Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
M  P
EDICAID  AYMENTS FOR 
 
T S E
HE  RAPY  ERVICES IN  XCESS 
   
S L
OF  TATE  IMITS
 
 
Daniel R. Levinson  
Inspector General 
 
March 2012 
OEI-07-10-00370   
   
EXECUTIVE SUMMARY:  MEDICAID PAYMENTS FOR THERAPY 
SERVICES IN EXCESS OF STATE LIMITS 
OEI-07-10-00370 
 
 
WHY WE DID THIS STUDY  
 
Past Office of Inspector General work has shown that Medicare- and Medicaid-paid 
physical, occupational, and speech therapy services were vulnerable to improper 
payments because (1) plans of care were incomplete or missing; (2) documentation was 
missing, or providers failed to respond to our request for documentation; or (3) providers 
lacked proper qualifications, or we could not determine whether they had proper 
qualifications.   
 
HOW WE DID THIS STUDY 
 
We asked Medicaid staff from all States and the District of Columbia (States) to respond 
to a questionnaire requesting information about whether their States placed limits on 
therapy services, and if so, the nature of those limits.  We examined paid Medicaid 
fee-for-service claims for therapy services in eight States (Arkansas, Florida, Hawaii, 
Illinois, Maine, Maryland, Michigan, and North Carolina) for the period July 1, 2008, 
through June 30, 2009, to determine whether the therapy services complied with State 
limits.  We asked State Medicaid officials to describe the safeguards established to 
prevent payments in excess of State limits.  We also asked State Medicaid staff to 
identify the reason(s) States safeguards failed to prevent payments in excess of State 
limits. 
 
WHAT WE FOUND 
 
Thirty-five of the forty-eight States that paid for any type of Medicaid therapy services 
placed limits on the amount of services a beneficiary could receive.  All eight States we 
reviewed described safeguards established to prevent payments in excess of State limits; 
however, six of those States improperly paid claims totaling approximately $744,000.  
Three States paid claims for therapy services that were potentially improper.  Although 
we identified a relatively low number of claims for therapy services paid improperly, the 
errors were easily preventable in most instances.  Several States reported improving their 
program integrity safeguards to address our findings.   
 
WHAT WE RECOMMEND 
 
We recommend that the Centers for Medicare & Medicaid Services (CMS) work with 
States to prevent Medicaid payments for therapy services in excess of State limits and to 
follow up on the inappropriate claims identified in our review.  CMS concurred with our 
recommendations. 
 
   
 
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................3 
Findings........................................................................................................6 
Thirty-five State Medicaid programs established limits on 
therapy services ................................................................................6 
All eight States reported safeguards to prevent 
payments in excess of State limits ...................................................7 
Despite reported program safeguards, six States improperly 
paid claims for therapy services totaling $744,000 .........................9 
Three States reviewed paid claims for therapy services that 
were potentially improper .............................................................. 11 
Recommendations ......................................................................................13 
Agency Comments and Office of Inspector General Response .....13 
Appendixes ................................................................................................15 
A:  State Limits on Medicaid Therapy Services ............................15 
B:  Sampled States Limits on Therapy Services ...........................20 
C:  Agency Comments ...................................................................22 
Acknowledgments......................................................................................25 
 
   
   
OBJECTIVES 
1.  To describe the limits that States established on physical; occupational; 
and speech, hearing, and language therapy services. 
2.  To identify payment safeguards that States established to prevent 
payments for therapy services in excess of State limits. 
3.  To identify Medicaid payments for therapy services that exceeded 
State limits. 
BACKGROUND 
Previous Office of Inspector General (OIG) work has shown that 
Medicare- and Medicaid-paid therapy services were vulnerable to 
improper payments because (1) plans of care were incomplete or missing; 
(2) documentation was missing, or providers failed to respond to requests 
for documentation; or (3) providers lacked proper qualifications, or we 
could not determine whether they had proper qualifications.  However, 
prior to this report, we had not assessed whether Medicaid payments for 
therapy services were paid in excess of State limits.  Identifying the extent 
of improper payments for therapy services and the reasons safeguards fail 
to prevent them will assist in ensuring the integrity of the Medicaid 
program. 
Title XIX of the Social Security Act (the Act) requires State Medicaid 
programs to provide certain basic medical services (e.g., physician 
services, hospital care, nursing facility care) to all categorically needy 
recipients.1  Additionally, the Act allows States to provide optional 
servicessuch as physical; occupational; and speech, hearing, and 
language (speech) therapythrough their Medicaid State plans.2  In fiscal 
year (FY) 2008, approximately $700 million for 16 million claims was 
paid for physical, occupational, and speech therapy services (therapy 
services).3  This $700 million represents both the State and Federal shares 
of the expenditures. 
 
1 Medicaid is funded by both the Federal and State governments.  Under  1903 (a)(1) of the Act, the Federal 
Medical Assistance Percentage (FMAP) is used to determine the amount of Federal matching funds for State 
medical assistance expenditures.  Sections 1905(b) and 1101(a)(8)(B) of the Act specify the basic formula for 
calculating the FMAP. 
2 Therapy services can be provided through the home health benefit ( 1905(a)(7) of the Act; 
42 CFR  440.70); the Early Periodic Screening, Diagnosis, and Treatment benefit ( 1905(a)(4)(B) of the Act; 
42 CFR  441.50); the rehabilitative services benefit ( 1905(a)(13) of the Act; 42 CFR  440.130); and various 
types of waivers. 
3 Medicaid Statistical Information System State Summary Datamart.  Accessed at http://msis.cms.hhs.gov/ on 
August 19, 2011.  The most recent data available for all 51 State Medicaid programs are from FY 2008. 
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State Limitations on Therapy Services 
States may establish limits on the amount, duration, and scope of the 
Medicaid services they will cover, as long as each service is sufficient to 
reasonably achieve its purpose.4  Such limits are included in the State 
Medicaid plan that the Centers for Medicare & Medicaid Services (CMS) 
approves.  State-established limits include the number of therapy services, 
hours of therapy services, or total dollar amount the Medicaid program 
will pay for each beneficiary during a certain period.  In some States, a 
single limit may include more than one type of therapy servicefor 
example, a State could limit beneficiaries to 60 hours per year of physical 
and occupational therapy combined. 
State Payment Safeguards 
For many types of Medicaid services, States establish safeguards to 
prevent improper payments, including payment system edits, utilization 
reviews, and postpayment audits.  One example of a payment system edit 
is to track the number of units or hours paid per recipient in a certain 
period and automatically deny payments for additional services once the 
limit is reached.  In utilization reviews, staff typically examine paid claims 
for therapy services to determine whether payments were made for 
services in excess of established limits.  Finally, postpayment audits 
consider whether the payments made to a particular provider were 
appropriate according to Federal and State rules, including service limits. 
Related Reports 
A 2006 OIG study of Medicare payments for physical therapy services 
billed by physicians found that 91 percent of the payments allowed by 
Medicare during the first 6 months of 2002 did not meet program 
requirements, resulting in $136 million in improper payments.5  That 
study found patterns in physician billing that suggest that physical therapy 
is vulnerable to abuse.  Four percent of physicians who submitted physical 
therapy claims made more than half of all allowed claims in 2004.  
Additionally, 134 physicians billed Medicare for more than 500 patients 
during the same period.  The median number of patients per physician in 
the study was eight. 
Another 2006 OIG study, which reviewed Medicaid claims for 
school-based therapy services, found that 43 out of 150 sampled claims 
did not meet Federal requirements regarding providers of therapy 
services.6  The study found that either the providers did not meet Federal 
 
4 42 CFR  440.230. 
5 OIG, Physical Therapy Billed by Physicians, OEI-09-02-00200, May 2006. 
6 OIG, Review of Medicaid Claims for School-Based Health Services in New Jersey, A-02-03-01003, 
May 2006.  
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  2 
   
   
provider qualification requirements or their qualifications could not be 
documented. 
METHODOLOGY 
Scope and Limitations 
This evaluation identified Medicaid fee-for-service claims for therapy 
services in eight States that exceeded State limits on amount, duration, 
and/or scope from July 1, 2008, through June 30, 2009.  We examined 
Medicaid paid claims for therapy services provided only through 
fee-for-service arrangements.  We did not determine whether therapy 
services were medically necessary or whether the providers were 
qualified.  We did not test the effectiveness of payment safeguards that 
States established to prevent payments for therapy services in excess of 
State limits. 
State Selection 
In the summer of 2010, we asked Medicaid staff from all States and the 
District of Columbia (States) to respond to a questionnaire requesting 
information about (1) whether their States provided therapy services paid 
on a fee-for-service basis from July 1, 2008, through June 30, 2009; 
(2) whether their States placed limits on those services; and (3) if so, the 
nature of those limits.  It was necessary to collect this information from 
State Medicaid programs to select States for our review.  We received 
responses from all 51 States.  From the responses, we identified 
six primary types of therapy limits (e.g., maximum number of units per 
specific procedure code in a specified timeframe, maximum number of 
units of service in a specified timeframe based on diagnosis).  We grouped 
six States responses into an Other category because their limits were 
not similar to those of other States. 
We selected States for further review based on two criteria:  (1) higher 
dollar expenditures for therapy services among all State Medicaid 
programs; and (2) representation of each type of limit we identified, 
including the Other category.  We selected the following eight States for 
review:  Arkansas, Florida, Hawaii, Illinois, Maine, Maryland, Michigan, 
and North Carolina.  Therapy service expenditures in these States 
accounted for 61 percent of national Medicaid spending on therapy 
services in FY 2008.  All eight States provided each type of therapy 
services (i.e., physical, occupational, and speech) and imposed a limit on 
each type of service during the study period.   
Structured Interviews With State Medicaid Staff 
We conducted structured interviews by conference call with Medicaid 
agency staff in each selected State.  During these interviews, we collected 
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information regarding the authorities through which therapy services were 
provided (e.g., benefit category), how the limits applied to these 
authorities, how therapy services were billed, and what safeguards existed 
to prevent payment of therapy services in excess of State limits.  We also 
collected copies of the relevant sections of State Medicaid plans and State 
Medicaid manuals. 
Claims Data and Analysis 
We requested data from each selected States Medicaid Management 
Information System for all final paid claims for therapy services provided 
from July 1, 2008, through June 30, 2009.7  Table 1 shows the number and 
dollar amount of those claims. 
Table 1:  Medicaid-Paid Claims for Therapy Services, July 1, 2008, Through 
June 30, 2009 
State  Number of Claims  Dollar Amount 
Arkansas  439,522  $29,518,966 
Florida  1,467,340  $82,219,947 
Hawaii  23,553  $560,809 
Illinois  737,518  $41,071,817 
Maine  191,479  $6,322,529 
Maryland  13,150  $235,259 
Michigan  288,722  $12,097,106 
North Carolina  746,822  $47,802,908 
     Total  3,918,348  $219,829,341 
Source:  Claims for therapy services submitted by States, 2011. 
In addition to requesting the claims information in Table 1, we requested 
claims data for hospital outpatient services from two States to determine 
whether the limits on therapy services were exceeded.  The Arkansas and 
Florida Medicaid programs established a hospital outpatient service limit 
that included therapy services for recipients over the age of 21.  For those 
States, we determined whether hospital outpatient service limits were 
exceeded.   In addition to submitting the claims in Table 1, the Arkansas 
Medicaid program submitted 31,346 claims totaling $1,974,623 and the 
Florida Medicaid program submitted 10,242 claims totaling $715,519 for 
the period of our review.  
 
7 We did not verify the number or dollar amount of claims that States reported to us with any other data source. 
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We also requested additional claims and eligibility information from all 
eight sampled States, such as recipient age, diagnosis, benefit category, or 
prior authorization information, to determine whether the therapy services 
received complied with State limits.  Using statistical analysis software 
(i.e., SAS), we calculated the number of paid Medicaid claims and the 
total number of units, visits, and/or dollars paid per recipient per period, as 
expressed in the appropriate States limit.  For example, if a State 
expressed its limit in terms of visits per month, we calculated the number 
of visits per month for each recipient; if a State expressed its limit in terms 
of dollars per year, we calculated dollars per year.  We compared these 
totals to the limits for each State to identify claims that exceeded those 
limits.   
We held followup discussions with State Medicaid staff regarding any 
identified paid claims for therapy services that exceeded the limits to 
determine whether any extenuating circumstances existed (e.g., the 
recipient received prior authorization for additional therapy services that 
was not apparent in the data we received from the State).  We also asked 
State Medicaid staff to identify the reason(s) safeguards failed to prevent 
payments in excess of State limits.  We calculated the total number and 
dollar amount of improperly paid claims. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
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FINDINGS 
Thirty-five State Medicaid programs established limits 
on therapy services  
Using the responses to our questionnaire, we determined that 47 States 
provided physical and occupational therapy services and 48 States 
provided speech therapy services on a fee-for-service basis during our 
period of review.8  Thirty-five of the forty-eight States that paid for any 
type of Medicaid therapy services placed limits on the amount of therapy 
services a beneficiary could receive.9  Thirty-five States placed limits on 
physical and occupational therapy services and 33 States placed limits on 
speech therapy services. 
State Medicaid programs varied in the types of limits they established on 
therapy services.  Even within a State, some programs varied the type of 
limit established among therapy disciplines.  For example, the Colorado 
Medicaid program established a unit limit per calendar year for physical 
and occupational therapy with the potential for additional services 
approved through prior authorization.  For speech therapy, the limit was a 
unit limit per date of service with no provision for additional services.   
We grouped the types of limits States established into seven categories.  
Table 2 provides a description and example of each category.  Appendix A 
lists the types of limits each State established for each type of therapy 
service.   
   
 
8 The States that did not provide physical or occupational therapy through their fee-for-service Medicaid 
programs were the District of Columbia, Rhode Island, Tennessee, and Vermont.  The States that did not 
provide speech therapy through their fee-for-service Medicaid programs were Rhode Island, Tennessee, and 
Vermont. 
9 The 13 States that did not place limits on the amount of therapy services a recipient could receive were  
Alaska, Arizona, Connecticut, the District of Columbia, Delaware, Louisiana, Minnesota, Mississippi, New 
Jersey, New Mexico, Oklahoma, South Carolina, and South Dakota. 
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Table 2:  Types and Examples of Therapy Service Limits Established by 
State Medicaid Programs, July 1, 2008, through June 30, 2009 
State  Type of Limit  Example of Limit 
Maximum number of units  Maximum of one physical 
per specific procedure  therapy evaluation per day. 
Alabama 
code in a specified 
timeframe. 
Maximum number of units  Maximum of 25 occupational 
in a specified timeframe;  therapy visits per recipient 
Idaho  prior authorization required  per calendar year; additional 
to exceed maximum.  services must have prior 
authorization.   
Maximum number of units  Maximum of 10 physician or 
in a specified timeframe;  clinic visits per 12-month 
New York  additional services cannot  period, inclusive of physical, 
be approved through a  occupational, and speech 
prior authorization.  therapy visits.   
Prior authorization required  Initial and 6-month 
for most or all services and  occupational therapy 
maximum number of units  evaluations do not require 
in a specified timeframe.  prior authorization.  All other 
California  occupational therapy services 
require prior authorization 
and are limited to two 
services per month per 
recipient.   
For recipients up to age  Up to age 21, one 
21, maximum number of  occupational therapy 
units in a specified  evaluation per year; over age 
timeframe or maximum  21, physical therapy must 
number of units per  follow the onset of an acute 
specific procedure code.   illness, injury, or impairment 
Georgia 
For recipients over age 21,  and requires prior 
therapy must be provided  authorization.   
by a particular provider 
type or in a particular 
setting; prior authorization 
is required for all services. 
For recipients up to age  Up to age 21, no limits on 
21, no limits.  For  any therapy service; over age 
recipients over age 21,  21, combined physical, 
maximum number of units  occupational, and speech 
Nebraska 
in a specified timeframe or  therapy services cannot 
maximum number of units  exceed 60 visits per year per 
based on diagnosis, place  recipient.   
of service, or provider type. 
Other (e.g., dollar limit per  Expenditures for combined 
specified timeframe).  physical and speech therapy 
services cannot exceed 
Iowa  $1,840 per year per recipient; 
expenditures for occupational 
therapy cannot exceed 
$1,840 per year per recipient.   
Source:  OIG analysis of State responses, 2010. 
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All eight States reported safeguards to prevent 
payments in excess of State limits 
During our structured interviews with the eight selected States, we 
confirmed our understanding of the limits that each State reported on its 
initial questionnaire.  Details of these limits are in Appendix B.   
We also asked State officials what safeguards (e.g., payment system edits, 
postpayment reviews) were established to prevent payments of claims that 
exceeded the limits.  All eight States reported having system edits to 
prevent payments in excess of State limits, and four States reported 
performing postpayment reviews of therapy claims.  Table 3 describes 
each States payment safeguards. 
Table 3:  Payment Safeguards Reported by State Medicaid Programs, 
  
July 1, 2008, Through June 30, 2009
State  Edits  Postpayment Reviews 
Determine whether the services were 
Check the total units or visits against  correctly billed as prescribed, whether 
Arkansas  the limit for evaluations and  services were delivered, and whether 
treatment services  the services were medically 
necessary 
Disallow payments over the unit or 
Florida  None reported 
dollar limit 
Check for the number of services 
within previous 90- or 120-day 
Hawaii  None reported 
timeframe and check for number of 
minutes, units, and visits per day 
Determine whether services were 
Deny payments for dates of service 
Illinois  provided as stated in the patients 
beyond the initial treatment period 
plan of care 
Review services billed by physical 
Maine  Deny claims in excess of limits  and occupational therapy providers on 
a case-by-case basis 
Maryland  Check for number of units per day  None reported 
Deny claims in excess of 36 within a 
Michigan  None reported 
90-day timeframe 
Match prior authorization information 
Each month, review a random sample 
with type of service and number of 
of paid claims to monitor utilization, 
North Carolina  units billed on the claim; edits 
quality, and appropriateness of 
prevent payments for more than one 
services 
evaluation per day   
Source:  OIG analysis of State responses, 2010. 
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Despite reported program safeguards, six States 
improperly paid claims for therapy services totaling 
$744,000 
We identified 16,268 claims for therapy services that exceeded State 
limits.  Six States in our review paid approximately $744,000 out of 
approximately $220 million for these claims.10  As an example of 
improperly paid claims, the Hawaii Medicaid program has a limit of 
36 units of therapy service in a 120-day period.  However, 1 recipient 
received 47 units of physical therapy from September 29, 2008, through 
January 21, 2009 (115 days).  Therefore, 11 units were paid in error, 
totaling $378.  We did not find any therapy services paid in excess of State 
limits in North Carolina.  Because we did not test the functionality of 
safeguards, we are unable to determine whether safeguards in North 
Carolina (and other States) prevented improper payments or whether 
providers simply did not submit claims in excess of State limits.  Table 4 
shows the number of improperly paid claims and amounts paid to 
providers for these claims. 
Table 4:  Therapy Services Paid in Excess of State Limits, July 1, 2008, 
Through June 30, 2009 
Total Improper 
State  Number of Claims 
Payments 
Arkansas  930  $77,574 
Florida  13,707  $621,364 
Hawaii  60  $3,236 
Illinois  1,517  $39,287 
Maryland  26  $2,235 
Michigan  28  $1,486 
     Total  16,268  $743,679 
Note:  We did not find any therapy services paid in excess of State limits in North Carolina.  The analysis of 
therapy services paid in excess of State limits in Maine is discussed later in this report. 
Source:  OIG analysis of Medicaid therapy claims, 2011. 
States lacked system edits to prevent some payments for 
therapy services in excess of limits, but described actions 
being taken to prevent future improper payments 
Although officials from all eight States initially reported having system 
edits to prevent claims in excess of limits from being paid, officials from 
 
10 The period of our review of therapy claims overlaps two Federal FYs; therefore, different FMAPs were in 
effect for this period.  We did not calculate the Federal and State shares for these claims. 
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six States responded that edits were not set up to prevent the claims in 
excess of limits that we identified.  Officials from several States told us 
that our analysis alerted them to areas in which system edits need to be 
implemented or reimbursement policy revised to prevent payments for 
therapy services in excess of State limits.  Following are descriptions of 
claims paid in excess of limits and the State officials explanations of the 
reasons that the claims were paid improperly.  This information may assist 
other State Medicaid programs in their program integrity efforts. 
In Arkansas, officials stated that system errors allowed claims to be paid 
for units of evaluation per year and units of treatment per day in excess of 
State limits.  In some cases, this happened because the claims system did 
not indicate that the same type of service was billed by different providers 
on the same date.  Arkansas officials reported that the system errors were 
corrected to properly control for therapy service limits. 
In Florida, the largest portion of claims paid improperly (10,936 claims 
totaling $491,604) was paid for more than 4 units per day or 14 units per 
week for services within each therapy discipline.  Following our review, 
Florida Medicaid officials stated that they had implemented a system edit 
to deny claims for more than 4 units per day and were implementing an 
edit to deny claims in excess of 14 units per calendar week.  The 
next-largest portion of improperly paid claims was paid for therapy 
evaluations for recipients under age 21 (2,162 claims totaling $103,990).  
Florida officials stated that these payments were caused by conflicting 
policy.11  Following our review, officials stated that they distributed policy 
clarification to providers via a provider forum, email, and the therapy 
services section of the Florida Medicaid Web site.  Additionally, Florida 
officials stated that they implemented an edit in the claims system to 
prevent payments for evaluations that exceed the limits. 
Illinois Medicaid officials explained that the claims system edits in place 
during the period of review did not consider time or session limits.  
Instead, Illinois relied upon providers to bill the appropriate amount and 
duration of services for the recipients conditions.  Officials reported that a 
change to the Medicaid Management Information System to correct this 
vulnerability was initiated as a result of our review; however, it was not 
yet complete at the writing of this report. 
Hawaii, Maryland, and Michigan each paid relatively few claims in excess 
of State limits.  Officials from these States focused on recouping payments 
from providers and stated that they would implement minor changes to the 
 
11
 Because of the conflicting policy, Florida officials believe these claims should not be considered 
overpayments.  However, these claims meet the definition of improperly paid claims as defined in this report. 
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edits in their claims systems to prevent future improper payments.  In one 
instance, the necessary system edit existed, but was put in place after the 
period of our claims review.   
Three States reviewed paid claims for therapy services 
that were potentially improper 
For two States, Florida and Illinois, we were able to evaluate most but not all 
aspects of therapy service limits.  In addition, Maine Medicaid officials did 
not respond to our request to review our initial analysis of claims.  Because 
we were unable to determine whether therapy service limits were exceeded, 
these three States paid claims for therapy services that were potentially 
improper. 
Not all Florida Medicaid program claims data indicated the 
type of service provided 
We were unable to evaluate one aspect of therapy service limits for Florida.  
The program limits outpatient hospital services (including therapy services) 
to $1,500 per year for recipients over age 21.  Florida provided a dataset of 
all outpatient hospital services for our period of review; however, the dataset 
did not include descriptions of the types of services provided.  We found  
623 claims for 175 recipients totaling $65,792 that exceeded the limit of 
$1,500 of outpatient hospital services per year.  We cannot definitively 
determine which claims in excess of State limits were for therapy services; 
therefore, they are not included in Table 4. 
The Illinois Medicaid program did not provide sufficient 
information in all cases to determine whether therapy limits 
were exceeded  
The Illinois Medicaid program limits the number of therapy service sessions 
provided to a beneficiary during an initial evaluation and treatment period 
without prior approval from the program.  The limit varies by diagnosis, 
ranging from 1 month and 8 sessions for the diagnosis fracture of vertebral 
column, to 3 months and 39 sessions for numerous diagnoses (e.g., closed 
head injury).12  Payments for claims exceeding 3 months and 39 sessions are 
clearly improper, as no limit for any diagnosis exceeds this threshold.  
Table 4 identifies the 1,517 claims totaling $39,287 that exceeded the 
3-month and 39-session limit.  Determining whether the remaining 
5,691 claims, totaling $133,333, were paid improperly would require 
individual assessment of whether the number and duration of services 
exceeded the maximum threshold set by Illinois Medicaid for the condition 
being treated.  Such an assessment would be complicated by the fact that 
 
12 Illinois Department of Healthcare and Family Services, Handbook for Providers of Therapy Services, 
App. J-4, January 2009. 
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claims data indicate beneficiary conditions using diagnosis codes, but the 
Illinois Medicaid program establishes treatment limits based on general 
descriptive groupings of diagnoses.  According to Illinois Medicaid program 
officials, there is no list of the diagnosis codes that correspond to the 
diagnosis groupings.  Therefore, we could not determine whether the 
5,691 claims totaling $133,333 were paid properly. 
Maine did not respond to requests to validate our initial 
analysis 
The Maine Medicaid program limits the number of hours of service per day 
for most services and the number of services per year for one particular 
procedure code.  Our initial analysis of therapy claims produced 695 claims 
totaling $56,628 that appeared to exceed the maximum number of hours of 
service per day.  We provided these claims to Maine Medicaid officials on 
June 3, 2011.  One of Maines therapy service limits involved recipients 
condition(s), but we were not provided this information.  Therefore, we 
needed a response from Maine to determine whether we correctly applied 
limits according to recipients condition(s).  We made repeated attempts via 
telephone and email to obtain a response.  We notified Maine officials on 
August 2, 2011, that we would report these claims as potentially improper.  
We did not receive a response to this notification. 
 
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RECOMMENDATIONS 
Thirty-five State Medicaid programs established limits on therapy services 
during the period July 1, 2008, through June 30, 2009.  All eight States we 
reviewed said they had safeguards to prevent payments in excess of State 
limits; however, six States improperly paid claims for Medicaid therapy 
services totaling approximately $744,000.  Three States paid claims for 
therapy services that were potentially improper.  Although we identified a 
relatively low number of claims for therapy services paid improperly, the 
errors were easily preventable in most instances.  States that paid claims in 
excess of State limits described actions they are taking to improve 
program integrity safeguards based on our findings and to prevent future 
improper payments.   
We recommend that CMS: 
Work With States To Prevent Medicaid Payments for Therapy 
Services in Excess of State Limits 
In implementing this recommendation, CMS could work with all States to: 
  alert State Medicaid directors and staff to the findings of this report 
so they can better target their program integrity efforts and 
  encourage State Medicaid programs to ensure that edits are in 
place to prevent payment of claims for therapy services in excess 
of State limits. 
In addition, CMS could ensure that Medicaid Integrity Contractors are 
aware of the findings of this report so they may, as appropriate, include 
therapy services in their Medicaid claims data analyses. 
Follow Up on the Inappropriate Claims Identified in Our Review   
We will forward information regarding the inappropriate claims we 
identified to CMS in a separate memorandum.  Where our findings have 
identified an overpayment by the State to a provider for therapy services, 
the State should refund the Federal share to CMS.   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with our recommendations.  In response to the first 
recommendation, CMS stated that the National Correct Coding Initiative 
(NCCI) methodologies provided State Medicaid agencies with 
claim-specific edits to improve the correct coding of claims and avoid 
paying for services that have been incorrectly submitted by the provider.  
States were required to implement the NCCI methodologies as of 
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October 1, 2010.  In addition, CMS plans to ensure that all State Medicaid 
agencies and Medicaid Integrity Contractors are aware of the findings of 
this report.  In response to the second recommendation, upon receipt of 
OIGs separate memorandum identifying the inappropriate claims, CMS 
will take action to ensure that the Federal share of any overpayment by the 
State Medicaid agency is refunded or recovered.  We addressed the 
technical comment that CMS provided.  For the full text of CMSs 
comments, see Appendix C. 
 
 
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  14 
   
   
APPENDIX A 
The following table illustrates the type of limit placed on therapy services 
in each of the 35 States that had such limits. 
Limit Type Key 
1Maximum number of units per specific procedure code in a specified 
timeframe. 
2Maximum number of units in a specified timeframe; prior 
authorization required to exceed maximum.  
3Maximum number of units in a specified timeframe; additional 
services cannot be approved through a prior authorization.  
4Prior authorization required for most or all services and maximum 
number of units in a specified timeframe. 
5For recipients up to age 21, maximum number of units in a specified 
timeframe or maximum number of units per specific procedure code.  For 
recipients over age 21, therapy must be provided by a particular provider 
type or in a particular setting; prior authorization is required for all 
services, or no therapy services are covered. 
6For recipients up to age 21, no limits.  For recipients over age 21, 
maximum number of units in a specified timeframe based on diagnosis, 
place of service, or provider type. 
7Other. 
Table A-1:  State Limits on Medicaid Therapy Services 
State  Therapy  Limit Type 
Service  1  2  3  4  5  6  7 
Alabama  Physical               
Occupational               
Speech  No limit on speech therapy services 
Arkansas  Physical               
Occupational               
Speech               
California  Physical               
Occupational               
Speech               
continued on next page 
 
   
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  15 
   
   
Table A-1:  State Limits on Therapy Services (Continued) 
State  Therapy  Limit Type 
Service  1  2  3  4  5  6  7 
Colorado  Physical               
Occupational               
Speech               
Florida  Physical               
Occupational               
Speech               
Georgia  Physical               
Occupational               
Speech               
Hawaii  Physical               
Occupational               
Speech               
Iowa  Physical               
Occupational               
Speech               
Idaho  Physical               
Occupational               
Speech               
Illinois  Physical               
Occupational               
Speech               
Indiana  Physical               
Occupational               
Speech               
Kansas  Physical               
Occupational               
Speech               
Kentucky  Physical               
Occupational               
Speech               
continued on next page 
   
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  16 
   
   
Table A-1:  State Limits on Therapy Services (Continued) 
State  Therapy  Limit Type 
Service  1  2  3  4  5  6  7 
Maine  Physical               
Occupational               
Speech               
Maryland  Physical               
Occupational               
Speech               
Massachusetts  Physical               
Occupational               
Speech               
Michigan  Physical               
Occupational               
Speech               
Missouri  Physical               
Occupational               
Speech               
Montana  Physical               
Occupational               
Speech               
Nebraska  Physical               
Occupational               
Speech               
Nevada  Physical               
Occupational               
Speech               
New  Physical               
Hampshire  Occupational               
Speech               
New York  Physical               
Occupational               
Speech               
North  Physical               
Carolina  Occupational               
Speech               
continued on next page 
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  17 
   
   
Table A-1:  State Limits on Therapy Services (Continued) 
State  Therapy  Limit Type 
Service  1  2  3  4  5  6  7 
North  Physical               
Dakota  Occupational               
Speech               
Ohio  Physical               
Occupational               
Speech               
Oregon  Physical               
Occupational               
Speech               
Pennsylvania  Physical               
Occupational               
Speech               
Texas  Physical               
Occupational               
Speech               
Utah  Physical               
Occupational               
Speech               
Virginia  Physical               
Occupational               
Speech               
Washington  Physical               
Occupational               
Speech               
West Virginia  Physical               
Occupational               
Speech  No limit on speech therapy services 
continued on next page 
 
   
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  18 
   
   
Table A-1:  State Limits on Therapy Services (Continued) 
State  Therapy  Limit Type 
Service  1  2  3  4  5  6  7 
Wisconsin   Physical               
Occupational               
Speech               
Wyoming  Physical               
Occupational               
Speech               
     Total States:*  2  11  4  2  7  6  6 
*The sum of the limit type totals does not equal 35 because 3 States use different types of limits for different therapy 
services. 
Source:  Office of Inspector General analysis of responses to questionnaire regarding therapy services limits, 2010. 
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  19 
   
   
APPENDIX B 
Table B-1:  Sampled States Limits on Therapy Services 
Prior 
Recipient  Authorization  
State  Description of Limit 
Category  May Override 
Limit* 
For each therapy discipline, there is a limit of four units of evaluation 
each year and four units of treatment per day.  Recipients may receive 
four units per day of treatment with and without UB modifier (i.e., UB 
Under age 21  Yes 
modifier indicates service provided by physical therapy assistant).  
Recipients may receive one evaluation for an augmentative 
Arkansas 
communication device every 3 years. 
In addition to the limits for recipients under age 21, recipients must 
Over age 21  receive therapy services in outpatient hospital settings.  Outpatient  Yes 
hospital visits are limited to 12 per year. 
For all therapy disciplines combined, recipients may receive four units of 
therapy service per day.  In addition, there is a limit of 14 units of service 
per week for each therapy discipline.  Each recipient may receive one 
evaluation and one reevaluation per discipline every 6 months; the first 
reevaluation may be done at 4 months.  For an initial evaluation for an 
Under age 21  No 
alternative communication device, up to three providers (one physical, 
one occupational, and one speech) who are members of the 
interdisciplinary team may be reimbursed.  Each recipient may receive 
one followup evaluation per alternative communication device, as well 
as one reevaluation every 6 months. 
Outpatient hospital services (including all disciplines of therapy) are 
Over age 21  limited to $1,500 per year.  For alternative communication devices, one  No 
Florida  initial evaluation is allowed per year. 
Recipients may receive eight treatments related to an augmentative and 
alternative communication device per year.  One evaluation and two 
All ages  No 
followup evaluations related to wheelchair use per year are allowed; the 
third wheelchair evaluation must be at least 6 months after the second. 
Aged and Disabled  Recipients may receive a maximum of 4 hours of physical therapy, 
No 
Waiver  2 hours of occupational therapy, and 4 hours of speech therapy per day. 
Mentally Retarded/  Recipients may receive a maximum of eight units of each therapy 
Developmental  discipline per day and one evaluation per therapy discipline per year.  No 
Disabilities Waiver 
For physical and occupational therapy services, there is a limit of 
45 minutes of service per therapy discipline per day.  In addition, there is 
Hawaii  All ages  a limit of 36 units of service for procedure codes billed in units and a  Yes 
limit of 12 visits for procedure codes billed in visits in a 120-day period 
per discipline.  All speech therapy requires prior authorization. 
Home and  Recipients may receive up to 26 hours of therapy per discipline per year. 
Illinois  Community Based  Yes 
Services Waiver 
continued on next page 
   
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  20 
   
   
Table B-1:  Sampled States Limits on Therapy Services (Continued) 
Prior 
Recipient  Authorization  
State  Description of Limit 
Category  May Override 
Limit* 
Every service must have prior authorization unless:  
1.  the date of service is within 60 calendar days following discharge 
from an acute care or rehab hospital, or 
2.  the service is covered by Medicare (i.e., Medicaid is simply paying 
Illinois  Over 21  the copayment for a dual-eligible), or  No 
3.  the service is for an individual who was hospitalized in the past 
30 days and was receiving therapy services while hospitalized, or 
4.  the service occurs during the initial evaluation and treatment period 
as defined in State policy.  These periods vary by diagnosis. 
Recipients may receive one evaluation or reevaluation per condition per 
year.**  For physical and occupational therapy, treatment is limited to 
2 hours per therapy discipline per day, plus up to 1 hour of collateral 
contacts per condition (collateral contacts are made by the therapy 
Yes 
Maine  Over age 21  provider to the recipients other providers regarding the recipients 
treatment).  Recipients may receive up to two sensory integration visits 
per year.***  Audiology evaluations must be at least 4 months apart; 
otherwise, no specific limit is placed on speech therapy services. 
Recipients may receive one physical therapy evaluation per condition.**  
For occupational therapy, recipients may receive one unit of evaluation 
Under age 21  and up to four units of treatment per day.  For speech therapy, recipients  No 
may receive one unit of evaluation and up to one unit of individual or 
group treatment per day. 
Maryland 
Only physical therapy is provided through fee-for-service arrangements; 
occupational and speech therapy are provided through managed care.  
Recipients may receive one physical therapy evaluation per condition.**  
No 
Over age 21  Recipients may receive up to four units of physical therapy treatment per 
day, with the exception of certain procedures, which are limited to one 
unit per day. 
All ages  Limits vary by procedure code.  No 
Seriously  Limits vary by procedure code. 
Michigan  Emotionally  No 
Disturbed Waiver 
Childrens Waiver  Limits vary by procedure code.  No 
North  Recipients may receive up to six visits per therapy discipline per year, 
Carolina  All ages  excluding evaluations and reevaluations.  Yes 
*Prior authorization means that the provider must seek permission from the State to provide the service to a particular recipient.  Typically, requests for 
prior authorization must be accompanied by documents justifying the medical necessity of the service and outlining the patients treatment plan.  If the 
State does not grant the request, Medicaid will not pay the provider for the service. 
**Maine and Maryland limit some therapy services based on recipients condition.  We were unable to determine whether the limits for these services 
were exceeded because we did not receive information on recipients conditions. 
***Sensory integration is a type of occupational therapy that takes place in a room specifically designed to stimulate all of the patients senses.  The goal 
of sensory integration therapy is to improve the brains ability to process sensory information.  It is often used to treat autism spectrum disorders. 
Source:  Office of Inspector General analysis of State responses, 2010. 
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  21 
  APPENDIXC 
Agency Comments 
"",-"",.,~ 
~
(  DEPARTMENT OF HEALTH & HUMAN SERVICES  Cent91's for Medicare & Medicalcl Senri08$ 
,~ 
Ad",in{strRtor 
Washlngloo. OC 20201 
JAN 192012
DATE: 
TO; 	 Daniel R. Levinson 
I~-ctor GOI.lerai 
FROM: 	 Marilyn..Tav.e~ 
Acting Adniinistrntor 
SUBJECl': 	 Office of1nspector General (OIG) Draft Report: " Medicaid Payments for 
Therapy Services in Excess ofState LimitS" (OEI-07-10-00370) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to comment 
on this subject OIO draft report. The objectives of the report were: I) to identify the limits that 
States established on physical; occupational; and speech. hearing, and language therapy services; 
2) to determine payment safeguards that States established to prevent payments for therapy 
services in excess of State limits; and 3) to identify Medicaid payments for therapy services that 
exceeded State limits. 
The 010 found that 35 Slate Medicaid programs have established limits on therapy services. 
The review ofclaims was focused on therapy services for the I year period beginning July I, 
2008, for 8 States. all of which have established payment safeguards to prevent payments in 
excess ofState limits. Six of the 8 States were found to have improperly paid therapy claims 
totaling $744,000, out ofthe sample of $220 million paid for therapy claims. 010 noted that the 
relatively low number of claims payment errors would be easily preventable with system edits in 
most cases and that several States reported having already taken corrective action to address 
OlG's findings.  Moreover, eMS has taken a comprehensive approach by establishing the 
National Correct Coding Initiative (NCCI) in October 2010 to require States to implement an up
to-date libr.uy ofsystem edits to prevent improper payments across a wide variety of Medicaid 
services such as those identified in this report. 
We appreciate the OIO's efforts in assessing the effectiveness of States' safeguards to prevent 
payments for Medicaid therapy services that exceed State limits, and reporting on system 
vulnerabilities. Our response to each of the 010 recommendations follows our technical 
comment 
Technical Comment 
Please note that the first recommendation in the report's summary statement is not the same a.~ 
the first recommendation in the concluding section on page 13. The distinction between 
OEI-07 -10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  22   
   
Agency Comments (Continued) 
   
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  23 
   
   
Agency Comments (Continued) 
   
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  24 
   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Brian T. Pattison, Regional 
Inspector General for Evaluation and Inspections in the Kansas City 
regional office, and Brian T. Whitley, Deputy Regional Inspector General.   
Tricia Fields served as the team leader for this study.  Other principal 
Office of Evaluation and Inspections staff from the Kansas City regional 
office who contributed to the report include Michael J. Brown and 
Michala Walker; central office staff who contributed include Kevin Farber 
and Scott Manley.  
 
 
 
 
OEI-07-10-00370  Medicaid Payments for Therapy Services in Excess of State Limits  25 
   
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