Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

AUGUST 1999 

OEI-09-97-00121 

Physical And Occupational Therapy in Nursing Homes 

Medical Necessity and Quality of Care 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 

protect the integrity of the Department of Health and Human Services programs as well as the 

health and welfare of beneficiaries served by them. This statutory mission is carried out through a 

nationwide program of audits, investigations, inspections, sanctions, and fraud alerts. The 

Inspector General informs the Secretary of program and management problems and recommends 

legislative, regulatory, and operational approaches to correct them. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 

Inspector General. It conducts short-term management and program evaluations (called 

inspections) that focus on issues of concern to the Department, the Congress, and the public. The 

inspection reports provide findings and recommendations on the efficiency, vulnerability, and 

effectiveness of departmental programs. 

OEI's San Francisco regional office prepared this report under the direction of Kaye D. Kidwell, 

Regional Inspector General, and Paul A. Gottlober, Deputy Regional Inspector General. Principal 

OEI staff included: 

REGION HEADQUARTERS 

Deborah Harvey, Project Leader Susan Burbach, Program Specialist 

Robert Gibbons, Program Analyst Jennifer Antico, Program Specialist 

Carrie Lozano, Program Analyst Stuart Wright, Program Specialist 

Lori Stickel, Program Analyst Barbara Tedesco, Statistician 

To obtain copies of this report, please call the San Francisco Regional Office at 415-437-7900. 

Reports are also available on the World Wide Web at our home page address: 

http://www.dhhs.gov/progorg/oei 
EXECUTIVE SUMMARY 

PURPOSE 

To determine the medical necessity and quality of care of physical and occupational therapy 

rendered to Medicare patients in skilled nursing facilities. 

BACKGROUND 

All skilled nursing facilities must meet the requirements of Section 1819 of the Medicare law. 

The facilities must, for example, (1) provide 24-hour skilled nursing service; (2) develop 

treatment plans for each patient from a physician’s order; (3) maintain clinical records on all 

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

skilled nursing facilities also provide custodial care. 

Medicare coverage guidelines state that all therapy must be reasonable, necessary, specific, and 

effective treatment for the patient’s condition. Policies developed by the Health Care 

Financing Administration, the federal agency that administers the Medicare program, require 

that therapy be ordered by a physician, require the skills of a qualified therapist, and be dictated 

by a written treatment plan. The treatment plan must include specific and measurable 

functional goals and a reasonable estimate of when those goals will be attained. It should 

describe specific therapeutic services, the frequency of visits, and the duration of therapy. 

We conducted on-site medical review at a random sample of 24 skilled nursing facilities 

nationwide. Several teams of physical and occupational therapists reviewed the March 1998 

medical records of a national random sample of 218 Medicare patients. The medical reviewers 

determined the medical necessity of the therapy provided to the sampled patients before the 

implementation of the prospective payment system for skilled nursing facilities which began on 

July 1, 1998. 

FINDINGS 

Most skilled nursing facility patients were appropriate candidates for physical and 

occupational therapy, and they benefitted from therapy 

Most patients received appropriate therapy interventions for their initial medical conditions, 

and at least two-thirds of patients achieved their treatment goals. Most patients would not 

have achieved similar levels of function without therapy. 

Medical Necessity of SNF Physical/Occupational Therapy 1 OEI-09-97-00121 
However, almost 13 percent of therapy was billed improperly to Medicare 

By facility, the percentage of therapy that was billed improperly ranged from zero to 

51 percent. Smaller facilities were more likely than larger facilities to bill improperly. 

Therapy was deemed as improperly billed to the Medicare program when it was not medically 

necessary and/or therapy was provided by staff who did not have the appropriate skill for the 

patient’s medical condition. 

In addition to the 13 percent of therapy that was billed improperly, another 

4 percent was not documented in the patients’ medical records 

In several cases, therapists did not explain changes in the patient’s progress which would 

justify large variations in the duration of therapy. 

RECOMMENDATION 

From our findings, it is clear that some problems stem from a lack of awareness and 

understanding of Medicare coverage and guidelines, while others may be more directly related 

to overutilization in order to maximize Medicare reimbursement. Our findings also reflect our 

general concern for the need for improved quality of care, with an emphasis on patient safety 

and appropriate therapy treatment. 

Therefore, we recommend that the Health Care Financing Administration provide more 

training to SNFs and therapy staff on Medicare coverage criteria and guidelines for physical 

and occupational therapy, local medical review policies, and monitoring procedures. This 

could be accomplished by: 

1. instructing Medicare fiscal intermediaries to provide regular workshops to SNFs, especially 

smaller facilities, and therapists and 

2. working collaboratively with the national therapy and nursing home associations to assure 

that they provide accurate and comprehensive information to their members. 

In this report, we have focused on the medical necessity of physical and occupational therapy. 

In a companion report entitled Physical and Occupational Therapy in Nursing Homes: Cost of 

Improper Billings to Medicare (OEI-09-97-00122), we analyzed how much improperly billed 

therapy costs the Medicare program. 

Medical Necessity of SNF Physical/Occupational Therapy 2 OEI-09-97-00121 
AGENCY RESPONSE 

We received comments on the draft report from the Health Care Financing Administration. 

The agency concurred with the report’s conclusions. The Health Care Financing 

Administration already has increased medical review efforts at the Medicare contractors as part 

of its on-going program integrity efforts, and they will continue to focus on appropriate 

therapy for Medicare beneficiaries. The agency also has published new medical review 

guidelines for skilled nursing facilities and plans to conduct related training to strengthen 

provider education. 

The full text of the Health Care Financing Administration’s comments appears in appendix C. 

Medical Necessity of SNF Physical/Occupational Therapy 3 OEI-09-97-00121 
TABLE TABLE OF CONTENTS CONTENTS 

PAGE

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

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

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

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

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

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

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

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

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

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

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

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

Medical Necessity of SNF Physical/Occupational Therapy 4 OEI-09-97-00121 
INTRODUCTION 

PURPOSE 

To determine the medical necessity and quality of care of physical and occupational therapy 

rendered to Medicare patients in skilled nursing facilities. 

BACKGROUND 

Medicare Coverage for Skilled Nursing Facilities 

All skilled nursing facilities (SNF) must meet the requirements of Section 1819 of the Medicare

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

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

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

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

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

care. The Part A benefit includes:

< nursing care;

< bed and board;

< physical, occupational, and/or speech therapy;

< medical social services; and

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

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

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

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

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

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

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

they are receiving only custodial care.

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

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

receive Part B-covered services only. The SNFs are responsible for meeting the needs of longterm patients who are eligible for Part B services only during their stay.

Medical Necessity of SNF Physical/Occupational Therapy 5 OEI-09-97-00121 
Description of Physical and Occupational Therapy 

According to the American Physical Therapy Association, physical therapy is “... the care and 

services that includes (1) examining patients with impairments, functional limitations or 

disabilities or other health-related conditions in order to determine a diagnosis, prognosis, and 

intervention; (2) alleviating impairments and functional limitations by designing, implementing 

and modifying therapeutic interventions; and (3) preventing injury, impairment, functional 

limitation and disability, including the promotion and maintenance of fitness, health, and quality 

of life.”1 Common treatments include therapeutic exercise, prescription and customization of 

prosthetic devices and equipment, and wound management. For example, physical therapy 

may include gait training on ramps, stairs, or curbs to improve a patient’s walking ability 

impaired by injury or illness. 

The American Occupational Therapy Association defines occupational therapy as “...the use 

of purposeful activity or interventions designed to achieve functional outcomes which promote 

health, prevent injury or disability, and which develop, improve, sustain or restore the highest 

possible level of independence of any individual who has an injury, illness, cognitive 

impairment, psycho social dysfunction, mental illness, developmental or learning disability, 

physical disability, or other disorder or condition.”2 Occupational therapy primarily focuses on 

compensatory techniques to improve a patient’s ability to complete the activities of daily living 

independently. Therapy may include (1) assessing patient need; (2) designing, developing, 

adapting, applying, or training in the use of assistive or orthotic devices; 

(3) adapting environments and processes to enhance functional performance; or (4) promoting 

health and wellness. Two examples include teaching a patient who has lost the use of an arm 

how to prepare food and cook with one hand and designing, building, and training a patient in 

the use of an assistive device that would enable him to hold a utensil and feed himself 

independently. 

The staff who provide physical and occupational therapy to patients include therapists, 

assistants, and aides. Staff are distinguished by training and experience and often are licensed, 

registered, or certified by the State where they practice. We have included descriptions of each 

staff level and some common terminology in appendix A. 

Medicare Coverage of Physical and Occupational Therapy 

1

American Physical Therapy Association, Model Definition of Physical Therapy for State 

Practice Acts, Board of Directors Policies, Positions and Guidelines, March 1998. 

2

The American Occupational Therapy Association, Inc. Definition of occupational therapy 

practice for State regulation. The American Occupational Therapy Association, Inc. Policy Manual 

(Association Policy 5.3.1), July 1994. 

Medical Necessity of SNF Physical/Occupational Therapy 6 OEI-09-97-00121 
All SNFs are required to assess each patient’s status and needs shortly after admission, 

including the need for physical and occupational therapy. The Nursing Home Reform Act (P.L. 

100-203), which Congress passed as part of the Omnibus Budget Reconciliation Act of 1987, 

requires that SNFs assess the needs of all patients within 14 days of admission and reassess 

long-term patients annually. Problems identified through the assessment must be treated to 

attain or maintain “the highest practicable level” of functioning based on the patient’s physical, 

mental, and psycho social well-being. 

Medicare guidelines state that all therapy must be reasonable, necessary, specific, and effective 

treatment for the patient’s condition. While Medicare regulations define common illnesses and 

injuries requiring therapy, the regulations do not specifically bar therapy for illnesses or injuries 

that are not mentioned. Fiscal intermediaries, the insurance companies that adjudicate cost 

reports for inpatient hospitals and SNFs, often develop local medical review policies to 

supplement Medicare guidelines. 

Medicare coverage requires that the therapy meet all of the following conditions:3 

< the therapy must be ordered by a physician; 

< the therapy level’s complexity and sophistication, or the patient’s condition, require the 

skills of a qualified therapist rather than nonskilled SNF staff; 

< the medical record contains an active written treatment plan that includes specific and 

measurable treatment goals related to the patient’s condition along with a reasonable time 

estimate of when those goals will be achieved; 

< the treatment plan should describe the specific therapeutic interventions that will be utilized 

to restore the patient’s level of function which has been lost or reduced by illness or injury; 

< the amount, frequency, and duration of therapy should be reasonable and necessary for the 

patient’s condition; 

< therapy is provided either by or under the direct supervision of a certified therapist;4 

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

physician or therapist of the patient’s restoration potential, that the patient’s condition will 

improve substantially in a reasonable and generally predictable period of time, or the 

therapy must be necessary for the establishment of a safe and effective maintenance 

program. However, therapy will only be covered until the physician and/or therapist 

concludes that the patient is not going to improve; and 

< the patient is seen by the physician at least every 30 days. 

3

Health Care Financing Administration, Skilled Nursing Facility Manual, Sections 214, 230, 

230.3(C), and 271. 

4

State regulations define whether or not direct supervision includes the onsite presence of a 

certified therapist. 

Medical Necessity of SNF Physical/Occupational Therapy 7 OEI-09-97-00121 
A SNF patient may receive more than one type of therapy within the same episode of care. For

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

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

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

Prior Work by the Office of Inspector General 

In April 1998, the Office of Inspector General published a report describing the results from a 

probe sample of physical and occupational therapy provided in six randomly selected SNFs in 

California.5 The major conclusions were: 

< Medically unnecessary physical and occupational therapy at sampled SNFs ranged from less 

than 4 to more than 80 percent, and 

< Multiple factors account for the high volume of medically unnecessary therapy, such as: 

1. skilled therapy is frequently provided when nonskilled maintenance services would be 

more appropriate, 

2. therapists sometimes ignore the patient’s prior level of function and set unrealistic 

goals, and 

3. the frequency of therapy is sometimes excessive. 

Based on the probe sample, the Office of Inspector General decided to conduct this national 

inspection. 

METHODOLOGY 

Sampled SNF Selection 

From the Medicare Common Working File, we extracted all March 1998 physical and 

occupational therapy claims (both Parts A and B) submitted by SNFs to fiscal intermediaries 

for payment. We limited the extract to SNFs in the continental United States. We reviewed 

therapy rendered to patients before the Health Care Financing Administration implemented the 

SNF prospective payment system on July 1, 1998. We purposely selected claims submitted 

before July 1, 1998 to maintain consistency in SNF and fiscal intermediary policies and 

procedures for the 12 months prior to the change in payment systems. 

5

Office of Inspector General, Medical Necessity of Physical and Occupational Therapy in Skilled 

Nursing Facilities--California Probe Sample Results [Early Alert], OEI-09-97-00120, April 1998. 

Medical Necessity of SNF Physical/Occupational Therapy 8 OEI-09-97-00121 
We stratified the SNFs into four strata by (1) regions of the United States and (2) the total

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

the SNFs into clusters such that

< the SNFs were in the same geographic area and

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

United States 

Region Stratum Facility Charges for Physical and Occupational Therapy 

East 

1 less than $60,000 

2 equal to or greater than $60,000 

West and Central 

3 less than $60,000 

4 equal to or greater than $60,000 

We then randomly selected two SNF clusters per stratum. Within each SNF cluster, we 

randomly selected 3 SNFs, resulting in a total sample of 24 SNFs. Within each SNF, we 

randomly selected 10 patients who received physical and/or occupational therapy during March 

1998. If a SNF had fewer than 10 patients who received therapy in that month, we reviewed 

all of them. 

Calculations for the confidence intervals account for all levels of clustering and stratification. 

The 95 percent confidence intervals for the statistics in this report are listed in appendix B. 

On-Site Medical Review 

We conducted on-site reviews at the 24 SNFs for the 218 sampled patients who received

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

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

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

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

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

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

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

opportunity to comment.

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

< therapy was ordered by a physician,

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

< therapy was based on medical need,

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

< the treatment plan was appropriate,

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

delineated clearly, 

< the therapy was rendered with appropriate frequency, 

< therapy was discontinued at the appropriate time, 

< appropriate therapy staff performed the interventions, and 

< medical records clearly documented the patient’s progress. 

While on-site, we reviewed therapy ledgers, requested copies of the Medicare bills for the 

sampled patients (i.e., Form UB-92), interviewed SNF administrators and some key therapy 

staff, obtained therapy contracts that were in effect in March 1998, and observed some physical 

and occupational therapy conducted with patients. Assuming that March 1998 is a typical 

month, we projected the results of the medical review to the 12-month period ending June 30, 

1998. See appendix B for more details. After the onsite review, we requested local medical 

review policies and therapy guidelines from the fiscal intermediaries for the sampled SNFs. 

This report is one in a series of reports on physical and occupational therapy for Medicare SNF 

patients. A companion report, Physical and Occupational Therapy in Nursing Homes: Cost 

of Improper Billings to Medicare (OEI-09-97-00122), details the costs for medically 

unnecessary and undocumented therapy described in this report. 

Our review was conducted in accordance with the Quality Standards for Inspections issued by 

the President’s Council on Integrity and Efficiency. 

Medical Necessity of SNF Physical/Occupational Therapy 10 OEI-09-97-00121 
FINDINGS 

Most SNF patients were appropriate candidates for physical 

and occupational therapy, and they benefitted from therapy 

Most patients received appropriate therapy given their initial medical conditions 

Approximately 83 percent of physical and occupational therapy provided in 1998 to SNF 

patients was billed properly to Medicare. Medical reviewers determined that treatment goals 

and plans were appropriate to the therapy diagnoses, and most patients initially received 

therapy with the appropriate frequency and duration of individual sessions. In fact, reviewers 

found that most patients would not have achieved similar functional levels without therapy. 

Medical reviewers determined that the medical conditions for most patients required the need 

for skilled physical and occupational therapy. The therapy interventions appeared functionally 

relevant and clinically appropriate. When a patient’s condition or progress changed, the 

therapist usually revised the goals and plan in measurable ways, and the medical record usually 

documented the patient’s prior functional level. Positive outcomes included shorter lengths of 

stay and returning more patients to independent living. Reviewers found that these medical 

records were complete, in order, and provided enough data to clearly justify all therapy 

provided to the patients. 

At least two-thirds of patients achieved their treatment goals 

Almost 67 percent of physical therapy patients and 73 percent of occupational therapy patients 

had good outcomes from therapy. Reviewers determined that most treatment goals were 

reached within a reasonable time given the patient’s medical condition, tolerance level, and 

therapy progress. Based on the planned interventions (for example, gait training or 

re-learning bathing and personal grooming activities), therapists provided sessions with the 

proper frequency and duration of individual sessions. 

ACHIEVEMENT OF TREATMENT GOALS 

Achievement 

Percent of Therapy 

Physical Occupational 

Patient achieved goals fully or partially 66.8% 73.3% 

Patient did not achieve goals 27.1% 16.5% 

Reviewer could not determine 6.0% 10.1% 

Source: Office of Evaluation and Inspections, 1999 

Medical Necessity of SNF Physical/Occupational Therapy 11 OEI-09-97-00121 
Assuming that March 1998 is a typical month, we projected the results of the medical review to 6

the 12-month period ending June 30, 1998.

Medical Necessity of SNF Physical/Occupational Therapy 12 OEI-09-97-00121

Medical reviewers noted that in a few of the SNFs, physical and occupational therapists

collaborated when they developed initial treatment plans and re-evaluated the patients. 

collaborating, therapists assured that they did not duplicate goals and plans, thereby helping the

patients progress further within a shorter time frame. 

collaboration occurs, the patient is the winner.”

Nationally, almost 13 percent of therapy was billed improperly

to Medicare

Almost 13 percent of physical and occupational therapy, or 10.6 million of 82.9 million

sessions, was billed improperly by SNFs to Medicare. Of these 10.6 million sessions, 6

51.6 percent were physical therapy, and 48.4 percent were occupational therapy.

Improper billings by SNFs ranged from zero to almost 51 percent

While 6 SNFs did not submit any improper therapy bills, 18 of the 24 sampled SNFs

improperly billed for physical and/or occupational therapy. 

smaller SNFs, those with fewer than 100 beds, exhibited a statistically higher rate of improper

billings than the larger SNFs. 

from 9 to 338 beds. 

profit), SNF affiliation (hospital-based or free-standing), type of therapy company (independent

or national corporation), and type of ownership (part of multi-facility chain or independently

owned). 

Source: Office of

Evaluation and

Inspections, 1999

By

One medical reviewer remarked, “When

As shown in the graph below,

The total number of licensed beds at the sampled SNFs ranged

We also analyzed other factors such as status (for-profit or not-forThe differences among these variables were not statistically significant.
Almost 75 percent of all improperly billed therapy was not medically necessary 

Of the 13 percent of improperly billed therapy, almost three-fourths was billed improperly

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

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

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

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

therapy.

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

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

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

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

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

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

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

increase the patient’s strength, balance, bed mobility, and sitting tolerance. The reviewer

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

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

have contributed to the patient’s need to be hospitalized repeatedly.

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

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

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

sufficiently consider the patient’s initial functional levels when developing goals. Several

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

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

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

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

11⁄2 to 2 hours. A pattern of lengthy evaluations appeared to be a standard practice at several

facilities.

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

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

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

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

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

less frequency and duration.

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

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

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

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

Medical Necessity of SNF Physical/Occupational Therapy 13 OEI-09-97-00121 
medical record. The medical reviewer commented, “Although the episode of care could be 

considered reasonable, 60 to 75 minutes of care on a daily basis raises questions of intensity of 

care provided, particularly given [the patient’s imminent] discharge to a rehabilitation nursing 

program rather than home.” 

Many patients received therapy from staff with inappropriate skill or experience 

Approximately 26 percent of the improperly billed physical and occupational therapy was 

provided by staff who did not have the appropriate skill for the patient’s medical condition. Of 

this 26 percent, the table below explains the major reasons. 

Reason Percent7 

Physical therapist assistants and occupational therapy 

assistants provided therapy beyond their skills 

46% 

Rehabilitation aides provided care that was billed as skilled 

therapy 

50% 

Therapy should have been provided by assistants rather 

than by therapists 

5% 

Source: Office of Evaluation and Inspections, 1999 

Other reasons included occupational therapists who provided physical therapy and physical 

therapist assistants who provided nonskilled maintenance services. For example, situations 

where (1) occupational therapy assistants who completed patient re-evaluations and discharge 

summaries instead of the occupational therapists; (2) physical therapist assistants who provided 

the entire episode of care, from evaluation through discharge summary, for several patients in 

the same facility; and (3) rehabilitation aides who provided therapy without evidence of direct 

supervision by a therapist or an assistant. 

Reviewers especially were concerned that physical therapist assistants and occupational therapy 

assistants were working beyond the scope of their State license and contrary to guidelines and 

practices followed by both national therapy associations. For example, a graduate occupational 

therapy student at one SNF provided services to patients, but the notes were not co-signed by 

the occupational therapist to indicate monitoring as required by State law. Reviewers also 

questioned the possible link between the length of therapy (both frequency of therapy and 

duration of individual sessions) and the skill level of the individual who rendered the 

treatments, i.e., the lesser the staff skill level, the higher the frequency and the longer the 

duration of therapy. 

7

The percents do not total 100.0 percent due to rounding. 

Medical Necessity of SNF Physical/Occupational Therapy 14 OEI-09-97-00121 
Almost 4 percent of therapy was not documented in the 

patients’ medical records 

Approximately 3.8 percent of therapy sessions either was not documented at all in the medical 

records or was not documented adequately to determine medical necessity. Documentation 

should include signed physician orders; individual treatment goals and plans; narrative 

summaries of care provided and/or therapy charts (also called grids) with all therapeutic 

interventions, the time spent on the interventions, which staff provided the therapy, and 

narratives of patient progress or changes in progress.8 Narrative summaries did not always 

provide necessary information, especially explanations for large variations in treatment times, 

such as a change from 30 minutes to 1 hour 45 minutes for the same interventions. Medical 

records that did not support the need for skilled therapy also had substandard documentation, 

including a lack of clinical data. Reasons for undocumented therapy may include the lack of 

staff training and/or the lack of time to document medical records properly. When asked how 

therapists receive information on Medicare coverage, medical necessity, and documentation 

guidelines, SNF administrators stated that they rely on the therapy companies to provide 

information to their staff. Few SNFs sponsor or actively participate in on-site Medicare 

therapy training. 

Reviewers commented that some forms and documentation methods were not comprehensive 

enough to capture clinical data to meet Medicare guidelines and professional therapy 

standards.9 Reasons may include the sharing of “cookbook forms” among staff from national 

therapy companies and a lack of knowledge by individual therapists of Medicare guidelines and 

criteria. Reviewers could not determine the skill level of the provider at one SNF due to poor 

documentation. 

8

The medical reviewers requested additional documentation from the on-site therapists if patient 

records were in storage, misplaced, or appeared incomplete. 

9

American Physical Therapy Association, “Guidelines for Physical Therapy Documentation,” 

Guide to Physical Therapist Practice, 1998, appendix 7. 

Medical Necessity of SNF Physical/Occupational Therapy 15 OEI-09-97-00121 
RECOMMENDATION 

From our findings, it is clear that some problems stem from a lack of awareness and 

understanding of Medicare coverage and guidelines, while others may be more directly related 

to overutilization in order to maximize Medicare reimbursement. Our findings also reflect our 

general concern for the need for improved quality of care, with an emphasis on patient safety 

and appropriate therapy treatment. 

Therefore, we recommend that the Health Care Financing Administration provide more 

training to SNFs and therapy staff on Medicare coverage criteria and guidelines for physical 

and occupational therapy, local medical review policies, and monitoring procedures. This 

could be accomplished by: 

1. instructing Medicare fiscal intermediaries to provide regular workshops to SNFs, especially 

smaller facilities, and therapists and 

2. working collaboratively with the national therapy and nursing home associations to assure 

that they provide accurate and comprehensive information to their members. 

In this report, we have focused on the medical necessity of physical and occupational therapy. 

As noted earlier, in a companion report entitled Physical and Occupational Therapy in 

Nursing Homes: Cost of Improper Billings to Medicare (OEI-09-97-00122), we analyzed how 

much improperly billed therapy costs the Medicare program. 

AGENCY RESPONSE 

We received comments on the draft report from the Health Care Financing Administration. 

The agency concurred with the report’s conclusions. The Health Care Financing 

Administration already has increased medical review efforts at the Medicare contractors as part 

of its on-going program integrity efforts, and they will continue to focus on appropriate 

therapy for Medicare beneficiaries. The agency also has published new medical review 

guidelines for skilled nursing facilities and plans to conduct related training to strengthen 

provider education. 

The full text of the Health Care Financing Administration’s comments appears in appendix C. 

Medical Necessity of SNF Physical/Occupational Therapy 16 OEI-09-97-00121 
APPENDIX A 

Glossary of Terms

Primary Therapy Providers 

< Physical therapist--professionally educated at the college or university level and is required to 

be licensed or registered in all States.10 A primary role is to provide therapy to patients who 

have impairments, functional limitations, disabilities, or changes in physical function and health 

status resulting from injury, disease, or other causes.11 The physical therapist is responsible for 

any evaluation and assessment of a patient’s therapy status. 

< Physical therapist assistant--a graduate of an accredited physical therapist assistant associate 

degree program accredited by an agency recognized by the Commission on Accreditation in 

Physical Therapy Education. Assistants are licensed, certified, registered, or approved in 

almost all States and Puerto Rico, except in Hawaii, Minnesota, Michigan, Washington, 

Wisconsin, the District of Columbia, and the U.S. Virgin Islands. The assistant works with the 

physical therapist in the provision of physical therapy. The assistant may perform procedures 

and related tasks that have been selected and delegated by the supervising physical therapist. 

Where permitted by law, the physical therapist assistant may complete routine operational 

functions, including supervision of physical therapy aides and documentation of patient 

progress. The assistant may modify a specific therapeutic activity in accordance with changes 

in patient status and within the scope of the established treatment plan.12 

< Physical therapy aide/technician--a nonlicensed worker, trained under the direction of a 

physical therapist. The aide performs designated routine therapy tasks that are delegated by 

the physical therapists or, in accordance with the State law, by a physical therapist assistant. 

The aide performs only with the continuous on-site supervision of the physical therapist or, 

where allowable by State law or regulation, the physical therapist assistant.13 

10American Physical Therapy Association, Definition of Physical Therapist for State Practice 

Acts, Board of Directors Policies, Positions and Guidelines, March 1999. 

11American Physical Therapy Association, Guide to Physical Therapist Practice (1998), 

page 1-1. 

12Ibid., page 1-10. 

13Ibid., page 1-10. 

Medical Necessity of SNF Physical/Occupational Therapy 17 OEI-09-97-00121 
APPENDIX A 

< Occupational therapist--professionally educated at the college or university level obtaining, at 

a minimum, a bachelor’s degree from a program accredited by the Accreditation Council for 

Occupational Therapy Education. The occupational therapist completes a minimum of 6 

months of clinical training under the supervision of an experienced occupational therapist. The 

therapist must successfully complete a national registration examination administered by the 

National Board of Occupational Therapy. States regulate occupational therapists by licensure, 

registration, certification, or trademark. The occupational therapist is responsible for (1) 

determining and interpreting the evaluation, (2) initiating treatment goals and plans, 

(3) initiating substantive changes to the goals and plans, and (4) determining when to discharge 

patients from occupational therapy programs.14 

< Occupational therapy assistant--a graduate of an associate degree program accredited by the 

Accreditation Council for Occupational Therapy Education. The assistant completes 

12 weeks of clinical training under the supervision of an occupational therapist or an 

experienced occupational therapy assistant. The assistant must successfully complete a 

national certification examination for occupational therapy assistants administered by the 

National Board Certification of Occupational Therapy. Many States regulate occupational 

therapy assistants by licensure or registration. The assistant (1) collects data for evaluation, (2) 

carries out treatment plans, and (3) modifies the treatment goals and plan under the supervision 

of an occupational therapist. Assistants also may gather data and complete portions of the reevaluation for the occupational therapist’s interpretation to change treatment goals and plans. 

< Occupational aide/technician--may assist an occupational therapist, under the direct 

supervision of the therapist at the time the therapy is given. Direct supervision is the physical 

presence of the qualified occupational therapist. 

Other Terminology15 

< Activities of Daily Living--self-care activities that must be performed to achieve functional 

independence may be classified as mobility activities, bathing, grooming, personal hygiene, 

eating, dressing, bowel control, and bladder control. An expectation exists that the therapy 

will result in a significant practical improvement in the patient’s level of functioning in a 

reasonable period of time. 

14Accreditation Council for Occupational Therapy Education, OTA Essentials, 

updated July 1995. 

15Most definitions were included in the American Physical Therapy Association’s Guide to 

Physical Therapist Practice (1998). 

Medical Necessity of SNF Physical/Occupational Therapy 18 OEI-09-97-00121 
APPENDIX A 

< Episode of care--all patient management activities provided, directed, or supervised by the 

therapist, from initial contact through discharge. 

< Evaluation--used to report the initial assessment before the treatment plan is established by the 

therapist or physician. The therapist makes clinical judgments based on data gathered during 

the initial examination. 

< Re-evaluation--process by which the patient’s status is updated following the initial 

examination because of new clinical indications, failure to respond to interventions, or failure 

to establish progress from baseline data. The re-evaluation usually is completed by a therapist 

or physician, not by an assistant or aide. 

< Therapeutic intervention--the purposeful and skilled interaction of the therapist with the 

patient, and, when appropriate, with other staff involved in the patient’s care, using various 

methods and techniques to produce changes in the patient’s condition. 

< Treatment goals--the therapist’s or physician’s description of what the patient is expected to 

achieve as a result of therapy.16 

< Treatment plan--specifies the anticipated short-term and long-term goals and the desired 

outcomes, predicted level of optimal improvement, specific interventions to be used, duration 

and frequency of the therapy required to reach the goals and outcomes, and criteria for 

discharge. 

16Health Care Financing Administration, Medicare Intermediary Guidelines, Section A3 3904C5 

under Medical Review of Part B Intermediary Outpatient Bills. 

Medical Necessity of SNF Physical/Occupational Therapy 19 OEI-09-97-00121 
APPENDIX B 

Confidence Intervals for Selected Statistics

The following tables show the point estimates and 95 percent confidence intervals for selected 

statistics, in the order that they appear in the report. These calculations account for all levels 

of clustering and stratification as described in the methodology. 

Statistic Point 

Estimate 

95 Percent 

Confidence Interval 

Of March 1998 physical and occupational therapy for SNF 

patients, percent that was billed properly 83.5% 79.7% - 87.2% 

Of March 1998 physical and occupational therapy for SNF 

patients, percent that was billed improperly 

12.7% 8.6% - 16.9% 

Of March 1998 physical and occupational therapy for SNF 

patients, percent that was undocumented 

3.8% 2.6% - 5.0% 

Of SNF patients who received physical therapy during 

March 1998, percent who achieved their treatment goals 66.8% 63.3% - 70.4% 

Of SNF patients who received physical therapy during 

March 1998, percent who did not achieve their treatment goals 27.1% 21.2% - 33.1% 

Of SNF patients who received physical therapy during 

March 1998, percent for whom the reviewers could not 

determine whether the patient achieved treatment goals 

6.0% 1.5% - 10.6% 

Of SNF patients who received occupational therapy during 

March 1998, percent who achieved their treatment goals 73.3% 63.4% - 83.3% 

Of SNF patients who received occupational therapy during 

March 1998, percent who did not achieve their treatment goals 16.5% 10.0% - 23.1% 

Of SNF patients who received occupational therapy during 

March 1998, percent for whom the reviewers could not 

determine whether the patients achieved treatment goals 

10.1% 0.2% - 20.0% 

Total number of physical and occupational therapy sessions 

provided to SNF patients during March 1998 7.0 million 3.5 million - 10.6 million 

Medical Necessity of SNF Physical/Occupational Therapy 20 OEI-09-97-00121 
APPENDIX B 

Statistic Point 

Estimate 

95 Percent 

Confidence Interval 

Total number of physical and occupational therapy sessions 

provided to SNF patients for a 12-month period ending 

June 30, 1998 

82.9 million ** 

Total number of improperly billed physical and occupational 

therapy sessions provided to SNF patients during March 1998 

0.9 million 0.3 million - 1.5 million 

Total number of improperly billed physical and occupational 

therapy sessions provided to SNF patients for a 12-month 

period ending June 30, 1998 

10.6 million ** 

Of improperly billed physical and occupational therapy sessions 

provided during March 1998, percent that were physical therapy 51.6% 41.3% - 61.8% 

Of improperly billed physical and occupational therapy sessions 

provided during March 1998, percent that were occupational 

therapy 

48.4% 38.2% - 58.7% 

**NOTE: These estimated projections from March 1998 to a 12-month period are based on the 

assumption that March 1998 is a typical month. We tested this assumption by examining 

SNF Medicare charges for physical and occupational therapy. For example, the SNFs 

submitted $685 million in physical and occupational therapy charges during March 1998 

and $7.85 billion during the 12 months ending March 31, 1998. This ratio ($685 

million/$7.85 billion) is approximately equivalent to the ratio (31/365) that we used in 

projecting to a 12-month period. Because our sample was limited to March 1998, we are 

unable to calculate 95 percent confidence intervals for these 12-month estimates. 

Medical Necessity of SNF Physical/Occupational Therapy 21 OEI-09-97-00121 
APPENDIX C 

Agency Comments

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

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

Medical Necessity of SNF Physical/Occupational Therapy 24 OEI-09-97-00121