Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Physical And Occupational Therapy in Nursing Homes 
Medical Necessity and Quality of Care 
JUNE GIBBS BROWN 
Inspector General 
AUGUST 1999 
OEI-09-97-00121  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them.  This statutory mission is carried out through a 
nationwide program of audits, investigations, inspections, sanctions, and fraud alerts.  The 
Inspector General informs the Secretary of program and management problems and recommends 
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's San Francisco regional office prepared this report under the direction of Kaye D. Kidwell, 
Regional Inspector General, and Paul A. Gottlober, Deputy Regional Inspector General.  Principal 
OEI staff included: 
REGION  HEADQUARTERS 
Deborah Harvey, Project Leader  Susan Burbach, Program Specialist 
Robert Gibbons, Program Analyst  Jennifer Antico, Program Specialist 
Carrie Lozano, Program Analyst  Stuart Wright, Program Specialist 
Lori Stickel, Program Analyst  Barbara Tedesco, Statistician 
To obtain copies of this report, please call the San Francisco Regional Office at 415-437-7900. 
Reports are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  E X E C U T I V E   S U M M A R Y  
PURPOSE 
To determine the medical necessity and quality of care of physical and occupational therapy 
rendered to Medicare patients in skilled nursing facilities. 
BACKGROUND 
All skilled nursing facilities must meet the requirements of Section 1819 of the Medicare law. 
The facilities must, for example, (1) provide 24-hour skilled nursing service; (2) develop 
treatment plans for each patient from a physicians order; (3) maintain clinical records on all 
patients; and (4) meet a number of conditions to assure patients health and safety.  Most 
skilled nursing facilities also provide custodial care. 
Medicare coverage guidelines state that all therapy must be reasonable, necessary, specific, and 
effective treatment for the patients condition.  Policies developed by the Health Care 
Financing Administration, the federal agency that administers the Medicare program, require 
that therapy be ordered by a physician, require the skills of a qualified therapist, and be dictated 
by a written treatment plan.  The treatment plan must include specific and measurable 
functional goals and a reasonable estimate of when those goals will be attained.  It should 
describe specific therapeutic services, the frequency of visits, and the duration of therapy. 
We conducted on-site medical review at a random sample of 24 skilled nursing facilities 
nationwide.  Several teams of physical and occupational therapists reviewed the March 1998 
medical records of a national random sample of 218 Medicare patients.  The medical reviewers 
determined the medical necessity of the therapy provided to the sampled patients before the 
implementation of the prospective payment system for skilled nursing facilities which began on 
July 1, 1998. 
FINDINGS 
Most skilled nursing facility patients were appropriate candidates for physical and 
occupational therapy, and they benefitted from therapy 
Most patients received appropriate therapy interventions for their initial medical conditions, 
and at least two-thirds of patients achieved their treatment goals.  Most patients would not 
have achieved similar levels of function without therapy. 
1 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  However, almost 13 percent of therapy was billed improperly to Medicare 
By facility, the percentage of therapy that was billed improperly ranged from zero to 
51 percent.  Smaller facilities were more likely than larger facilities to bill improperly. 
Therapy was deemed as improperly billed to the Medicare program when it was not medically 
necessary and/or therapy was provided by staff who did not have the appropriate skill for the 
patients medical condition. 
In addition to the 13 percent of therapy that was billed improperly, another 
4 percent was not documented in the patients medical records 
In several cases, therapists did not explain changes in the patients progress which would 
justify large variations in the duration of therapy. 
RECOMMENDATION 
From our findings, it is clear that some problems stem from a lack of awareness and 
understanding of Medicare coverage and guidelines, while others may be more directly related 
to overutilization in order to maximize Medicare reimbursement.  Our findings also reflect our 
general concern for the need for improved quality of care, with an emphasis on patient safety 
and appropriate therapy treatment. 
Therefore, we recommend that the Health Care Financing Administration provide more 
training to SNFs and therapy staff on Medicare coverage criteria and guidelines for physical 
and occupational therapy, local medical review policies, and monitoring procedures.  This 
could be accomplished by: 
1.	 instructing Medicare fiscal intermediaries to provide regular workshops to SNFs, especially 
smaller facilities, and therapists and 
2.	 working collaboratively with the national therapy and nursing home associations to assure 
that they provide accurate and comprehensive information to their members. 
In this report, we have focused on the medical necessity of physical and occupational therapy. 
In a companion report entitled Physical and Occupational Therapy in Nursing Homes: Cost of 
Improper Billings to Medicare (OEI-09-97-00122), we analyzed how much improperly billed 
therapy costs the Medicare program. 
2 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  AGENCY RESPONSE 
We received comments on the draft report from the Health Care Financing Administration. 
The agency concurred with the reports conclusions.  The Health Care Financing 
Administration already has increased medical review efforts at the Medicare contractors as part 
of its on-going program integrity efforts, and they will continue to focus on appropriate 
therapy for Medicare beneficiaries.  The agency also has published new medical review 
guidelines for skilled nursing facilities and plans to conduct related training to strengthen 
provider education. 
The full text of the Health Care Financing Administrations comments appears in appendix C. 
3 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  TT AA BB LL EE     OO FF     CCOONNTTEENNTTSS 
PAGE

EXECUTIVE SUMMARY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

Medically necessary therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

Improperly billed therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12

Undocumented therapy  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

RECOMMENDATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

AGENCY COMMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

A:  Glossary of Terms  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

B:  Confidence Intervals for Selected Statistics  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20

C:  Agency Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22

4 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  I N T R O D U C T I O N  
PURPOSE 
To determine the medical necessity and quality of care of physical and occupational therapy 
rendered to Medicare patients in skilled nursing facilities. 
BACKGROUND 
Medicare Coverage for Skilled Nursing Facilities 
All skilled nursing facilities (SNF) must meet the requirements of Section 1819 of the Medicare

law.  The facilities must, for example, (1) provide 24-hour skilled nursing service under policies

developed by physicians, registered nurses, or other professionals; (2) develop health plans for

each patient, under the supervision of a physician; (3) maintain clinical records on all patients;

and (4) meet a number of conditions to assure patients health and safety.

The Medicare program provides SNF coverage under Part A, which does not include custodial

care.  The Part A benefit includes:

<  nursing care;

<  bed and board;

<  physical, occupational, and/or speech therapy;

<  medical social services; and

<  drugs, biologicals, supplies, appliances, and equipment for use in the facility.

Medicare stipulates that patients are eligible for Part A benefits if they are transferred to a SNF

after a minimum 3-day covered stay in an acute care hospital.  The patient must require skilled

nursing care and/or rehabilitation services, and a physician must order the services.  Part A

covers SNF services for up to 100 days per spell of illness.  The patient is responsible for a

copayment for the 21st through 100th day of care.  After 100 days, patients are not covered

under the SNF benefit, but they may be covered for various services under Part B, even while

they are receiving only custodial care.

Most SNFs provide custodial care as well as skilled nursing services.  Unlike other 

long-term care facilities, SNFs also may be reimbursed under Part B for any patients who

receive Part B-covered services only.  The SNFs are responsible for meeting the needs of long-

term patients who are eligible for Part B services only during their stay.

5 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  Description of Physical and Occupational Therapy 
According to the American Physical Therapy Association, physical therapy is ... the care and 
services that includes (1) examining patients with impairments, functional limitations or 
disabilities or other health-related conditions in order to determine a diagnosis, prognosis, and 
intervention; (2) alleviating impairments and functional limitations by designing, implementing 
and modifying therapeutic interventions; and (3) preventing injury, impairment, functional 
limitation and disability, including the promotion and maintenance of fitness, health, and quality 
of life.1  Common treatments include therapeutic exercise, prescription and customization of 
prosthetic devices and equipment, and wound management.  For example, physical therapy 
may include gait training on ramps, stairs, or curbs to improve a patients walking ability 
impaired by injury or illness. 
The American Occupational Therapy Association defines occupational therapy as ...the use 
of purposeful activity or interventions designed to achieve functional outcomes which promote 
health, prevent injury or disability, and which develop, improve, sustain or restore the highest 
possible level of independence of any individual who has an injury,  illness, cognitive 
impairment, psycho social dysfunction, mental illness, developmental or learning disability, 
physical disability, or other disorder or condition.2  Occupational therapy primarily focuses on 
compensatory techniques to improve a patients ability to complete the activities of daily living 
independently.  Therapy may include (1) assessing patient need; (2) designing, developing, 
adapting, applying, or training in the use of assistive or orthotic devices; 
(3) adapting environments and processes to enhance functional performance; or (4) promoting 
health and wellness.  Two examples include teaching a patient who has lost the use of an arm 
how to prepare food and cook with one hand and designing, building, and training a patient in 
the use of an assistive device that would enable him to hold a utensil and feed himself 
independently. 
The staff who provide physical and occupational therapy to patients include therapists, 
assistants, and aides.  Staff are distinguished by training and experience and often are licensed, 
registered, or certified by the State where they practice.  We have included descriptions of each 
staff level and some common terminology in appendix A. 
Medicare Coverage of Physical and Occupational Therapy 
1American Physical Therapy Association, Model Definition of Physical Therapy for State 
Practice Acts, Board of Directors Policies, Positions and Guidelines, March 1998. 
2The American Occupational Therapy Association, Inc.  Definition of occupational therapy 
practice for State regulation. The American Occupational Therapy Association, Inc. Policy Manual 
(Association Policy 5.3.1), July 1994. 
6 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  All SNFs are required to assess each patients status and needs shortly after admission, 
including the need for physical and occupational therapy.  The Nursing Home Reform Act (P.L. 
100-203), which Congress passed as part of the Omnibus Budget Reconciliation Act of 1987, 
requires that SNFs assess the needs of all patients within 14 days of admission and reassess 
long-term patients annually.  Problems identified through the assessment must be treated to 
attain or maintain the highest practicable level of functioning based on the patients physical, 
mental, and psycho social well-being. 
Medicare guidelines state that all therapy must be reasonable, necessary, specific, and effective 
treatment for the patients condition.  While Medicare regulations define common illnesses and 
injuries requiring therapy, the regulations do not specifically bar therapy for illnesses or injuries 
that are not mentioned.  Fiscal intermediaries, the insurance companies that adjudicate cost 
reports for inpatient hospitals and SNFs, often develop local medical review policies to 
supplement Medicare guidelines. 
Medicare coverage requires that the therapy meet all of the following conditions:3 
< the therapy must be ordered by a physician; 
< the therapy levels complexity and sophistication, or the patients condition, require the 
skills of a qualified therapist rather than nonskilled SNF staff; 
<	 the medical record contains an active written treatment plan that includes specific and 
measurable treatment goals related to the patients condition along with a reasonable time 
estimate of when those goals will be achieved; 
< the treatment plan should describe the specific therapeutic interventions that will be utilized 
to restore the patients level of function which has been lost or reduced by illness or injury; 
< the amount, frequency, and duration of therapy should be reasonable and necessary for the 
patients condition; 
< therapy is provided either by or under the direct supervision of a certified therapist;4 
< therapy must be provided with the expectation, based on the assessment made by the 
physician or therapist of the patients restoration potential, that the patients condition will 
improve substantially in a reasonable and generally predictable period of time, or the 
therapy must be necessary for the establishment of a safe and effective maintenance 
program.  However, therapy will only be covered until the physician and/or therapist 
concludes that the patient is not going to improve; and 
< the patient is seen by the physician at least every 30 days. 
3Health Care Financing Administration, Skilled Nursing Facility Manual, Sections 214, 230, 
230.3(C), and 271. 
4State regulations define whether or not direct supervision includes the onsite presence of a 
certified therapist. 
7 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  A SNF patient may receive more than one type of therapy within the same episode of care.  For

example, the occupational therapist may assist the patient with the use of adaptive 

self-help devices while the physical therapist might address a different need, such as increasing

muscle strength, sitting balance, and control of head movement.

Prior Work by the Office of Inspector General 
In April 1998, the Office of Inspector General published a report describing the results from a 
probe sample of physical and occupational therapy provided in six randomly selected SNFs in 
California.5  The major conclusions were: 
<	 Medically unnecessary physical and occupational therapy at sampled SNFs ranged from less 
than 4 to more than 80 percent, and 
<  Multiple factors account for the high volume of medically unnecessary therapy, such as: 
1.	 skilled therapy is frequently provided when nonskilled maintenance services would be 
more appropriate, 
2.	 therapists sometimes ignore the patients prior level of function and set unrealistic 
goals, and 
3.  the frequency of therapy is sometimes excessive. 
Based on the probe sample, the Office of Inspector General decided to conduct this national 
inspection. 
METHODOLOGY 
Sampled SNF Selection 
From the Medicare Common Working File, we extracted all March 1998 physical and 
occupational therapy claims (both Parts A and B) submitted by SNFs to fiscal intermediaries 
for payment.  We limited the extract to SNFs in the continental United States.  We reviewed 
therapy rendered to patients before the Health Care Financing Administration implemented the 
SNF prospective payment system on July 1, 1998.  We purposely selected claims submitted 
before July 1, 1998 to maintain consistency in SNF and fiscal intermediary policies and 
procedures for the 12 months prior to the change in payment systems. 
5Office of Inspector General, Medical Necessity of Physical and Occupational Therapy in Skilled 
Nursing Facilities--California Probe Sample Results [Early Alert], OEI-09-97-00120, April 1998. 
8 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  We stratified the SNFs into four strata by (1) regions of the United States and (2) the total

physical and occupational therapy charges for March 1998.  Within each stratum, we grouped

the SNFs into clusters such that

< the SNFs were in the same geographic area and

< the sum of physical and occupational therapy charges per cluster was fairly constant.

United States  Facility Charges for Physical 
Stratum 
Region  and Occupational Therapy 
1  less than $60,000 
East 
2  equal to or greater than $60,000 
3  less than $60,000 
West and Central 
4  equal to or greater than $60,000 
We then randomly selected two SNF clusters per stratum.  Within each SNF cluster, we 
randomly selected 3 SNFs, resulting in a total sample of 24 SNFs.  Within each SNF, we 
randomly selected 10 patients who received physical and/or occupational therapy during March 
1998.  If a SNF had fewer than 10 patients who received therapy in that month, we reviewed 
all of them. 
Calculations for the confidence intervals account for all levels of clustering and stratification. 
The 95 percent confidence intervals for the statistics in this report are listed in appendix B. 
On-Site Medical Review 
We conducted on-site reviews at the 24 SNFs for the 218 sampled patients who received

physical and occupational therapy in March 1998.  Several teams of physical and occupational

therapists reviewed the medical records.  All reviewers are licensed or certified therapists in

their respective States and are current members of both their national and State therapy

associations.  The medical reviewers used structured medical review instruments to determine

if each therapy (i.e., treatment encounter) was medically necessary, unnecessary, or

undocumented.  We presented the draft instruments to representatives of various therapy and

nursing home national associations and patient interest groups and provided them the

opportunity to comment.

The reviewers used structured medical review instruments to determine whether or not:

< therapy was ordered by a physician,

< the patient was a good candidate for physical and/or occupational therapy,

< therapy was based on medical need,

9 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  < the medical condition warranting the therapy was documented in the medical records,

< the treatment plan was appropriate,

< the types of therapeutic activities and the frequency and duration of the treatment were

delineated clearly, 
< the therapy was rendered with appropriate frequency, 
< therapy was discontinued at the appropriate time, 
< appropriate therapy staff performed the interventions, and 
< medical records clearly documented the patients progress. 
While on-site, we reviewed therapy ledgers, requested copies of the Medicare bills for the 
sampled patients (i.e., Form UB-92), interviewed SNF administrators and some key therapy 
staff, obtained therapy contracts that were in effect in March 1998, and observed some physical 
and occupational therapy conducted with patients.  Assuming that March 1998 is a typical 
month, we projected the results of the medical review to the 12-month period ending June 30, 
1998.  See appendix B for more details.  After the onsite review, we requested local medical 
review policies and therapy guidelines from the fiscal intermediaries for the sampled SNFs. 
This report is one in a series of reports on physical and occupational therapy for Medicare SNF 
patients.  A companion report, Physical and Occupational Therapy in Nursing Homes:  Cost 
of Improper Billings to Medicare (OEI-09-97-00122), details the costs for medically 
unnecessary and undocumented therapy described in this report. 
Our review was conducted in accordance with the Quality Standards for Inspections issued by 
the Presidents Council on Integrity and Efficiency. 
10 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  F I N D I N G S  
Most SNF patients were appropriate candidates for physical 
and occupational therapy, and they benefitted from therapy 
Most patients received appropriate therapy given their initial medical conditions 
Approximately 83 percent of physical and occupational therapy provided in 1998 to SNF 
patients was billed properly to Medicare.  Medical reviewers determined that treatment goals 
and plans were appropriate to the therapy diagnoses, and most patients initially received 
therapy with the appropriate frequency and duration of individual sessions.  In fact, reviewers 
found that most patients would not have achieved similar functional levels without therapy. 
Medical reviewers determined that the medical conditions for most patients required the need 
for skilled physical and occupational therapy.  The therapy interventions appeared functionally 
relevant and clinically appropriate.  When a patients condition or progress changed, the 
therapist usually revised the goals and plan in measurable ways, and the medical record usually 
documented the patients prior functional level.  Positive outcomes included shorter lengths of 
stay and returning more patients to independent living.  Reviewers found that these medical 
records were complete, in order, and provided enough data to clearly justify all therapy 
provided to the patients. 
At least two-thirds of patients achieved their treatment goals 
Almost 67 percent of physical therapy patients and 73 percent of occupational therapy patients 
had good outcomes from therapy.  Reviewers determined that most treatment goals were 
reached within a reasonable time given the patients medical condition, tolerance level, and 
therapy progress.  Based on the planned interventions (for example, gait training or 
re-learning bathing and personal grooming activities), therapists provided sessions with the 
proper frequency and duration of individual sessions. 
ACHIEVEMENT OF TREATMENT GOALS 
Percent of Therapy 
Achievement 
Physical  Occupational 
Patient achieved goals fully or partially  66.8%  73.3% 
Patient did not achieve goals  27.1%  16.5% 
Reviewer could not determine  6.0%  10.1% 
Source: Office of Evaluation and Inspections, 1999 
11 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  Medical reviewers noted that in a few of the SNFs, physical and occupational therapists
collaborated when they developed initial treatment plans and re-evaluated the patients.  By
collaborating, therapists assured that they did not duplicate goals and plans, thereby helping the
patients progress further within a shorter time frame.  One medical reviewer remarked, When
collaboration occurs, the patient is the winner.
Nationally, almost 13 percent of therapy was billed improperly
to Medicare
Almost 13 percent of physical and occupational therapy, or 10.6 million of 82.9 million
sessions, was billed improperly by SNFs to Medicare.6  Of these 10.6 million sessions, 
51.6 percent were physical therapy, and 48.4 percent were occupational therapy.
Improper billings by SNFs ranged from zero to almost 51 percent
While 6 SNFs did not submit any improper therapy bills, 18 of the 24 sampled SNFs
improperly billed for physical and/or occupational therapy.  As shown in the graph below,
smaller SNFs, those with fewer than 100 beds, exhibited a statistically higher rate of improper
billings than the larger SNFs.  The total number of licensed beds at the sampled SNFs ranged
from 9 to 338 beds.  We also analyzed other factors such as status (for-profit or not-for-
profit), SNF affiliation (hospital-based or free-standing), type of therapy company (independent
or national corporation), and type of ownership (part of multi-facility chain or independently
owned).  The differences among these variables were not statistically significant.
Source: Office of
Evaluation and
Inspections, 1999
6Assuming that March 1998 is a typical month, we projected the results of the medical review to
the 12-month period ending June 30, 1998.
12
Medical Necessity of SNF Physical/Occupational Therapy OEI-09-97-00121 Almost 75 percent of all improperly billed therapy was not medically necessary 
Of the 13 percent of improperly billed therapy, almost three-fourths was billed improperly

because the therapy was not medically necessary.  Medical reviewers found that therapy was

not medically necessary because, among other reasons, (1) patients were not appropriate

candidates for therapy, (2) treatment goals were too ambitious, (3) therapy was too frequent

and/or the session was too long, or (4) therapists billed routine maintenance services as skilled

therapy.

In some instances, medical reviewers suggested that physical and occupational therapy should

have been postponed for some patients until their medical conditions became more stable.  For

example, one patient had received both physical and occupational therapy six times a week in

spite of her declining medical condition.  Towards the end of the month, the patient was

receiving physical therapy twice each day along with one to two sessions of occupational

therapy.  Each session lasted 45 to 75 minutes.  The patient was hospitalized for several days in

the same month for dehydration and diarrhea.  The treatment goals for physical therapy were to

increase the patients strength, balance, bed mobility, and sitting tolerance.  The reviewer

determined that the patient did not receive any significant benefit from skilled physical therapy

and expressed concern that the physical stress from the excessive and unnecessary therapy may

have contributed to the patients need to be hospitalized repeatedly.

Approximately 27 percent of physical therapy patients and almost 17 percent of occupational

therapy patients could not achieve their goals and complete their treatment plans because the

plans were too ambitious.  Medical reviewers cited plans as unrealistic because they did not

sufficiently consider the patients initial functional levels when developing goals.  Several

facilities used a cookie-cutter treatment plan for all patients within the same SNF regardless

of the diagnosis.  The reviewers questioned why treatment plans were not revised immediately,

or at all, to reflect the patients documented lack of progress.  Reviewers also noted that some

initial evaluations, especially for occupational therapy, were very lengthy--

112 to 2 hours.  A pattern of lengthy evaluations appeared to be a standard practice at several

facilities.

Excessive frequency and duration of therapy was a standard practice at some SNFs.  For

example, every sampled patient in three SNFs received therapy B.I.D. or twice a day except

on Sundays (when they received therapy only once).  Each session was 45 to 60 minutes long. 

Reviewers questioned the higher frequency and duration because patients at other SNFs with

similar diagnoses, goals, and plans achieved similar or better outcomes in shorter times with

less frequency and duration.

Patients medical conditions and tolerance levels often were not considered when they received

therapy very frequently.  For example, one patient was admitted with a diagnosis of chronic

obstructive pulmonary disease and cardiac failure.  The patient received 5 weeks of physical

therapy with sessions twice a day.  The lengthy and intense therapy was not justified in the

13 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  medical record.  The medical reviewer commented, Although the episode of care could be 
considered reasonable, 60 to 75 minutes of care on a daily basis raises questions of intensity of 
care provided, particularly given [the patients imminent] discharge to a rehabilitation nursing 
program rather than home. 
Many patients received therapy from staff with inappropriate skill or experience 
Approximately 26 percent of the improperly billed physical and occupational therapy was 
provided by staff who did not have the appropriate skill for the patients medical condition.  Of 
this 26 percent, the table below explains the major reasons. 
Reason  Percent7 
Physical therapist assistants and occupational therapy  46% 
assistants provided therapy beyond their skills 
Rehabilitation aides provided care that was billed as skilled  50% 
therapy 
Therapy should have been provided by assistants rather  5% 
than by therapists 
Source: Office of Evaluation and Inspections, 1999 
Other reasons included occupational therapists who provided physical therapy and physical 
therapist assistants who provided nonskilled maintenance services.  For example, situations 
where (1) occupational therapy assistants who completed patient re-evaluations and discharge 
summaries instead of the occupational therapists; (2) physical therapist assistants who provided 
the entire episode of care, from evaluation through discharge summary, for several patients in 
the same facility; and (3) rehabilitation aides who provided therapy without evidence of direct 
supervision by a therapist or an assistant. 
Reviewers especially were concerned that physical therapist assistants and occupational therapy 
assistants were working beyond the scope of their State license and contrary to guidelines and 
practices followed by both national therapy associations.  For example, a graduate occupational 
therapy student at one SNF provided services to patients, but the notes were not co-signed by 
the occupational therapist to indicate monitoring as required by State law.  Reviewers also 
questioned the possible link between the length of therapy (both frequency of therapy and 
duration of individual sessions) and the skill level of the individual who rendered the 
treatments, i.e., the lesser the staff skill level, the higher the frequency and the longer the 
duration of therapy. 
7The percents do not total 100.0 percent due to rounding. 
14 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  Almost 4 percent of therapy was not documented in the 
patients medical records 
Approximately 3.8 percent of therapy sessions either was not documented at all in the medical 
records or was not documented adequately to determine medical necessity.  Documentation 
should include signed physician orders; individual treatment goals and plans; narrative 
summaries of care provided and/or therapy charts (also called grids) with all therapeutic 
interventions, the time spent on the interventions, which staff provided the therapy, and 
narratives of patient progress or changes in progress.8  Narrative summaries did not always 
provide necessary information, especially explanations for large variations in treatment times, 
such as a change from 30 minutes to 1 hour 45 minutes for the same interventions.  Medical 
records that did not support the need for skilled therapy also had substandard documentation, 
including a lack of clinical data.  Reasons for undocumented therapy may include the lack of 
staff training and/or the lack of time to document medical records properly.  When asked how 
therapists receive information on Medicare coverage, medical necessity, and documentation 
guidelines, SNF administrators stated that they rely on the therapy companies to provide 
information to their staff.  Few SNFs sponsor or actively participate in on-site Medicare 
therapy training. 
Reviewers commented that some forms and documentation methods were not comprehensive 
enough to capture clinical data to meet Medicare guidelines and professional therapy 
standards.9  Reasons may include the sharing of cookbook forms among staff from national 
therapy companies and a lack of knowledge by individual therapists of Medicare guidelines and 
criteria.  Reviewers could not determine the skill level of the provider at one SNF due to poor 
documentation. 
8The medical reviewers requested additional documentation from the on-site therapists if patient 
records were in storage, misplaced, or appeared incomplete. 
9American Physical Therapy Association, Guidelines for Physical Therapy Documentation, 
Guide to Physical Therapist Practice, 1998, appendix 7. 
15 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  R E C O M M E N D A T I O N  
From our findings, it is clear that some problems stem from a lack of awareness and 
understanding of Medicare coverage and guidelines, while others may be more directly related 
to overutilization in order to maximize Medicare reimbursement.  Our findings also reflect our 
general concern for the need for improved quality of care, with an emphasis on patient safety 
and appropriate therapy treatment. 
Therefore, we recommend that the Health Care Financing Administration provide more 
training to SNFs and therapy staff on Medicare coverage criteria and guidelines for physical 
and occupational therapy, local medical review policies, and monitoring procedures.  This 
could be accomplished by: 
1.	 instructing Medicare fiscal intermediaries to provide regular workshops to SNFs, especially 
smaller facilities, and therapists and 
2.	 working collaboratively with the national therapy and nursing home associations to assure 
that they provide accurate and comprehensive information to their members. 
In this report, we have focused on the medical necessity of physical and occupational therapy. 
As noted earlier, in a companion report entitled Physical and Occupational Therapy in 
Nursing Homes: Cost of Improper Billings to Medicare (OEI-09-97-00122), we analyzed how 
much improperly billed therapy costs the Medicare program. 
AGENCY RESPONSE 
We received comments on the draft report from the Health Care Financing Administration. 
The agency concurred with the reports conclusions.  The Health Care Financing 
Administration already has increased medical review efforts at the Medicare contractors as part 
of its on-going program integrity efforts, and they will continue to focus on appropriate 
therapy for Medicare beneficiaries.  The agency also has published new medical review 
guidelines for skilled nursing facilities and plans to conduct related training to strengthen 
provider education. 
The full text of the Health Care Financing Administrations comments appears in appendix C. 
16 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  APPENDIX A 
Glossary of Terms

Primary Therapy Providers 
<	 Physical therapist--professionally educated at the college or university level and is required to 
be licensed or registered in all States.10  A primary role is to provide therapy to patients who 
have impairments, functional limitations, disabilities, or changes in physical function and health 
status resulting from injury, disease, or other causes.11  The physical therapist is responsible for 
any evaluation and assessment of a patients therapy status. 
<	 Physical therapist assistant--a graduate of an accredited physical therapist assistant associate 
degree program accredited by an agency recognized by the Commission on Accreditation in 
Physical Therapy Education.  Assistants are licensed, certified, registered, or approved in 
almost all States and Puerto Rico, except in Hawaii, Minnesota, Michigan, Washington, 
Wisconsin, the District of Columbia, and the U.S. Virgin Islands.  The assistant works with the 
physical therapist in the provision of physical therapy.  The assistant may perform procedures 
and related tasks that have been selected and delegated by the supervising physical therapist. 
Where permitted by law, the physical therapist assistant may complete routine operational 
functions, including supervision of physical therapy aides and documentation of patient 
progress.  The assistant may modify a specific therapeutic activity in accordance with changes 
in patient status and within the scope of the established treatment plan.12 
<	 Physical therapy aide/technician--a nonlicensed worker, trained under the direction of a 
physical therapist.  The aide performs designated routine therapy tasks that are delegated by 
the physical therapists or, in accordance with the State law, by a physical therapist assistant. 
The aide performs only with the continuous on-site supervision of the physical therapist or, 
where allowable by State law or regulation, the physical therapist assistant.13 
10American Physical Therapy Association, Definition of Physical Therapist for State Practice 
Acts, Board of Directors Policies, Positions and Guidelines, March 1999. 
11American Physical Therapy Association, Guide to Physical Therapist Practice (1998), 
page 1-1. 
12Ibid., page 1-10. 
13Ibid., page 1-10. 
17 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  APPENDIX A 
<	 Occupational therapist--professionally educated at the college or university level obtaining, at 
a minimum, a bachelors degree from a program accredited by the Accreditation Council for 
Occupational Therapy Education.  The occupational therapist completes a minimum of 6 
months of clinical training under the supervision of an experienced occupational therapist.  The 
therapist must successfully complete a national registration examination administered by the 
National Board of Occupational Therapy.  States regulate occupational therapists by licensure, 
registration, certification, or trademark.  The occupational therapist is responsible for (1) 
determining and interpreting the evaluation, (2) initiating treatment goals and plans, 
(3) initiating substantive changes to the goals and plans, and (4) determining when to discharge 
patients from occupational therapy programs.14 
<	 Occupational therapy assistant--a graduate of an associate degree program accredited by the 
Accreditation Council for Occupational Therapy Education.  The assistant completes 
12 weeks of clinical training under the supervision of an occupational therapist or an 
experienced occupational therapy assistant.  The assistant must successfully complete a 
national certification examination for occupational therapy assistants administered by the 
National Board Certification of Occupational Therapy.  Many States regulate occupational 
therapy assistants by licensure or registration.  The assistant (1) collects data for evaluation, (2) 
carries out treatment plans, and (3) modifies the treatment goals and plan under the supervision 
of an occupational therapist.  Assistants also may gather data and complete portions of the re-
evaluation for the occupational therapists interpretation to change treatment goals and plans. 
<	 Occupational aide/technician--may assist an occupational therapist, under the direct 
supervision of the therapist at the time the therapy is given.  Direct supervision is the physical 
presence of the qualified occupational therapist. 
Other Terminology15 
<	 Activities of Daily Living--self-care activities that must be performed to achieve functional 
independence may be classified as mobility activities, bathing, grooming, personal hygiene, 
eating, dressing, bowel control, and bladder control.  An expectation exists that the therapy 
will result in a significant practical improvement in the patients level of functioning in a 
reasonable period of time. 
14Accreditation Council for Occupational Therapy Education, OTA Essentials, 
updated July 1995. 
15Most definitions were included in the American Physical Therapy Associations Guide to 
Physical Therapist Practice (1998). 
18 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  APPENDIX A 
<	 Episode of care--all patient management activities provided, directed, or supervised by the 
therapist, from initial contact through discharge. 
<	 Evaluation--used to report the initial assessment before the treatment plan is established by the 
therapist or physician.  The therapist makes clinical judgments based on data gathered during 
the initial examination. 
<	 Re-evaluation--process by which the patients status is updated following the initial 
examination because of new clinical indications, failure to respond to interventions, or failure 
to establish progress from baseline data.  The re-evaluation usually is completed by a therapist 
or physician, not by an assistant or aide. 
<	 Therapeutic intervention--the purposeful and skilled interaction of the therapist with the 
patient, and, when appropriate, with other staff involved in the patients care, using various 
methods and techniques to produce changes in the patients condition. 
<	 Treatment goals--the therapists or physicians description of what the patient is expected to 
achieve as a result of therapy.16 
<	 Treatment plan--specifies the anticipated short-term and long-term goals and the desired 
outcomes, predicted level of optimal improvement, specific interventions to be used, duration 
and frequency of the therapy required to reach the goals and outcomes, and criteria for 
discharge. 
16Health Care Financing Administration, Medicare Intermediary Guidelines, Section A3 3904C5 
under Medical Review of Part B Intermediary Outpatient Bills. 
19 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  APPENDIX B 
Confidence Intervals for Selected Statistics

The following tables show the point estimates and 95 percent confidence intervals for selected 
statistics, in the order that they appear in the report.  These calculations account for all levels 
of clustering and stratification as described in the methodology. 
Point  95 Percent 
Statistic 
Estimate  Confidence Interval 
Of March 1998 physical and occupational therapy for SNF 
83.5%  79.7% - 87.2% 
patients, percent that was billed properly 
Of March 1998 physical and occupational therapy for SNF  12.7%  8.6% - 16.9% 
patients, percent that was billed improperly 
Of March 1998 physical and occupational therapy for SNF  3.8%  2.6% - 5.0% 
patients, percent that was undocumented 
Of SNF patients who received physical therapy during 
66.8%  63.3% - 70.4% 
March 1998, percent who achieved their treatment goals 
Of SNF patients who received physical therapy during 
27.1%  21.2% - 33.1% 
March 1998, percent who did not achieve their treatment goals 
Of SNF patients who received physical therapy during 
March 1998, percent for whom the reviewers could not  6.0%  1.5% - 10.6% 
determine whether the patient achieved treatment goals 
Of SNF patients who received occupational therapy during 
73.3%  63.4% - 83.3% 
March 1998, percent who achieved their treatment goals 
Of SNF patients who received occupational therapy during 
16.5%  10.0% - 23.1% 
March 1998, percent who did not achieve their treatment goals 
Of SNF patients who received occupational therapy during 
March 1998, percent for whom the reviewers could not  10.1%  0.2% - 20.0% 
determine whether the patients achieved treatment goals 
Total number of physical and occupational therapy sessions 
7.0 million  3.5 million - 10.6 million 
provided to SNF patients during March 1998 
20 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  APPENDIX B 
Point  95 Percent 
Statistic 
Estimate  Confidence Interval 
Total number of physical and occupational therapy sessions 
provided to SNF patients for a 12-month period ending  82.9 million  ** 
June 30, 1998 
Total number of improperly billed physical and occupational  0.9 million 
0.3 million - 1.5 million 
therapy sessions provided to SNF patients during March 1998 
Total number of improperly billed physical and occupational 
therapy sessions provided to SNF patients for a 12-month  10.6 million  ** 
period ending June 30, 1998 
Of improperly billed physical and occupational therapy sessions 
51.6%  41.3% - 61.8% 
provided during March 1998, percent that were physical therapy 
Of improperly billed physical and occupational therapy sessions 
provided during March 1998, percent that were occupational  48.4%  38.2% - 58.7% 
therapy 
**NOTE:	 These estimated projections from March 1998 to a 12-month period are based on the 
assumption that March 1998 is a typical month.  We tested this assumption by examining 
SNF Medicare charges for physical and occupational therapy.  For example, the SNFs 
submitted $685 million in physical and occupational therapy charges during March 1998 
and $7.85 billion during the 12 months ending March 31, 1998.  This ratio ($685 
million/$7.85 billion) is approximately equivalent to the ratio (31/365) that we used in 
projecting to a 12-month period.  Because our sample was limited to March 1998, we are 
unable to calculate 95 percent confidence intervals for these 12-month estimates. 
21 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  APPENDIX C 
Agency Comments

22 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  APPENDIX C 
23 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121  APPENDIX C 
24 
Medical Necessity of SNF Physical/Occupational Therapy  OEI-09-97-00121