Department  of Health  and Human  Services 
OFFICE  OF

INSPECTOR  GENERAL 
PHYSICAL  THERAPY

IN  PHYSICIANS  OFFICES

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43&~dJ{]  OEI-02-!WO0590  OFFICE  OF  INSPEHOR  GENERAL 
The  mission of the  Office of Inspector  General  (OIG),  as mandated  by Public  Law 95-452, as 
amended,  is to protect  the  integrity  of the Department  of Health  and Human  Semites  (HHS) 
programs  as well as the  health  and welfare  of beneficiaries  setved  by those  programs.  This 
statutory  mission is carried  out  through  a nationwide  network  of audits,  investigations,  and 
inspections  conducted  by three  OIG  operating  components:  the  Office of Audit  Services,  the 
Office of Investigations,  and the Office of Evaluation  and Inspections.  The  OIG  also informs 
the  Secretary  of HHS  of program  and management  prob]ems  and recommends  courses  to 
correct  them. 
OFFICE  OF  AUDIT  SERVICES 
The  OIGS Office of Audit  Sewices  (OAS)  provides  all auditing  semices  for HHS,  either  by 
conducting  audits with its own audit  resources  or by overseeing  audit work done  by others. 
Audits  examine  the performance  of HHS  programs  and/or  its grantees  and contractors  in 
carrying out  their  respective  responsibilities  and are intended  to provide  independent 
assessments  of HHS  programs  and operations  in order  to reduce  waste,  abuse,  and 
mismanagement  and to promote  economy  and efficiency throughout  the  Department. 
OFFICE  OF  INVESTIGATIONS 
The  OIGS  Office of Investigations  (01)  conducts  criminal,  civil, and administrative

investigations  of allegations  of wrongdoing  in HHS  programs  or to HHS  beneficiaries  and of

unjust  enrichment  by providers.  The  investigative  efforts  of 01  lead to criminal  convictions,

administrative  sanctions,  or civil money  penalties.  The  01  also oversees  State  Medicaid  fraud

control  units which investigate  and prosecute  fraud  and patient  abuse  in the  Medicaid  program.

OFFICE  OF  EVALUATION  AND  INSPECTIONS 
The  OIGS Office of Evaluation  and  Inspections  (OEI)  conducts  short-term  management  and 
program  evaluations  (called  inspections)  that  focus on issues of concern  to the  Department, 
the  Congress,  and the  public.  The  findings and recommendations  contained  in these  inspection 
reports  generate  rapid.  accurate,  and  up-to-date  information  on the efficiency, vulnerability, 
and effectiveness  of departmental  programs. 
This  report  was prepared  in the New York  Regional  Office  under  the direction  of Regional 
Inspector  General  Thomas  F. Tully and Deputy  Regional  Inspector  General  Alan  S. Meyer. 
Project  Staff included: 
Ncw York  Headquarters 
Rcncc  C. Dunn,  P.T. (Project  Leader)  Wayne  A. Powell 
Lucille  M. Cop,  R.N.  Barbara  R. Tcdcsco 
William J. Counihan  Linda  M. MOSC(IC 
Nancy T. Hurrison 
To obtain  a copy of this report  contact  the  Ncw York  Regional  Office at (212)  264-1})S  Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
PHYSICAL  THERAPY 
IN  PHYSICIANS  OFFICES  EXECUTIVE  SUMMARY

PURPOSE 
To  determine  the  nature  and  extent  of physical  therapy  services  provided  to  Medicare 
beneficiaries  in physicians  offices  and  to  describe  carrier  monitoring  of these  sewices. 
BACKGROUND 
Physical  therapy  treatment  consists  of a planned  program  to  relieve  symptoms, 
improve  function  and  prevent  further  disability  for  individuals  disabled  by chronic  or 
acute  disease  or  injury.  Treatment  may  include  various  forms  of heat  or  cold, 
electrical  stimulation,  therapeutic  exercises,  ambulation  training  and  training  in 
functional  activities. 
Medicare  has  detailed  coverage  guidelines  for  physical  therapy  which  apply  to  all 
outpatient  settings,  except  physicians  offices.  While  no  specific  coverage  requirements 
exist  regarding  physical  therapy  in physicians  offices,  the  services  like  all  others,  must 
be  reasonable  and  necessary  and  not  for  palliation.  As  in any  other  area  in Medicare, 
in the  absence  of HCFA  national  policy,  local  carriers  establish  their  own  policies. 
For  outpatient  settings  other  than  physicians  offices,  Medicare  requires  the  services 
must  be  restorative  or  for  the  purpose  of designing  and  teaching  a maintenance 
program  for  the  patient  to  carry  out  at  home.  The  services  must  also  relate  to  an 
written  treatment  plan  and  be  of  a level  of complexity  that  requires  the  judgement, 
knowledge  and  skills  of a qualified  physical  therapist  to, perform  and/or  supervise  the 
services.  The  amount,  frequency  and  duration  of the  physical  therapy  services  must  be 
reasonable.  Lastly,  the  sewices  must  be  considered  reasonable  and  necessary  and 
must  not  be  palliative  in nature. 
Medicare  reimbursement  for  physical  medicine  services  provided  by physicians  and 
independently  practicing  physical  therapists  increased  by 40 percent  from  1990  to 
1991.  Allowed  charges  for  these  services  in the  HCFA  common  procedure  code  index 
(HCPCS)  went  from  a combined  total  of $144  million  in  1990  to  $202  million  in  1991. 
We  selected  a stratified  random  sample  of 300  beneficiary  cases  who  received  physical 
therapy  services  ( 100 from  independently  practicing  physical  therapists  offices  and  200 
from  physicians  offices)  in  1991  to  compare  sewices  in physicians  offices  with  those  in 
another  outpatient  setting.  We  obtained  the  medical  records  of  166 of  the  physicians 
claims  and  89 of  the  independently  practicing  physical  therapists.  We  conducted  a 
medical  review  of  the  records,  determined  the  percentage  of cases  which  would  not 
have  met  Medicare  coverage  guidelines  had  they  been  performed  outside  a physicians 
office  and  those  which  were  palliative  and  calculated  the  possible  cost  savings  to 
Medicare. 
1  The  study  team  also  interviewed,  by  telephone,  36 physicians,  20 physical  therapists,  42

carriers  and  representatives  of  professional  associations  to  gather  their  perspectives

six 
and  concerns  pertaining  to  physical  therapy  setices  provided  in physicians  offices.

We  also  obtained  and  reviewed  carrier  documents  regarding  provider  education,

policies  and  screens  for  physical  therapy  services.

FINDINGS

Alnwst  Four Out of Five Cases Rei.mlxud  as Physical l%erapy in Physicians Ofices  Do 
Not Represent Tw  Physical l%eraW Services: $47 Million Was Inapproptitely  Paid in 
1991 
The  services  are  not  restorative  or  complex  nor  do  they  have  treatment  plans  with 
goals  or  objective  evaluations.  Most  of the  questionable  services  are  palliative,  giving 
only  temporary  relief  and,  therefore,  are  not  covered  under  section  1862  (a)(l)(A)  of 
the  Social  Security  Act.  The  great  majority  of independently  practicing  physical 
therapy  services  meet  all  Medicare  coverage  guidelines;  they  routinely  have  plans  of 
care,  goals,  objective  evaluations  and  are  restorative  in nature. 
Cam-en Have Paid Little Attention  to Physical Therapy in Phy.ncians0j5ces 
Two-thirds  of the  carriers  have  no  policies  concerning  physical  therapy  in physicians 
offices. 
All Profwonal  Associatwm,  Some  Camers,Physician and Phyncall%erapy Respondents 
Encourage More StringentRequirement  for Physical Therapy in Physicians Ofices 
Both  professional  physician  specialty  organizations  and  physical  therapy  associations

agree  that  physical  therapy  in physicians  offices  should  be  restorative  and  have  goals

set  forth  in a plan  of care.  Over  a third  of the  carrier  respondents  feel  there  are

problems  with  the  frequency  of  physical  therapy  treatments  in physicians  offices,  such

as  overutilization  and  excessive  sexvices.

RECOMMENDATIONS

We  recommend  that  FICFA  take  appropriate  steps  to  prevent  inappropriate  payments

for  physical  therapy  in physicians  offices.  The  HCFA  can  use  the  following

approaches  to  achieve  this  goal:

  Conduct  focused  medical  review. 
  Provide  physician  education  activities, 
	 Apply  its existing  physical  therapy  coverage  guidelines  for  other  settings  to 
physicians  offices. 
ii  We  estimate  that  implementation  of this  recommendation  would  save  $235  million 
over  five years. 
COMMENTS

Comments  on  the  draft  report  received  from  HCFA  and  the  Assistant  Secretary  for 
Planning  and  Evaluation  (ASPE)  concur  with  the  general  thrust  and  significant  details 
of our  recommendations.  Suggestions  for  changes  in wording,  clarifications  of the  text 
and  technical  changes  have,  for  the  most  part  been  incorporated  into  the  final  report. 
The  actual  comments  received  are  in Appendix  B. 
The  HCFA  plans  to  share  copies  of the  IG  report  with  carriers  and  ask  them  to  focus 
on  issues  identified  in the  report.  Also,  it has  a work  group  considering  alternative 
ways  of providing  appropriate  physician  education.  The  HCFA  would  like  to  analyze 
the  results  of these  actions  before  changing  coverage  guideline  policies.  We  support 
this  approach  and  will,  of course,  be  interested  in the  results  of the  analysis. 
Finally,  while  we  appreciate  ASPES  desire  to  see  a more  explicit  recommendation,  it 
is our  desire  to  allow  the  operating  agency  flexibility  in addressing  the  concerns 
identified  and  developing  corrective  actions. 
... 
111  TABLE  OF  CONTENTS

PAGE

EXECUTTVE  SUMMARY

INTRODUCJ30N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7


$47  Million  inappropriately  Paid  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7


Carriers  Pay  Little  Attention  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

.  More  Stringent  Requirements  Encouraged  . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

APPENDIX

lk  Sampling  Methodology  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l 
B:  Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B-l  INTRODUCTION

PURPOSE 
To  determine  the  nature  and  extent  of physical  therapy  services  provided  to  Medicare 
beneficiaries  in physicians  offices  and  to  describe  carrier  monitoring  of  these  semices. 
BACKGROUND 
Physical  therapy  treatment  consists  of a planned  program  to  relieve  symptoms, 
improve  function  and  prevent  further  disability  for  individuals  disabled  by chronic  or 
acute  disease  or  injury.  Any  condition  which  requires  physical  rehabilitation,  such  as 
low  back  pain,  bursitis,  stroke,  Parkinsons  disease,  or  arthritis,  can  benefit  from 
physical  therapy. 
A licensed  physical  therapist  evaluates  the  patient,  develops  a treatment  program  and 
sets  goals  to  meet  each  patients  needs.  This  plan  may  include  various  types  of 
therapeutic  exercise,  either  manual  or  with  the  assistance  of a machine,  to  decrease 
pain  and  improve  strength,  endurance,  coordination,  range  of  motion  and  mobility. 
Treatment  may  also  include  such  modalities  as  hot  or  cold  packs,  whirlpool,  diathermy, 
ultrasound,  traction  and  electrical  stimulation.  These  modalities  are  most  often  used 
in combination  with  exercise.  Additional  physical  therapy  treatments  include 
ambulation  training,  assessment  for  orthotic  or  prosthetic  devices,  and  functional 
training  activities  needed  for  daily  living. 
An  aging  population  and  medical  advances  in the  treatment  of chronic  disease  have 
contributed  to  the  need  for  physical  therapy  in recent  years.  The  number  of  licensed 
physical  therapists  and  the  variety  of settings  in which  they  work  have  also  increased. 
These  settings  may  include  acute  care  hospitals,  outpatient  clinics,  home  health 
agencies,  independently  practicing  physical  therapists  offices  or  physicians  office. 
All  States  have  licensing  laws  and  specific  regulations  pertaining  to  physical  therapy 
practice.  Physical  therapists  must  pass  certain  educational  and  examination 
requirements  to  qualify  for  a license.  Most  States  require  that  only  a person  licensed 
or  authorized  under  their  legislation  shall  practice  physical  therapy  or  use  the  title 
physical  therapist. 
Medicare Coverage 
Medicare  covers  physical  therapy  in both  inpatient  and  outpatient  settings.  Inpatient 
settings  include  institutions  such  as  hospitals  and  nursing  homes.  Outpatient  settings 
are  independently  practicing  physical  therapists  offices,  outpatient  clinics,  home  health 
agencies,  rehabilitation  agencies,  and  physicians  offices. 
1
 To  bereimbursed  by Medicare,  allprovider  settings,  with  theexception  of physicians' 
offices,  must  be  certified.  AS part  of the  certification  process,  the  State  surveys  each 
facility  to  assure  that  Medicare  standards  are  met.  During  these  surveys,  the  State 
representative  reviews  personnel  records  of staff  giving  care  to  be  sure  they  are 
qualified. 
Covera~e  in Physicians  offices 
Medicare  has  detailed  coverage  guidelines  for  physical  therapy  which  apply  to  all 
outpatient  settings,  except  physicians  offices.  Medicare  covers  physical  therapy  in 
physicians  offices  as  it does  any  other  medical  treatment,  as  incident  to  a physicians

service.  This  means,  according  to  the  Medicare  Carriers  Manual  (MCM)  section  2050,

the  semices  must  be:  an  integral  part  of  a physicians  service;  commonly  furnished  in

a physicians  office;  rendered  without  charge  or  included  in  the  physicians  bill;

performed  under  the  direct  (rather  than  general)  personal  supervision  of the

physician;  and  performed  by  an  employee  of the  physician.  As  any  other  physicians

services,  according  to  the  Social  Security  Act,  in the  section  on  exclusions  from

coverage,  Section  1862  (a)(l)(A)  states  that,...  no  payment  may  be  made  under  part

A  or  part  B for  any  expenses  incurred  for  items  or  services  which,...  are  not

reasonable  and  necessary  for  the  diagnosis  and  treatment  of  illness  or  injury  or  to

improve  the  functioning  of  a malformed  body  member.  This  section  goes  on  to  say

that  payment  is prohibited  for  medical  semices  that  are  for  prevention,  palliation,

research,  or  experimentation.  Palliation  is generally  defined  as  relieving  or  easing  pain

temporarily.  No  specific  MCM  coverage  requirements  exist  regarding  physical  therapy

in a physicians  office.  As  in any  other  area  in  Medicare,  in the  absence  of  HCFA

national  policy,  local  carriers  establish  their  own  policies.

Coverage  in outpatient  settinus  other  than  physicians  offices

The  MCM,  section  2210,  contains  coverage  requirements  for  independently  practicing

physical  therapists.  The  Medicare  Intermediary  Manual  (HIM)  contains  similar

coverage  requirements  for  other  Part  B outpatient  providers  of physical  therapy,

including  approved  clinics,  rehabilitation  agencies,  participating  hospitals,  skilled

nursing  facilities,  and  home  health  agencies.  The  key  elements  in both  manual

sections  include:

. The  semices  must  be  restorative  with  an  expectation  that  the  patients  condition 
will  improve  significantly  in a reasonable  and  generally  predictable  period  of 
time  based  on  the  assessment  by the  physician  and  qualified  physical  therapist: 
or  the  services  of a qualified  therapist  may  be  necessary  to  design  and  teach  a 
maintenance  program  for  the  patient  to  carry  out  at  home. 
. The  physical  therapy  services  must  relate  to  an  written  treatment  plan 
established  by the  physician  after  consultation  with  the  qualified  physical 
therapist.  The  plan  must  relate  the  type,  amount.  frequency,  and  duration  of 
the  physical  therapy  services  ... and  indicate  the  ciitignosis  and  anticipated  goals.  The  MCM  states  that  the  plan  may  be  established  by  either  the 
physician  or  the  qualified  physical  therapist. 
The  physical  therapy  service  must  be  of a level  of complexity  and  sophistication, 
or  the  condition  of  the  patient  must  be  such  that  requires  the  judgement, 
knowledge  and  skills  of a qualified  physical  therapist  to  perform  and/or 
supervise  the  services. 
The  amount,  frequency  and  duration  of the  physical  therapy  semices  must  be 
reasonable. 
To  fulfill  these  requirements  and  demonstrate  the  patients  restoration  potential,  the 
patients  record  must  show  objective  measures  of patient  evaluations  such  as  strength, 
balance,  endurance,  range  of motion  and  activities  of daily  living.  There  must  also  be 
periodic  review  by  the  physician. 
The  Medicare  manual  physical  therapy  guidelines  for  outpatient  settings,  other  than 
physicians  offices,  discuss  some  of the  more  common  physical  therapy  modalities  and 
procedures  utilized  in  the  treatment  of patients.  They  give  examples  of what  would 
constitute  Medicare  covered  physical  therapy.  For  instance,  simple  heat  treatments 
such  as  hot  packs,  cold  packs,  infra-red,  and  whirlpool,  which  do  not  ordinarily  require 
the  skills  of a qualified  physical  therapist  and  when  used  alone  are  usually  palliative 
(giving  temporary  relief),  are  not  covered.  However,  such  treatments  may  be  given  as 
a part  of a more  complex  program  and  would  be  considered  part  of that  physical 
therapy  service.  Also,  in some  cases  where  the  patient  has  circulatory  deficiency,  areas 
of desensitization,  open  wounds  or  other  complications,  the  skills  and  judgement  of a 
qualified  therapist  may  be  necessary  and,  therefore,  covered.  Other  more  complex 
modalities  such  as  ultrasound,  shortwave,  and  microwave  diathermy  treatments  must 
always  be  performed  by or  under  the  supervision  of a qualified  physical  therapist,  and 
would  then  constitute  physical  therapy. 
To  be  covered  by Medicare,  range  of motion  tests  must  be  performed  by  qualified 
therapists.  Range  of  motion  exercises  require  the  skills  of  a qualified  therapist  only 
when  they  are  a part  of active  treatment  for  a specific  disease;  the  degree  of  motion 
lost  and  the  degree  restored  must  be  documented.  Generally,  range  of  motion 
exercises  which  are  not  related  to  a specific  of function,  but  intended  for  the 
loss 
maintenance  of  function,  do  not  require  the  skills  of a qualified  therapist.  However, 
the  therapist  could  design  a program  of  maintenance  exercises  for  the  patient  and 
Pamily to  carry  out,  and  Medicare  would  cover  it. 
Therapeutic  exercises  which  must  be  performed  by or  under  the  supervision  of the 
qualified  therapist,  due  to  the  type  of exercise  or  the  condition  of  the  patient,  are  also 
covered.  Gait  evaluation  and  training  with  a patient  who  has  impaired  function  would 
require  the  skills  of  a qualified  physical  therapist,  but  would  be  considered  physical 
therapy  only  if the  patient  can  be  reasonably  expected  to  improve  his  or  her  ability  to 
walk.  Repetitive  exercises  to  improve  gait  or  m:lint:lin  strength  and  endurance,  or  to 
3
 assist  a feeble  patient  in walking,  do  not  require  the  skills  of  a qualified  physical 
therapist.  An  example  would  be  a patient  who  has  generalized  weakness  and  needs 
assistance  and  encouragement  to  walk  and  to  increase  his/her  endurance.  This  semice 
could  be  carried  out  by a non-physical  therapist  such  as  a nurse  or  nurses  aide,  but 
would  not  be  considered  covered  physical  therapy. 
Medicare Reimbursement 
Medicare  reimbursement  varies  for  different  physical  therapy  providers.  Medicare 
pays  both  inpatient  and  outpatient  institutional  providers  on  a reasonable  cost  basis. 
Physicians  and  independently  practicing  physical  therapists  in their  offices  are  paid  on 
the  basis  of a Medicare  fee  schedule.  The  independently  practicing  physical  therapists 
are,  however,  subject  to  a yearly  $750  reimbursement  limitation  per  patient. 
Medicare  reimbursement  for  physical  medicine  services  provided  by physicians  and 
independently  practicing  physical  therapists  increased  by  40 percent  from  1990  to 
1991.  Allowed  charges  for  these  services  in the  HCFA  common  procedure  code  index 
(HCPCS)  went  from  a combined  total  of $144  million  in  1990  to  $202  million  in  1991. 
Medicare  reimbursement  for  the  three  most  commonly  reimbursed  physical  therapy 
HCPCS  codes  for  physicians  and  independently  practicing  physical  therapists  shows  a 
273  percent  increase  over  the  five-year  period  from  $24.8  million  in  1986  to  $92.1 
million  in  1991.  In  one  year,  from  1990  to  1991,  allowed  charges  for just  these  three 
codes  increased  26 percent  from  $73.3  million  to  $92.1  million.  The  three  codes  are 
97010,  physical  treatment  of one  area  of the  body  with  hot  or  cold  packs;  97110,  initial 
physical  therapy  treatment  of therapeutic  exercise  in one  area  of the  body  for  30 
minutes  and;  97128  ultrasound  treatments. 
Prior Study 
A  1982  HCFA  Region  II validation  study  raised  certain  issues.  The  fact  that  these 
issues  remain  is one  factor  that  prompted  the  present  inspection.  The  prior  study 
noted  that  there  were  no  HCFA  directives  addressing  physical  therapy  services 
furnished  by physicians  in their  offices  and  thus  no  requirement  that  the  care  be 
restorative.  However,  there  were  HCFA  instructions  governing  the  same  therapy  for 
other  outpatient  providers,  including  independently  practicing  physical  therapists.  The 
study  also  reported  the  absence  of  HCFA  guidelines  addressing  the  reimbursement  of 
non-restorative,  palliative  treatment  billed  as  physical  therapy  in either  setting.  The 
medical  record  review  identified  57  percent  of the  total  study  semices  in  physicianss 
offices  as  palliative  care.  The  study  recommended  that  HCFA  establish  uniform 
guidelines  for  the  coverage  and  reimbursement  of restorative  physical  therapy  services. 
It also  recommended  that  non-restorative  services  be  reimbursed  as  a part  of  medical 
semices,  but  not  separately  as  physical  therapy.  No  action  was  taken.  METHODOLOGY 
First,  we  selected  a stratified  random  sample  of 300  beneficiary  cases.  Each  case 
represents  all  physical  therapy  semices  received  by a sample  beneficiary  from  a single 
provider  in  1991.  The  sample  consists  of the  HCFA  common  procedure  coding 
system  (HCPCS)  codes  97010  to  97799.  One  stratum  included  beneficiaries  who 
received  physical  therapy  services  in independently  practicing  physical  therapists 
offices  and  the  other  stratum  included  beneficiaries  who  received  services  in 
physicians  offices.  The  independently  practicing  physical  therapists  offices  were 
selected  as  a representative  of other  outpatient  settings  with  which  to  compare 
services  in physicians  offices.  One  hundred  of the  beneficiaries  treated  by 
independently  practicing  physical  therapists  were  chosen  from  the  first  stratum  and 
200  by physicians  from  the  second  stratum  (see  appendix  A.)  This  sample  of 300 
beneficiary  cases  was  handled  by  42 Medicare  carriers,  whom  we  contacted  to  obtain 
the  names  of the  providers  in each  of these  claims. 
Next,  we  asked  the  providers  to  send  copies  of all  of the  sample  patients  physical 
us 
therapy  medical  records  for  the  period  of  1990  to  the  present.  We  received  255  (85 
percent)  of the  300  records  requested;  166 records  from  physicians  and  89 from 
independently  practicing  physical  therapists.  The  study  team  created  a review  form 
for  the  medical  records  based  on  Medicare  coverage  guidelines  for  physical  therapy 
provided  in all outpatient  settings  other  than  physicians  offices  (where  there  are  no 
guidelines).  A HCFA  physical  therapist  reviewed  the  form  and  found  it an  acceptable 
way  to  determine  whether  the  treatment  would  constitute  covered  physical  therapy.  A 
physical  therapist  and  registered  nurse  from  the  study  team  reviewed  the  medical 
records  to  ascertain  whether  there  was  a written  treatment  plan  with  diagnosis  and 
anticipated  goals;  whether  the  care  was  restorative  with  the  expectation  that  the 
patient  would  improve  significantly  in a predictable  period  of  time;  whether  a 
maintenance  program  was  designed  and  taught;  whether  objective  testing  was  done; 
whether  the  services  were  palliative;  and  whether  the  amount,  frequency  and  duration 
of the  services  was  reasonable.  We  next  compared  the  medical  records  of physicians 
with  those  of independently  practicing  physical  therapists  to  identify  differences  or 
similarities  regarding  semices  provided,  the  type  of  person  providing  them,  and  levels 
of documentation.  Based  on  the  results  of this  medical  review,  we  determined  the 
percentage  of semices  which  would  have  met  Medicare  coverage  guidelines  had  they 
been  performed  outside  a physicians  office  and  calculated  the  possible  cost  savings  to 
Medicare  if these  coverage  requirements  for  physical  therapy  were  applicable  to  that 
in physicians  offices. 
We  also  selected  a stratified  random  subsample  of 60 of  the  300  providers,  40 
physicians  and  20 independently  practicing  physical  therapists  to  interview  by 
telephone.  We  were  able  to  contact  36 of these  physicians  and  all  20 of  the 
independently  practicing  physical  therapists.  We  asked  both  groups  how  ph~sical 
therapy  in physicians  offices  compares  to  that  in independently  practicing  physical 
therapists  offices,  and  about  the  qualifications  of  the  person  in their  office  providing 
the  service  and  compared  their  responses. 
5
 We  reviewed  carrier  documents  related  to  physical  therapy,  which  40 of  the  42  carriers 
submitted,  regarding  their  provider  education,  po]icies  and  screens.  We  identified 
billing  restrictions  and  screens  or  other  controls,  both  pre-and  post-payment.  Also,  we 
interviewed,  by telephone,  staff  experienced  in physical  therapy  coverage  and 
reimbursement  from  the  42 carriers  in our  sample  to  gather  their  perspectives  and 
concerns  pertaining  to  physical  therapy  services  provided  in physicians  offices. 
Lastly,  we  interviewed  representatives  of  physical  therapy  associations  and  four 
two 
other  medical  specialty  organizations  to  gain  their  views  on  physical  therapy  in 
physicians  offices. 
6
 FINDINGS

ALMOST  FOUR  OUT  OF  FIVE  CASES  (78  PERCENT)  REIMBURSED  AS

PHYSICAL  THERAPY  IN  PHYSICIANS  OFFICES  DO  NOT  REPRESENT  TRUE

PHYSICAL  THERAPY  SERVICES:  $47  MILLION  WAS  INAPPROPRIATELY

PAID  IN  1991

Most of the questionable services are palliative, therejore not covered under section  1862 
(a)(l)(A)  of the Social Security Act.  They are not restorative or complq  nor h  they 
have treatment plain  with goai%or objective evaluations. 
The  physical  therapy  sexvices  in  physicians  offices  are  generally  some  form  of 
palliative  treatment  giving  only  temporary  relief,  such  as hot  packs,  whirlpool, 
ultrasound,  diathermy  and/or  massage,  often  given  by unlicensed  people  without  any 
exercises  or  functional  activities.  Almost  three-quarters  of the  physician  medical 
records  do  not  show  the  physical  therapy  services  to  be  of a level  of  complexity  to 
require  the  judgement,  knowledge  and  skills  of a qualified  physical  therapist.  Only  13 
percent  of the  cases  involve  exercises.  When  physicians  were  asked  about  the  kinds  of 
semices  they  provide,  over  one-third  of the  physician  respondents  report  that  they  only 
provide  some  type  of heat.  This  group  includes  13 of the  15 podiatrists  interviewed. 
only  38  percent  of physicians  interviewed  report  that  they  ever  provide  exercises. 
The  1991  HCFA  data  show  that  the  most  frequently  reimbursed  physical  therapy 
procedures  in physicians  offices  are  hot  or  cold  packs  and  ultrasound.  Table  A below 
shows  the  fiscal  year  1991  frequency  and  allowed  amounts  for  the  top  eight  physical 
medicine  codes  in physicians  offices  only.  These  are  ranked  in terms  of dollars 
allowed. 
TABLE  A 
:  HCPCS  ~DESCRIPTION  I FREQUENCY  ~ ALLOWED  \ 
~ CODES  ~  ! AMOUNT  ~ 
~ 97128  ~Ultrasound  ! 1,145,900  ~$~o, 182,800  ~ 
j 97010  ~ Hot  or  cold  packs   1,111,100   $19,214,900   
[ 97110  ! Therapeutic  exercises  :  811,000  , $16,174,100  ~ 
! 97014  : Electrical  stimulation  (unattended)  464,300  $s,401,400 
~97022  ~Whirlpool  558,700  $8,279,400
~ 
i 97530  I Kinetic  activities  ~3~,300  $6,805,400 
.  .. 
! 97124  ~Massage  375.500  $6,384,300  ~ 
, 
: 9711s  Electrical  stimulation  (manual)  ~~&joo  $5,719,300 
--==- ---=  .. -...=-=...  
7  Most  physical  therapy  care  in physicians  offices  is not  restorative  nor  does  it establish 
a maintenance  program.  Almost  four  out  of five  cases  (130  out  of  166)  would  not 
meet  the  primary  Medicare  guideline  for  physical  therapy  in  other  settings  that 
sefices  be  restorative  or  for  the  establishment  of a maintenance  program.  Of  the  36 
cases  in  physicians  offices  meeting  the  guidelines  26  have  restorative  care  and  in ten  a 
maintenance  program  was  established. 
The  medical  record  review  reveals  that  the  physical  therapy  patients  get  in  physicians 
offices  is usually  provided  too  sporadically  and  infrequently  to  achieve  any  goals  in a 
predictable  time  and  is therefore  not  restorative.  The  following  are  examples  of  non-
restorative  care  found  in the  medical  records: 
C)ne  patient  treated  by a specialist  in internal  medicine  who  employs  a physical

therapist  has  osteoarthritis  and  pain  in the  knee,  neck  and  back.  She  visits  her

physician  once  every  month  or  two.  She  receives  physical  therapy  once  or  twice

a week,  off  and  on,  with  a treatment  of hot  packs  and  massage  and  sometimes

ultrasound.  The  physical  therapists  notes  generally  say  patient  tolerated

treatment  well  and  that  sometimes  she  feels  better  after  treatment,  and

sometimes  not.  This  care  appears  to  be  palliative  with  temporary  relief  at  best;

no  real  functional  outcome  can  reasonably  be  expected.

In  another  example,  a specialist  in internal  medicine  occasionally  administers

ultrasound  to  his  patient  with  chronic  arthritis  of  the  right  shoulder  during  a

routine  visit.  The  record  shows  no  objective  evaluations  or  plan  of care  or  any

expected  functional  outcome  from  the  ultrasound  treatment.

over  two-thirds  (114)  of the  physicians  medical  records  had  no  written  treatment  plan

for  physical  therapy  and  over  three-quarters  (128)  of  the  records  have  no  physical

therapy  goals  spelled  out.  Further,  over  two-thirds  (113)  of  the  physicians  medical

records  have  no  objective  evaluations  with  which  to  measure  the  patients  progress.

Of  those  that  do  have  a treatment  plan  with  goals,  the  goals  include  increasing

function,  strength  and  range  of  motion,  decreasing  pain,  and  improving  ambulation.

of  those  with  objective  evaluations,  the  majority  evaluated  range  of motion  and/or

pain.

Among  difierent physician groups, podiixoists are least likely to provide care tha[ ir tndy 
physkal  them~. 
only  two  of the  47 cases  from  podiatrists  show  restorative  care.  Almost  two-thirds  of 
the  non-restorative  podiatry  care  was  palliative.  The  remaining  one-third  was  related 
to  surgery  such  as whirlpool  to  soften  the  skin  and  nails  prior  to  debridement  or  a post 
operative  cold  pack  to  prevent  swelling.  In most  cases  these  treatments  were  provided 
once  every  month  or  six weeks  when  the  patient  routinely  visited  the  podiatrist. 
Seventy-eight  percent  of  podiatrists  had  no  treatment  plan;  82  percent  had  no  goals. 
and  S0 percent  had  no  objective  evaluations  (see  tuble  B below.)  TABLE  B

FEW  SPECIALTIES  WOULD  MEET  THE  PHYSICAL  THERAPY 
REQUIREMENTS  FOR  OTHER  OUTPATIENT  SEITINGS 
Orthopedic  Physical  General 
Surgery  Medicine  Medical  Podiatry  Others*  Totals 
& Rehab  Practice  + 
N=28  N=8  N=66  N=47  N=17  N=166 
F

Has 
Treatment  (10:%)  (1?%)  (2:L)  (3:%)  (3:;) 
Plan 
Has  goals 38 
(2:%)  (6i)  ]  (1;%)  (3:%) 
Has  objective 
evaluations  (7?%)  (8/%)  (3:%) 
m 
Care  Either 
I 
Restorative 
or  (6~%)  (7:%)  (9i)  (4i)  (1:%) 
~L Establi
shing 
I Maintenance 
~ Program
The  numbers  within  each  specialty  are  not  mutually  exclusive. 
+  General  Medical  Practice  includes  29 family  practitioners,  28 general 
practitioners,  and  9 internists. 
* 
Others  include  4 general  surgeons,  2 cardiovascular  specialists,  2 clinics,  2 
unknowns,  2 osteopaths,  an  anesthesiologist,  a dermatologist,  a plastic  surgeon, 
a radiologist,  and  a pediatrician. 
Physical  therapy  services  in the  offices  of orthopedic  surgeons  and  physical  medicine 
and  rehabilitation  specialists  are  more  likely  to  be  restorative  or  for  the  establishment 
of  a maintenance  program  than  to  be  palliative.  The  medical  records  of  more  than 
two-thirds  (19  of  28)  of the  orthopedic  surgeons  and  three-quarters  (6  of 8)  of  the 
physical  medicine  and  rehabilitation  specialists  show  restorative  care  or  the 
establishment  of  a maintenance  program  (see  table  B above.)  This  compares  to  only 
four  percent  of  the  podiatrists,  nine  percent  of those  in general  medical  practice 
(including  internists)  and  18 percent  of the  other  specialties. 
The  physical  therapy  services  are  also  more  likely  to  be  performed  by a  licensed 
physical  therapist  or  occupatiomd  therapist  in the  offices  of  orthopedic  surgeons  and 
9
 physical  medicine  and  rehabilitation  specialists  than  in other  physicians  offices.  All  of 
the  2S orthopedic  surgeons  had  licensed  professionals  providing  the  physical  therapy 
services,  25 had  physical  therapists  and  three  occupational  therapists.  Of  the  eight 
physiatrists,  three  had  physical  therapists,  two  physical  therapy  assistants  and  the 
remaining  performed  the  physical  therapy  service  themselves.  None  of the  podiatrists, 
only  eight  percent  (5 of 66)  of those  in general  medical  practice  and  18 percent  (3 of 
17) of the  other  specialties  had  licensed  physical  therapists  or  occupational  therapists 
performing  the  sefices. 
Ntie  out of ten casa  in independently practicing physical therapk  ofices  meet all 
Medicare coverage guidelines; thq  routinely have plhs  of car% goak  and are restorative 
in nature. 
The  great  majority  (88  percent)  of the  independently  practicing  physical  therapists

medical  records  document  medically  necessary  restorative  care  or  the  establishment  of

a maintenance  program.  The  services  are  always  provided  by a licensed  physical

therapist  or,  in one  case,  a licensed  physical  therapy  assistant.  The  remaining  care

appears  to  be  palliative.

Almost  all  independently  practicing  physical  therapists  medical  records  have  a written

treatment  plan  (92  percent)  with  goals  established  (81  percent).  Over  three-quarters

(79  percent)  of the  patients  with  goals  met  these  goals  in a predictable  period  of time.

Almost  all  independently  practicing  physical  therapists  records  had  objective

evaluations  to  measure  the  patients  progress.  These  evaluations  include  range  of

motion,  muscle  strength,  pain,  gait,  posture,  sensation,  functional  activities,  and

activities  of daily  living.

Most  of their  physical  therapy  treatments  are  complex.  In  over  three-quarters  of the

independently  practicing  physical  therapists  records,  the  patient  was  either  evaluated

or  performed  exercises  or  functional  activities,  all of which  are  complex  activities.  All

independently  practicing  physical  therapist  respondents  reported  that  they  provide  a

whole  range  of services,  usually  including  exercises  or  functional  training  in conjunction

with  modalities  such  as  heat  or  electrical  stimulation.

CARRIERS  HAVE  PAID  LITTLE  ATTENTION  TO  PHYSICAL  THERAPY  IN

PHYSICIANS  OFFICES

Four-jiftti  of the carriers have no polici~  concerning the r~torative nature of physica[ 
therapy in physicians ojjices. 
Although  each  carrier  is expected  to  establish  local  policy  where  no  national  HCFA 
policy  exists,  twenty-four  of the  42 carriers  have  no  policy  for  physical  therapy  in 
physicians  offices.  (krier  documentation  and  intemiew  responses  by carriers  and 
physicians  reveal  that  most  carriers  require  little  information  other  than  what  is on  the 
initial  claim  form.  One,  however,  requires  that  a plan  of  treatment  for  services  by 
physicians  be  attached  to  claims  for  physical  therapy.  Another  requires  a physician 
note  on  the  claim  thilt  there  is a treatment  plan  available  for  physical  therapy  services. 
1()  In  contrast,  all  carriers  require  some  sort  of documentation  by  independently 
practicing  physical  therapists  that  a treatment  plan  is available.  Some  require  the 
treatment  plan  itself  and  others  require  a notation  on  the  claim  saying  that  the 
treatment  plan  is available. 
Tencarriers  have  policies  such  asnotreimbursing  physical  therapy  on  the  same  day  as 
an  office  visit  without  a separate  diagnosis  or  only  reimbursing  specific  HCPCS  codes. 
These  policies  do  not  relate  to  the  restorative  nature  of physical  therapy  services. 
Eight carrim  ti  their instructions indicate physical thera~  must be restorative; howeve~ 
no enfoxement  k apparent. 
Eight  carriers  have  policies  relating  to  the  restorative  nature  of physical  therapy 
services.  Six of them  have  sent  newsletters  or  bulletins  to  physicians  mentioning  the 
need  for  physical  therapy  services  to  be  restorative.  One  restricts  this  policy  to 
physiatrists.  one  of these  eight  carriers  has  a screen  dealing  with  the  restorative 
nature  of  the  physical  therapy  services.  A review  of the  medical  records  from  claims 
reimbursed  by these  carriers,  however,  shows  that  they  are  not  enforcing  these 
restrictive  policies.  They  approved  the  same  percentage  of  non-restorative  care  as 
other  carriers  in our  sample. 
PROFESSIONAL  ASSOCIATIONS,  AS  WELL  AS  SOME  CARRIERS, 
PHYSICIANS  AND  PHYSICAL  THERAPISTS,  ENCOURAGE  MORE 
STRINGENT  REQUIREMENTS  FOR  PHYSICAL  THERAPY  IN  PHYSICIANS 
OFFICES 
Professional associations contactai  agree that physical therapy in physicians ofices 
should be restorative. 
Physician  specialty  organizations  such  as  the  American  Academy  of Physical  Medicine

and  Rehabilitation,  the  American  Osteopathic  Association,  the  American  Academy  of

Orthopedic  Surgeons  and  the  American  Podiatric  Medical  Association  and

professional  physical  therapy  associations,  the  American  Physical  Therapy  Association

and  an  organization  of  Independent  Private  Practitioners  all  agree  that  physical

therapy  in physicians  offices  should  be  restorative  and  should  have  goals  set  forth  in a

plan  of care.  The  representative  from  the  osteopathic  society  says,  It should  not  go

on  indefinitely.  It should  not  be  done  indiscriminately.  The  response  from  the

Academy  of Physical  Medicine  and  Rehabilitation  was  that,  PT  should  also  maintain

function  and  prevent  complications,  PT  may  be  instructional  for  the  development  of

home  maintenance  therapy  programs.  Modifications  to  maintenance  programs  are

frequently  necessary,  ...  guidelines  are  needed  to  prevent  abuse.  The  American

Academy  of Orthopedic  Surgeons  expresses  similar  feelings,  Physical  therapy  in a

physicians  office  should  follow  the  same  guidelines  and  requirements  as  therapy

performed  in a free  standing  physical  therapy  office.
 Some carrkrs, physicians and physical therapists have concerns about physical therapy 
sewices provided in physicians ofices. 
Over  a third  of the  carrier  respondents  feel  there  are  probiems  with  the  frequency  of

physical  therapy  treatments  in physicians  offices,  such  as overutilization  and  excessive

semices.  One  carrier,  concerned  about  possible  overutilization  of  physical  therapy

modalities  by physicians,  requested  an  opinion  from  its State  Society  of  Physical

Medicine  and  Rehabilitation.  Some  of the  features  included  in  its  guidelines,

developed  as  a result  of the  Societys  opinion,  follow  the  Medicare  guidelines  for

independently  practicing  physical  therapists.  The  State  society  opinion  also  states

There  is limited  justification  for  treating  multiple  areas  with  modalities...  The  use  of

modalities  on  a sporadic  basis  concurrent  with  routine  office  visits  is not  justified.

Other  carriers  agree  physicians  are  billing  for  too  many  physical  therapy  services.  One

respondent  suggests,  HCFA  should  have  better  guidelines.  We  should  rebundle

therapy,  heat  treatment  is a part  of several  modalities.  A  lot  of  services  are  being

given,  I feel,  that  are  unnecessa~.  One  carrier  noted  that  they  had  25  doctors  on

their  Provider  Audit  List  (PAL)  who  billed  for  too  many  physical  therapy  semices,  too

many  times  with  no  documented  medical  necessity.

Physical  therapy  in  podiatrists  offices  is of particular  concern  to  several  carriers.  One

carrier  reported  that  prior  to  1992  it denied  physical  therapy  for  podiatrists  since  the

semices  were  considered  to  be  part  of a visit  code.  However,  evaluation  and

management  codes  do  not  contain  physical  therapy,  so  the  carrier  now  pays  for  both.

Some  carriers  express  the  need  to  monitor  podiatry  semices  more  closely.  A  number

agree  that  whirlpool  which  is used  to  soften  nails  or  tissues  prior  to  debridement  is not

really  physical  therapy.  One  podiatrist  supports  this  by saying,  We  have  found  it

(physical  therapy)  beneficial  for  patients.  We  use  it frequently  following  a procedure.

but  not  usually  on  its own  when  the  patient  is not  in the  office  for  another  reason.  In

contrast,  another  podiatrist  states,  It should  be  done  every  other  day  or  every  third

day  for  several  weeks  and  evaluated,  not  just  every  few  months  when  the  patient

comes  in.  Then  its a foot  washing.

Physical  therapists  also  voice  concerns  about  the  frequency  and  care  in  physicians

offices.  One  therapist  says,  We  have  had  complaints  by patients  who  have  got

physical  therapy  in a physicians  office.  They  said  they  got  too  many  treatments  that

were  not  necessary.

The use of licensed prof~sionah  to provide physical thera~  servictx is encouraged by 
some. 
The  American  Academy  of Orthopedic  Surgeons  in an  advisory  statement  dated 
December  19S9 said,  Quality  of care  considerations  dictate  that  the  patient  receives 
physical  therapy  semices  which  meet  the  highest  professional  standards.  Only  properly 
trained  and  certified  physical  therapists  should  be  involved  in the  patients  treatment, 
The  American  Physical  Therapy  Association  in its Qualifications  for  Persons  Providing  Physical  Therapy  Services  says,  Protection  of the  public  interest  requires  that  physical 
therapy  be  provided  only  by persons  who  have  successfully  completed  specialized 
education  in that  field  and  whose  practice  complies  with  well-defined  regulations. 
The  association  also  suggests  in  its  response  that  providers  of physical  therapy  services 
in a physicians  office  should  be  required  to  put  their  State  professional  license 
number  on  the  billing  forms. 
Some  carriers  have  concerns  about  who  is giving  the  care.  One  carrier  respondent 
voices  the  concern  of  others  when  she  says,  Lesser  qualified  people  are  used  by 
physicians  to  give  physical  therapy,  they  are  not  using  physical  therapists.  Another 
adds,  We  have  no  way  of knowing  who  is giving  physical  therapy  in a physicians 
office...  the  physician  should  explain  who  did  it and  why  on  the  claim  itself.  Another 
respondent  says,  I would  like  HCFA  to  state  that  a physician  cannot  hire  a person  to 
do  physical  therapy  unless  that  person  is licensed. 
Some  physicians  also  had  concerns  about  who  provides  the  care.  An  orthopedist 
voices  the  concerns  of others  when  he  says,  If doctors  are  billing  for  physical  therapy 
by other  than  a therapist,  it should  be  stopped.  Having  a nurse  put  hot  packs  on  is 
not  physical  therapy.  All  physical  therapists  agree  that  physical  therapy  should  be 
performed  by  a physical  therapist.  One  therapist  says,  Physical  therapy  should  be 
given  by  a licensed  physical  therapist,  technicians  have  no  idea  why  we  do  what  we  do, 
or  the  physiological  ideas  behind  therapy. 
13
 RECOMMENDATIONS

We  recommend  that  HCFA  take  appropriate  steps  to  prevent  inappropriate  payments

for  physical  therapy  in physicians  offices.  The  HCFA  can  use  the  following

approaches  to  achieve  this  goal:

.  Conduct  focused  medical  review, 
  Provide  physician  education  activities, 
. Apply  its  existing  physical  therapy  coverage  guidelines  for  other  settings  to 
physicians  offices. 
We  estimate  that  implementation  of this  recommendation  would  save  $235  million 
over  five  years.  This  figure  was  calculated  by multiplying  $47  million  per  year  by five 
years. 
COMMENTS

Comments  on  the  draft  report  received  from  HCFA  and  the  Assistant  Secretary  for

Planning  and  Evaluation  (ASPE)  concur  with  the  general  thrust  and  significant  details

of  our  recommendations.  Suggestions  for  changes  in wording,  clarifications  of the  text

and  technical  changes  have,  for  the  most  part  been  incorporated  into  the  final  report.

The  actual  comments  received  are  in Appendix  B.

The  HCFA  plans  an  alternative  course  of action  to  the  IG  suggestion  to  conduct

focused  medical  review.  It plans  to  share  copies  of  the  IG  report  with  carriers  and  ask

them  to  focus  on  issues  identified  in the  report.  In  response  to  the  suggestion  that

HCFA  provide  physician  education  activities,  it has  a work  group  considering

alternative  ways  of  providing  appropriate  physician  education.  The  HCFA  would  like

to  analyze  the  results  of these  actions  before  changing  coverage  guideline  policies.  We

support  this  approach  and  will,  of  course,  be  interested  in the  results  of the  analysis.

The  HCFA  also  raised  several  technical  comments.  Noting  that  our  sample  consisted

of  HCFA  common  procedure  coding  system  (HCPCS)  physical  medicine  codes,  HCFA

was  concerned  that  services  other  than  physical  therapy  may  have  been  included  in

our  sample.  We  confirmed  that  the  service  was  actually  physical  therapy  through

review  of  actual  services  in the  medical  record.  The  HCF.4  also  noted  increases  in

reimbursement  and  asked  for  further  information.  We  focused  on  coverage  in this

study  and  do  not  have  sufficient  information  to  determine  why  there  has  been  a 40

percent  increase  in reimbursement  for  physical  therapy  codes.

14
 The  ASPE  raised  several  technical  points  regarding  the  basis  of overpayments,  the 
projection  of our  results,  and  the  intent  of our  recommendations.  The  basis  for  our 
determination  that  overpayments  were  made  is the  nature  of the  services,  rather  than 
the  individual  providing  them.  Our  method  of sampling  allows  us to  project  our 
results  (see  appendix  A for  further  details).  Finally,  while  we  appreciate  ASPES 
desire  to  see  a more  explicit  recommendation,  it is our  desire  to  allow  the  operating 
agency  flexibility  in  addressing  the  concerns  identified  and  developing  corrective 
actions. 
15
 APPENDIX  A

SAMPLE  SELECIION  AND  PROJJXIIONS 
We  extracted  all  Physical  Therapy  services  (FICPCS  97010-97799)  from  a  1%  Part  B 
Common  Working  File  (CWF)  sample  of  1991.  There  were  123,950  sexvices  for  8,562 
beneficiaries  which  totalled  approximately  $1,800,000.  The  file was  sorted  by 
beneficiary  and  date  of service  to  facilitate  categorizing  beneficiaries  by  the  specialty 
of the  provider. 
The  two  provider  categories  were  independent  physical  therapists  (IPT)  and  all  types 
of  physicians.  We  used  the  first  occurrence  of each  beneficiarys  semice  to  determine 
the  provider  category.  Therefore,  if the  beneficiary  had  services  from  more  than  one 
provider,  only  one  provider  was  sampled.  There  were  2,078  beneficiaries  in the  IPT 
group  and  6,484  in the  physician  group.  Simple  random  sampling  was  used  to  select 
semices  within  each  category  of provider.  The  sample  consists  of  100 IPT  services  and 
200  physician  semices. 
Beneficiary  medical  records  were  requested  for  the  sample  300  cases,  however,  45 
beneficiary  records  were  not  sent.  From  the  sample  of  100 beneficiaries  who  received 
semices  from  IPTs,  89 were  sent  and  from  the  200  beneficiaries  requested  from 
physicians  offices,  166 were  sent.  After  reviewing  a beneficiarys  record,  it was 
determined  whether  or  not  the  care  given  was  restorative  or  for  the  establishment  of a 
maintenance  program.  If it did  not  fit  either  of these  categories,  we  determined  them 
to  be  non-covered.  If the  decision  was  that  the  care  was  non-covered,  all  physical 
therapy  services  for  the  beneficiary/provider  combination  in  1991 were  assumed  to  be 
non-covered  and  the  estimated  savings  was  based  on  the  amount  for  the  non-covered 
semices.  If the  beneficiary  was  treated  by more  than  one  provider,  only  data  from  the 
sampled  beneficiary/provider  combination  was  used  to  estimate  the  savings.  Separate 
estimates  were  calculated  for  physicians  and  IPTs.  Standard  statistical  formulas  were 
used  to  estimate  the  total  savings  and  to  compute  a confidence  interval  around  the 
estimate.  The  table  below  shows  the  distribution  of  beneficiaries  and  allowed  charges 
from  the  one-percent  Part  B Common  Working  File  for  1991. 
1%  Part  B Common  Working  File  in  1991 
Beneficiaries  Allowed  Beneficiaries  Allowed 
in Universe  amount  in  in Sample  Amount 
universe  In Sample 
IPT  2,078  $733,488    100  $37,S76 
1
 The  table  below  shows  the  covered  and  non-covered  status  of allowed  charges  based 
on  the  result  of the  medical  record  review  for  physicians  and  IPTs. 
Physicians 
Result  of  Number  of  Allowed  Number  of  Allowed 
Review  Beneficiaries  Charges  in  Beneficiaries  Charges  in 
in Sample  Sample  in Sample  Sample 
Covered  36  $5,733  78  $30,496 
Non-covered  130  $14,512  11  $5,192 
No  Records  34  $4,760  11  $2,188 
Received 
Total  200  $25,005  100  $37,876 
Nearly  20 percent  of the  medical  records  from  physicians  offices  were  not  received 
and  approximately  6 percent  of the  medical  records  from  IPTs  were  not  received  and 
therefore  not  reviewed.  Of  the  received  records,  the  percent  of dollars  for  non-
covered  cases  in physicians  offices  is about  72 percent  ($14,512/$20,245).  Projected  to 
the  Medicare  population  the  $14,512  is estimated  to  be  approximately  $47  million. 
The  95 percent  confidence  internal  for  the  estimated  $47  million  is $27.7  million  to 
$66.4  million.  This  estimate  was  computed  by multiplying  the  unweighed  amount  by 
the  inverse  of the  probability  of selection  (6,484/200)  and  then  by  100 to  weight  from 
the  1 percent  file  to  the  population.  By comparison,  the  estimated  amount  for  non-
covered  care  provided  by  IPTs  was  only  about  15 percent  (5,192/35,688)  of the  total  of 
covered  and  non-covered  amounts.  The  unweighed  amount  of non-covered  care  in 
IPTs  offices  was  projected  in the  same  manner  to  obtain  the  estimate  of $10.8  million. 
A-2
 APPENDIX  B 
COMMENTS 
B-1  ..ACJ.  ~!  Hoakn  Cm

DEPARTMENT OFHEALTH a HU,MANSERWCES 
.  ..  Fhncma  Admirvatratlan

Memorandum---
Ja&giq#q 
Office  of Inspector  General  (OIG)  Drdt  Rqafi  PtyiuI  Therapy  in Phydc;* 
Ofices  (OE142-!XMKJ590) 
June  Gibbs  Brown 
I.napectorGeneral 
We have rcvicwcd  the above-referenced  draft repon  which exaxain=  the  nature  ~d 
extent  of phyaid  therapy semkes  provided  to Medicare  beneficiaries  in physic!!n# 
offices, and desai%es  ~er  monitoring  for kse  aati~ 
Based  on tic  biing~  OIG  recommended  that the Health  Cue  Financing 
Administration  take appropriate  steps to prewnt  inappropfiata  payments  for 
physical  thenpy  in physicians offb.  These  steps cuuld  include  focused  rncdical 
rcvkw,  physician  education  activitiq  and applying &sting  phyafral therapy 
cmeraga  guidelines  for ether  settings  co physicians c&- OKI  rhnatea  that 
implczm.matian  of tbia resommendaticn  wculd  mrt  S235 miIiion over 5 ymn  We 
cone~r  with the  overau  r~o~eadaticn.  We agree with the first Wa optiIxI,A but 
disagree  with  the third.  Our  detailed  comments  are attached  for your 
consideradcn. 
Thank  you fcr the  opportunity  to retiew  and ccrnment  on this draft repafi  Pkxse 
advise us if you wish to discuss cm: position  cm the repons  recommendations  at 
your  earliest  cimvenferxe. 
Attachmczt  . 
We re~~end  that  HCFA  tie  appropriatsetep topreventinapFr@a& 
paymeats  fcrphyskl  thempy  hI phyaidans  of&ss.  EICFA canuse the fcbwing 
Bppraachm  to achieve  Ma god: 
Conduct  focuxd  medical  review. 
We ecmcur uhti  this opdq  but prop=  an alternadve  cnurac of den  hn 
focmed  rnedicd  review speciffcal.ly. We would like tQ diatiuts  espies  of OIGs 
repart  to the  carriers  with a caver note  asking them to review it and f-c  on the 
issues idcztified  in the rep- We will ask the carricra to publixb pertinent 
infomatbn presmtedin0K3sreportc cmcerninsgppropriam  bflling of physical 
therapy  scmices  in their quarttrly  bulletins  to providcra.  For  example,  -Aem 
ccruid list commau  pa]tiative semicrx  that may be pefiormed in offic~  but that  we 
not  caverec? regardless  of where the semhs  xc  delivered. 
QQQn2 
Provide  ph@cian  education  a.cdvities 
~ere iscurreatIay workgrcupwithin HCFAS Bureuuof policy Dcvc!oprmnt 
ccmpriseci  of carrier  physicians and phpical  &ra@m  that  is k.xdng  on physicai 
tlmr~p~ in general.  TMJ edxing  work group  b considering  alternative  ways of 
prawdmg  physician educmion  cu drninistcrkg  physfcal the:spy  in 
apprcpiatc 
phy3ician cfficu. 
Apply  &stiig  physic.d thcmpy  cawc:sge g-uic?efies fcr  ather  scttitigt  to phprism 
Officu.  Page 2
RCF A Rc:s on5e
fi 
We would lie to implement and anal: thf 
e.nge  reslts of thae .rvtWo option before
changmg  guidelie policies for physci efce 
Qi010f    c.n Jy poinu aut, phy medcie aees Mfunerccd.  in ph
are cO'red under the lIincluent to" preon of  Under thc
a.t 
incident to prevon. a ph)'ic mAY employ J.u%i persel to 
ph)'ci  au:ry 
renderig semcet. The  include. the charges for such  pcn.n.el
servcu in his aw bil.
IJthough there are no detae. CQeragc guideline. for physca therpy in ph)1!lcia
offce:! the Social Security Act requires the aeMecs to be reuonable and n
for the di::gnoas and tr tme:t of 
ile. or  jwy or to improv thc functicning of
3. malormseedc body member. AI poited cut in the rcpcn, payment is prom.oltbd for
medial  for prevention,  enution. Curen
eatabli their cw poHde. to inpta.lrtipcnr trte saucnh dor  
Impcaa thes requircmen on ph
serv We beU "'e that impl!.mentig the fit tW Qption wi1  idh
amers  prcdc 
to the locl  as well 31 to physcian I, en wb2t  are deemed
rea30nllbte and nc S!ary to re,tcre functiniDg under the extig incident to
provion.
Tl.hnit:1 Comments
c.on 
CIG's sample 
cOIlsi:sU!d of the HCF A  procedure  ! l)em (HCICS)
codes 97010 to 97799. We would 
lie to point out that th coes ar for 
medicinc, which may have b n us.d to report servces other than 
phytc. thcnpY.
Therefore, OIG'. cmpbasil OIl whether thC3 servcu represnt 8trea pfh ysc1
tber
validiptyY o mf tahye b fei dig ttahteadt.  TaheI aaeolcud onf oefu trh iso ut of fie cta o f rCet.ebsu.mncady  as phythsec:
thcrnpy in pb)"icians' off do not represent tre ph)"al tberapy servces 
would be inter tc:d OD OIG's ! k On ths point.
The report Jta tbat there W' a S4a million mcreue from 1990 to 1991 in
MediC:et rhei mbunemcnt for physcal medicie servc. It wold be ulcsfuyl t,o  'cow
whether  inC' C3used by camu from phytci abuli the 
cpp ed to phytc:u the pis the legisted inc:e from SSOO to $750 i:l the: C3p
on c:brges fer 
pb. t: and ooJp!. ona. ther3py 'eM or SCe other C3u
This inlon: rion would help u, evac:1te whether the. recencation ..ld ,o!"e
t.,e problem of inc:re3. es iI thb &Iel. cr if 3bu$e by phyrans is a $mal pi
of A
much luger problem. .
On page A-2. the p r3gI1ph fol1C"g !.e bblc: i... lic CC' JhC\Id rc:
nc: 9 pcr nt conEde:1c. icterv! fcr tbc  trilcn 
527.7 milon to S66.4 lDilio:: (nt:c:r than $e,6tm.At4.d  miloS.4)i . --  (;  ." 
,..... &. 
DEPARTMENT Of HEALTH 
HUMAN SERVICES
Offce  ot  the Secretary
l(i
PDIG Washington, D.C. 20201
DIG-AS
DIG-
AIG-MP
OGIIG
AUG 2 3 
EX SEC
:c::  n 
Dj,TE SENT
Cm1 ranG rr
.t 
::z-
rn -- IT
TO: Bryan B. Mitchell
;: UJ -c
Principal Deputy Inspector General
1- 
o c:
FROM: Assistant Secretary for
Planning and Evaluation
SUBJECT: OIG Draft Report: "Physical Therapy in
Physicians' Offices"  CONCUCE 
WITH COMMS
E/-
tJ2- fit) -tJOSC;O
This report examines the nature and extent of physical therapy
services provided to Medicare beneficiaries in physicians'
offices
, and also describes carrier monitoring of these 
services.
In brief, ASPE recommends that OIG: 1.
inappropriate payments is examined in - ) clarify which cause of
appropriateness of generalizing the stutdhye' data, 2. ) discuss the
recommendations more explicit s results; 3. ) make the
changes. , and 4. ) make minor editorial
1. 
Clarifv which cause of 
inaDDroDriate paYments is examined in
the data
We believe  is report identifies two distinct
reasons why many PT serviat ces provided in physicians' offices
would not be reimbursed if provided in any other outpatient
setting. 
These causes (which are not mutually exclusive) are:
nature e ser ices was inappropriate (i. 
pwalas)  tnhapt  atwhel iltiha tgiovael,s  noorn -ocof bomjepcletixv,e  oerv anolut arteiolantse)d.  to a trea ent
This cause is
discussed on pages 6-9.
individual 
providincr
that  e services was not
appropriately qualified. This 
cause is discussed in quali-
tative te s on pages 11-12.
Upon first reading this report
, we were uncertain if it was
addressing one or both issues. 
Upon closer inspection, we
recognized that claims had been inspected 
the nature of the services was appropriateto dete ine only if
e providers.
We thus realized  e t at the quantitative fi , not 
first of  o potential causes of i appdrinogsp rerfeir oanlty eto  payments.
Given that clai:ns fOn1s do 
not indicate who provided "
FT" servic-
ex,t wee unndetrs taond fth ati  is study was not able to deten1i
appropriate pa
ents d
However, to avoid confusion e to  qualified providers.
, we recO at orG:
end  , "
, ,-
r.-
Page 2 - Bryan  tchell
B. Mi 
1. ) distinguish between the two potential causes of inap-
propriate payments early in the report
, and explain that due
to data limitations the quantitative aspects of the report
first.
address only the 
state that, because of the possibility of unqualified
persons providing services of an appropriate nature
incidence of inappropriate payments may be higher th,a nt htehe
findings indicate. 
2. 
Discuss the appropriateness of qeneralizinq the 
studv' s
resul ts The conclusions of this study are based on a sample
which is relatively small and which is also subject to non-
response bias. 
Due to these limitations
, we recommend that the
report explicitly discuss whether the results are simply sugges-
tive or if they are considered to be generalizable to the entire
Medicare population.
3. 
Make the recommendations more exPlicit
We suggest that the
recommendations be expanded as follows:
"Conduct focused medical review"
- This recommendation
should include the answers to the following 
of what? For  issues: Review
what purpose? Would this require collecting
any data beyond what is collected at present?
"Provide 'Chvsician education activities"
- Some specific
examples of education activities would be helpful 
here.
Also
, given that on page 10 the report suggests that educa-
tion without enforcement is not effective, this recommenda-
tion should mention that enforcement measures may also be
necessary if education efforts are to have their desired
effect.
Also
, the report should explicitly state that the figure of $235
million of savings was calculated by multiplying $47 million per
year by five 
years.
4 . Make minor editorial chanqes
- In the fou paragraph, second sentence
ere should
not be a comma after the word "goals"
IL 
- In the third full paragr-aph
should read " , last sentence ay"
many" /: 
.' t ..
Page 3 - Bryan B. Hi tchell
In the second paragraph, 
four sentence
limit of the confidence interval should not be $,6 .the Upper
4 million.
David T. Ell. 
Prepared by:
c. Prentice/rg 690-7994