Department of Health and Human Services

OFFICE OF

INSPECTOR GENERAL

 

M

HERAP

EDICAID PAYMENTS FOR 

T Y SERVICES IN EXCESS 

OF STATE LIMITS

Daniel R. Levinson 

Inspector General

March 2012

OEI-07-10-00370
 

EXECUTIVE SUMMARY: MEDICAID PAYMENTS FOR THERAPY 

SERVICES IN EXCESS OF STATE LIMITS

OEI-07-10-00370 

WHY WE DID THIS STUDY 

Past Office of Inspector General work has shown that Medicare- and Medicaid-paid 

physical, occupational, and speech therapy services were vulnerable to improper 

payments because (1) plans of care were incomplete or missing; (2) documentation was 

missing, or providers failed to respond to our request for documentation; or (3) providers 

lacked proper qualifications, or we could not determine whether they had proper 

qualifications. 

HOW WE DID THIS STUDY

We asked Medicaid staff from all States and the District of Columbia (States) to respond 

to a questionnaire requesting information about whether their States placed limits on 

therapy services, and if so, the nature of those limits. We examined paid Medicaid 

fee-for-service claims for therapy services in eight States (Arkansas, Florida, Hawaii, 

Illinois, Maine, Maryland, Michigan, and North Carolina) for the period July 1, 2008, 

through June 30, 2009, to determine whether the therapy services complied with State 

limits. We asked State Medicaid officials to describe the safeguards established to 

prevent payments in excess of State limits. We also asked State Medicaid staff to 

identify the reason(s) States’ safeguards failed to prevent payments in excess of State 

limits.

WHAT WE FOUND

Thirty-five of the forty-eight States that paid for any type of Medicaid therapy services 

placed limits on the amount of services a beneficiary could receive. All eight States we 

reviewed described safeguards established to prevent payments in excess of State limits; 

however, six of those States improperly paid claims totaling approximately $744,000. 

Three States paid claims for therapy services that were potentially improper. Although 

we identified a relatively low number of claims for therapy services paid improperly, the 

errors were easily preventable in most instances. Several States reported improving their 

program integrity safeguards to address our findings. 

WHAT WE RECOMMEND

We recommend that the Centers for Medicare & Medicaid Services (CMS) work with 

States to prevent Medicaid payments for therapy services in excess of State limits and to 

follow up on the inappropriate claims identified in our review. CMS concurred with our 

recommendations. 
TABLE OF CONTENTS

Objectives ....................................................................................................1 

Background ..................................................................................................1 

Methodology ................................................................................................3 

Findings........................................................................................................6 

Thirty-five State Medicaid programs established limits on

therapy services ................................................................................6 

All eight States reported safeguards to prevent

payments in excess of State limits ...................................................7 

Despite reported program safeguards, six States improperly 

paid claims for therapy services totaling $744,000 .........................9 

Three States reviewed paid claims for therapy services that

were potentially improper .............................................................. 11 

Recommendations ......................................................................................13 

Agency Comments and Office of Inspector General Response .....13 

Appendixes ................................................................................................15 

A: State Limits on Medicaid Therapy Services ............................15 

B: Sampled States’ Limits on Therapy Services ...........................20 

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

Acknowledgments......................................................................................25 
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 1

OBJECTIVES 

1. To describe the limits that States established on physical; occupational; 

and speech, hearing, and language therapy services.

2. To identify payment safeguards that States established to prevent 

payments for therapy services in excess of State limits.

3. To identify Medicaid payments for therapy services that exceeded 

State limits.

BACKGROUND

Previous Office of Inspector General (OIG) work has shown that 

Medicare- and Medicaid-paid therapy services were vulnerable to 

improper payments because (1) plans of care were incomplete or missing; 

(2) documentation was missing, or providers failed to respond to requests 

for documentation; or (3) providers lacked proper qualifications, or we 

could not determine whether they had proper qualifications. However, 

prior to this report, we had not assessed whether Medicaid payments for 

therapy services were paid in excess of State limits. Identifying the extent 

of improper payments for therapy services and the reasons safeguards fail 

to prevent them will assist in ensuring the integrity of the Medicaid 

program. 

Title XIX of the Social Security Act (the Act) requires State Medicaid 

programs to provide certain basic medical services (e.g., physician 

services, hospital care, nursing facility care) to all categorically needy 

recipients.1

 Additionally, the Act allows States to provide optional 

services—such as physical; occupational; and speech, hearing, and 

language (speech) therapy—through their Medicaid State plans.2 In fiscal 

year (FY) 2008, approximately $700 million for 16 million claims was 

paid for physical, occupational, and speech therapy services (therapy 

services).3

 This $700 million represents both the State and Federal shares 

of the expenditures. 

1 Medicaid is funded by both the Federal and State governments. Under § 1903 (a)(1) of the Act, the Federal 

Medical Assistance Percentage (FMAP) is used to determine the amount of Federal matching funds for State 

medical assistance expenditures. Sections 1905(b) and 1101(a)(8)(B) of the Act specify the basic formula for 

calculating the FMAP.

2 Therapy services can be provided through the home health benefit (§ 1905(a)(7) of the Act; 

42 CFR § 440.70); the Early Periodic Screening, Diagnosis, and Treatment benefit (§ 1905(a)(4)(B) of the Act; 

42 CFR § 441.50); the rehabilitative services benefit (§ 1905(a)(13) of the Act; 42 CFR § 440.130); and various 

types of waivers.

3 Medicaid Statistical Information System State Summary Datamart. Accessed at http://msis.cms.hhs.gov/ on 

August 19, 2011. The most recent data available for all 51 State Medicaid programs are from FY 2008.
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 2

State Limitations on Therapy Services

States may establish limits on the amount, duration, and scope of the 

Medicaid services they will cover, as long as each service is sufficient to 

reasonably achieve its purpose.4

State Payment Safeguards

 Such limits are included in the State 

Medicaid plan that the Centers for Medicare & Medicaid Services (CMS) 

approves. State-established limits include the number of therapy services, 

hours of therapy services, or total dollar amount the Medicaid program 

will pay for each beneficiary during a certain period. In some States, a 

single limit may include more than one type of therapy service—for 

example, a State could limit beneficiaries to 60 hours per year of physical 

and occupational therapy combined. 

For many types of Medicaid services, States establish safeguards to 

prevent improper payments, including payment system edits, utilization 

reviews, and postpayment audits. One example of a payment system edit 

is to track the number of units or hours paid per recipient in a certain 

period and automatically deny payments for additional services once the 

limit is reached. In utilization reviews, staff typically examine paid claims 

for therapy services to determine whether payments were made for 

services in excess of established limits. Finally, postpayment audits 

consider whether the payments made to a particular provider were 

appropriate according to Federal and State rules, including service limits. 

Related Reports

A 2006 OIG study of Medicare payments for physical therapy services 

billed by physicians found that 91 percent of the payments allowed by 

Medicare during the first 6 months of 2002 did not meet program 

requirements, resulting in $136 million in improper payments.5

Another 2006 OIG study, which reviewed Medicaid claims for 

school-based therapy services, found that 43 out of 150 sampled claims 

did not meet Federal requirements regarding providers of therapy 

services.

 That 

study found patterns in physician billing that suggest that physical therapy 

is vulnerable to abuse. Four percent of physicians who submitted physical 

therapy claims made more than half of all allowed claims in 2004. 

Additionally, 134 physicians billed Medicare for more than 500 patients 

during the same period. The median number of patients per physician in 

the study was eight. 

6

 The study found that either the providers did not meet Federal 

4 42 CFR § 440.230.

5 OIG, Physical Therapy Billed by Physicians, OEI-09-02-00200, May 2006.

6 OIG, Review of Medicaid Claims for School-Based Health Services in New Jersey, A-02-03-01003, 

May 2006. 
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 3

provider qualification requirements or their qualifications could not be 

documented. 

METHODOLOGY

Scope and Limitations

This evaluation identified Medicaid fee-for-service claims for therapy 

services in eight States that exceeded State limits on amount, duration, 

and/or scope from July 1, 2008, through June 30, 2009. We examined 

Medicaid paid claims for therapy services provided only through 

fee-for-service arrangements. We did not determine whether therapy 

services were medically necessary or whether the providers were 

qualified. We did not test the effectiveness of payment safeguards that 

States established to prevent payments for therapy services in excess of 

State limits. 

State Selection

In the summer of 2010, we asked Medicaid staff from all States and the 

District of Columbia (States) to respond to a questionnaire requesting 

information about (1) whether their States provided therapy services paid 

on a fee-for-service basis from July 1, 2008, through June 30, 2009; 

(2) whether their States placed limits on those services; and (3) if so, the 

nature of those limits. It was necessary to collect this information from 

State Medicaid programs to select States for our review. We received 

responses from all 51 States. From the responses, we identified 

six primary types of therapy limits (e.g., maximum number of units per 

specific procedure code in a specified timeframe, maximum number of 

units of service in a specified timeframe based on diagnosis). We grouped 

six States’ responses into an “Other” category because their limits were 

not similar to those of other States.

We selected States for further review based on two criteria: (1) higher 

dollar expenditures for therapy services among all State Medicaid 

programs; and (2) representation of each type of limit we identified, 

including the “Other” category. We selected the following eight States for 

review: Arkansas, Florida, Hawaii, Illinois, Maine, Maryland, Michigan, 

and North Carolina. Therapy service expenditures in these States 

accounted for 61 percent of national Medicaid spending on therapy 

services in FY 2008. All eight States provided each type of therapy 

services (i.e., physical, occupational, and speech) and imposed a limit on 

each type of service during the study period. 

Structured Interviews With State Medicaid Staff 

We conducted structured interviews by conference call with Medicaid 

agency staff in each selected State. During these interviews, we collected 
OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 4

information regarding the authorities through which therapy services were 

provided (e.g., benefit category), how the limits applied to these 

authorities, how therapy services were billed, and what safeguards existed

to prevent payment of therapy services in excess of State limits. We also 

collected copies of the relevant sections of State Medicaid plans and State 

Medicaid manuals.

Claims Data and Analysis 

We requested data from each selected State’s Medicaid Management 

Information System for all final paid claims for therapy services provided 

from July 1, 2008, through June 30, 2009.7

Table 1: Medicaid-Paid Claims for Therapy Services, July 1, 2008, Through 

June 30, 2009

 Table 1 shows the number and 

dollar amount of those claims.

State Number of Claims Dollar Amount

Arkansas 439,522 $29,518,966

Florida 1,467,340 $82,219,947

Hawaii 23,553 $560,809

Illinois 737,518 $41,071,817

Maine 191,479 $6,322,529

Maryland 13,150 $235,259

Michigan 288,722 $12,097,106

North Carolina 746,822 $47,802,908

 Total 3,918,348 $219,829,341

Source: Claims for therapy services submitted by States, 2011.

In addition to requesting the claims information in Table 1, we requested

claims data for hospital outpatient services from two States to determine

whether the limits on therapy services were exceeded. The Arkansas and 

Florida Medicaid programs established a hospital outpatient service limit 

that included therapy services for recipients over the age of 21. For those

States, we determined whether hospital outpatient service limits were 

exceeded. In addition to submitting the claims in Table 1, the Arkansas 

Medicaid program submitted 31,346 claims totaling $1,974,623 and the 

Florida Medicaid program submitted 10,242 claims totaling $715,519 for 

the period of our review. 

7 We did not verify the number or dollar amount of claims that States reported to us with any other data source.
OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 5

We also requested additional claims and eligibility information from all 

eight sampled States, such as recipient age, diagnosis, benefit category, or 

prior authorization information, to determine whether the therapy services 

received complied with State limits. Using statistical analysis software 

(i.e., SAS), we calculated the number of paid Medicaid claims and the 

total number of units, visits, and/or dollars paid per recipient per period, as 

expressed in the appropriate State’s limit. For example, if a State 

expressed its limit in terms of visits per month, we calculated the number 

of visits per month for each recipient; if a State expressed its limit in terms 

of dollars per year, we calculated dollars per year. We compared these 

totals to the limits for each State to identify claims that exceeded those 

limits. 

We held followup discussions with State Medicaid staff regarding any 

identified paid claims for therapy services that exceeded the limits to 

determine whether any extenuating circumstances existed (e.g., the 

recipient received prior authorization for additional therapy services that 

was not apparent in the data we received from the State). We also asked 

State Medicaid staff to identify the reason(s) safeguards failed to prevent 

payments in excess of State limits. We calculated the total number and 

dollar amount of improperly paid claims.

Standards

This study was conducted in accordance with the Quality Standards for 

Inspection and Evaluation issued by the Council of the Inspectors General 

on Integrity and Efficiency.
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 6

FINDINGS

Thirty-five State Medicaid programs established limits 

on therapy services 

Using the responses to our questionnaire, we determined that 47 States 

provided physical and occupational therapy services and 48 States 

provided speech therapy services on a fee-for-service basis during our 

period of review.8 Thirty-five of the forty-eight States that paid for any 

type of Medicaid therapy services placed limits on the amount of therapy 

services a beneficiary could receive.9

State Medicaid programs varied in the types of limits they established on 

therapy services. Even within a State, some programs varied the type of 

limit established among therapy disciplines. For example, the Colorado 

Medicaid program established a unit limit per calendar year for physical 

and occupational therapy with the potential for additional services 

approved through prior authorization. For speech therapy, the limit was a 

unit limit per date of service with no provision for additional services. 

 Thirty-five States placed limits on 

physical and occupational therapy services and 33 States placed limits on 

speech therapy services.

We grouped the types of limits States established into seven categories. 

Table 2 provides a description and example of each category. Appendix A 

lists the types of limits each State established for each type of therapy 

service. 

8 The States that did not provide physical or occupational therapy through their fee-for-service Medicaid 

programs were the District of Columbia, Rhode Island, Tennessee, and Vermont. The States that did not 

provide speech therapy through their fee-for-service Medicaid programs were Rhode Island, Tennessee, and 

Vermont.

9 The 13 States that did not place limits on the amount of therapy services a recipient could receive were 

Alaska, Arizona, Connecticut, the District of Columbia, Delaware, Louisiana, Minnesota, Mississippi, New 

Jersey, New Mexico, Oklahoma, South Carolina, and South Dakota.
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 7

Table 2: Types and Examples of Therapy Service Limits Established by 

State Medicaid Programs, July 1, 2008, through June 30, 2009

State Type of Limit Example of Limit

Alabama

Maximum number of units 

per specific procedure 

code in a specified 

timeframe.

Maximum of one physical 

therapy evaluation per day.

Idaho

Maximum number of units 

in a specified timeframe; 

prior authorization required 

to exceed maximum.

Maximum of 25 occupational 

therapy visits per recipient 

per calendar year; additional 

services must have prior 

authorization. 

New York

Maximum number of units 

in a specified timeframe; 

additional services cannot 

be approved through a 

prior authorization. 

Maximum of 10 physician or 

clinic visits per 12-month 

period, inclusive of physical, 

occupational, and speech 

therapy visits. 

California

Prior authorization required 

for most or all services and 

maximum number of units 

in a specified timeframe.

Initial and 6-month 

occupational therapy 

evaluations do not require 

prior authorization. All other 

occupational therapy services 

require prior authorization 

and are limited to two 

services per month per 

recipient. 

Georgia

For recipients up to age 

21, maximum number of 

units in a specified 

timeframe or maximum 

number of units per 

specific procedure code. 

For recipients over age 21, 

therapy must be provided 

by a particular provider 

type or in a particular 

setting; prior authorization 

is required for all services.

Up to age 21, one 

occupational therapy 

evaluation per year; over age 

21, physical therapy must 

follow the onset of an acute 

illness, injury, or impairment 

and requires prior 

authorization. 

Nebraska

For recipients up to age 

21, no limits. For 

recipients over age 21, 

maximum number of units 

in a specified timeframe or 

maximum number of units 

based on diagnosis, place 

of service, or provider type.

Up to age 21, no limits on 

any therapy service; over age 

21, combined physical, 

occupational, and speech 

therapy services cannot 

exceed 60 visits per year per 

recipient. 

Iowa

Other (e.g., dollar limit per 

specified timeframe).

Expenditures for combined 

physical and speech therapy 

services cannot exceed 

$1,840 per year per recipient; 

expenditures for occupational 

therapy cannot exceed 

$1,840 per year per recipient. 

Source: OIG analysis of State responses, 2010.
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 8

All eight States reported safeguards to prevent 

payments in excess of State limits

During our structured interviews with the eight selected States, we 

confirmed our understanding of the limits that each State reported on its 

initial questionnaire. Details of these limits are in Appendix B. 

We also asked State officials what safeguards (e.g., payment system edits, 

postpayment reviews) were established to prevent payments of claims that 

exceeded the limits. All eight States reported having system edits to 

prevent payments in excess of State limits, and four States reported 

performing postpayment reviews of therapy claims. Table 3 describes 

each State’s payment safeguards.

Table 3: Payment Safeguards Reported by State Medicaid Programs, 

July 1, 2008, Through June 30, 2009 

State Edits Postpayment Reviews

Arkansas

Check the total units or visits against 

the limit for evaluations and 

treatment services

Determine whether the services were 

correctly billed as prescribed, whether 

services were delivered, and whether 

the services were medically 

necessary

Florida Disallow payments over the unit or 

dollar limit None reported

Hawaii

Check for the number of services 

within previous 90- or 120-day 

timeframe and check for number of 

minutes, units, and visits per day

None reported

Illinois Deny payments for dates of service 

beyond the initial treatment period

Determine whether services were 

provided as stated in the patient’s 

plan of care

Maine Deny claims in excess of limits

Review services billed by physical 

and occupational therapy providers on 

a case-by-case basis

Maryland Check for number of units per day None reported

Michigan Deny claims in excess of 36 within a 

90-day timeframe None reported

North Carolina

Match prior authorization information 

with type of service and number of 

units billed on the claim; edits 

prevent payments for more than one 

evaluation per day 

Each month, review a random sample 

of paid claims to monitor utilization, 

quality, and appropriateness of 

services

Source: OIG analysis of State responses, 2010.
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 9

Despite reported program safeguards, six States 

improperly paid claims for therapy services totaling 

$744,000

We identified 16,268 claims for therapy services that exceeded State 

limits. Six States in our review paid approximately $744,000 out of 

approximately $220 million for these claims.10

Table 4: Therapy Services Paid in Excess of State Limits, July 1, 2008, 

Through June 30, 2009

 As an example of 

improperly paid claims, the Hawaii Medicaid program has a limit of 

36 units of therapy service in a 120-day period. However, 1 recipient 

received 47 units of physical therapy from September 29, 2008, through 

January 21, 2009 (115 days). Therefore, 11 units were paid in error, 

totaling $378. We did not find any therapy services paid in excess of State 

limits in North Carolina. Because we did not test the functionality of 

safeguards, we are unable to determine whether safeguards in North 

Carolina (and other States) prevented improper payments or whether

providers simply did not submit claims in excess of State limits. Table 4 

shows the number of improperly paid claims and amounts paid to 

providers for these claims.

State Number of Claims Total Improper 

Payments

Arkansas 930 $77,574

Florida 13,707 $621,364

Hawaii 60 $3,236

Illinois 1,517 $39,287

Maryland 26 $2,235

Michigan 28 $1,486

 Total 16,268 $743,679

Note: We did not find any therapy services paid in excess of State limits in North Carolina. The analysis of 

therapy services paid in excess of State limits in Maine is discussed later in this report.

Source: OIG analysis of Medicaid therapy claims, 2011.

States lacked system edits to prevent some payments for 

therapy services in excess of limits, but described actions 

being taken to prevent future improper payments

Although officials from all eight States initially reported having system 

edits to prevent claims in excess of limits from being paid, officials from 

10 The period of our review of therapy claims overlaps two Federal FYs; therefore, different FMAPs were in 

effect for this period. We did not calculate the Federal and State shares for these claims. 
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 10

six States responded that edits were not set up to prevent the claims in 

excess of limits that we identified. Officials from several States told us 

that our analysis alerted them to areas in which system edits need to be 

implemented or reimbursement policy revised to prevent payments for 

therapy services in excess of State limits. Following are descriptions of 

claims paid in excess of limits and the State officials’ explanations of the 

reasons that the claims were paid improperly. This information may assist 

other State Medicaid programs in their program integrity efforts.

In Arkansas, officials stated that system errors allowed claims to be paid 

for units of evaluation per year and units of treatment per day in excess of 

State limits. In some cases, this happened because the claims system did 

not indicate that the same type of service was billed by different providers 

on the same date. Arkansas officials reported that the system errors were 

corrected to properly control for therapy service limits. 

In Florida, the largest portion of claims paid improperly (10,936 claims 

totaling $491,604) was paid for more than 4 units per day or 14 units per 

week for services within each therapy discipline. Following our review, 

Florida Medicaid officials stated that they had implemented a system edit 

to deny claims for more than 4 units per day and were implementing an 

edit to deny claims in excess of 14 units per calendar week. The 

next-largest portion of improperly paid claims was paid for therapy 

evaluations for recipients under age 21 (2,162 claims totaling $103,990). 

Florida officials stated that these payments were caused by conflicting 

policy.11

Illinois Medicaid officials explained that the claims system edits in place 

during the period of review did not consider time or session limits. 

Instead, Illinois relied upon providers to bill the appropriate amount and 

duration of services for the recipients’ conditions. Officials reported that a 

change to the Medicaid Management Information System to correct this 

vulnerability was initiated as a result of our review; however, it was not 

yet complete at the writing of this report.

 Following our review, officials stated that they distributed policy 

clarification to providers via a provider forum, email, and the therapy 

services section of the Florida Medicaid Web site. Additionally, Florida 

officials stated that they implemented an edit in the claims system to 

prevent payments for evaluations that exceed the limits.

Hawaii, Maryland, and Michigan each paid relatively few claims in excess 

of State limits. Officials from these States focused on recouping payments 

from providers and stated that they would implement minor changes to the 

11 Because of the conflicting policy, Florida officials believe these claims should not be considered 

overpayments. However, these claims meet the definition of improperly paid claims as defined in this report.
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 11

edits in their claims systems to prevent future improper payments. In one 

instance, the necessary system edit existed, but was put in place after the 

period of our claims review. 

Three States reviewed paid claims for therapy services 

that were potentially improper

For two States, Florida and Illinois, we were able to evaluate most but not all 

aspects of therapy service limits. In addition, Maine Medicaid officials did 

not respond to our request to review our initial analysis of claims. Because 

we were unable to determine whether therapy service limits were exceeded, 

these three States paid claims for therapy services that were potentially 

improper. 

Not all Florida Medicaid program claims data indicated the 

type of service provided

We were unable to evaluate one aspect of therapy service limits for Florida. 

The program limits outpatient hospital services (including therapy services) 

to $1,500 per year for recipients over age 21. Florida provided a dataset of 

all outpatient hospital services for our period of review; however, the dataset 

did not include descriptions of the types of services provided. We found 

623 claims for 175 recipients totaling $65,792 that exceeded the limit of 

$1,500 of outpatient hospital services per year. We cannot definitively 

determine which claims in excess of State limits were for therapy services; 

therefore, they are not included in Table 4. 

The Illinois Medicaid program did not provide sufficient 

information in all cases to determine whether therapy limits 

were exceeded 

The Illinois Medicaid program limits the number of therapy service sessions 

provided to a beneficiary during an initial evaluation and treatment period 

without prior approval from the program. The limit varies by diagnosis, 

ranging from 1 month and 8 sessions for the diagnosis “fracture of vertebral 

column,” to 3 months and 39 sessions for numerous diagnoses (e.g., closed 

head injury).12

12 Illinois Department of Healthcare and Family Services, Handbook for Providers of Therapy Services, 

App. J-4, January 2009.

 Payments for claims exceeding 3 months and 39 sessions are 

clearly improper, as no limit for any diagnosis exceeds this threshold. 

Table 4 identifies the 1,517 claims totaling $39,287 that exceeded the 

3-month and 39-session limit. Determining whether the remaining 

5,691 claims, totaling $133,333, were paid improperly would require 

individual assessment of whether the number and duration of services 

exceeded the maximum threshold set by Illinois Medicaid for the condition 

being treated. Such an assessment would be complicated by the fact that 
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 12

claims data indicate beneficiary conditions using diagnosis codes, but the 

Illinois Medicaid program establishes treatment limits based on general 

descriptive groupings of diagnoses. According to Illinois Medicaid program 

officials, there is no list of the diagnosis codes that correspond to the 

diagnosis groupings. Therefore, we could not determine whether the 

5,691 claims totaling $133,333 were paid properly. 

Maine did not respond to requests to validate our initial 

analysis

The Maine Medicaid program limits the number of hours of service per day 

for most services and the number of services per year for one particular 

procedure code. Our initial analysis of therapy claims produced 695 claims 

totaling $56,628 that appeared to exceed the maximum number of hours of 

service per day. We provided these claims to Maine Medicaid officials on 

June 3, 2011. One of Maine’s therapy service limits involved recipients’ 

condition(s), but we were not provided this information. Therefore, we 

needed a response from Maine to determine whether we correctly applied 

limits according to recipients’ condition(s). We made repeated attempts via 

telephone and email to obtain a response. We notified Maine officials on 

August 2, 2011, that we would report these claims as potentially improper. 

We did not receive a response to this notification. 
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 13

RECOMMENDATIONS

Thirty-five State Medicaid programs established limits on therapy services 

during the period July 1, 2008, through June 30, 2009. All eight States we 

reviewed said they had safeguards to prevent payments in excess of State 

limits; however, six States improperly paid claims for Medicaid therapy 

services totaling approximately $744,000. Three States paid claims for 

therapy services that were potentially improper. Although we identified a 

relatively low number of claims for therapy services paid improperly, the 

errors were easily preventable in most instances. States that paid claims in 

excess of State limits described actions they are taking to improve 

program integrity safeguards based on our findings and to prevent future 

improper payments. 

We recommend that CMS:

Work With States To Prevent Medicaid Payments for Therapy 

Services in Excess of State Limits

In implementing this recommendation, CMS could work with all States to: 

• alert State Medicaid directors and staff to the findings of this report 

so they can better target their program integrity efforts and

• encourage State Medicaid programs to ensure that edits are in 

place to prevent payment of claims for therapy services in excess 

of State limits.

In addition, CMS could ensure that Medicaid Integrity Contractors are 

aware of the findings of this report so they may, as appropriate, include 

therapy services in their Medicaid claims data analyses.

Follow Up on the Inappropriate Claims Identified in Our Review 

We will forward information regarding the inappropriate claims we 

identified to CMS in a separate memorandum. Where our findings have 

identified an overpayment by the State to a provider for therapy services, 

the State should refund the Federal share to CMS. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with our recommendations. In response to the first 

recommendation, CMS stated that the National Correct Coding Initiative 

(NCCI) methodologies provided State Medicaid agencies with 

claim-specific edits to improve the correct coding of claims and avoid 

paying for services that have been incorrectly submitted by the provider. 

States were required to implement the NCCI methodologies as of 
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 14

October 1, 2010. In addition, CMS plans to ensure that all State Medicaid 

agencies and Medicaid Integrity Contractors are aware of the findings of 

this report. In response to the second recommendation, upon receipt of 

OIG’s separate memorandum identifying the inappropriate claims, CMS 

will take action to ensure that the Federal share of any overpayment by the 

State Medicaid agency is refunded or recovered. We addressed the

technical comment that CMS provided. For the full text of CMS’s 

comments, see Appendix C. 
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 15

APPENDIX A

The following table illustrates the type of limit placed on therapy services 

in each of the 35 States that had such limits.

Limit Type Key

1—Maximum number of units per specific procedure code in a specified 

timeframe.

2—Maximum number of units in a specified timeframe; prior 

authorization required to exceed maximum. 

3—Maximum number of units in a specified timeframe; additional 

services cannot be approved through a prior authorization. 

4—Prior authorization required for most or all services and maximum 

number of units in a specified timeframe.

5—For recipients up to age 21, maximum number of units in a specified 

timeframe or maximum number of units per specific procedure code. For 

recipients over age 21, therapy must be provided by a particular provider 

type or in a particular setting; prior authorization is required for all 

services, or no therapy services are covered.

6—For recipients up to age 21, no limits. For recipients over age 21, 

maximum number of units in a specified timeframe based on diagnosis, 

place of service, or provider type.

7—Other.

Table A-1: State Limits on Medicaid Therapy Services

State Therapy 

Service

Limit Type

1 2 3 4 5 6 7 

Alabama Physical  

Occupational 

Speech No limit on speech therapy services

Arkansas Physical 

Occupational 

Speech 

California Physical  

Occupational 

Speech 

continued on next page
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 16

Table A-1: State Limits on Therapy Services (Continued)

State Therapy 

Service

Limit Type

1 2 3 4 5 6 7 

Colorado Physical  

Occupational 

Speech 

Florida Physical  

Occupational 

Speech 

Georgia Physical  

Occupational 

Speech 

Hawaii Physical  

Occupational 

Speech 

Iowa Physical  

Occupational 

Speech 

Idaho Physical  

Occupational  

Speech 

Illinois Physical  

Occupational 

Speech 

Indiana Physical  

Occupational  

Speech 

Kansas Physical  

Occupational 

Speech 

Kentucky Physical  

Occupational 

Speech 

continued on next page
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 17

Table A-1: State Limits on Therapy Services (Continued)

State Therapy 

Service

Limit Type

1 2 3 4 5 6 7 

Maine Physical  

Occupational 

Speech 

Maryland Physical  

Occupational 

Speech 

Massachusetts Physical  

Occupational 

Speech 

Michigan Physical  

Occupational 

Speech 

Missouri Physical  

Occupational  

Speech  

Montana Physical  

Occupational  

Speech  

Nebraska Physical  

Occupational 

Speech 

Nevada Physical  

Occupational 

Speech 

New

Hampshire

Physical  

Occupational  

Speech  

New York Physical  

Occupational  

Speech 

North

Carolina

Physical  

Occupational  

Speech 

continued on next page
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 18

Table A-1: State Limits on Therapy Services (Continued)

State Therapy 

Service

Limit Type

1 2 3 4 5 6 7 

North

Dakota

Physical  

Occupational  

Speech 

Ohio Physical  

Occupational 

Speech 

Oregon Physical  

Occupational 

Speech 

Pennsylvania Physical  

Occupational 

Speech 

Texas Physical  

Occupational 

Speech 

Utah Physical  

Occupational 

Speech 

Virginia Physical  

Occupational 

Speech 

Washington Physical  

Occupational 

Speech 

West Virginia Physical  

Occupational 

Speech No limit on speech therapy services

continued on next page
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 19

Table A-1: State Limits on Therapy Services (Continued)

State Therapy 

Service

Limit Type

1 2 3 4 5 6 7 

Wisconsin Physical  

Occupational 

Speech 

Wyoming Physical  

Occupational 

Speech 

 Total States:* 2 11 4 2 7 6 6 

*The sum of the limit type totals does not equal 35 because 3 States use different types of limits for different therapy 

services. 

Source: Office of Inspector General analysis of responses to questionnaire regarding therapy services limits, 2010.
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 20

APPENDIX B

Table B-1: Sampled States’ Limits on Therapy Services

State Recipient 

Category Description of Limit

Prior 

Authorization 

May Override 

Limit*

Arkansas

Under age 21

For each therapy discipline, there is a limit of four units of evaluation 

each year and four units of treatment per day. Recipients may receive 

four units per day of treatment with and without “UB” modifier (i.e., “UB” 

modifier indicates service provided by physical therapy assistant). 

Recipients may receive one evaluation for an augmentative 

communication device every 3 years.

Yes

Over age 21

In addition to the limits for recipients under age 21, recipients must 

receive therapy services in outpatient hospital settings. Outpatient 

hospital visits are limited to 12 per year.

Yes

Florida

Under age 21

For all therapy disciplines combined, recipients may receive four units of 

therapy service per day. In addition, there is a limit of 14 units of service 

per week for each therapy discipline. Each recipient may receive one 

evaluation and one reevaluation per discipline every 6 months; the first 

reevaluation may be done at 4 months. For an initial evaluation for an 

alternative communication device, up to three providers (one physical, 

one occupational, and one speech) who are members of the 

interdisciplinary team may be reimbursed. Each recipient may receive 

one followup evaluation per alternative communication device, as well 

as one reevaluation every 6 months.

No

Over age 21

Outpatient hospital services (including all disciplines of therapy) are 

limited to $1,500 per year. For alternative communication devices, one 

initial evaluation is allowed per year.

No

All ages

Recipients may receive eight treatments related to an augmentative and 

alternative communication device per year. One evaluation and two 

followup evaluations related to wheelchair use per year are allowed; the 

third wheelchair evaluation must be at least 6 months after the second.

No

Aged and Disabled 

Waiver

Recipients may receive a maximum of 4 hours of physical therapy, 

2 hours of occupational therapy, and 4 hours of speech therapy per day. No

Mentally Retarded/

Developmental 

Disabilities Waiver

Recipients may receive a maximum of eight units of each therapy 

discipline per day and one evaluation per therapy discipline per year. No

Hawaii All ages

For physical and occupational therapy services, there is a limit of 

45 minutes of service per therapy discipline per day. In addition, there is 

a limit of 36 units of service for procedure codes billed in units and a 

limit of 12 visits for procedure codes billed in visits in a 120-day period 

per discipline. All speech therapy requires prior authorization.

Yes

Illinois

Home and 

Community Based 

Services Waiver

Recipients may receive up to 26 hours of therapy per discipline per year.

Yes

continued on next page
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 21

Table B-1: Sampled States’ Limits on Therapy Services (Continued)

State Recipient 

Category Description of Limit

Prior 

Authorization 

May Override 

Limit*

Illinois Over 21

Every service must have prior authorization unless: 

1. the date of service is within 60 calendar days following discharge 

from an acute care or rehab hospital, or

2. the service is covered by Medicare (i.e., Medicaid is simply paying 

the copayment for a dual-eligible), or

3. the service is for an individual who was hospitalized in the past 

30 days and was receiving therapy services while hospitalized, or

4. the service occurs during the initial evaluation and treatment period 

as defined in State policy. These periods vary by diagnosis.

No

Maine Over age 21

Recipients may receive one evaluation or reevaluation per condition per 

year.** For physical and occupational therapy, treatment is limited to 

2 hours per therapy discipline per day, plus up to 1 hour of collateral 

contacts per condition (collateral contacts are made by the therapy 

provider to the recipient’s other providers regarding the recipient’s 

treatment). Recipients may receive up to two sensory integration visits 

per year.*** Audiology evaluations must be at least 4 months apart; 

otherwise, no specific limit is placed on speech therapy services.

Yes

Maryland

Under age 21

Recipients may receive one physical therapy evaluation per condition.** 

For occupational therapy, recipients may receive one unit of evaluation 

and up to four units of treatment per day. For speech therapy, recipients 

may receive one unit of evaluation and up to one unit of individual or 

group treatment per day.

No

Over age 21

Only physical therapy is provided through fee-for-service arrangements; 

occupational and speech therapy are provided through managed care. 

Recipients may receive one physical therapy evaluation per condition.** 

Recipients may receive up to four units of physical therapy treatment per 

day, with the exception of certain procedures, which are limited to one

unit per day.

No

Michigan

All ages Limits vary by procedure code. No

Seriously 

Emotionally 

Disturbed Waiver

Limits vary by procedure code. No

Children’s Waiver Limits vary by procedure code. No

North 

Carolina All ages Recipients may receive up to six visits per therapy discipline per year, excluding evaluations and reevaluations. Yes

*Prior authorization means that the provider must seek permission from the State to provide the service to a particular recipient. Typically, requests for 

prior authorization must be accompanied by documents justifying the medical necessity of the service and outlining the patient’s treatment plan. If the 

State does not grant the request, Medicaid will not pay the provider for the service. 

**Maine and Maryland limit some therapy services based on recipients’ condition. We were unable to determine whether the limits for these services 

were exceeded because we did not receive information on recipients’ conditions. 

***Sensory integration is a type of occupational therapy that takes place in a room specifically designed to stimulate all of the patient’s senses. The goal 

of sensory integration therapy is to improve the brain’s ability to process sensory information. It is often used to treat autism spectrum disorders.

Source: Office of Inspector General analysis of State responses, 2010.
APPENDIXC 

Agency Comments 

"",-"", ~ 

( DEPARTMENT OF HEALTH & HUMAN SERVICES Cent91's for Medicare & Medicalcl Senri08$ 

,~ Ad",in{strRtor 

Washlngloo. OC 20201 

JAN 192012 DATE: 

TO; 	 Daniel R. Levinson 

I~-ctor GOI.lerai 

FROM: 	 Marilyn..Tav.e~ 

Acting Adniinistrntor 

SUBJECl': 	 Office of1nspector General (OIG) Draft Report: " Medicaid Payments for 

Therapy Services in Excess ofState LimitS" (OEI-07-10-00370) 

The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to comment 

on this subject OIO draft report. The objectives of the report were: I) to identify the limits that 

States established on physical; occupational; and speech. hearing, and language therapy services; 

2) to determine payment safeguards that States established to prevent payments for therapy 

services in excess of State limits; and 3) to identify Medicaid payments for therapy services that 

exceeded State limits. 

The 010 found that 35 Slate Medicaid programs have established limits on therapy services. 

The review of claims was focused on therapy services for the I· year period beginning July I, 

2008, for 8 States. all of which have established payment safeguards to prevent payments in 

excess ofState limits. Six of the 8 States were found to have improperly paid therapy claims 

totaling $744,000, out ofthe sample of $220 million paid for therapy claims. 010 noted that the 

relatively low number of claims payment errors would be easily preventable with system edits in 

most cases and that several States reported having already taken corrective action to address 

OlG's findings. Moreover, eMS has taken a comprehensive approach by establishing the 

National Correct Coding Initiative (NCCI) in October 2010 to require States to implement an upto-date libr.uy ofsystem edits to prevent improper payments across a wide variety of Medicaid 

services such as those identified in this report. 

We appreciate the OIO's efforts in assessing the effectiveness of States' safeguards to prevent 

payments for Medicaid therapy services that exceed State limits, and reporting on system 

vulnerabilities. Our response to each of the 010 recommendations follows our technical 

comment 

Technical Comment 

Please note that the first recommendation in the report's summary statement is not the same a.~ 

the first recommendation in the concluding section on page 13. The distinction between 

OEI-07 -10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 22 
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 23

Agency Comments (Continued)
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 24

Agency Comments (Continued)
 

OEI-07-10-00370 Medicaid Payments for Therapy Services in Excess of State Limits 25

ACKNOWLEDGMENTS

This report was prepared under the direction of Brian T. Pattison, Regional 

Inspector General for Evaluation and Inspections in the Kansas City 

regional office, and Brian T. Whitley, Deputy Regional Inspector General. 

Tricia Fields served as the team leader for this study. Other principal 

Office of Evaluation and Inspections staff from the Kansas City regional 

office who contributed to the report include Michael J. Brown and 

Michala Walker; central office staff who contributed include Kevin Farber

and Scott Manley. 
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.