Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

 

QUESTIONABLE BILLING FOR 

MEDICARE OUTPATIENT 

THERAPY SERVICES 

 

Daniel R. Levinson 

Inspector General 

December 2010 

OEI-04-09-00540 
 

 EXECUTIVE SUMMARY 

OBJECTIVE

To identify questionable billing for Medicare outpatient therapy 

services in 2009. 

BACKGROUND 

Outpatient therapy is designed to improve, restore, and/or compensate 

for loss of functioning following illness or injury. Medicare expenditures 

for outpatient therapy increased 133 percent between 2000 and 2009, 

from $2.1 billion to $4.9 billion, while the number of Medicare 

beneficiaries receiving outpatient therapy increased only 26 percent, 

from 3.6 million to 4.5 million. 

Medicare limits (i.e., caps) its annual per-beneficiary outpatient therapy 

expenditures. Providers may exceed a beneficiary’s cap if the services 

are medically necessary and are supported by medical record 

documentation. If services are expected to exceed an annual cap, 

providers must indicate this when submitting the claim to Medicare. 

We identified 20 counties that had in 2009 (1) the highest average 

Medicare payment per beneficiary and (2) more than $1 million in total 

Medicare payments for outpatient therapy (i.e., high-utilization 

counties). We analyzed Miami-Dade County, Florida, separately 

because it had the highest average Medicare payments per beneficiary 

among the high-utilization counties and the highest total Medicare 

payments for outpatient therapy in 2009. Additionally, prior Office of 

Inspector General work has demonstrated that Miami-Dade County is a 

high-risk area for Medicare fraud. 

We then determined the extent to which levels of outpatient therapy 

billing characteristics in the 20 high-utilization counties differed from 

national levels. These included the following six questionable billing 

characteristics that may indicate fraud: (1) services for which providers 

indicated that an annual cap would be exceeded, (2) beneficiaries whose 

providers indicated that an annual therapy cap would be exceeded on 

the beneficiaries’ first date of service, (3) payments for beneficiaries who 

received outpatient therapy from multiple providers, (4) payments for 

therapy services provided throughout the year, (5) payments for services 

that exceeded an annual cap, and (6) providers who were paid for more 

than 8 hours of outpatient therapy provided in a single day. We did not 

assess the medical necessity of outpatient therapy services. 

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EXECUTIVE SUMMARY 

FINDINGS 

Medicare per-beneficiary spending on outpatient therapy services in 

Miami-Dade County was three times the national average in 2009. 

Medicare paid an average of $3,459 per Miami-Dade beneficiary for 

outpatient therapy, compared to an average of $1,078 nationally. Each 

therapy beneficiary in Miami-Dade County received an average of 158 

services during 2009, while the national average was 49 services per 

beneficiary. Medicare also paid therapy providers that served MiamiDade beneficiaries an average of $83,867, eight times the average 

amount it paid providers that served beneficiaries in other counties 

nationally ($10,131). Providers that served Miami-Dade beneficiaries 

provided an average of 3,828 outpatient therapy services, eight times 

the average number of services by providers that served beneficiaries in 

other counties nationally (458). 

Miami-Dade County had at least three times the national levels for 

five of the six questionable billing characteristics in Medicare 

outpatient therapy services. Five of the six questionable billing 

characteristics occurred in Miami-Dade County at three to four times 

the national levels. Specifically, (1) providers serving beneficiaries in 

Miami-Dade County indicated that outpatient therapy services would 

exceed an annual cap four times as often as providers nationally, 

(2) providers serving Miami-Dade beneficiaries indicated on claims that 

an annual cap would be exceeded on the beneficiaries’ first date of 

service four times as often as providers nationally, (3) the average 

Medicare payment for Miami-Dade beneficiaries who received 

outpatient therapy from multiple providers was three times the national 

average, (4) Miami-Dade beneficiaries were three times as likely to 

receive outpatient therapy throughout the year as beneficiaries 

nationally, and (5) Miami-Dade beneficiaries were three times as likely 

to exceed an annual cap as beneficiaries nationally. 

Medicare per-beneficiary spending on outpatient therapy in the 

other high-utilization counties was 72 percent greater than the 

national average; these counties also exhibited questionable billing 

but to a lesser extent than Miami-Dade County. Medicare paid an 

average of $1,852 per beneficiary in 19 other high-utilization counties, 

72 percent greater than the national average of $1,078. Additionally, as 

a group, these counties had at least twice the national level for five of 

the six questionable billing characteristics in Medicare outpatient 

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EXECUTIVE SUMMARY 

therapy services we reviewed. Further, each of these counties had at 

least twice the national level for 1 or more of the 6 characteristics. 

RECOMMENDATIONS 

We found that high-utilization counties had high levels of 

per-beneficiary spending and questionable billing characteristics 

compared to national levels. Our findings demonstrate that outpatient 

therapy services in Miami-Dade County, as well as 19 other highutilization counties nationwide, warrant additional review as part of 

ongoing Medicare antifraud activities. 

We recommend that the Centers for Medicare & Medicaid Services 

(CMS): 

Target outpatient therapy claims in high-utilization areas for further 

review. CMS should monitor utilization trends and use this information 

to target providers in geographic areas that may be susceptible to fraud. 

Target outpatient therapy claims with questionable billing 

characteristics for further review. CMS should use the questionable 

billing characteristics we identified to analyze and monitor claims data 

to detect and deter fraud and abuse. 

Review geographic areas and providers with questionable billing 

and take appropriate action based on results. Prior to payment, CMS 

should review claims submitted by providers with high levels of 

questionable billing and in geographic areas with high utilization to 

ensure that they are legitimate. If CMS determines that fraudulent 

claims have been submitted, it should take steps to suspend payments 

to these providers and recover overpayments to them. 

Revise the current therapy cap exception process. We found that 

providers in high-utilization counties used the KX modifier and exceeded 

annual therapy caps at levels much higher than the national average. 

The current therapy cap exception process does not ensure appropriate 

utilization of Medicare outpatient therapy services. CMS should consider 

developing per-beneficiary edits and maximum payment amounts to 

control overutilization of outpatient therapy services. 

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EXECUTIVE SUMMARY 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

In its written comments on this report, CMS concurred with all four of 

our recommendations and described actions it would take to address 

them. We support CMS’s efforts to address these issues and encourage 

it to continue making progress in these areas. We did not make changes 

to the report based on CMS’s comments. 
 

 TABLE OF CONTENTS 

EXECUTIVE SUMMARY .....................................i 
 

INTR C ODU TION ........................................... 1 
 

FINDI NGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 
 

Medicare per-beneficiary spending on outpatient therapy 

services in Miami-Dade County was three times the national

average in 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 
 

 

Miami-Dade County had at least three times the national levels 

for five of the six questionable billing characteristics in Medicare 

outpatient therapy services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 
 

 

Medicare per-beneficiary spending on outpatient therapy services in the other high-utilization counties was 72 percent 

greater than the national average; these counties also exhibited

questionable billing but to a lesser extent than Miami-Dade 

County . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 
 

 

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 
 

Agency Comments and Inspector General Response. . . . . . . . . . . 20 
 

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 
 

 A: HCPCS Codes for Medicare Outpatient Therapy Services, 

 Fee Schedule Amounts, and Medicare Payments, 2009 . . . . . . 22 
 

 

B: Questionable Billing Characteristic for 20 High-Utilization 

Counties, Compared to National Levels. . . . . . . . . . . . . . . . . . 24 
 

 

C: Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 
 

ACKN OWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 
 
 

INTRODUCTION INTRODUCTION INTRODUCTION 

OBJECTIVE OBJECTIVE 

To identify questionable billing for Medicare outpatient therapy 

services in 2009. 

BACKGROUND 

Outpatient therapy is designed to improve, restore, and/or compensate 

for loss of functioning following illness or injury. Medicare expenditures 

for outpatient therapy increased 133 percent between 2000 and 2009, 

from $2.1 billion to $4.9 billion, while the number of Medicare 

beneficiaries receiving outpatient therapy increased only 26 percent, 

from 3.6 million to 4.5 million.1, 2, 3 

Medicare beneficiaries are eligible to receive outpatient therapy under 

Medicare Part B. Medicare covers three types of outpatient therapy: 

 physical therapy (PT): diagnosis and treatment of impairments, 

functional limitations, disabilities, or changes in physical function 

and health status;4

 occupational therapy (OT): treatment to improve or restore 

functions that have been impaired (or permanently lost or reduced) 

because of illness or injury, to improve the individual’s ability to 

perform tasks required for independent functioning;5 and 

 speech language pathology (SLP): diagnosis and treatment of 

speech and language disorders, that result in communication 

disabilities or swallowing disorders.6

PT services account for the majority of Medicare payments for 

outpatient therapy. In 2009, PT services represented approximately 

74 percent ($3.6 billion) of Medicare expenditures for outpatient therapy 

1 Computer Sciences Corporation (CSC), CY 2006 Outpatient Therapy Services 

Utilization Report, February 2008. Accessed at 

http://www.cms.hhs.gov/TherapyServices/downloads/2_CY2006OutpatientTherapyUtilizatio

nReport_PDF_Final.pdf on June 17, 2009. 

2 Office of Inspector General (OIG) analysis of Centers for Medicare & Medicaid Services 

(CMS) claims data, April 2010. The percentage increase is based on unrounded figures. 

3 “Expenditures” describes the amount paid by Medicare after the Part B coinsurance. 

This represents approximately 80 percent of the amount allowed by Medicare. 

4 CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15, § 230.1. 5 Ibid., § 230.2. 

6 Ibid., § 230.3. 

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INTRODUCTION 

services.7 OT services accounted for 19 percent ($945 million) and SLP 

services accounted for 7 percent ($328 million) of all Medicare 

expenditures for outpatient therapy.8 

Each type of outpatient therapy service must be provided in accordance 

with a written plan of care established by an appropriate medical 

professional, such as a physician or physical therapist.9 The service 

must be appropriate for the beneficiary’s condition and reasonable in 

terms of frequency and duration under accepted standards of practice. 

Further, outpatient therapy must be provided to improve a beneficiary’s 

functioning level.10 Therefore, Medicare does not typically cover 

services provided to maintain a beneficiary’s existing level of 

functioning.11 

Outpatient therapy may be provided in a variety of settings. In addition 

to covering services provided in physicians’ and therapists’ offices, 

Medicare covers outpatient therapy provided by hospitals, skilled 

nursing facilities, outpatient rehabilitation facilities, comprehensive 

outpatient rehabilitation facilities, and home health agencies.12 

Medicare Payment for Outpatient Therapy Services 

Medicare pays for most outpatient therapy services according to the 

Medicare Physician Fee Schedule (fee schedule).13 Medicare reimburses 

the provider 80 percent of either the fee schedule amount or the actual 

2 

7 OIG analysis of CMS claims data, April 2010. 

8 Ibid. 

9 42 CFR § 410.61(a) and (b). See also 42 CFR § 410.59(a)(2), § 410.60(a)(2), and 

§ 410.62(a)(2). 

10 CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15, § 220.2. 

11 CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15, § 220.2.D. The 

services of a therapy provider are not necessary to carry out maintenance treatment and 

are not covered under ordinary circumstances. However, if the patient’s safety is at risk 

and the functional maintenance services involve complex and sophisticated therapy 

procedures, the judgment and skill of a therapist may be necessary for the safe and effective 

delivery of such services. 

12 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 5, § 10. Accessed at 

http://www.cms.hhs.gov/manuals/downloads/clm104c05.pdf on June 17, 2009. Hospitals 

may provide outpatient therapy to outpatients and to inpatients when they are not covered 

under Part A. Skilled nursing facilities may provide outpatient therapy to residents and 

nonresidents when they are not covered under Part A. Home health agencies may provide 

outpatient therapy only to individuals who are not homebound or are not receiving services 

under home health plans of care. For beneficiaries who are under home health plans of 

care, Medicare pays for rehabilitation therapy services provided by home health agencies at 

the home health prospective payment system rate. 

13 Ibid. Applies to all settings except Critical Access Hospitals, which are paid on a 

reasonable cost basis. 

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INTRODUCTION 

charge (whichever is lower), and the beneficiary is responsible for the 

remaining 20 percent.14 

3 

10) 

the 

All outpatient therapy services are reported to Medicare using 

Healthcare Common Procedure Coding System (HCPCS) codes.15 In 

2009, Medicare covered outpatient therapy under 75 HCPCS codes. 

Some of the services billed using these codes are considered outpatient 

therapy services only when billed by a therapist.16 To indicate that the 

claim is for outpatient therapy, a provider must add a modifier to the 

code on the claim.17 The modifier also indicates whether the service 

was PT, OT, or SLP.18 The 2009 fee schedule amounts for these 

services ranged from $5.05 for hot- or cold-pack therapy (HCPCS 970

and infrared therapy (HCPCS 97026) to $182.86 for a test involving 

beneficiary’s vocal cords (HCPCS 92616).19 Appendix A provides a list 

of the 75 HCPCS codes, the associated fee schedule amounts, and total 

Medicare payments in 2009. 

Medicare reimburses providers at different rates based on the setting in 

which the service is provided. Physicians and therapists in private 

practice who serve beneficiaries in their offices may be paid at the 

nonfacility rate, which includes additional reimbursement for some 

services to account for additional overhead expenses.20 

Medicare per-beneficiary payment limits. Medicare limits (i.e., caps) its 

annual per-beneficiary outpatient therapy services expenditures unless 

the services are furnished by or under arrangement with a hospital. 

The Balanced Budget Act of 1997 added the caps as a way to control 

increasing therapy costs.21 The caps have been updated annually since 

2002 using the Medicare Economic Index.22 

14 Ibid. 

15 Ibid. 

16 Ibid., § 20. 

17 Ibid., § 20. Modifiers are two-digit codes appended to HCPCS codes to provide 

additional information about the billed service. In some cases, addition of a modifier may 

directly affect payment. 

18 Billing providers use the modifier GP to indicate PT services, GO to indicate OT 

services, and GN to indicate SLP services. These three modifiers are for informational 

purposes only and do not affect payment. 

19 HCPCS 92616 is described in the Medicare Physician Fee Schedule as a “laryngeal 

sense test.” 

20 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 5, § 10. 

21 Ibid.

22 Ibid., § 10.2. 

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INTRODUCTION 

In 2009, a beneficiary could receive a combination of PT and SLP 

services for which Medicare allowed up to $1,840 before exceeding the 

cap; the cap for OT services was also $1,840.23, 24 The caps are 

determined on a calendar-year basis, meaning that beneficiaries’ 

services begin counting toward the cap on January 1 of each year. 

The beneficiary may qualify for use of the cap exceptions process when 

documented, medically necessary services exceed an annual cap.25 By 

adding a modifier (KX) to the HCPCS code on the claim, the provider 

attests that the services are reasonable and necessary, and are 

supported by documentation in the medical record indicating that the 

beneficiary requires continued outpatient therapy and qualifies for an 

exception. Providers should use the KX modifier only when services are 

expected to exceed an annual cap. According to the Medicare Claims 

Processing Manual, “[u]se of the KX modifier when there is no 

indication that the cap is likely to be exceeded is abusive.” 26 

Fraud in Medicare Outpatient Therapy Services 

Outpatient therapy service providers have been prosecuted for 

defrauding the Medicare program in recent years. For example, OIG 

and the Department of Justice (DOJ) investigated a Detroit-area 

provider who pled guilty in 2009 to an $18 million fraud scheme. This 

provider paid kickbacks to hundreds of Medicare beneficiaries in 

exchange for their Medicare identification numbers. The numbers were 

used to bill for PT and OT services that were never provided to the 

beneficiaries.27 In 2004, an OIG investigation resulted in a $325 million 

settlement with one therapy provider for alleged fraud.28 The types of 

alleged fraud included services that lacked a certified plan of care and 

4 

23 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, Transmittal No. 1678, 

Change Request 6321 (February 13, 2009).

24 In 2010, caps were increased to $1,860. 

25 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 5, § 10.2. 

26 Ibid. 

27 DOJ, Detroit-Area Rehabilitation Facility Executive Pleads Guilty To $18.2 Million 

Medicare Fraud Scheme, September 28, 2009. Accessed at 

http://www.justice.gov/opa/pr/2009/September/09-crm-1040.html on February 23, 2010. 

28 DOJ, HealthSouth To Pay United States $325 Million To Resolve Medicare Fraud 

Allegations, December 30, 2004. Accessed at 

http://www.usdoj.gov/opa/pr/2004/December/04_civ_807.htm on June 17, 2009. 

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INTRODUCTION 

services provided by inappropriate personnel.29 In this case, services 

were not performed by licensed physical therapists, as required. 

Medicare Fraud in Miami-Dade County 

Miami-Dade County, Florida, has been a focus area of efforts to combat 

Medicare fraud, waste, and abuse in recent years. OIG has published 

reports indicating that Miami-Dade County is at high risk for 

fraudulent Medicare claims, including infusion therapy services for 

beneficiaries with HIV/AIDS, home health services, inhalation drugs, 

and ultrasound services.30 Additionally, in 2007, HHS and DOJ 

established a joint Medicare Fraud Strike Force (Strike Force) team in 

South Florida to combat Medicare fraud. Strike Forces are teams of 

Federal, State, and local investigators that combat fraud in certain 

areas of the country by analyzing current Medicare claims data.31 In 

July 2010, the Strike Force in South Florida charged 24 defendants in 

Miami for allegedly participating in various schemes that resulted in 

approximately $103 million in false billing.32 

These schemes involved fraudulent billing for physical therapy services, 

as well as other types of services. HHS and DOJ also created the 

Health Care Fraud Prevention and Enforcement Action Team (HEAT) 

5 

29 CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15, §§ 230.1, 230.2, and 

230.3. In addition to covering services provided by therapists and physicians, Medicare 

covers therapy provided by physician assistants, nurse practitioners, and clinical nurse 

specialists if permitted by the States in which they practice. Qualified physical and 

occupational assistants are also covered if they are supervised. All therapy providers must 

be licensed, certified, or registered to practice in the States in which they provide services 

and have passed a national examination. However, some outpatient therapy services must 

be provided only by therapists. CMS, Medicare Claims Processing Manual, 

Pub. No. 100-04, ch. 5, § 20. 

30 The Department of Health & Human Services (HHS) OIG, Aberrant Billing in South 

Florida for Beneficiaries With HIV/AIDS, OEI-09-07-00030, September 2007; HHS OIG, 

Aberrant Medicare Home Health Outlier Payment Patterns in Miami-Dade County and 

Other Geographic Areas in 2008, OEI-04-08-00570, November 2009; HHS OIG, Aberrant 

Claim Patterns for Inhalation Drugs in Miami-Dade County, OEI-03-08-00290, April 2009; 

and HHS OIG, Medicare Part B Billing for Ultrasound, OEI-01-08-00100, July 2009. 

31 HHS News Release, Strike Force Formed To Target Fraudulent Billing of Medicare 

Program by Health Care Companies. Accessed at 

http://www.hhs.gov/news/press/2007pres/05/20070509c.html on February 23, 2010. 

32 Nationwide Strike Force operations in July 2010 resulted in charges against 

94 doctors and over $251 million in alleged false billing. HHS and DOJ, Medicare Fraud 

Strike Force Charges 94 Doctors, Health Care Company Owners, Executives and Others for 

More Than $251 Million in Alleged False Billing. Accessed at 

http://www.stopmedicarefraud.gov/innews/dc.html#july-16-2010 on July 28, 2010. 

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INTRODUCTION 

to strengthen and expand efforts to combat health care fraud, waste, 

and abuse.33

Medicare Program Integrity 

CMS uses program safeguard contractors (PSC) and Zone Program 

Integrity Contractors (ZPIC) to perform program integrity 

responsibilities, including data analysis; investigations; and other 

activities to reduce fraud, waste, and abuse.34 PSCs and ZPICs identify 

overpayments associated with their investigations and notify the 

appropriate claims-processing contractor to collect the overpayments. 

CMS is authorized to suspend Medicare payments to providers 

suspected of committing fraud.35 Additionally, the Social Security Act 

specifies circumstances under which the Secretary of HHS must exclude 

certain entities from Medicare and other circumstances under which the 

Secretary may, at his or her discretion, exclude entities.36

METHODOLOGY 

Scope 

We reviewed national Part B Medicare outpatient therapy claims from 

2009. Our population consisted of claims from the 100-percent paid 

claims data from the National Claims History (NCH) File and includes 

claims processed by fiscal intermediaries, carriers, and Medicare 

Administrative Contractors (MAC).37, 38 

33 HHS, Attorney General Holder and HHS Secretary Sebelius Announce New 

Interagency Health Care Fraud Prevention and Enforcement Action Team. Accessed at 

http://www.hhs.gov/news/press/2009pres/05/20090520a.html on February 23, 2010. 

34 CMS is replacing PSCs with ZPICs. 

35 42 CFR § 405.371. CMS may suspend approved payments if it suspects overpayment 

to a provider or if a provider has engaged in fraud or willful misrepresentation of claims. 

36 Social Security Act § 1128. The Secretary of HHS has delegated the exclusion 

authority to OIG. 

37 In 2009, Medicare contracted with fiscal intermediaries, carriers, and MACs to process 

outpatient therapy claims. Generally, fiscal intermediaries processed claims from 

institutions and carriers processed claims from physicians, certain nonphysician 

practitioners, and physical and occupational therapists in private practice. CMS began the 

process of replacing its fiscal intermediaries and carriers with MACs in October 2005. 

MACs assumed claims processing from both fiscal intermediaries and carriers as the 

transitions occurred. 

38 We used the files with claims processed through December 31, 2009, for our analysis. 

These files are estimated to be 88 percent complete; that is, they included approximately 

88 percent of all claims for outpatient therapy services provided during 2009. 

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We defined outpatient therapy claims as those billed under one of the 

75 outpatient therapy HCPCS codes with one of the three modifiers that 

specify whether the service was PT, OT, or SLP. We did not assess the 

medical necessity of outpatient therapy or compliance with Medicare 

billing requirements.

Identification of High-Utilization Counties 

To identify high-utilization counties, we assigned each Medicare 

outpatient therapy claim in our population to a county based on the 

beneficiary’s residence.39 We determined the total Medicare payments 

for outpatient therapy in each county. We also calculated the average 

payment for outpatient therapy services per therapy beneficiary in each 

county.40 We then identified 20 counties that had (1) the highest 

average Medicare payment per beneficiary and (2) more than $1 million 

in total Medicare payments for outpatient therapy services.41 We refer 

to these counties as “high-utilization counties.” See Figure 1 for a map 

showing their locations. 

7 

39 We used the Social Security Administration standard county code of a beneficiary’s 

residence. Our population included 3,721 county codes; however, some of the county codes 

may have been inaccurately reported. The U.S. Census Bureau estimates there are 

3,141 counties and county equivalents in the United States. U.S. Census Bureau, Census 

Bureau Tip Sheet, January 16, 2009. Accessed at 

http://www.census.gov/newsroom/releases/archives/tip_sheets/tp09-02.html on 

May 24, 2010. 

40 We calculated numbers of therapy services based on the units of service on each claim 

line with a therapy HCPCS code. That is, we considered a claim line with a unit count of 

“2” (for example, the beneficiary received two 15-minute increments of a timed service) as 

having two services. 

41 Nationally, the average of total payments within a county was $1.3 million. Counties 

with less than $1 million accounted for 16 percent of all Medicare payments for outpatient 

therapy services nationally. 

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Figure 1: Counties With Highest Utilization of Medicare Outpatient 

Therapy Services, 2009 

Analysis of Billing in High-Utilization Counties and Nationally 

We categorized the claims into three groups: (1) Miami-Dade County, 

(2) the other 19 high-utilization counties combined, and (3) national. 

We analyzed Miami-Dade County separately because it had the highest 

average Medicare payments per beneficiary among the high-utilization 

counties and the highest total Medicare payments for outpatient 

therapy in 2009.42 

To determine how billing for outpatient therapy in high-utilization 

counties compared to national billing, we calculated the average 

Medicare payments and number of services per beneficiary in MiamiDade County, in the other 19 high-utilization counties combined, and 

nationally. We also calculated the average payment and number of 

services per provider serving beneficiaries in a county. We compared 

8 

42 Fifteen of the 3,721 counties had a higher average payment per beneficiary than 

Miami-Dade County. Medicare paid a total of less than $1 million for outpatient therapy in 

these 15 counties, combined. All but 1 of these 15 counties was reported with an inaccurate 

county code. 

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INTRODUCTION 

both averages for Miami-Dade County and the other 19 high-utilization 

counties combined to national averages.43 

We used the National Provider Identifier Directory to identify providers 

that received over $1 million in total Medicare payments for outpatient 

therapy. We calculated these providers’ total payments for outpatient 

therapy. We then determined how many of these providers were located 

in Miami-Dade County and the other 19 high-utilization counties. 

Questionable billing characteristics. By using past OIG work on Medicare 

billing and in consultation with representatives of the Medicare PSCs, 

we identified six billing characteristics that may indicate fraud in 

outpatient therapy services. For example, a high prevalence of these 

characteristics may indicate inappropriate billing, such as providers’ 

billing for services that were unnecessary or not provided. These 

characteristics were: 

 Average number of outpatient therapy services per beneficiary that 

providers indicated would exceed an annual cap. According to 

therapy fraud experts within the PSCs, the KX modifier is often 

overused and/or used inappropriately. We calculated the average 

number of services per beneficiary that had the KX modifier. 

 Percentage of outpatient therapy beneficiaries whose providers 

indicated that an annual cap would be exceeded on the beneficiaries’ 

first date of service in 2009. Providers should use the KX modifier 

only when providing services that are expected to exceed an annual 

cap. This is unlikely to occur on the beneficiary’s first date of 

service in a new calendar year. We identified beneficiaries whose 

providers billed Medicare using the KX modifier on the 

beneficiaries’ first date of service in calendar year 2009. 

 Average Medicare payment per beneficiary who received outpatient 

therapy from multiple providers. This characteristic raises concerns 

about stolen Medicare identification numbers or “professional 

beneficiaries” who exchange their identification numbers for 

kickbacks from providers. We identified beneficiaries who received 

43 Beneficiaries who received services in more than one county and providers that served 

beneficiaries in more than one county during 2009 are included in multiple counties in the 

national averages. In 2009, 4,531,609 beneficiaries received outpatient therapy from 

81,170 providers. Less than 1 percent of these beneficiaries lived in more than one county. 

Providers served outpatient therapy beneficiaries in an average of six counties. 

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INTRODUCTION 

outpatient therapy from more than one provider in 2009 and 

calculated the average reimbursement per beneficiary in 2009. 

 Percentage of outpatient therapy beneficiaries whose providers were 

paid for services provided throughout the year. Therapy services 

are appropriate for improving the beneficiary’s functioning level, 

but not for maintaining an existing level of functioning. We 

identified beneficiaries who received outpatient therapy during all 

four quarters of 2009. 

 Percentage of outpatient therapy beneficiaries whose providers were 

paid for services that exceeded one of the annual caps. We 

identified beneficiaries who received either a combination of PT and 

SLP services or OT services, excluding those provided in hospitals, 

for which Medicare allowed more than $1,840. 

 Percentage of outpatient therapy beneficiaries whose providers were 

paid for more than 8 hours of outpatient therapy provided in a 

single day. According to PSC representatives, providing more than 

8 hours of therapy to a beneficiary in a single day is usually 

medically unnecessary and/or infeasible because of the 

characteristics of the Medicare population and the nature of 

services provided. We identified HCPCS codes for which the unit of 

service represents a specific amount of time (typically, 15 minutes) 

spent in direct contact with the beneficiary on any single calendar 

day. We then determined how many of these services a beneficiary 

received on the same day. 

We determined the incidence of the 6 characteristics in Miami-Dade 

County, in the other 19 high-utilization counties combined, and 

nationally. We calculated the levels of the characteristics nationally 

and for the 19 high-utilization counties by combining all outpatient 

therapy claims in each of these two groups. For example, to determine 

the average number of services per beneficiary billed with the KX 

modifier, we identified the total number of services billed with the KX 

modifier in each group and divided these sums by the total number of 

outpatient therapy beneficiaries in each group. The approach we used 

resulted in weighted averages based on county size. See Appendix B for 

the incidence of the six characteristics within each high-utilization 

county. 

Limitations 

The six characteristics are not intended to be a comprehensive set of 

characteristics for identifying questionable billing. Also, although the 

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INTRODUCTION 

presence of such characteristics raises questions about the 

appropriateness of outpatient therapy claims, it does not necessarily 

mean that such claims are inappropriate or fraudulent. 

The findings in this report are based on Medicare claims for services 

provided in 2009 and cannot be generalized to any other time period. 

Standards 

This study was conducted in accordance with the Quality Standards for 

Inspections approved by the Council of the Inspectors General on 

Integrity and Efficiency. 

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FINDINGS FINDINGS 

Medicare per-beneficiary spending on outpatient 

therapy services in Miami-Dade County was 

three times the national average in 2009 

Medicare paid $159 million for 

outpatient therapy services provided 

to Miami-Dade beneficiaries, the 

highest of any county in 2009. On 

average, per-beneficiary spending on 

outpatient therapy services in Miami-Dade County was three times the 

national average in 2009. Miami-Dade beneficiaries also received three 

times as many services as beneficiaries nationally. Providers serving 

Miami-Dade beneficiaries received eight times the average payment and 

provided eight times the average number of services as providers that 

served beneficiaries elsewhere. Table 1 compares these averages in 

Miami-Dade County with national averages. 

12 

 

Table 1. Medicare Outpatient Therapy Services in Miami-Dade County 

Compared to National Levels, 2009 

 Outpatient Therapy Utilization 

Miami-Dade 

County 

Average 

National 

Average* 

Ratio of MiamiDade County 

Average to 

National Average 

Medicare payments per beneficiary $3,459 $1,078 3:1 

Number of services per beneficiary 158 49 3:1 

Medicare payments per provider serving 

beneficiaries in a county $83,867 $10,131 8:1 

Number of services per provider serving 

beneficiaries in a county 3,828 458 8:1 

* Beneficiaries who received services in more than one county and providers that served beneficiaries in more 

than one county during 2009 are included in multiple counties in the national averages. In 2009, 4,531,609 

beneficiaries received outpatient therapy from 81,170 providers. Less than 1 percent of these beneficiaries 

lived in more than one county. Providers served outpatient therapy beneficiaries in an average of six 

counties. 

Note: All figures have been rounded to nearest whole number. 

Source: OIG analysis of 2009 Medicare outpatient therapy claims, 2010. 

These outpatient therapy utilization levels did not occur in all counties 

with high Medicare outpatient therapy payments. For example, Los 

Angeles County, California, the county with the second-highest total 

payments ($125 million in 2009), was home to more than twice as many 

outpatient therapy beneficiaries as Miami-Dade County. However, the 

average per-beneficiary payment and average payment per provider 

that served beneficiaries in Los Angeles County more closely resembled 

the national averages than did Miami-Dade County. The ratios of Los 

Angeles County to national averages for payments per beneficiary and 

per provider were 1:1 and 3:1, respectively. 

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FINDINGS 

Medicare paid an average of $3,459 per Miami-Dade beneficiary for 

outpatient therapy services, compared to an average of $1,078 nationally 

Medicare paid an average of $3,459 per Miami-Dade beneficiary for 

outpatient therapy in 2009. This was the second-highest of all counties 

nationally and was over three times the national average of $1,078 per 

beneficiary.44 In contrast, Medicare paid an average of $1,294 per Los 

Angeles beneficiary. For 10 Miami-Dade beneficiaries, Medicare paid 

over $278,000 for outpatient therapy in 2009, an average of $27,810 per 

beneficiary. 

Outpatient therapy beneficiaries in Miami-Dade County received an average 

of 158 services, compared to an average of 49 services nationally 

Miami-Dade beneficiaries received an average of 158 outpatient therapy 

services in 2009. The average number of services per Miami-Dade 

beneficiary was the highest of all high-utilization counties and was 

three times the national average of 49 services. In contrast, 

beneficiaries in Los Angeles County received an average of 

54 outpatient therapy services. 

Medicare paid providers serving Miami-Dade beneficiaries an average of 

$83,867 for outpatient therapy, compared to an average of $10,131 nationally 

Medicare paid outpatient therapy providers that served Miami-Dade 

beneficiaries an average of $83,867 in 2009, eight times the average 

amount it paid providers that served beneficiaries in other counties 

nationally ($10,131). In contrast, Medicare paid providers that served 

beneficiaries in Los Angeles County an average of $26,814. 

Additionally, 52 of the 235 providers that received over $1 million in 

Medicare payments for outpatient therapy services in 2009 were located 

in Miami-Dade County. These Miami-Dade providers received a total of 

$88 million, with payments ranging from $1 million to $4 million. 

Providers serving Miami-Dade beneficiaries provided an average of 

3,828 services, compared to an average of 458 services nationally 

Providers that served Miami-Dade beneficiaries provided an average of 

3,828 outpatient therapy services in 2009, eight times the average 

number of services by providers that served beneficiaries in other 

counties nationally (458). In contrast, providers that served 

beneficiaries in Los Angeles County provided an average of 

1,124 services. 

13 

44 The highest Medicare payment per beneficiary in counties reported with accurate 

codes was $4,452. Payments in this county for outpatient therapy totaled $623,000. 

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FINDINGS 

Miami-Dade County had at least three times the Miami-Dade County exceeded the 

national level for five of the six national levels for five of the six questionable 

questionable billing characteristics billing characteristics in Medicare outpatient in Medicare outpatient therapy therapy services services we reviewed by at least a 

factor of three. Table 2 compares, for each characteristic, levels in 

Miami-Dade County to the national levels. 

Table 2. Questionable Outpatient Therapy Billing in Miami-Dade County Compared to 

National Levels, 2009 

Characteristic 

Miami-Dade 

County National 

Ratio of Miami-Dade 

County to National 

Average number of outpatient therapy services per 

beneficiary that providers indicated would exceed an 

annual cap 60 14 4:1 

Percentage of outpatient therapy beneficiaries whose 

providers indicated that an annual cap would be exceeded 

on the beneficiaries’ first date of service in 2009 20% 5% 4:1 

Average Medicare payment per beneficiary who received 

outpatient therapy from multiple providers $5,664 $1,670 3:1 

Percentage of outpatient therapy beneficiaries whose 

providers were paid for services provided throughout the 

year 10% 3% 3:1 

Percentage of outpatient therapy beneficiaries whose 

providers were paid for services that exceeded an annual 

cap 63% 22% 3:1 

Percentage of outpatient therapy beneficiaries whose 

providers were paid for more than 8 hours of outpatient 

therapy provided in a single day 0.3% 0.7% <1:1 

Note: All figures have been rounded to nearest whole number. 

Source: OIG analysis of 2009 Medicare outpatient therapy claims, 2010. 

Providers serving beneficiaries in Miami-Dade County indicated that 

outpatient therapy services would exceed an annual cap four times as 

often as providers nationally 

Providers serving Miami-Dade beneficiaries were paid for an average of 

60 outpatient therapy services per beneficiary for which they billed 

Medicare using the KX modifier in 2009. Services billed with the KX 

modifier represented an average of 38 percent of each Miami-Dade 

beneficiary’s total number of outpatient therapy services. Nationally, 

providers were paid for an average of 14 services with the KX modifier 

per beneficiary, representing an average of 29 percent of all outpatient 

therapy services. 

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FINDINGS 

Providers serving Miami-Dade beneficiaries indicated that an annual cap 

would be exceeded on the beneficiaries’ first date of service four times 

more often than providers nationally 

For 20 percent of therapy beneficiaries in Miami-Dade County, 

providers used the KX modifier on their first date of service in 2009. 

Nationally, providers used the KX modifier on beneficiaries’ first date of 

service in 2009 for 5 percent of therapy beneficiaries. Payments for 

these claims in Miami-Dade County totaled nearly $3 million. 

According to the Medicare Claims Processing Manual, this practice may 

be abusive.45

This characteristic was not prevalent in all counties with high Medicare 

therapy payments. For example, providers serving beneficiaries in Cook 

County, Illinois, the county with the third-highest Medicare outpatient 

therapy payments ($92 million in 2009), used the KX modifier on the 

beneficiaries’ first date of service only 5 percent of the time. 

The average Medicare payment for Miami-Dade beneficiaries who received 

outpatient therapy from multiple providers was three times the national 

average 

Twenty-nine percent of outpatient therapy beneficiaries in Miami-Dade 

County were served by more than one provider in 2009. Medicare paid 

an average of $5,664 for these beneficiaries. Nationally, 18 percent of 

outpatient therapy beneficiaries were served by more than one provider. 

Medicare paid an average of $1,670 for each of these beneficiaries. 

Miami-Dade beneficiaries were three times as likely to receive outpatient 

therapy throughout the year as beneficiaries nationally 

Ten percent of Miami-Dade beneficiaries received outpatient therapy 

during all four quarters of 2009. In contrast, 3 percent of outpatient 

therapy beneficiaries nationally received services during all four 

quarters. 

Miami-Dade beneficiaries were three times as likely to exceed an annual cap 

as beneficiaries nationally 

Medicare allowed payment above an annual cap for 63 percent of 

outpatient therapy beneficiaries in Miami-Dade County in 2009. That 

is, these beneficiaries received either a combination of PT and SLP 

services or OT services, excluding those provided in hospitals, that cost 

15 

45 CMS, Medicare Claims Processing Manual , Pub. No. 100-04, ch. 5, § 10.2. 

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FINDINGS 

more than $1,840. Nationally, 22 percent of beneficiaries exceeded an 

annual cap. 

Ninety-four percent of Medicare payments to providers serving beneficiaries in 

Miami-Dade County were attributed to beneficiaries who exceeded an annual 

cap. Medicare paid providers that served Miami-Dade beneficiaries who 

exceeded an annual cap $150 million in 2009, accounting for 94 percent 

of all payments to providers serving Miami-Dade beneficiaries. 

Medicare paid an average of $5,162 for outpatient therapy provided to 

each of these beneficiaries, almost three times the cap amount of $1,840. 

Nationally, 63 percent of payments were for beneficiaries who exceeded 

an annual cap. Medicare paid an average of $3,169 nationally for 

beneficiaries who exceeded an annual cap. 

Medicare per-beneficiary spending on outpatient 

therapy in the other high-utilization counties was 

72 percent greater than the national average; these 

counties also exhibited questionable billing but to 

a lesser extent than Miami-Dade County 

As a group, the 19 other highutilization counties accounted for a 

total of $162 million in Medicare 

payments for outpatient therapy in 

2009. Medicare paid an average of 

$1,852 per beneficiary in these 

counties, 72 percent greater than the 

national average of $1,078. 

Beneficiaries who received outpatient therapy in these counties received 

an average of 83 services in 2009, compared to the national average of 

49 services per beneficiary. Medicare paid an average of $21,131 per 

provider for outpatient therapy provided to beneficiaries in these 

counties, compared to the national average of $10,131 per provider. 

Additionally, 12 of the 243 providers that received over $1 million in 

Medicare payments for outpatient therapy in 2009 were located in these 

19 counties and received a total of $19 million.

The 19 high-utilization counties combined had at least twice the national 

level for 5 of the 6 questionable billing characteristics 

As a group, these 19 high-utilization counties had at least twice the 

national level for 5 of the 6 questionable billing characteristics in Medicare 

outpatient therapy services we reviewed. Table 3 compares these highutilization counties to Miami-Dade County and national levels of the six 

characteristics. 

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FINDINGS 

17 

Table 3. Questionable Outpatient Therapy Billing Characteristics in Miami-Dade County and 

19 High-Utilization Counties Combined Compared to National Levels, 2009 

Characteristic 

MiamiDade 

County 

19 Other 

HighUtilization 

Counties National 

Ratio of the 19 

High-Utilization 

Counties to 

National 

Average number of outpatient therapy services per 

beneficiary that providers indicated would exceed an annual 

cap 60 37 14 3:1 

Percentage of outpatient therapy beneficiaries whose 

providers indicated that an annual cap would be exceeded on 

the beneficiaries’ first date of service in 2009 20% 9% 5% 2:1 

Average Medicare payment per beneficiary who received 

outpatient therapy from multiple providers $5,664 $3,152 $1,670 2:1 

Percentage of outpatient therapy beneficiaries whose 

providers were paid for services provided throughout the year 10% 14% 3% 4:1 

Percentage of outpatient therapy beneficiaries whose 

providers were paid for services that exceeded an annual cap 63% 38% 22% 2:1 

Percentage of outpatient therapy beneficiaries whose 

providers were paid for more than 8 hours of outpatient 

therapy provided in a single day 0.3% 1.0% 0.7% 1:1 

Note: All figures have been rounded to nearest whole number. 

Source: OIG analysis of 2009 Medicare outpatient therapy claims, 2010. 

The 19 high-utilization counties combined had lower levels than MiamiDade County for 4 of the 6 characteristics. The characteristics that 

were more prevalent in these 19 counties than in Miami-Dade County 

were the percentages of beneficiaries who (1) received outpatient 

therapy throughout the year and (2) received over 8 hours of outpatient 

therapy in 1 day. Fourteen percent of beneficiaries in these counties 

received outpatient therapy throughout the year. In contrast, 3 percent 

of outpatient therapy beneficiaries nationally and 10 percent of MiamiDade beneficiaries received services throughout the year. Additionally, 

the percentage of beneficiaries who received over 8 hours of outpatient 

therapy in 1 day was slightly greater in these 19 high-utilization 

counties than nationally and in Miami-Dade County. 

Each of the 19 high-utilization counties had at least twice the national level 

for 1 or more of the 6 questionable billing characteristics 

Individually, each high-utilization county had at least twice the 

national level for one or more of the six questionable billing 

characteristics. Four of the 19 counties had at least twice the national 

level for at least 3 of the 6 characteristics. 

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FINDINGS 

The levels of some characteristics were high in many of these 

19 counties. For example, in 11 high-utilization counties, the 

percentages of beneficiaries that received more than 8 hours of 

outpatient therapy in 1 day were at least twice the national average. 

Additionally, in 8 of these 11 counties, at least 5 percent of therapy 

beneficiaries received over 8 hours of outpatient therapy in 1 day, over 

7 times the national average. See Appendix B for each high-utilization 

county’s questionable billing levels. 

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RECOMMENDATIONS 

 RECOMMENDATIONS 

Miami-Dade County, Florida, had the highest total Medicare payments 

for outpatient therapy in 2009. We found that per-beneficiary spending 

on outpatient therapy in Miami-Dade County was three times the 

national average in 2009. We also found that Miami-Dade County had 

high levels of questionable billing for outpatient therapy. Miami-Dade 

County exceeded the national levels for five of the six questionable 

billing characteristics we reviewed by at least a factor of three. 

Nineteen other high-utilization counties exhibited questionable 

characteristics in billings for Medicare outpatient therapy services in 

2009, but to a lesser extent than Miami-Dade County. The presence of 

these characteristics raises questions about the appropriateness of 

outpatient therapy claims but does not necessarily mean that such 

claims are inappropriate or fraudulent. 

South Florida, and Miami-Dade County in particular, has been the 

focus of efforts to combat Medicare fraud, waste, and abuse in recent 

years. In May 2009, HHS and DOJ established an interagency team to 

combat health care fraud nationwide focusing on South Florida and 

several other geographic areas. Our findings demonstrate that 

outpatient therapy services in Miami-Dade County and other highutilization counties warrant additional review as part of ongoing 

Medicare antifraud activities. 

We recommend that CMS: 

Target outpatient therapy claims in high-utilization areas for further review 

We found that high-utilization counties have high levels of questionable 

billing characteristics compared to national levels. CMS should monitor 

utilization trends, such as therapy expenditures per provider and per 

beneficiary, and use this information to target providers in geographic 

areas that may be susceptible to fraud. 

Target outpatient therapy claims with questionable billing characteristics 

for further review 

CMS should use the questionable billing characteristics we identified to 

analyze and monitor claims data to detect and deter fraud and abuse. 

As part of its analysis, CMS should examine claims for characteristics 

that are readily identifiable, such as providers that frequently bill for 

services using the KX modifier on the beneficiary’s first date of service 

in the calendar year and those that become evident across beneficiaries’ 

and providers’ claims over time. For example, CMS could identify 

providers that bill for high numbers of services per beneficiary using the 

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RECOMMENDATIONS 

KX modifier, relative to the national or surrounding geographic area’s 

levels. 

Review geographic areas and providers with questionable billing and take 

appropriate action based on results 

When geographic areas are found to have high or increasing utilization 

of outpatient therapy or when monitoring identifies providers with high 

levels of questionable billing, CMS should review selected claims prior 

to payment to ensure that they are legitimate. If CMS determines that 

fraudulent claims have been submitted, it should take steps to suspend 

payments to these providers and recover overpayments to them. To 

assist CMS, we will provide a list of additional high-utilization counties 

and non-high-utilization counties with high levels of questionable billing 

characteristics under separate cover. Additionally, we will consider 

providers with high levels of questionable billing for investigation. 

Revise the current therapy cap exception process 

We found that providers in high-utilization counties used the KX 

modifier and exceeded annual therapy caps at levels much higher than 

the national average. The current therapy cap exception process does 

not ensure appropriate utilization of Medicare outpatient therapy 

services. CMS should consider developing per-beneficiary edits and 

maximum payment amounts to control overutilization of outpatient 

therapy services. Unless CMS claims-processing contractors use edits 

or review claims prior to payment, the current therapy cap exceptions 

process does not identify or limit unusually high annual per-beneficiary 

utilization. CMS could determine payment amounts that only a small 

percentage of beneficiaries would surpass in a single year. Claims that 

exceed these maximum amounts would automatically be subject to 

medical review prior to payment. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with all four recommendations. Through several of its 

PSCs and ZPICs, CMS is engaged in data analysis of outpatient therapy 

services. For example, CMS is monitoring specific geographic areas and 

has already identified claim characteristics and utilization patterns that 

may detect and deter fraud and abuse in certain designated high-risk 

areas. CMS’s analyses have already resulted in investigations and 

referrals to law enforcement, which subsequently led to criminal 

indictments and arrests. In addition, the MAC in Miami, Florida, 

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RECOMMENDATIONS 

instituted a prepayment edit to lower the utilization rate for outpatient 

therapy services. 

CMS also stated that when PSCs and ZPICs identify geographic areas 

with high or increasing outpatient therapy utilization, it takes 

corrective actions, such as onsite reviews, prepayment edits, and 

postpayment reviews. 

Regarding the last recommendation, CMS concurs with the need to 

address the limitations of the current therapy cap exceptions process 

and is developing both short-term and long-term options. CMS included 

the following short-term options in the 2011 Physician Fee Schedule 

Proposed Rule: 

 requiring the reporting of new patient function-related Level II 

HCPCS codes and severity modifiers, 

 applying medical necessity edits when per-beneficiary expenditures 

reach a predetermined value, and 

 introducing per-session codes to bundle payment for groups of 

current therapy codes into a single per-session payment. 

For the long term, CMS is developing a therapy-related data collection 

instrument that includes measurement items relevant to payment. 

We support CMS’s efforts to address these issues and encourage it to 

continue making progress in these areas. We will consider providers 

with high levels of questionable billing for investigation. We will also 

share a list of these providers with CMS so it may take appropriate 

action. We did not make changes to the report based on CMS’s 

comments. For the full text of CMS’s comments, see Appendix C. 

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 APPENDIX~A 

HCPCS Codes for Medicare Outpatient Therapy Services, Fee Schedule Amounts, and Medicare 

Payments, 2009*

HCPCS 

Code Description 

Nonfacility 

Fee 

Schedule 

Amount 

Facility Fee 

Schedule 

Amount 

Number of 

Medicare 

Claims 

Total Medicare 

Payments 

97110 Therapeutic exercises $28.49 $28.49 49,229,880 $1,994,469,190 

97530 Therapeutic activities $29.94 $29.94 16,920,929 $604,742,625 

97140 Manual therapy $26.33 $26.33 18,279,063 $502,444,717 

97112 Neuromuscular reeducation $29.21 $29.21 12,435,150 $375,879,132 

97001 Physical therapy evaluation $69.25 $69.25 4,199,233 $227,015,902 

97116 Gait training therapy $24.89 $24.89 8,951,914 $205,988,238 

92526 Oral function therapy $77.54 $26.69 2,902,618 $177,572,847 

97535 Self care management training $30.30 $30.30 4,646,094 $172,681,674 

G0283 Electrical stimulation other than wound $11.90 $11.90 9,585,421 $89,965,073 

97113 Aquatic therapy/exercises $35.35 $35.35 1,165,459 $83,420,907 

92507 Speech/hearing therapy $61.67 $25.25 1,604,393 $76,822,378 

97035 Ultrasound therapy $11.54 $11.54 6,746,273 $65,794,786 

97003 Occupational therapy evaluation $73.22 $73.22 1,003,691 $58,465,572 

97032 Electrical stimulation $16.59 $16.59 2,695,018 $43,038,732 

97532 Cognitive skills development $24.16 $24.16 698,410 $27,702,946 

97150 Group therapeutic procedures $18.03 $18.03 1,782,119 $25,539,949 

97124 Massage therapy $22.72 $22.72 1,134,287 $24,108,635 

97542 Wheelchair management training $27.05 $27.05 604,481 $22,473,139 

92610 Swallowing function evaluation $61.67 $61.67 309,513 $18,705,280 

92506 Speech/hearing evaluation $154.00 $42.56 160,331 $17,864,825 

97760 Orthotic management and training $32.82 $32.82 459,094 $17,180,166 

97002 Physical therapy reevaluation $37.15 $37.15 557,614 $16,760,845 

97597 Active wound care: 20 cm or less $62.03 $27.41 239,873 $10,640,377 

97012 Mechanical traction therapy $14.43 $14.43 846,893 $9,761,844 

92611 Motion fluoroscopy/swallowing $70.69 $70.69 109,937 $7,643,271 

97033 Electric current therapy $25.61 $25.61 323,713 $6,694,468 

97022 Whirlpool therapy $18.39 $18.39 401,468 $5,551,642 

97750 Physical performance test $28.85 $28.85 135,518 $4,428,371 

97016 Vasopneumatic device therapy $15.51 $15.51 354,614 $4,193,393 

97024 Diathermy, e.g., microwave $5.41 $5.41 639,190 $2,734,629 

97598 Active wound care: greater than 20 cm $76.46 $37.15 42,363 $2,434,433 

97004 Occupational therapy reevaluation $41.84 $41.84 54,982 $1,911,344 

97018 Paraffin bath therapy $8.30 $8.30 261,651 $1,734,700 

97761 Prosthetic training $28.85 $28.85 39,514 $1,666,576 

97762 Checkout for orthotic/prosthetic use $36.07 $36.07 46,457 $1,605,450 

92508 Speech/hearing therapy $29.57 $12.98 60,355 $1,393,711 

97533 Sensory integration $25.97 $25.97 37,384 $1,129,882 

* Healthcare Common Procedure Coding System (HCPCS) codes provide a standardized coding system used by Medicare to describe specific items 

and services. 

Sources: Medicare Physician Fee Schedule (2009) and Office of Inspector General analysis of 2009 Medicare outpatient therapy claims. 

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APPENDIX A 

Continued: HCPCS Codes for Medicare Outpatient Therapy Services, Fee Schedule Amounts, and 

Medicare Payments, 2009* 

HCPCS 

Code Description 

Nonfacility 

Fee 

Schedule 

Amount 

Facility Fee 

Schedule 

Amount 

Number of 

Medicare 

Claims 

Total Medicare 

Payments 

97026 Infrared therapy $5.05 $5.05 237,206 $1,000,552 

G0281 Unattended electrical stimulation $11.90 $11.90 98,928 $982,243 

97537 Community/work reintegration $26.69 $26.69 21,681 $952,940 

92609 Use of speech device service $86.92 $86.92 11,348 $718,044 

97034 Contrast bath therapy $15.15 $15.15 48,020 $587,001 

92612 Endoscopy swallowing test (fees) $152.92 $63.48 5,013 $579,374 

92597 Oral speech device evaluation $102.79 $42.92 6,329 $526,915 

95831 Limb muscle testing, manual $24.89 $13.71 22,587 $472,713 

95851 Range of motion measurements $15.15 $7.57 32,043 $441,859 

97605 Negative pressure wound treatment, < 50 cm $35.35 $25.25 14,514 $431,545 

64550 Application of neurostimulator $13.71 $8.66 35,634 $429,507 

90901 Biofeedback training, any method $31.74 $19.48 12,368 $411,492 

96125 Cognitive test by health care professional $94.86 $80.79 4,259 $386,866 

0183T** Wound ultrasound $0.00 $0.00 4,115 $357,281 

97036 Hydrotherapy $26.33 $26.33 10,401 $261,857 

97039** Physical therapy treatment $0.00 $0.00 10,609 $244,501 

97755 Assistive technology assessment $33.18 $33.18 2,755 $237,770 

92607 Exam for speech device treatment, 1 hour $162.30 $162.30 2,071 $236,062 

96105 Assessment of aphasia $74.66 $74.66 2,484 $188,254 

G0329 Electromagnetic treatment for ulcers $7.93 $7.93 18,724 $134,480 

97139** Physical medicine procedure $0.00 $0.00 5,543 $105,235 

97606 Negative pressure wound treatment, > 50 cm $37.87 $27.77 2,613 $92,541 

92616 Laryngeal sense test $182.86 $93.05 529 $80,436 

95852 Range of motion measurements $12.26 $5.77 6,060 $58,720 

97799** Physical medicine procedure $0.00 $0.00 555 $56,642 

97028 Ultraviolet therapy $6.49 $6.49 10,764 $55,970 

97010 Hot or cold pack therapy $5.05 $5.05 220,633 $28,655 

92608 Exam for speech device treatment additional $31.74 $31.74 671 $28,006 

95832 Hand muscle testing, manual $24.16 $14.79 1,167 $21,076 

97602*** Wound(s) care, nonselective $0.00 $0.00 16,422 $19,433 

95833 Body muscle testing, manual $33.90 $22.36 671 $17,408 

95834 Body muscle testing, manual $40.39 $28.49 319 $9,849 

96111 Developmental test, extended $127.68 $123.35 68 $6,189 

92614 Laryngoscopic sensory test $133.81 $63.48 36 $3,797 

95992 Canalith repositioning procedure $40.76 $36.79 968 $1,125 

96110 Developmental test, limited $12.62 $12.62 22 $404 

92605*** Evaluation for nonspeech device prescription $0.00 $0.00 60 $24 

92606*** Nonspeech device service $0.00 $0.00 118 $0 

* Healthcare Common Procedure Coding System (HCPCS) codes provide a standardized coding system used by Medicare to describe specific items 

and services. 

** No fee schedule amount exists for this code; the local carrier (or A/B Medicare Administrative Contractor) determines the coverage and pricing for 

this code. 

*** This code is a bundled service under the fee schedule. 

Sources: Medicare Physician Fee Schedule (2009) and Office of Inspector General analysis of 2009 Medicare outpatient therapy claims. 
 APPENDIX~B

Questionable Billing Characteristics for 20 High-Utilization Counties, Compared to National Levels 

Questionable Billing Characteristics 

County/Parish 

Average 

Payment 

per 

Beneficiary 

Total Medicare 

Payments 

Average 

Number of 

Services 

Billed With KX 

Modifier per 

Beneficiary 

Percentage of 

Services Billed 

With KX Modifier 

on First Date of 

Service per Beneficiary 

Average Payment 

for Beneficiaries 

Who Received 

Services From 

More Than One 

Provider 

Percentage of 

Beneficiaries 

Receiving 

Services 

Throughout the 

Year 

Percentage of 

Beneficiaries 

Exceeding 

Annual Cap 

National $1,078 $4,922,328,414 14 4.9% $1,670 3.1% 21.6% Miami-Dade, FL $3,459 $159,180,288 60 20.2% $5,664 9.7% 63.0% St. Mary, LA $2,343 $1,571,955 48 7.2% $2,365 2.7% 35.3% Avoyelles, LA $2,054 $1,244,468 43 10.2% $2,103 2.6% 39.1% Leflore, MS $2,031 $1,062,159 45 6.9% $1,773 3.4% 29.6% Okeechobee, FL $2,026 $1,616,424 17 4.9% $4,301 4.0% 38.2% Kings, NY $1,972 $79,973,326 41 9.8% $3,361 16.8% 40.7% Rusk, TX $1,890 $1,124,662 52 16.6% $1,785 3.4% 30.1% Lauderdale, MS $1,814 $2,368,575 39 15.0% $2,883 2.7% 27.9% Liberty, TX $1,807 $1,442,333 51 15.0% $2,394 2.6% 27.8% Warren, MS $1,791 $1,296,449 37 4.3% $3,201 3.7% 38.0% Ouachita, LA $1,749 $3,255,832 32 6.9% $2,307 3.3% 31.8% Thomas, GA $1,747 $1,864,483 45 7.6% $2,024 2.2% 36.7% Lincoln, LA $1,747 $1,109,029 39 8.7% $2,493 2.7% 29.6% San Patricio, TX $1,744 $1,641,316 33 5.2% $2,821 3.1% 35.0% Acadia, LA $1,742 $1,332,625 34 3.3% $1,836 2.4% 31.5% Iberia, LA $1,742 $1,929,809 27 7.4% $1,506 2.1% 30.4% De Kalb, IN $1,739 $1,038,248 48 8.0% $1,973 2.7% 27.5% Angelina, TX $1,718 $2,283,187 30 10.0% $2,696 2.6% 34.6% Queens, NY $1,714 $53,872,258 33 8.0% $3,007 14.6% 37.3% Dubois, IN $1,676 $1,670,940 36 7.9% $1,753 2.8% 27.2% Note: Bolded figures indicate levels that are at least twice the national level. * Figures are based on rounded questionable billing levels. Source: Office of Inspector General analysis of 2009 Medicare outpatient therapy services claims. 

 O E I - 0 4 - 0 9 - 0 0 5 4 0 QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT T HERAPY S ERVICES 
A P PEN D x c 

Agency Comments: Centers for Medicare & Medicaid Services 

/$oP....q,,, ( tf... 	DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services 

,~,!- AdminilJtrator 

Washington, DC 20201 

DATE: 	 OCT 1 2 2010 

TO: 	 Daniel R. Levinson 


Inspector General 


FROM: 	 Donald M. Berwick, M.D. 


Administrator 


SUBJECT: 	 Office ofInspector General (OIG) Draft Report: "Questionable Billing for 

Medicare Outpatient Therapy Services" (OEI-04-09-00540) 

Thank you for the opportunity to review and comment on the subject OIG draft report. The 

Office of Inspector General (OIG) study found that counties with high-utilization of outpatient 

therapies had high levels of per beneficiary spending and questionable billing characteristics 

compared to national levels. During this study, OIG's findings demonstrated that outpatient 

therapy services in Miami-Dade Cotmty and other high-utilization counties warrant additional 

review as part of ongoing Medicare antifraud activities. 

In its report, OIG made several recommendations to the Secretary ofthe Department ofHealth 

and Human Services and the Administrator ofthe Centers for Medicare & Medicaid Services 

(CMS). CMS responded to each of these recommendations for OIG's review and consideration. 

OIG Recommendation 

Target outpatient therapy claims in high-utilization areas for further review. 

CMS Response 

The CMS concurs with OIG's recommendation. CMS, through several ofits Program Safeguard 

Contractors (PSCs) and Zone Program Integrity Contractors (ZPICs) in certain designated high 

risk areas, is already engaged in extensive data analysis of outpatient therapy services. CMS is 

monitoring specific geographic areas by comparing per beneficiary spending in these area') with 

state-wide and national averages to target providers in geographic areas that may be susceptible 

to fraudulent activities. SafeGuard Services (SGS), the PSC responsible for New York, has 

successfully utilized extensive zip code comparative analyses for physical therapy, other 

outpatient therapy and other claim types for provider target identification. Such analyses have 

resulted in investigations and referrals to law enforcement in Brooklyn, NY, a HEAT Strike 

Force city, that subsequently led to criminal indictments and arrests. Other SGS contractors in 

other states are performing similar reviews. Likewise, Health Integrity, the ZPIC for Texas, has 

OEI·04·09·00540 QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT THERAPY SERVICES 

25 
APPENDIX~C 

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APPENDIX~C 

 O E I - 0 4 - 0 9 - 0 0 5 4 0 QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT T HERAPY S ERVICES 

 27 
 O E I - 0 4 - 0 9 - 0 0 5 4 0 QUESTIONABLE BILLING FOR MEDICARE OUTPATIENT T HERAPY S ERVICES 

 28 

 ACKNOWLEDGMENTS 

This report was prepared under the direction of Dwayne Grant, Regional 

Inspector General for Evaluation and Inspections in the Atlanta regional 

office, and Jaime Durley, Deputy Regional Inspector General. 

Sarah Ambrose served as the team leader for this study and 

Holly Williams served as the lead analyst. Other principal Office of 

Evaluation and Inspections staff from the Atlanta regional office who 

contributed to this report include Gerius Patterson; central office staff 

who contributed include Kevin Farber and Arianne Spaccarelli. 
Office of Inspector General 

http://oig.hhs.gov 

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 Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides auditing services 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. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and beneficiaries. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities.