The Centers for Medicare & Medicaid Services (CMS) Web site address referenced on 
page 1 and page 4 of the following report has changed.  The new address is:  
 
http://www.cms.hhs.gov/TherapyServices/
 
 
 
   ~~~~
""'ClS 
DEPARTMENT OF HEALTH &. HUMAN SERVICES	
Office of Inspector General 
":."410  Washington, D. C. 20201
MAY, i 1 2006 
TO:	 Leslie V. Norwalk

Deputy Administrator

Centers for Medicare & Medicaid Services

FROM: 
Stuart Wright 

Deputy Inspector General

for Evaluation and Inspections

SUBJECT:	 Physical Therapy Biled by Physicians 
In 2002, the Office of Inspector General (OIG) initiated work associated with Medicare 
payments for physical therapy. In October 2003, we reported interim results to your office 
detailing aberrant biling patterns by certain physicians and carrier efforts to target physicians 
physical therapy claims. Since the issuance of our 2003 memorandum, we have completed the 
results of our medical review of claims paid by Medicare in the first 6 months of 2002 and we 
have updated our claims data analysis of physicians who show aberrant 
biling patterns for 
physical therapy claims. 
Based on a simple random sample of 70 physical therapy line items 
biled by physicians and 
rendered in the first 6 months of2002, we found that 91 percent of physical therapy biled by 
physicians and allowed by Medicare during the first 6 months of 2002 did not meet program 
requirements, resulting in $136 milion in improper payments. In addition, we analyzed 
Medicare claims data from 2002 to 2004 and identified aberrances in physicians 
biling patterns 
and unusually high volumes of claims. Finally, based on our review, we identified a number of 
issues associated with physical therapy 
biled by physicians under the "incident to" rule. 
During the course of our review, the Centers for Medicare & Medicaid Services (CMS) took 
actions that addressed many of our findings. First, in November 2004, CMS issued a final rule to 
address the skil level of staff that provides physical therapy "incident to" physician services. 
Additionally, in May 2005, CMS issued a change request that clarifies CMS policy with respect 
to physical therapy services (Publication 100- , Transmittal 36, Change Request 3648). 
Finally, CMS recently posted provider education materials regarding physical therapy services 
ww.
on its Web site ( cms.hhs.gov/providers/therapyO. In light of these changes, we have 
decided not to issue a report that would include formal recommendations to CMS. Instead
, we 
are transmitting this summary of our review in the event that the information 
wil be useful 
CMS' s review of the physical therapy benefit and future considerations of the "
incident to" rule. 
BACKGROUND 
Physical therapy is the treatment of functional limitations to prevent the onset and/or slow the 
progression of physical impairments after an ilness or injury. Physical therapy includes: 
(1) examining patients with impairments, functional limitations, disabilities, or other health-
related conditions to determine a diagnosis, prognosis, and intervention; (2) alleviating  Page 2  Leslie V. Norwalk 
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 performed in physicians offices include therapeutic procedures, manual therapy, 
electrical stimulation, and ultrasound therapy.   
Physical therapy billed directly by physicians represented approximately $158 million out of a 
total of approximately $528 million for physical therapy claims billed to the Part B carriers and 
allowed by Medicare in the first 6 months of 2002.  Medicare allows physicians to submit claims 
for physical therapy that they do not perform personally, as long as the services are an integral, 
although incidental, part of the physicians personal professional services in the course of 
diagnosis or treatment of an injury or illness.2 The total allowed for physicians physical 
therapy claims has increased from $353 million in 2002 to $509 million in 2004, and the number 
of physicians who billed for more than $1 million in physical therapy has more than doubled, 
from 15 to 38 in the same 2-year period. 
General provisions of the Social Security Act (the Act) govern Medicare reimbursement of all 
services, including physical therapy.  Section 1862(a)(1)(A) of the Act states that  
. . . no payment may be made [under the Medicare title for services that] are not reasonable and 
necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a 
malformed body member. 
Specific coverage requirements for physical therapy are in section 1861(p) of the Act, which 
requires that: 
 	 The patient must be under the care of a physician (a doctor of medicine, osteopathy, 
optometry, or podiatric medicine).  
 	 The services must be furnished under a plan of care.  The plan of care indicates the type, 
amount, frequency, and duration of the services.    
 	 The plan of care must be recertified periodically by a physician. 
The implementing regulations at 42 CFR  410.60 and 410.61 restate these coverage 
requirements and further specify that the plan of care must include the diagnosis and anticipated 
goals of the therapy that a physician must recertify every 30 days.  Section 2218 of the Medicare 
Carriers Manual3 states that the plan of care must contain: 
 	 the patients significant past history;  
 	 patients diagnoses that require physical therapy; 
 	 related physician orders; 
 	 therapy goals and potential for achievement; 
1 For a more complete definition of physical therapy, see American Physical Therapy Association, Model Definition of Physical 

Therapy for State Practice Acts in the Guide to Physical Therapy Practice, 1997, chapter 1, p. 2.

2 Centers for Medicare & Medicaid Services, Medicare Carriers Manual, section 2050.1. 

3 Online Centers for Medicare & Medicaid Services Manual System, Publication 100-2, chapter 15, section 220.2.
 Page 3  Leslie V. Norwalk 
 	 any contraindications; 
 	 patients awareness and understanding of diagnoses, prognosis, treatment goals; and  
 	 when appropriate, the summary of treatment provided and results achieved during 

previous periods of physical therapy services. 

Section 1833(e) of the Act requires that providers furnish such information as may be necessary 
in order to determine the amounts due to receive Medicare payment.  Related regulations at 
42 CFR  411.15(k) and 424.5(a)(6) reflect these provisions of Federal law. 
Section 1861(s)(2)(A) of the Act provides for Medicare coverage of services and supplies 
furnished incident to the professional services of a physician.  This section defines covered 
medical and other health services as . . . services and supplies (including drugs and biologicals 
which are not usually self-administered by the patient) furnished as incident to a physicians 
professional service, of kinds which are commonly furnished in physicians offices and are 
commonly either rendered without charge or included in the physicians bills.  The 
implementing regulations at 42 CFR  410.10(b) and 410.26 restate this language.  Section 
2050 of the Medicare Carriers Manual4 provides examples of services and supplies covered 
under the incident to rule. Examples of services include taking blood pressures and 
temperatures, giving injections, and changing dressings.  Examples of supplies include gauze, 
ointments, bandages, and oxygen. 
The incident to rule allows physicians to bill for physical therapy performed by any 
nonphysician staff (including, but not limited to, licensed physical therapists).  The rule allows 
physician reimbursement for physical therapy at the full physician fee schedule amount for 
physical therapy provided by nonphysician staff, if the services are: 
 	 commonly furnished in a physicians office and are an integral, although incidental, part 
of the physicians covered services; 
 	 included in a treatment plan for an injury or illness, where the physician personally 
performs the initial service and is involved actively in the course of treatment; and  
 	 furnished under the direct supervision of a physician.5 
Section 1862(a)(20) of the Act permits payment for therapy services furnished incident to a 
physicians professional services only if the practitioner meets the standards and conditions that 
would apply to such therapy services if they were furnished by a therapist, with the exception of 
the licensing requirement.  Under the incident to rule, licensed physical therapists need not 
perform the services, and Medicare currently does not require licensure or certification of staff 
that perform incident to physical therapy.  However, in all other settings, including nursing 
homes, independently practicing physical therapists offices, and rehabilitation facilities, 
Medicare requires that only licensed physical therapists can render physical therapy.  In addition, 
licensed physical therapist assistants, performing within their scope of practice, may render 
Medicare physical therapy under the direct supervision of a physical therapist. 
4 Ibid., sections 60.1-60.4.

5 Direct supervision means that the physician must be present within the office suite and immediately available to render 

assistance in person, if necessary.  Physicians do not need to be present in the room when the services are rendered.  The incident

to rule does not limit the number of services physicians can bill concurrently (42 CFR  410.26). 
 Page 4  Leslie V. Norwalk 
Training, licensure, and direct billing for physical therapists 
Physical therapists are college-educated and State-licensed health care professionals.  To qualify 
for a State physical therapy license, candidates must have completed a post-baccalaureate 
professional education program from an accredited institution.6  Generally, the education 
includes a 4-year college degree and at least 2 additional years of full-time study in physical 
therapy.  Therapists must pass a State-administered national examination in order to practice.  
Additional requirements may vary according to individual State practice acts.  For example, in 
California, physical therapists must complete an additional 18 weeks of clinical experience under 
the supervision of a licensed physical therapist to become licensed. 
To bill Medicare directly, physical therapists must be licensed by the State in which they practice 
and must adhere to Medicares coverage guidelines for outpatient physical therapy.  Physical 
therapists can provide services in their own offices, a physicians office, a nursing home, a 
hospital, or a rehabilitation facility.  When physical therapy is rendered incident to physicians 
professional services, unlicensed individuals can render the services. 
In November 2004, CMS issued a final rule to address the skill level of staff that provides 
physical therapy incident to physicians services.  CMS now requires that staff providing these 
services must meet the same standards and conditions as qualified therapists, with the exception 
of the licensing requirement.  For example, unlicensed staff furnishing incident to physical 
therapy services must meet the existing training standards for licensed physical therapists.  In 
May 2005, CMS issued a change request (Publication 100-02, Transmittal 34, Change Request 
3648) that reorganizes and clarifies current CMS policy with respect to physical therapy services.  
The change request includes: 
  clarification of conditions of coverage for physical therapy services;  
  descriptions of plan of care, certification, and recertification requirements;  
  description of reasonable and necessary requirements;  
  description of supervision requirements for physical therapy services; and   
  clarification of incident to physical therapy services. 
In addition, CMS has posted provider education materials regarding physical therapy services on 
its Web site (www.cms.hhs.gov/providers/therapy/). 
Previous Office of Inspector General Work 
OIG began reviewing Medicare rehabilitation therapy (including physical therapy) in 1994.  Our 
evaluations, which have focused on therapy provided in physicians offices and nursing homes, 
found that significant compliance and quality of care problems persist, including overutilization, 
services rendered by unskilled staff, and services billed that do not meet Medicares coverage 
rules. 
6 Graduates from 1960 to the present must have graduated from an institution accredited by the Commission on Accreditation in 
Physical Therapy Education (CAPTE).  Beginning in 2002, the CAPTE limited its accreditation to only those programs offering a 
post-baccalaureate degree in physical therapy.  Page 5  Leslie V. Norwalk 
In 1994, OIG reported that approximately 78 percent of physical therapy rendered in physicians 
offices did not represent true physical therapy, as defined by Medicare.7  The services were 
mostly palliative in nature or did not represent the complexity required by Medicares coverage 
guidelines. 
In 1999, OIG issued two reports8 addressing therapy provided to Medicare beneficiaries in 
skilled nursing facilities during 1998, prior to implementation of the prospective payment 
system.  We found that while most nursing home patients were proper candidates for physical 
and occupational therapy, approximately 13 percent of the services were billed improperly.  
These improper billings represented almost $1 billion reimbursed to nursing homes in 1998. 
In 2001, OIG issued two reports9 addressing physical therapy for nursing home patients.  We 
found that the $1,500 financial limitation on therapy in 1999 did not prevent nursing home 
patients from receiving necessary and appropriate services.  We also found that, despite the 
limitation, 14 percent of the therapy (representing $28 million during the first 6 months of 1999) 
was not medically necessary. 
METHODOLOGY 
We used multiple methodologies to accomplish our objectives:  
1.  medical review of a random sample of claims,   
2.  analysis of Medicare claims and billing patterns, and 
3.  interviews with physicians in our sample and Medicare carrier personnel. 
For this review, we selected a simple random sample of 70 physical therapy line items billed by 
physicians and rendered in the first 6 months of 2002.  We eliminated two line items from our 
sample because one line item was for respiratory therapy and a physician we could not locate 
submitted the other.  The total allowed amount in our sample of 68 line items was $2,176.62.  
We selected the line items from the population of all line items billed by physicians with service 
dates between January 1 and June 30, 2002.10  We selected line items in order to project our 
findings to the total Medicare allowed amounts for physicians physical therapy during the 
sample timeframe.   
A line item is a single current procedural terminology (CPT) code within the claim; however, it 
may reflect multiple units of the same procedure.  For example, CPT 97110 represents a 
therapeutic procedure, one or more areas, each 15 minutes.  The line items ranged from one to 
7 Office of Inspector General, Physical Therapy in Physicians Offices, OEI-02-90-00590. 
8 Office of Inspector General, Physical and Occupational Therapy in Nursing Homes:  Medical Necessity and Quality of Care

(OEI-09-97-00121) and Physical and Occupational Therapy in Nursing Homes:  Cost of Improper Billings (OEI-09-97-00122), 

both issued in August 1999.  

9 Office of Inspector General, Physical, Occupational, and Speech Therapy for Medicare Nursing Home Patients: Medical 

Necessity, Cost, and Documentation Under the $1,500 Caps (OEI-09-99-00560) and Physical, Occupational, and Speech 

Therapy for Medicare Nursing Home Patients: Medical Necessity and Quality of Care Based on the Treatment Diagnosis (OEI
-
09-99-00563), both issued in August 2001. 

10 The total population of line items is 5,669,575 representing $164.4 million.
 Page 6  Leslie V. Norwalk 
three units each (15 to 45 minutes).  Each line item, regardless of the number of units, is 
weighted equally when we report aggregate claim percentages.  We used the actual allowed 
amount for each line item, which reflects the number of units for each CPT code to estimate total 
allowed Medicare dollars.  A claim may contain multiple line items with multiple units.  
Throughout this report, we use the term claim to refer to single physical therapy line items (a 
single CPT code). 
We requested complete medical records from the physicians for each beneficiary for the dates 
reflecting the physical therapy episode of care during which the sampled claim was rendered.  In 
addition, we requested the Medicare billing records, physician and staff schedules for each day 
the beneficiary received medical services, and all licenses and credentials for the staff that 
provided services to the beneficiary.  The episodes of care varied in length and occurred from 
July 2001 through December 2002.  We made four requests for the records.  We received  
54 valid responses (79 percent). The confidence intervals at the 95 percent level are in  
Appendix A. 
We contracted with licensed physical therapists to review each service according to a standard 
protocol, which was based on Medicare coverage guidelines and requirements.  The review 
instrument solicited information about the beneficiarys physical therapy as a whole and about 
the individual sampled service in particular.  This enabled the reviewers to determine if the 
services billed to Medicare were covered and properly documented.  This level of information 
would not generally be available to carriers unless they were to conduct a comprehensive 
medical review of a particular physician or patient.11 After completing their review, the 
contractors returned the completed instruments to us for data entry.  We analyzed the medical 
review results using the statistical software packages SAS and SUDAAN.  
When we requested medical records from a physician and received no response after four 
requests, we considered the claim undocumented.  This is consistent with 42 CFR 
 424.5(a)(6), which states that Medicare providers must furnish to the Medicare carriers 
sufficient information to determine whether or not payment is due.  In our final written request to 
the physicians, we informed them that if we did not receive the requested documentation, we 
would not be able to confirm the appropriateness of payment, and we would refer the matter to 
the appropriate Medicare carrier for resolution.  Carriers could collect overpayments from the 
physicians and determine if fraud or abuse investigations are warranted.  
Data Analysis and Interviews 
We analyzed all physicians Medicare Part B physical therapy claims for 2002, 2003, and 2004.  
We analyzed and reviewed physicians billing patterns.  Our analysis included: 
  total allowed amounts for physicians physical therapy;  
  total allowed amounts for physical therapy per physician; 
  total allowed amounts for physical therapy per beneficiary; 
  geographic dispersion of Medicares physical therapy; and 
11 We recognize that our methodological approach differs from that of CMSs Comprehensive Error Rate Testing (CERT) 
program. The CERT paid claims error rate is based on the review of a single claim, while our review elicited information about 
the beneficiaries episode of physical therapy care in addition to an evaluation of the individual sampled service.  Page 7  Leslie V. Norwalk 
 	 relationships among physicians, including physicians who share the same beneficiaries 
with other physicians. 
We interviewed, in person and by telephone, selected Medicare Part B carriers that have 
conducted reviews and investigations of physicians physical therapy claims.  The carriers 
provided summaries of their work, including the total dollar amounts for therapy that was paid 
inappropriately. 
We conducted telephone interviews with 32 of the 54 physicians who responded to our medical 
record request and consented to an interview.  We asked to what extent they personally render 
physical therapy and who on their staff render physical therapy. 
2002 MEDICAL REVIEW RESULTS 
Ninety-one percent of physical therapy billed by physicians and allowed by Medicare 
during the first 6 months of 2002 did not meet program requirements, resulting in $136 
million in improper payments.  During the first 6 months of 2002, Medicare allowed 
approximately $158 million for physical therapy billed by physicians (Table 1).  Based on our 
medical review, 26 percent of the therapy during this period was not medically necessary, and  
34 percent was undocumented.  Fifty-seven percent of the services were furnished under 
incomplete plans of care or had no plan of care documented.  All of the services that were not 
medically necessary also were furnished under incomplete plans of care or had no plans of care 
documented. 
Table 1: Improper Payments for Physical Therapy Billed by Physicians 
Sample  Projected 
Allowed  Services  Allowed Amount 
Type of error  Services  Amount  (Percent)  (Millions) 
Not medically necessary  18  $455.65  26%  $33.0 
Undocumented: 
   -Nonresponse  14  466.58  *  *
   -Missing documentation  9  209.56  *  * 
Total undocumented  23  $676.14  34%  $49.0 
Incomplete/No plan of care: 
   -Incomplete plan of care  23  $802.40  34%  $58.2
   -No plan of care  16  $397.50  24%  $28.8 
Total incomplete/no plan of care  39  $1,199.90  57%  $87.0 
Overlapping errors 
 (Both not medically necessary and incomplete/no plan  (18)  ($455.65>  <26%>  <$33.0> 
of care) 
Total  62   $1,876.04  91%  $136.0 
Source: Medical Review of Physical Therapy Billed by Physicians January to June 2002.  
* Indicates the n for that cell is too small to reliably project.  Totals may not equal the sum of individual rows due to 
rounding.  Page 8  Leslie V. Norwalk 
Not medically necessary.  Pursuant to section 1862(a)(1)(A) of the Act, services that are not 
reasonable and necessary are not covered by Medicare.  Twenty-six percent of the physical 
therapy billed by physicians and allowed in the first 6 months of 2002, totaling $33 million, did 
not meet Medicare criteria for medical necessity.  Medical reviewers found that there were no 
objective bases for care, no identified outcomes, and/or no change in the patients conditions to 
justify ongoing therapy. 
Undocumented.  Physicians did not provide substantiating documentation for approximately  
34 percent of the services billed to Medicare.  Despite repeated requests, we did not receive the 
medical records related to 14 of the services in our sample.  The physicians who billed for an 
additional nine of the services provided us with records that did not substantiate that any service 
was rendered on the date claimed.  Based on these findings, we estimate that Medicare may have 
allowed approximately $49 million during the first 6 months of 2002 for undocumented physical 
therapy services billed by physicians. Although some cases of missing documentation may be 
attributable to billing errors (e.g., putting the wrong date on the claim form), others might 
represent services not rendered.  In any case, claims for services that lack sufficient 
documentation to show that care was provided do not meet the requirements of section  
1833(e) of the Act. 
No plan/incomplete plan of care.  Separate from the completely undocumented services 
previously discussed, 57 percent of physical therapy services were furnished without a plan of 
care or under an incomplete plan of care, contrary to the requirements of section 1861(p) of the 
Act.  Approximately 24 percent of the services were furnished under no plan of care, and  
34 percent were furnished under incomplete plans.12  The incomplete plans did not contain 
information concerning the amount, frequency, or duration of the therapy, and/or physician 
certification.  When projected to the national population of therapy billed by physicians, we 
estimate the services furnished without a plan of care or under an incomplete plan of care 
represent $87 million that Medicare allowed during the first 6 months of 2002. 
Overlapping errors.  All of the services that were not medically necessary also were furnished 
under incomplete plans of care or had no plans of care documented. 
Because of inadequate documentation, reviewers had difficulty assessing the quality of the 
therapy services.  Reviewers could not assess the quality of care for 33 of the  
54 records they reviewed. However, 12 records contained enough documentation for the 
reviewers to question the quality of care and note that some services lacked an objective basis 
for care. They also noted that massage therapy alone, which was the only service provided in 
three cases, is not considered a skilled intervention or restorative care. 
Most medical records did not indicate the skill level of the individual who rendered the therapy. 
The reviewers could not determine the skill level of the staff who rendered physical therapy in  
32 of the 54 records. Persons with the appropriate skill levels, including physicians, physical 
therapists, and physical therapist assistants appear to have rendered the services in 18 of the  
54 records. Persons who lacked appropriate skill levels,13 such as an acupuncturist, a certified 
12 These approximations total 58 percent due to rounding. 
13 According to the judgment of our medical reviewers.  Page 9  Leslie V. Norwalk 
disability examiner, a massage therapist, and a physical therapist aide, appear to have rendered 
the services for four of the claims. 
Of the 32 physicians we interviewed, 24 told us that their staff render some or all of the physical 
therapy for which they bill Medicare.  According to these physicians, therapy in their offices is 
rendered by: 
 	 podiatrists, 
 	 chiropractors, 
 	 physical therapists, 
 	 physical therapist assistants, 
 	 massage therapists, and 
 	 physical therapist aides. 
Fourteen of the physicians we interviewed reported that they personally render some or all of the 
therapy for which they bill; however, we could not verify through Medicare claims data what 
proportion of the physicians physical therapy claims were rendered personally by the physician. 
Some physicians in our sample billed Medicare for extensive physical therapy without 
developing a plan of care.  Twenty-three of the fifty-four beneficiaries in our sample received 
physical therapy with no plan of care.  These beneficiaries received a mean average of 30 days of 
physical therapy in 2002 from the physicians in our sample.  Medicare allowed a mean average 
of $2,691 for each beneficiary for physical therapy from the physicians in our sample.  In total, 
physicians for these 23 beneficiaries billed physical therapy for more than 8,000 beneficiaries in 
2002 for which Medicare allowed approximately $7.8 million. 
One beneficiary in our sample received 15 months of physical therapy for lumbago and 
osteoarthritis, for which Medicare allowed $39,126.  The beneficiarys physician did not 
document a plan of care and did not establish medical necessity for the services.  The physician, 
a general practitioner, billed physical therapy to Medicare for 672 patients in 2002, an average of 
27 patients per day.  In 2002, Medicare allowed $752,531 for this physicians physical therapy 
claims. 
ANALYSIS OF PHYSICIAN BILLING PATTERNS FOR PHYSICAL THERAPY 
We identified aberrances in physicians billing patterns and unusually high volumes of claims 
that suggest physical therapy is vulnerable to abuse.  Using 100 percent of Medicares claims 
data for 2002, 2003, and 2004, we analyzed physicians billing patterns for physical therapy.  
The following are examples of what we found that raise questions about physicians physical 
therapy billing patterns: 
 	 Approximately 4 percent of all physicians who submitted physical therapy claims

account for more than half of all allowed claims in 2004 (Table 2). 

 	 Medicare allowed between $1 million and $7.6 million in physical therapy claims for 
each of 15 physicians in 2002, 29 physicians in 2003, and 38 physicians in 2004.  (See 
Appendix B.)  Page 10  Leslie V. Norwalk 
 	 For an additional 992 physicians, Medicare allowed more than $100,000 each in physical 
therapy claims alone in 2004. 
 	 One hundred thirty-four physicians each billed Medicare for physical therapy for more 
than 500 patients in 2004. In contrast, the median number of patients receiving physical 
therapy for the entire physician population (that rendered physical therapy in 2004) is 
eight.  Of the 134 physicians, 97 shared at least 50 of their patients with another of the 
134 physicians who also billed physical therapy for the same patient. 
 	 We identified 13,090 beneficiaries whom Medicare allowed at least $5,000 each in 
physical therapy billed by physicians in 2004. In contrast, for the entire beneficiary 
population, Medicare allowed a median of $305 each for physical therapy billed by 
physicians in 2004. 
 	 The aberrances in billing patterns we observed cannot be explained by the specialties of 
providers who bill for excessive services. For example, only 4 of the 51 physicians who 
billed Medicare more than $1 million for physical therapy in 2002, 2003, or 2004 were 
physical medicine and rehabilitation or osteopathic manipulative therapy specialists.  
(See Appendix B.) 
Table 2: Selected Statistics for Physical Therapy Billed by Physicians in 2004  
 by Categories of Medicare Allowed Amounts 
Allowed  $1 to  $100,000 to  $500,000 to  $1 million 
per physician  $99,999  $499,999  $999,999  or more 
Total physicians  23,777  885  107  38 
Percent of physicians  95.85%  3.57%  0.43%  0.15% 
Percent of allowed physical therapy  38.85%  34.26%  13.92%  12.97% 
Median allowed per physician  $987  $163,127  $623,091  $1,419,803 
Source: Office of Inspector General analysis of Medicare claims data, 2005. 
THE INCIDENT TO RULE 
Physicians are not required to indicate on their claims if services were rendered incident to 
their professional services, and thus, the claims appear as if the physician personally rendered the 
services.  Therefore, in our medical review and our analysis of billing patterns, we could not 
measure the proportion of physicians claims that were rendered incident to nor could we 
determine whether qualified therapists rendered the service.   
Under the incident to rule, a physician can bill for an unlimited amount of physical therapy 
rendered at the same time, as long as the physician is directly supervising the staff rendering 
the services.  However, based on the medical record documentation provided by the sampled 
physicians, we could not confirm that physicians directly supervised the provision of the service 
because they are not required to document direct supervision of therapy.  In our analysis of 
billing patterns, we found that some physicians are billing physical therapy for dozens of 
beneficiaries daily, but we could not determine how many receive therapy at the same time, and 
therefore could not determine whether direct supervision for all of these services was physically 
possible. For example, 1 physician in our sample billed Medicare for physical therapy for an  Page 11  Leslie V. Norwalk 
average of 51 patients per day in 2002.  Among all physicians who billed Medicare for physical 
therapy in 2002,14 110 billed at least once for more than 50 patients per day.  
Finally, under Medicare, although staff that render physical therapy incident to physicians 
services need not be licensed, they are required to adhere to the same standards of care15 as 
independently practicing physical therapists.  However, because physicians medical records 
were documented inadequately, we could not confirm their compliance with these standards of 
care. 
CONCLUSION AND ITEMS FOR CONSIDERATION 
Under the incident to rule, Medicare allows physicians to bill for physical therapy that is 
rendered either by the physicians themselves or by their staff.  Until 2005, staff who rendered 
physical therapy in physicians offices did not have to be trained or licensed.  In 2005, CMS 
implemented a regulation that requires staff who render physical therapy in physicians offices 
have the same training as licensed physical therapists.  They still do not need to be licensed.  In 
addition, under the incident to rule, there is no limit on the number of therapy staff that 
physicians can supervise concurrently.  These conditions represent a vulnerability that could 
partially account for the noncovered and undocumented care described above and could be 
placing beneficiaries at risk of receiving services that do not meet professionally recognized 
standards of care.  Therefore, we believe that the requirements for physical therapy rendered in 
physicians offices, including licensure, should not differ with the requirements for therapy 
rendered in other settings, such as independently practicing physical therapists offices and 
nursing homes. 
In addition, given the vulnerabilities identified in our medical review as well as our analysis of 
physician billing patterns for physical therapy, CMS should consider revisions, clarifications, 
and further study of the incident to rule to ensure that Medicare beneficiaries are receiving 
skilled services from appropriately trained and licensed staff and that the services meet 
professionally recognized standards of care.  Under separate cover, we will forward information 
on the noncovered and undocumented services identified in our sample to CMS for appropriate 
action. 
We plan to continue to monitor Medicare payments for physical therapy and will conduct 
additional reviews in this area as warranted.  
If you have any questions about this summary of our review, please do not hesitate to call me or 
one of your staff may contact Tricia Davis, Director, Medicare and Medicaid Branch, at (410) 
786-3143 or through e-mail [Tricia.Davis@oig.hhs.gov]. 
14 This includes, but is not limited to, the physicians who appeared in our random sample of claims. 
15 Effective June 6, 2005, CMS requires that staff providing physical therapy incident to physicians services must be graduates 
of a qualified program of training in physical therapy. (Online CMS Manual System, Publication 100-02, chapter 15, section 
230.5. Accessed November 21, 2005.)  Page 12  Leslie V. Norwalk 
APPENDIX A 
Confidence Intervals for Selected Statistics 
95 Percent Confidence Intervals 
Estimated Allowed  Estimated Allowed 
Selected Statistics  Estimates  Services  Dollars 
(percent)  (in millions) 
Dollar 
Point  Estimate 
Estimates  Estimate  (in millions)  Lower  Upper  Lower  Upper 
What Medicare allowed  100%  $157.8  $148.5  $167.1 
Inappropriately paid services  91.2%  $136.0  84.4%  98.0%  $115.8  $156.3
  -Not medically necessary  26.4%  $33.0  15.9%  37.0%  $15.7  $50.4
  -Undocumented services  33.8%  $49.0  22.5%  45.2%  $29.2  $68.8
  -Incomplete or no plan of care  57.4%  $87.0  45.5%  69.2%  $64.2  $109.8 
Source: Office of Inspector General analysis of Medicare claims data, 2005.  Page 13  Leslie V. Norwalk 
APPENDIX B 
Physician Profiles:  Physicians Allowed More Than $1 Million for Physical 
Therapy Claims in 2001 and 2002 
Total Part B   Part B Beneficiary 
Physician 
Allowed Physical Therapy Claims  Statistics (2004) 
Total  Average 
Beneficiaries  Allowed 
Who Received  Physical 
Physical  Therapy Claims 
No.  Specialty  2002  2003  2004  Therapy  Per Beneficiary 
1  Internal Medicine  $   1,876,782   $   2,067,335   $    3,901,621   389  $          10,030 
Osteopathic Manipulative 
2  Therapy  $             163  $   1,727,941   $    3,873,463   221  $          17,527 
3  Pediatric Medicine $                - $      260,663  $    3,569,459   138  $          25,866 
4  Family Practice  $      378,670  $      742,025  $    3,160,019   328  $            9,634 
5  Internal Medicine  $      137,437  $   2,355,194   $    2,991,062   251  $          11,917 
6  Internal Medicine  $      174,925  $   1,379,520   $    2,770,288   198  $          13,991 
7  Family Practice  $      414,089  $   2,943,860   $    2,745,495   131  $          20,958 
8  Obstetrics/Gynecology $                - $                - $    2,304,814   185  $          12,458 
9  Family Practice  $   1,282,524   $   7,629,540   $    2,021,617   456  $            4,433 
10  Internal Medicine  $   1,414,012   $   1,698,609   $    1,775,549   400  $            4,439 
11  Internal Medicine  $                - $                - $    1,765,782   103  $          17,144 
Physical Medicine and 
12  Rehabilitation  $      377,629  $   1,328,291   $    1,683,338   699  $            2,408 
13  Family Practice  $                - $      549,832  $    1,675,719   980  $            1,710 
14  General Practice  $                - $      152,757  $    1,671,809   899  $            1,860 
15  Family Practice  $          5,395  $          6,368  $    1,620,016   577  $            2,808 
16  Family Practice  $      809,255  $      150,485  $    1,604,205   717  $            2,237 
17  General Practice  $      421,882  $      610,184  $    1,578,111   751  $            2,101 
18  Internal Medicine  $      638,291  $   1,609,510   $    1,496,640   278  $            5,384 
19  Family Practice  $   1,354,725   $   2,237,009   $    1,445,758   112  $          12,909 
20  Internal Medicine  $      519,960  $   1,010,853   $    1,393,847   62  $          22,481 
21  Internal Medicine  $   2,016,524   $   1,631,839   $    1,338,885   510  $            2,625 
22  Family Practice  $      945,352  $   1,665,354   $    1,319,578   1564  $               844 
23  General Practice  $      452,046  $   1,183,474   $    1,278,525   742  $            1,723 
Physical Medicine and 
24  Rehabilitation  $        99,221  $                - $    1,273,308   622  $            2,047 
25  Internal Medicine  $      327,561  $   1,068,519   $    1,247,487   585  $            2,132 
26  General Surgery  $      290,313  $      755,328  $    1,234,159   841  $            1,467 
27  Family Practice  $   1,170,425   $   1,234,733   $    1,222,831   663  $            1,844 
28  Family Practice  $   1,432,369   $   1,762,887   $    1,214,077   925  $            1,313 
29  General Practice  $                - $        51,062  $    1,149,140   464  $            2,477 
30  Family Practice  $                - $          3,613  $    1,122,661   869  $            1,292 
31  Internal Medicine  $   1,097,949   $   1,110,347   $    1,116,834   311  $            3,591  Page 14  Leslie V. Norwalk 
APPENDIX B 
Physician Profiles:  Physicians Allowed More Than $1 Million for Physical 
Therapy Claims in 2001 and 2002 (continued) 
Total Part B   Part B Beneficiary 
Physician 
Allowed Physical Therapy Claims  Statistics (2004) 
Average 
Total  Allowed 
Beneficiaries  Physical 
Who Received  Therapy Claims 
No.  Specialty  2002  2003  2004  Physical Therapy Per Beneficiary 
32  General Practice  $                - $          2,252  $    1,110,650  702  $            1,582 
33  General Practice  $      160,478  $        56,733  $    1,099,092  527  $            2,086 
34  General Practice  $      756,197  $   1,004,757  $    1,072,267  648  $            1,655 
Osteopathic Manipulative 
35  Therapy  $             108  $      360,466  $    1,043,992  84  $          12,428 
36  Internal Medicine  $      109,675  $      477,074  $    1,039,833  331  $            3,141 
37  Ophthalmology  $      652,059  $   1,097,927  $    1,022,585  267  $            3,830 
38  Internal Medicine  $        50,956  $      287,431  $    1,003,409  670  $            1,498 
39  Internal Medicine  $   1,167,398   $   1,201,513  $       939,284  450  $            2,087 
40  Internal Medicine  $      115,999  $   1,029,026  $       873,985  341  $            2,563 
41  Internal Medicine  $   1,073,827   $      514,978  $       563,536  386  $            1,460 
42  General Practice  $      921,636  $   1,090,810  $       525,272  565  $               930 
43  Internal Medicine  $   1,203,828   $   2,056,425  $       301,632  343  $               879 
44  Family Practice  $      407,647  $   2,124,714  $       300,544  217  $            1,385 
45  Internal Medicine  $   1,283,553   $      230,010  $       100,357  129  $               778 
46  General Practice  $   1,725,638   $   1,318,579  $         80,004  711  $               113 
47  General Practice  $      732,566  $   1,165,387  $         52,367  55  $               952 
48  Internal Medicine  $   1,088,169   $             808  $           5,368  12  $               447 
49  Family Practice  $      589,697  $   1,382,912  $              131  1  $               131 
50  General Practice  $   1,878,761   $                - $                 - 0  $                  -
51  Internal Medicine  $          2,362  $   1,605,499  $                 - 0  $                  -
Averages $      595,510  $   1,055,442  $    1,315,178                        439  $            5,129
Totals $ 31,562,055   $ 55,938,437  $  69,704,410  18,887 
Source: Office of Inspector General analysis of Medicare claims data, 2005.