing per beneficiary spending in these area') with 
state-wide and national averages to target providers in geographic areas that may be susceptible 
to fraudulent activities.  SafeGuard Services (SGS), the PSC responsible for New York, has 
successfully utilized extensive zip code comparative analyses for physical therapy, other 
outpatient therapy and other claim types for provider target identification.  Such analyses have 
resulted in investigations and referrals to law enforcement in Brooklyn, NY, a HEAT Strike 
Force city, that subsequently led to criminal indictments and arrests.  Other SGS contractors in 
other states are performing similar reviews. Likewise, Health Integrity, the ZPIC for Texas, has 
OEI040900540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES 
25  A P P E N D I X ~ C  
 
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES   
      26  A P P E N D I X ~ C  
 
 
 
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES   
      27   
 
 A C K N O W L E D G M E N T S  
 
This report was prepared under the direction of Dwayne Grant, Regional 
Inspector General for Evaluation and Inspections in the Atlanta regional 
office, and Jaime Durley, Deputy Regional Inspector General.   
Sarah Ambrose served as the team leader for this study and               
Holly Williams served as the lead analyst.  Other principal Office of 
Evaluation and Inspections staff from the Atlanta regional office who 
contributed to this report include Gerius Patterson; central office staff 
who contributed include Kevin Farber and Arianne Spaccarelli.  
 
  OEI-04-09-00540  QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES   
      28   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 
of fraud and misconduct related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI utilizes its resources 
by actively coordinating with the Department of Justice and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.