Physical , Occupational, and Speech Therapy 
for Medicare Nursing Home Patients 
Medical Necessity and Qualiy of Care Based on Treatment Diagnosis 
August 2001 
OEI-09-99-00563 
Offce ofInspector General 
Offce of Evaluation and Inspections 
Region IX  DEPARTMENT OF HEALTH &. HUMAN SERVICES 
Office of Inspector General

Memorandum 
"IIQ 
AUG  3 2001 
Date 
From 
Subject OIG Final Report: "Physical, Occupational  Speech Therapy for Medicare Nursing 
and 
Home Patients: Medical Necessity and Quality of Car Based on Treatment Diagnosis 
OEI-09-99-00563 
Jacquelyn Y. Whte 
Acting Director, Office of Communcations 
and Operations Support 
Centers for Medicare and Medicaid Services 
Attached is our final report concernng the relationship between treatment diagnosis and the 
medical necessity and quality of Par B therapy services for Medicare nursing home patients. 
This information was requested by CMS staff durng our discussions about our reports on 
medical necessity, cost, and document of these therapy services. 
We found indications that the medical necessity oftherapy vared by treatment diagnosis. 
Although we were not able to identify specific diagnoses that were associated consistently 
with higher rates of medically unecessar therapy or poor quality of care, we believe that 
examining the relationships between treatment diagnosis and therapy in skilled nursing 
facilities is a promising approach. This data could be useful in guiding medical review and 
ensurng that all patients receive therapy that meets acceptable standards of care. 
If you have any questions, please call me or have your staff contact Stuar Wright at 
(410) 786-3144. 
Attachment  EXECUTIVE 
SUMMARY

PURPOSE 
To examine the relationship between treatment diagnosis and the medical necessity and 
quality of Medicare Par B physical, occupational, and speech therapy for skilled nursing 
facility patients. 
BACKGROUND 
Medicare coverage guidelines state that therapy must be reasonable, necessar, specific 
and effective treatment for the patient' s condition. Therapy must be ordered by a 
physician or other qualified health care practitioner, require the skills of a qualified 
therapist, and be dictated by a wrtten treatment plan. The treatment plan must include 
functional goals and a reasonable estimate of when patients will attain the goals. 
Medicare, Medicaid 1999 requires 
The  , and SCHIP Balanced Budget Refinement Act of 
the Centers for Medicare and Medicaid Services (formerly called known as the Health 
Care Financing Admnistration) to (I) recommend a process to assure the appropriate 
utilization of Medicare outpatient therapy; (2) establish an alternative payment policy 
based on diagnostic categories, fuctional status, and prior use of therapy; and 
(3) conduct focused medical reviews oftherapy services, with emphasis on claims for 
services provided to residents of skilled nursing facilities. To meet the requirement of the 
law, the Centers for Medicare and Medicaid Services (CMS) staff requested our 
assistance. 
Our national random sample consisted of 320 Medicare patients. We conducted on-site 
medical and financial reviews at 132 nursing homes, rehabilitation agencies, and hospital 
outpatient deparents nationwide. Several teams of physical and occupational therapists 
and speech-language pathologists reviewed medical records for the sampled patients. 
FINDINGS 
By diagnosis, the proportion of therapy that was not medically necessary ranged 
from 4 percent to 26 percent 
We found an overall difference in the receipt of medically unecessar therapy 
diagnosis. However, because of the relatively small number of episodes associated with 
each diagnosis, we were not able to state definitively which diagnoses would be more 
Treatment Diagnosis and SNF Therapy 
OEI-09-99-00563  likely to involve rnedically unecessar therapy. Among sampled patients, the proportion 
of medically unecessar units, when grouped in the 10 diagnostic categories, ranged 
from approximately 4 percent for ortopedic and back disorder patients to approximately 
25 percent for stoke patients. 
CONCLUSION 
In our sample, we found indications that the rnedical necessity of therapy vared by 
treatment diagnosis. Although we were not able to identify specific diagnoses that were 
associated consistently with higher rates of medically unecessar therapy or poor quality 
of care, we believe that examinig the relationships between treatment diagnosis and 
therapy in skilled nursing facilities is a prornsing approach. Targeting those diagnoses 
that are most vulnerable may help to guide medical review and ensure that all patients 
receive therapy that meets acceptable standards of care. 
AGENCY RESPONSE

We received comments on the three draft reports on therapy services from the CMS. 
Although this report does not contain any recommendations, CMS concured with the 
recommendations offered in the two companon reports. The full text of the Agency 
comments appears in appendix D. 
Treatment Diagnosis and SNF Therapy 
OEI-09-99-00563  .. .. . . .. . . .  . . . . . . . . . . . . . . . . .. . .. 
. . . ...   ...   ....    ....    ....    ....    ....    ....   . .. .  .. .  .. ....     .....    .....    .....     ....    ....   . ..   ....    .....     ......      ......      ......     . .... .   .  ... ..   . . .. . .  . ... .  .   .......       .......       .......       .......       .......       .......      . .... .    .. ...  .   ... ..    . .....      ......      ......      ......      .....     .....     ....  .  ... .   . ... .   . ... .   . ....     .....     .....     .....     .....    .. . .  .. ..   . ... .   . .. .  . . . ..   ...   ...   ...  . ...   ... . 
TABLE OF CONTENTS 
PAGE 
EXECUTIVE SUMMARY. 

.. 4

INTRODUCTION. 
FINDINGS.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Diagnosis and medical necessity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Diagnosis and appropriate therapy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . 12

CONCLUSION.  . . . . . . . . . . . . . . . . . . . . . . . . . . 14

APPENDICES. 
A: Diagnostic Categories. . . . . 
. . . . . . . . 15

B: Number of Therapy Episodes by Diagnosis. . . . . 

C: Confidence Intervals for Selected Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

D: Agency Comments. . . . . . . . .  . . . . . . . 27

Treatment Diagnosis and SNF Therapy 
OEI-09-99-00563  INTRODUCTION

PURPOSE 
To examine the relationship between treatment diagnosis and the medical necessity and 
quality of Medicare Par B physical, occupational, and speech' therapy for skilled nursing 
facility patients. 
BACKGROUND 
Medicare Coverage Guidelines for Part B Physical , Occupational, and Speech 
Therapy 
Medicare guidelines state that all therapy must be reasonable, necessar, specific, and 
effective treatment for the patient's condition. Policies developed by the Centers for 
Medicare and Medicaid Services (formerly known as the Health Care Financing 
Adminstration or HCF A), the federal agency that administers the Medicare program 
require that therapy (I) is ordered by a physician or other qualified health care 
practitioner, (2) requires the skills of a qualified therapist rather than nonskilled nursing 
home staff, (3) is provided either by or under the direct supervision of a certified therapist 
(as defined in State law), and (4) is dictated by a written treatment plan. 
Medicare coverage also requires that the therapy meet the following conditions: 
the wrtten treatment plan includes specific and measurable treatment goals related to 
the patient's condition along with a reasonable time estirnate of when those goals will 
be achieved; 
the treatment plan describes the specific therapeutic interventions that will be used to 
restore the patient s levels of fuction that has been lost or reduced by illness or 
ilJUry; 
the amount, frequency, and duration of therapy must be reasonable and necessar for 
the patient's condition;

therapy must be provided with the expectation, based on the assessment made by the

therapist, physician, or non-physician staff member (nurse practitioner, physician

assistant, or clincal nurse specialist) of the patient's restoration potential , that the

Thoughout this report, we will refer to speech-language pathology as speech therapy. 
Health Care Financing Administration  Skiled Nursing Facility Manual  Sections 214, 230 
230. 3(c), and 271. 
Treatment Diagnosis and SNF Therapy 
OEI-09-99-00563  patient' s condition will improve substantially in a reasonable and generally 
predictable period of time, or the therapy must be necessar for the establishment of a 
safe and effective maintenance program. Therapy only will be covered until the 
physician and/or therapist concludes that the patient is not going to improve; and 
the patient is seen by the physician or non-physician staff member at least every 
30 days. 
The Therapy Caps 
1997 changed skilled nursing facility 
Section 4541(c) of the  Balanced Budget Act of 
(SNF) reimbursement for physical, occupational, and speech therapy by setting an anual 
cap for Medicare Par B patients. Effective Januar I , 1999, occupational therapy was 
limited to $1 500 anually, while physical and speech therapy shared the same $1 500 
anual cap. 
Medicare, Medicaid, and SCHIfF Balanced Budget Refinement Act

Section 221 of the 
1999, passed in November 1999, suspended the cap for 2 years effective

of 
Januar 1 , 2000. Section 22 I (c)(2) of the legislation requires the Centers for Medicare

and Medicaid Services (CMS) to (I) recommend a mechansrn to assure the appropriate

utilization of Medicare outpatient therapy and (2) establish an alternative payment policy

based on diagnostic categories, fuctional status, and prior use oftherapy.

Focused Medical Review 
The law also mandated th t the Secretar conduct focused rnedical reviews of Par B 
therapy clairns , with an emphasis on SNF claims in calendar years 2000 and 2001. In 
October 2000, CMS launched a Program Safeguard Contract for therapy to (I) analyze 
curent national and local medical review policies; (2) conduct extensive literatue 
review, analysis, and abstraction; (3) interview fiscal intermediares and therapy 
providers; and (4) develop medical review protocol for the fiscal intermediares. 
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 
Section 421 of the 
Act of 2000  passed in November 2000, extended the moratorium on the therapy caps for 
another year, through calendar year 2002. The law also extended the requirement for 
focused review of SNF therapy claims until year 2003. 
State Children s Health Insurance Program. 
The Social Security Act  Section 1833(g) as amended. 
Treatment Diagnosis and SNF Therapy  OEI-9-99-00563  Recent Offce of Inspector General Work on Patient Diagnosis and SNF Therapy 
The Office of Inspector General released a memorandum report in October 1999 
concerng physical, occupational, and speech therapy provided to Medicare patients in 
skilled nursing facilities. This report examined estirnated physical, occupational, and 
speech therapy reimbursement per SNF stay durng calendar year 1998. The report also 
examed the relationship between therapy reimbursement and patient diagnosis before 
the transition from cost-based reimbursement to the Par B fee schedule. Members ofthe 
therapy communty had expressed concerns that SNF patients who are hospitalized for 
strokes or hip fractues may require signficantly more therapy than others. According to 
the report, preliminar analysis indicated that patients with these diagnoses were slightly 
more likely to receive at least $1500 in occupational therapy or combined physical and 
speech therapy in calendar year 1998. 
METHODOLOGY 
Selection of Sampled SNF Part B Therapy Patients 
From the Medicare Common Working File, we extracted all Par B physical 
occupational, and speech therapy clairns processed by Medicare fiscal intermediares' for 
services provided to nursing home patients. We identified beneficiares as nursing home 
patients if(l) the nursing home submitted the therapy claims or (2) beneficiares were 
identified as residents in the CMS minimum data set. These claims were submitted to 
fiscal intermediares by nursing homes, rehabilitation agencies, and hospital outpatient 
deparents for therapy initiated between Januar 1 and June 30  1999. We limited the 
extract to the continental United States. 
We used a multi-stage stratified cluster sampling approach to select 320 nursing home 
patients who received Par B therapy during the first 6 months of calendar year 1999. 
We reviewed 318 of320 medical records. Two records were missing because the nursing 
horne closed before our review, and the corporate owner could not retreve the records 
from storage. 
Fiscal inteTIediaries are the insurance companies that pay Medicare claims for hospitals 
skilled nursing facilities, and home health agencies. 
6por more details on sample selection, refer to the Methodology section of our report Physical 
00560), July 2001. 
Occupational, and Speech Therapy for Nursing Home Patients: Medical Necessity and Cost under the 
(OEI-09-99-
$1500 Caps 
Treatment Diagnosis and SNF Therapy 
OEI-09-99-00563  On-Site Medical Review 
Several teams of certified and/or licensed physical and occupational therapists and 
speech-language pathologists conducted on-site review of the medical records for the 
national random sample. Reviewers assessed the medical necessity, underutilization 
overutilization, and quality of care of therapy provided in calendar year 1999. 
Claims Analysis

We analyzed the Par B physical, occupational, and speech therapy claims subrnitted for 
the sampled patients. For each patient, we extracted clais that were submitted for 
therapy initiated between Januar I and June 30, 1999. 
We analyzed the claims by individual therapy units and clusters of therapy unts. 
individual "unt" of physical, occupational, or speech therapy constitutes one 15-minute 
session oftherapy. Clusters of therapy unts were grouped into "episodes oftherapy.,,7 
An episode of therapy consists of a series of continuous therapy unts tied to a physician 
order, specific diagnosis, treatment plan, and set of patient goals. An episode of therapy 
may last a few days or a few months. 
Medical Necessity and Quality of Care 
Using strctued review instrents, medical reviewers determined the medical necessity 
and quality of therapy care received by SNF patients. Reviewers examed medical 
records and treatment logs to determine which ofthe therapy unts provided to patients 
were either medically necessar or unecessar. Within each episode oftherapy, medical 
reviewers assessed the quality of care received by patients according to four criteria. 
Reviewers determined whether or not: 
therapy was provided when needed;

therapy was provided with the appropriate frequency and duration;

therapy was adminstered by providers with the appropriate skill level; and

the patient reached treatment goals, defined as what the therapist or physician expects

the patient to achieve as a result oftherapy.

Treatment Diagnosis

Medical reviewers examned patients' records to identify treatment diagnoses for each 
episode of therapy. Reviewers used information contained in physicians' therapy orders 
7 Also 
referred to as "episodes of care. 
Health Care Financing Administration Medicare Intermediary Guidelines  Section A3 3904C5 
under Medical Review of Part B Intermediary Outpatient Bils. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  " "
, and therapy evaluations to determine the primar 
notes wrtten by physicians and nurses
diagnosis indicating the need for physical, occupational, or speech therapy. Patients who 
received therapy durng more than one episode of care may have had a different primar 
treatment diagnosis for each episode. 
priar  9 Among 
We grouped  treatment diagnoses into I of 11 diagnostic categories. 
others, the categories include "stroke  neurologic disorders," and "hip fractues." An 
eleventh category includes all other diagnoses that are not included in I ofthe 10 major 
categories. These categories were created to differentiate patients according to expected 
rehabilitation requirements. We conducted all analyses involving patient diagnosis using 
this classification system. 
This report is one in a series ofreports on physical, occupational, and speech therapy for

Medicare SNF patients. The first report Physical, Occupational, and Speech Therapy for

Medicare Nursing Home Patients: Medical Necessity and Cost under the $1500 Therapy

(OEI-09-99-00560), focuses on the medical necessity and cost of Medicare Par B

Caps 
therapy while the $1500 anual caps were in place. A cornpanon report Physical

Occupational, and Speech Therapy for Nursing Home Patients: Medical Record

(OEI-09-99-00562), details rnedical record documentation

Documentation and Biling 
and Par B billing practices identified in our sample.

Our review was conducted in accordance with the  Quality Standards for Inspections 
issued by the President' s Council on Integrty and Effciency. 
See appendix A for a detailed description of the diagnostic classification system. This system 
was developed by the Rand research team that developed the Functional Related Groups classification 
system. See Joan L. Buchanan Outpatient Institutional 
, 1. David Rumpel & Helen Hoenig, 
Rehabilitation Services 1987-1990: Who provides them and how do they compare?  Supported by CMS. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  " "
FINDINGS
By diagnosis, the proportion of therapy that was not 
medically necessary ranged from 4 percent to 26 percent 
Primar treatment diagnoses were identified and grouped according rnajor diagnostic 
' priar 
categories. Durng on-site SNF visits, medical reviewers identified patients 
lO for each episode of therapy. II 
treatment diagnoses  We then classified these treatment 
diagnoses into II diagnostic categories.

Among others, the diagnostic categories include "stroke  neurological disorders " and 
hip fractues." An eleventh category includes all other diagnoses that are not included in 
any of the 10 major categories. Sampled patients who were in this category had 
diagnoses such as general debility, decreased 
fuctional mobility, and muscle wasting. 
Among sampled patients, approximately 52 percent of their therapy episodes fell into the 
priar 
neurological disorders" category. 13 This category includes such  treatment 
diagnoses as dysphagia, abnormality of gait, and Parkinson s Disease. With the 
exception of the "musculoskeletal" (11.4 percent) and the "other 6 percent) 
" (13.
categories, each of the remainig categories accounted for less than 10 percent of the 
therapy episodes in our sample. The categories of "back" and "cardiovascular" were the 
least common, with only 2.4 percent each. 
In approximately 40 percent ofthe therapy episodes, a secondar diagnosis contrbuted to 
the patients' need for therapy. For example , some patients received therapy related to a 
stroke or a musculoskeletal or cardiovascular disorder even when this condition was not 
their primar treatment diagnosis. Whle stroke was the primar treatment diagnosis in 
approximately 7. 1 percent of episodes, patients received some therapy related to a stroke 
approxirnately 11.5 percent of the time. Similarly, a musculoskeletal disorder contrbuted 
Diagnosis or treatment diagnosis refers to patients' primary treatment diagnosis for a particular 
episode of therapy. 
An episode of therapy or episode of care consists of a series of continuous therapy units tied to 
a physician order, specific diagnosis, treatment plan, and set of patient goals. 
See appendix A for a detailed description of the diagnostic classification system. We excluded 
diagnoses that comprised less than 2 percent of all therapy episodes fTom our analyses. These diagnoses 
include spinal cord injury (1.7 percent), amputation and deformities (0 percent), and rehabilitation 
(0 percent). 
13 Appendix B lists the number of therapy episodes for sampled patients by diagnosis. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  to patients' need for therapy in approxirnately 21. 9 percent of all episodes although it was 
patients' primar diagnosis only 11.4 percent of the time. 
We identified a relationship between diagnosis and medical necessity; " however, because 
of the relatively small number of episodes associated with each diagnosis, we were not 
able to state defitively which diagnoses would be more likely to involve medically 
unecessar therapy. As noted in the following char, the proportion of medically 
unecessar unts, when grouped in the 10 diagnostic categories, ranged from 
5 and back disorder patients to approximately 
approximately 3.9 percent for ortopedic 
24.4 percent for stoke patients. 
Medical Necessity Varied by Diagnosis 
:: 20 
1! 10 
StroNekureo logic Back Disorders Musculoskeletal Other
Hip Fractures Cardiovascular Orthopedic 
Diagnostic CategorlBS 
Source: Offce of Evaluation and Inpections, 2001 
''is is based on a chi-square test for differences among diagnostic categories in the percent of 
units medically unecessar. The difference was significant at the 95 percent confidence level 
(p-value = 0.027). 
15 An orthopedic diagnosis includes bone fractues (other than hip), joint replacement, and 
dislocations. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  Stroke patients frequently received unnecessary therapy 
Stroke patients often received therapy that was not medically necessar. Medical 
reviewers found that stroke patients received medically unecessar therapy for several 
reasons: 
Sorne stroke patients simply received too much therapy. They received therapy more 
frequently than was required in the same day or in the course of a week. One patient 
repeatedly received more than four physical therapy unts each day. According to 
medical reviewers, this was unecessar and excessive. 
In other situations, stroke patients did not require the skilled care that therapists 
provided. For example, following an initial evaluation one patient received an 
additional 32 units of therapy from a speech therapist over the course of2 weeks. 
Medical reviewers indicated that ths patient needed care only from the SNF staff. 
Therapists often failed to adjust stroke patients' treatment plans even when they no 
longer benefitted from additional therapy. For example, one stroke patient received 
2 weeks of medically necessar physical therapy. He continued to receive therapy 
according to his original plan of care for another 4 months, despite the fact that he 
received no objective re-evaluations and showed no significant progress durng this 
time. 
Approximately 26 percent of therapy units biled for patients in the catchall 
diagnostic category labeled " other" were medically unnecessary 
According to medical reviewers, patients in the "other" category received unecessar 
therapy for reasons sirnilar to stroke patients: 
Some patients received more therapy than they needed. Two patients received too 
much physical therapy in a given day, whereas another patient received too much 
physical therapy for her paricular treatment goals. One patient with decreased 
fuctional ability received 64 unts of unecessary physical 
therapy, almost twice the 
number of necessar unts that this patient received. 
Other patients received therapy that was inappropriate for their treatment goals or 
progress rate. One patient received occupational therapy that was not sufficiently 
planed. As a result, this patient was not able to progress towards stated treatment 
goals. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  Across all diagnoses, the majority of patients benefitted from 
appropriate therapy without exceeding the caps 
Regardless of diagnosis, the majority of patients reached their goals 
Medicare coverage guidelines require that therapy is provided with the expectation that 
the patient' s condition will improve substantially in a reasonable period of time. To meet 
ths requirement, therapists, physicians, or non-physician staff members (nurse 
practitioners, physician assistants, or clincal nurse specialists) conduct an assessment to 
determne what improvements can be expected as a result of therapy. Based on the 
assessment, a written treatment plan is developed which is incorporated in the patient's 
record. This plan must include specific and measurable treatment goals related to the 
patient's condition and an estirnate of when the goals will be achieved. 
During SNF visits, medical reviewers examed treatment plans for each episode of 
therapy to determne whether or not patients reached their treatment goals. Reviewers 
found that the majority of patients achieved their treatment goals by the end oftheir 
therapy episodes. In our sample, the proportion of episodes in which patients reached 
treatment goals ranged from approximately 90 percent for ortopedic patients to 
approximately 57 percent for stroke patients. 
The duration and frequency of therapy was appropriate for most patients 
regardless of diagnosis 
According to medical reviewers, patients received therapy for the length of time that was 
appropriate for their medical condition and treatment goals. On average, patients 
required no additional therapy by the end of approximately 82 percent of therapy 
episodes. The proportion of episodes in which patients required no additional therapy 
ranged from 99 percent for back patients to 75 percent for orthopedic patients. 
Although patients received enough therapy in most episodes, medical reviewers identified 
some episodes in which patients did not. In some cases, it was a rnatter of frequency 
rather than duration. For example, one patient received occupational therapy three times 
a week although, according to medical reviewers, he should have received therapy five 
times a week (with a 2 week rest) until all treatment goals were met. 
16 Among episodes in which medical reviewers were able to determine whether or not patients 
reached their goals. 
17 Among episodes in which medical reviewers were able to determine whether or not patients 
required additional therapy. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  In other episodes, therapists prematuely discontinued therapy. They terminated therapy, 
someties without providing a clear reason in patient records, even though it continued 
to benefit patients' fuctional performance. 
Few patients of any diagnosis exceeded the $1500 therapy caps 
Regardless of diagnosis, patients rarely reached or exceeded the therapy caps durng the

fist 6 months of 1999. As noted  Physical, Occupational, and Speech

in the report 
Therapy for Nursing Home Patients: Medical Necessity and Cost under the $1500

(OEI-09-99-00560), approximately 0.5 percent of all patients reached or

Therapy Caps 
exceeded the $1500 occupational therapy cap, and approximately 1. 7 percent of all

patients reached or exceeded the shared $1500 physical and speech therapy cap.

with 
Similarly,  individual diagnostic categories, relatively few patients reached or

exceeded either ofthe therapy caps. As noted in the following table, with each

diagnostic category fewer than 6 percent of patients reached the occupational therapy cap

and fewer than 7 percent of patients reached the shared physical and speech therapy cap.

FEW PATIENTS EXCEEDED THE THERAPY CAPS 
Percent Who Reached or Exceeded 
the Therapy Cap 
Diagnosis 
Shared Physical 
Occupational 
and Speech 
Stroke 
Neurologic  1.6 
Hip Fracture
 1.5 
Back 
Cardiovascular 
Musculoskeletal 
Orthopedic 
Other  5.4 
Source: Offce of Evaluation and Inspections, 200 1 
Due to the small number of individuals in our sample who reached the therapy caps, we were 
not able to perfonn the chi-square test to identify differences in the likelihood of reaching the cap by 
diagnosis. Based on the confidence intervals in appendix C, it does not appear that these differences are 
statistically significant. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  CONCLUSION
Although we found evidence that medical necessity vared by diagnosis, we were not able 
to identify specific diagnoses that were associated consistently with higher rates of 
medically unecessar therapy or poor quality of therapy care. Targeting specific 
diagnoses for focused medical review could be a cost-effective way of identifyng therapy 
that is not medically necessar or does not meet acceptable standards of care. By 
isolatig those diagnoses that are most vulnerable, CMS could ensure that medical review 
resources are reserved for situations that are most likely to yield results. 
AGENCY RESPONSE 
We received comments on the three draft reports on therapy services from CMS. 
Although ths report does not contai any recommendations, the Agency concurred with 
the recommendations offered in the two companon reports. The full text of the Agency 
comments appears in appendix D. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  APPENDIX A 
Diagnostic Categories 
Stroke 
342  Hemiplegia 
430  Subarachnoid hemorrhage 
431  Intracerebral hemorrhage 
432  Intracranial hemorrhage 
433  Occlusion and stenosis of precerebral areries 
434  Occlusion of cerebral arteries 
436  Acute, but ill-defmed, cerebrovascular disease 
437  Other and il-defined cerebrovascular disease 
438  Late effects of cerebrovascular disease 
784.  Aphasia 
(A) 
Spinal Cord Injury 
806 
Fractures and injury without fracture
907.2 Fractue of vertebral column with spinal cord injur
952 
Late effect of spinal cord injur
injur 
Spinal cord injur without evidence of spinal bone 
(B)  Nontraumatic and other spinal cord damage

192.  192.3  Malignant neoplasm of spinal cord and meninges

225.  225.4  Benign neoplasm of spinal cord and meninges

324.  Intraspinal abscess

335  Anterior horn cell disease

336  Other diseases of spinal cord

344  Other paralytic syndromes

741  Spina bifida

(A) 
Neurologic Disorders 
800 
Fractures and concussions
801 
Fractue of vault of skull
803 
Fractue of base of skull
804 
Other and unqualified skull fractures
850 
Multiple fractues involving skull or face 
851 
Concussion
Cerebral laceration and contusion 
853 
852 Subarachnoid, subdural or extradural hemorrhage following injur
854 
Other and unspecified Intracranial hemorrhage following injur
Intracranial injury of other and unspecified natue 
905.  Late effect of fractue of skull and face bones 
907.  Late effect of Intracranial injur without skull fractue 
Table modified from Debra A. Dayoff & Victoria Barghout  Comprehensive outpatient 
rehabilitationjacilties data analysis December 1999, Supported by CMS 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  APPENDIX A 
(B) 
Neurologic Disorders (continued)
191 
Nontraumatic and other brain damage
Malignant neoplasm of brain
192.  Malignant neoplasm of cerebral meninges
198.  198.4 Secondary malignant neoplasm of brain and meninges
225.  225.  Benign neoplasm of brain, cranial nerves, and meninges
237.  237.6 Neoplasm of uncertain behavior in the brain and meninges
23391.  0.2 Neoplasm of unspecific behavior in the brain
Postconcussion syndrome
045 
997.  Central nervous system complications (anoxic brain damage)
053 
Acute poliomyelitis
138 
Herpes zoster
294 Late effects of acute poliomyelitis
310 
290- Organic psychotic conditions
Specific nonpsychotic mental disorders due to organic brain
damage
315  Specific delays
316  Psychic factors associated with diseases classified elsewhere
317-319  Mental retardation
320-323  Meningitis, encephalitis, myelitis, encephalomyelitis
324.  Intracranial abscess
324.  Extradural or subdural abscess
325  Phlebitis and thrombophlebitis of Intracranial venous sinuses
326  Late effects of Intracranial abscess
330-331  Cerebral degenerations
332  Parkinson s disease 
333  Other extra pyramidal disease and abnormal movement disorders
334  Spinocerebellar disease
337  Disorders of the autonomic nervous system
340  Multiple sclerosis
341  Other demyelinating diseases of the central nervous system
343  Infantile cerebral palsy
345  Epilepsy
346  Migraine
348  Anoxic brain damage and other conditions of the brain
349  Other and unspecified disorders of nervous system
350  Trigeminal nerve disorders
351  Facial nerve disorders
352  Disorders of the cranial nerves
353  Nerve root and plexus disorders
354  Mononeurtis of upper limb and mononeuritis multiplex
355  Mononeuritis ofIower limb
356  Heredity and idiopathic peripheral neuropathy
357  Inflammatory and toxic neuropathy
358  Myoneural disorders
359  Muscular dystrophies and other myopathies
386  Vertginous syndromes and other disorders of vestibular system
742  Other congenital anomalies of nervous system
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563 APPENDIX A
Neurologic Disorders (continued) 
788 
780- General and specific body systems 
907.39-9507.7   Late effect of injures to the nervous system 
950- Injur to nerves and spinal cord 
V45.  Presence of cerebrospinal fluid drainage device 
808 
Hip Fractures 
820 
Fractue of pelvis 
821 
Fractue of neck of femur
905.3 Fractue of other, unspecified part of femur
Late effect of fracture of neck of femur 
720 
Back Disorders 
721 
Anlosing spondylitis
722 
Spondylosis and allied disorders 
723 
Intervertebral disc disorders 
724 
Other disorders of cervical region
Other disorders of back 
77333.  3.1 Osteoporosis 
737 
805 Pathological fractue
Curatue of spine
Fractue of vertebral colun 
88349 6Ot her without spinal cord injur
, multiple and il-defined dislocations 
847 
Sprains and strains of sacroiliac region
Sprains and strains of other and unspecified par of back 
905.  Late effect of fractue of spine and 
(A) 
Amputation and Deformities 
896 
Traumatic amputation 
897 
Traumatic amputation of foot (partial)
Traumatic amputation ofleg(s) (partial) 
(B)  Acquired deformities 
736.3  Acquired deformities of hip 
736.  736.  Acquired deformities of lower limbs 
738.  738.  Other acquired deformities 
754  Certain congenital musculoskeletal deformities 
755.  Reduction deformities of lower limb 
755.  Other anomalies of lower limb 
905.  Late effect of traumatic amputation 
997.  Late amputation stump complication 
V52.  Fittng and adjustment of artificial leg 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00S63  APPENDIX A
(A) 
Cardiovascular Disorders

402 
Circulatory disorders 
410 
Hypertensive heart disease
412 
Acute myocardial infarction
413 
Old myocardial infarction 
414 
Angia pectoris
Other forms of chronic ischemic disease 
416 
415.  Acute cor pulmonale
429 Chronic pulmonar heart disease 
81 
420- Other forms of heart disease 
785 
442. Aneursm of artery of neck
Symptoms involving cardiovascular system 
(B)  Pulmonary disorders 
415.  Pulmonary embolism and inarction 
490-496  Chronic obstrctive pulmonary disease 
500-508  Pneumoconioses and lung diseases from external agents 
518  Other diseases oflung 
786  Symptoms involving respiratory system and other chest symptoms 
799.  Respiratory failure 
(A) 
Rehabiltation
Therapy for unspecified agents 
VV575.  7.2 Other physical therapy

Occupational therapy and vocation rehabilitation

V57.  Speech therapy

V57.  Other specified rehabilitation procedure

V57.  Unspecified rehabilitation procedure

(A) 
Musculoskeletal and soft tissues 
714 
Arthritis

715 
Rheumatoid arthrtis and other inflammatory polyartopathies

716 
Osteoarhrosis and allied disorders
717 
Other and unspecified arthropathies 
718 
Internal derangement oflmee 
719 
Other derangement of joint
274 
Other and unspecified disorder of joints
Gout 
(B)  Burns 
941  Bur of face, head and neck 
942  Bum of trnk 
943-944  Bur of upper limbs, wrsts, and hands 
945  Bur of lower limbs 
946  Burs of multiple specified sites 
948  Burs classified according to extent of body surface involved 
949  Bum, unspecified 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  APPENDIX A
(C) 
Musculoskeletal and soft tissues (continued)
451 
Soft tissues
454 
Phlebitis and thombophlebitis
709 Varicose veins oflower extremities 
680-739 Diseases of the skin and subcutaeous tissue
710-848 Diseases of the musculoskeletal system and connective tissue

840-887 Sprains and strains of joints and adjacent muscles

880-897 Open wound of upper limb

890-904 Open wound oflower limb

905 
900- Injur to blood vessels

919 Late effect of musculoskeletal and connective tissue injures

912-924 Superficial injuries
920-929 Contusion with intact skin surface

925-934 Crushig injur

930- Effects of foreign body entering though orifice

959.  Injur to shoulder and upper 

959.  Injur to Imee, leg, ankle and foot

V53.  Ortopedic devices 
Orthopedic 
V43.  Joint replacement 
V54  Other orthopedic aftercare 
802  Fractue of face bones 
805  Fractue of vertebral colum without mention of spinal cord injur 
, lary 
807  Fractue of ribs, sternum and trachea 
trk 
809  ll-defined fTactures of bones of 
810-819  Fracture of upper limb 
823  Fracture of tibia and fibula 
824  Fractue of anke 
825  Fracture of one or more tarsal and metatarsal bones 
826  Fractue of one or more phalanges of foot 
827  Other, multiple and il-defined fTactues oflower limb 
828  Multiple fTactues involving both lower limbs, lower with upper 
limb and lower limbs with ribs and sternum 
829  Fracture of unspecified bones 
830-839  Dislocation 
Other 
All codes not elsewhere specified 
Treatment Diagnosis and SNF Therapy OEI-09-99-00563  APPENDIX B

Number of Therapy Episodes by Diagnosis 
The following table shows the number of therapy episodes for sampled patients by 
primar treatment diagnosis. 
Primary Treatment Dial!Dosis  Number of EDisodes 
Stroke 
Spinal Cord Injur

Neurologic disorder  255 
Hip fractue

Back disorder
Amputation and defonnity
Cardiovascular disorder
Rehabilitation
Musculoskeletal and soft tissues
Orthopedic disorder
Other 
Reviewer could not detennine diagnosis 
TOTAL"o 
609 
Tbe total number of episodes is greater than the number of sampled patients because patients 
may have received therapy during more than one episode 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  APPENDIX C
Confidence Intervals for Selected Statistics 
The following tables show the point estimates and 95 percent confdence intervals for 
selected statistics, in the order that they appear in the report. These calculations account 
for all levels of clustering and stratification as described in the methodology. 
Point  95 Percent 
Statistic 
Estimate  Confidence Interval 
2I percent in which priar 
Of therapy episodes  treatment 
1% - 11.% 
diagnosis was stroke 
Of therapy episodes, percent in which primar treatment 
1.7%  0% - 3. 
diagnosis was spinal cord injur 
, percent in which primary treatment 
Of therapy episodes
52.  38. 8% - 65.2%
diagnosis was neurologic disorder 
Of therapy episodes, percent in which primary treatment 
5.1%  0% - 10.2% 
diagnosis was hip fractue 
Oftherapy episodes, percent in which primary treatment 
2.4%  0% - 4.
diagnosis was back disorder 
Of therapy episodes, percent in which primary treatment 
N/A*
diagnosis was amputation and deformity 
Of therapy episodes, percent in which primar treatment 
2.4%  1%-
diagnosis was cardiovascular disorder 
Of therapy episodes, percent in which primar treatment 
N/A*
diagnosis was rehabilitation 
Of therapy episodes, percent in which primar treatment 
11.4%  6.1 %-16.
diagnosis was musculoskeletal and soft tissues 
Of therapy episodes , percent in which primary treatment 
0%-
diagnosis was orthopedic disorder 
Of therapy episodes, percent in which primary treatment 
13.  8.1 % - 19. 
diagnosis was "other 
* Could not be calculated because there were no patients with this primary diagnosis in our sample. 
21 Among episodes in which medical reviewers identified a primary treatment diagnosis. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  APPENDIX C

Point  95 Percent 
Statistic 
Estimate 
Confidence Interval 
Of January - June 1999 therapy units for stroke patients 
24.4%  2% - 43.
percent that were not medically necessary
Of January - June 1999 therapy units for neurologic 
13.  1%. 20.
patients, percent that were not medically necessary
Of January - June 1999 therapy units for hip fracture 
12.  0% - 26.
patients, percent that were not medically necessary
Of January - June 1999 therapy units for back patients 
0% - 10.4%
percent that were not medically necessary
Of January - June 1999 therapy units for cardiovascular 
19.  0% - 43.4%
patients, percent that were not medically necessary
Of January - June 1999 therapy units for musculoskeletal 
and soft tissues patients, percent that were not medically  0%- 17.
necessar
Of January - June 1999 therapy units for orthopedic 
1. % - 6.
patients, percent that were not medically necessary
Of January - June 1999 therapy units for patients in 
other" category, percent that were not medically  25.  6.5% - 45.
necessar
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563 APPENDIX C
Point  95 Percent 
Statistic 
Estimate  Confidence Interval 
Of stroke episodes 22 percent in which patient reached 
56.  23. 1% -90.4% 
treatment goals 
Of neurologic episodes, percent in which patient reached
67.  59.3% - 76.4%
treatment goals 
Of hip fractue episodes, percent in patient reached 
62.4%  44.9% - 80.
treatment goals 
Of back episodes, percent in which patient reached 
64.2%  15.5% - 100%
treatment goals 
Of cardiovascular episodes, percent in which patient 
67.  26.4% - 100%
reached treatment goals 
Of musculoskeletal episodes, percent in which patient 
79.  65.2% - 93.
reached treatment goals 
Of ortopedic episodes, percent in which patient reached 
89.5%  74.0% - 100%
treatment goals 
Of "other" episodes, percent in which patient reached
treatment goals  76.  60.7% - 91.5%
22 Among episodes in which medical reviewers were able to determine whether or not patients 
reached their goals. 
Treatment Diagnosis and SNF Therapy OEI-09-99-00563  APPENDIX C

Point  95 Percent
Statistic 
Estiate 
Confidence Interval 
2J percent in which patient required no 
Of stroke episodes 
85.  60.0% - 100%
additional therapy 
Of neurologic episodes, percent in which patient required 
89.  80.7% - 98.
no additional therapy 
Of hip fractue episodes, percent in which patient 
80.  57.2% - 100%
required no additional therapy 
Of back episodes, percent in which patient required no 
98.  95. 7% - 100%
additional therapy 
Of cardiovascular episodes, percent in which patient 
94.  83. 8% - 100%
required no additional therapy 
Of musculoskeletal episodes, percent in which patient 
97.  94.4% - 100%
required no additional therapy 
Of ortopedic episodes, percent in which patient required 
74.  52.2% - 97.
no additional therapy 
Of "other" episodes , percent in which patient required no 
78.1 %  55. 6% - 100% 
additional therapy 
23 Among episodes in which medical reviewers were able to determine whether or not patients 
required additional therapy. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  \.%
APPENDIX C
Point  95 Percent 
Statistic 
Estimate  Confidence Interval 
Of stroke patients, percent who reached the occupational 
1.%  0% - 11.9%
cap durng the review period 
Of neurologic patients , percent who reached the 
0% - \.%
occupational cap during the review period 
Of hip fractue patients , percent who reached the 
1.5%  0% - 4. 
occupational cap durig the review period
Of back patients, percent who reached the occupational 
0% - 20. 
cap durng the review period 
Of cardiovascular patients, percent who reached the 
0% - 3.4% 
occupational cap during the review period 
Of musculoskeletal patients, percent who reached the 
NA* 
occupational cap durng the review period 
Of orthopedic patients, percent who reached the 
0%-
occupational cap durng the review period 
Of "other" patients, percent who reached the occupational 
0% - 2.4% 
cap durng the review period 
priar 
. Could not be calculated because none of the sampled patients with ths  diagnosis reached the cap. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  APPENDIX C
Point  95 Percent
Statistic 
Estimate  Confidence Interval 
Of stroke patients, percent who reached the combined cap 
3.4%  0% - 8.
durg the 
review period 
Of neurologic patients, percent who reached the 
1.6%  0% - 3. 
combined cap durng the review period 
Of hip fractue patients, percent who reached the 
1%- 10. 
combined cap durng the review period 
Of back patients, percent who reached the combined cap 
NA* 
durng the review period 
Of cardiovascular patients, percent who reached the 
NA* 
combined cap during the review period 
Of musculoskeletal patients, percent who reached the  1.%  0% - 4. 
combined cap durng the review period 
Of orthopedic patients, percent who reached the 
0% - 2.1% 
combined cap durng the review period 
Of "other" patients, percent who reached the combined 
5.4%  0% - 12.
cap during the review period 
. Could not be calculated because none of the sampled patients with ths priary diagnosis reached the cap. 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563 APPENDIX D 
Agency Comments 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  ,.:"-

'!.'
..-
APPENDIX D
DEI'Ak'tMWiD." 1fALTH&HUMANlitHVICf.  ..r-'  rirolhC.'\reFII\MCngi\mlnlLraliDl 
..I.. 
OOpIIYJI/TIr;:tIOl 
lInolm  C. 20201 
Zuul JU!l20 AI; II: 
DATE: 
JUN r 3 2001  OFFICE OF I, \S?ECTOR 
GENERI\L 
TO:	 Michael F. Mangano 
ACtingD1SpectorGc 
er 
Offce ofInspcctor 
FROM:  Michael McMullall 
Actng Dcputy Admintra or 
Health Car Financig Administrtion 
SUBJECT: 
Offce of Inspcctor Gc'Teral (OIG) Draft Report"  Physical. Occupational. 
and Speech Therapy /or Medicare Nursing I-lome Patients: Medical 
Necessity and Cost Under the $1, 500 Therapy Caps,  (OEI-09-99-00560); 
Medical Record and Documentarion and Biling.  (OEI-09-99-00562); and 
MedicaJ Neoessicy cvld QUi/lly  of Care  Based on Treatmnt Diagnosis 
(OEI-09-99-00563) 
Than you for the opportunity to revew the above-referenced drft 
report. The Health
Care Financing Administration s (HCfiA) main focus i3 to ensue health car security for 
bencfici::ries. These lhrec companion reports have provided us with 
aU of  OUT 
infonnation that wil anow us to protect amI  improv  bcnetlciary heath and satisfaction
with outpatient rellabilitation seric:c:s. 
Following a thorough rcview, 010 found tht less than 2 pertmt  of Medicare 
beneficiaries reached cithcr ofthc $1,500 therpy caps and tht &6 percent of all 
Medical' e Pan B therapy was medically necessar. The om also foun that dle 
provider' medical documentation and biling technques were not up to HCFA' 
stanrds and that efforts should bo m::de to address these issues. We concur with orG
timHngs and will contim1C to work with the fiscal intermediaries (Frs), nuring home
staff, and national therapy associations to make sure our beneficiares receive the 
qualiy
cure they dt:crvc. 
The OIG bas issued the following recommendations: 
IG Recommcndation 
HCFA should encourage I"ls to continue educating nursing homes all Medicnre  rt B
biling. 
CFA Respon,e 
Tht: HCFA will contiue to encourge PIs to educate nursing homes on 
We  COil cut'. 
Pnr B billng. The Therapy Rcview Progr (TP) mcntionod in ths report is tasked 
with providing educational materials and activities. We believe that providers  of serices 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  APPENDIX D
Page 2 - Michael F. Mangano 
tht 
a.q well as administrators of nursing homes should be provided with infOlmaton 
facililales appropriate claims biUing. 
orG Recommendaton
HCFA should instrt Fls to conduct focued mcdica review in order to idcntify and

col1ect Medicare Par B therapy overpayments. 
HCFA ReSDonse 
We concur. The HCFA highly rceommcnds focu.sed medcal review. The l's were 
whenever their analysis sugges egregious 
instrcted 10 conduct focused medical review 
avenlliU:ztion of services. Furterore, progressivo con-ccnan action ensus both 
education and monitoring. The TRP wil provide medica revew of a stastically 
serce clai for 
significant number of skilcd nursing facility (SNF Par B  the years 
1998, 1999, and 2000. 
QKi Recornmendation 
lICF A should consider options when developing a new reimbursement system for 
Medicare Part B therapy Sleh  as:  (I) rcimurement based on an episode of therapy; and 
(2) prior authoriation 1'01' therapy that exceeds a separte monetary ca for each tye of 
therapy. 
HCF A Rcsnonse
Wc concur. As requircd by stalute, HCFA will be cnnsiderig alternatve payment

systems for therapy serices. Infonnation collected by TRP !rom data anayscs, medica 
review, and a varety ofinfonnation-gatherg actvities wi be analyz by HCFA in the 
rerts that Congress requested U1 the !3l1anced Budget Reconciliation Act of 1999. 
Drg Recommendation 
HCFA should continue working collaboratively with the nationa therpy associatons to 
CIl'UlrC that they provide accurate and comprehensive informtion to their members on 
proper documentation ofthcrpy in medical records. 
HCrA Resno
l).
We concur. The HCFA plans to contiue working collaborativelywith thc national

therapy associations to encoLlrage provision of accurte and comprehenive information

to thcir members on documentation of therapy serces. The TRP has developed working
relationships with the relevant associations rcsulting;n a valuable exchange of
informatiolL
QIQJ  mmcnd3linn 
HCF A should instrct Fls to provide regnlar worksheps to nuring homes am their staff 
on Medicare requirements for reurd documentaon nnd retention with an emphasis on 
of physicIan  orders in patient records. 
the proper docUlncnt1tion 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563  APPENDIX D 
Page 3 - Michael F. Mangao 
HCF A ResDOnsc 
We concur. Nuring home sIaff wil bc encourged to lea an use apprprate 
s orer. 
dOC1mcnt&tion an retentien, including documentation of physician 
Attachmcnt 
Treatment Diagnosis and SNF Therapy  OEI-09-99-00563