Comprehensive Outpatient Rehabilitation Facilities: High Medicare Payments in Florida Raise Program Integrity Concerns
Published: 2004-08-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Comprehensive Outpatient Rehabilitation Facilities (CORF) are highly concentrated in Florida. These facilities, which provide physical therapy, occupational therapy, speech-language pathology services, and other related services, have been promoted as lucrative business opportunities for investors. Aware of such promotions, the Chairman, Senate Committee on Finance, raised concerns about whether Medicare could be vulnerable to overbilling for CORF services. In this report, focusing our review on Florida, we (1) compared Medicare's outpatient therapy payments to CORFs in 2002 with its payments that year to other facility-based outpatient therapy providers and (2) assessed the program's effectiveness in ensuring that payments to CORFs complied with Medicare rules.
section_title: What GAO Found
paragraphs: In Florida, CORFs were by far the most expensive type of outpatient therapy provider in the Medicare program in 2002. Per-patient payments to CORFs for therapy services were 2 to 3 times higher than payments to other types of facility-based therapy providers. Higher therapy payments were largely due to the higher volume of services--more visits or more intensive therapy per visit--delivered to CORF patients. This pattern of relatively high CORF payments was evident in each of the eight metropolitan statistical areas (MSA) of the state where nearly all Florida CORFs operated and the vast majority of CORF patients were treated. A consistent pattern of high payments and service levels was also evident for patients in each of the diagnosis categories most commonly treated by CORFs. Differences in patient characteristics--age, sex, disability, and prior inpatient hospitalization--did not explain the higher payments that Florida CORFs received compared to other types of outpatient therapy providers. Steps taken by Medicare's claims administration contractor for Florida have not been sufficient to mitigate the risk of improper billing by CORFs. After examining state and national trends in payments to CORFs in 1999, the contractor increased its scrutiny of CORF claims to ensure that Medicare payments made to CORFs were appropriate. It found widespread billing irregularities in Florida CORF claims, including high rates of medically unnecessary therapy services. Since late 2001, the contractor has intensified its review of claims from new CORF providers and required medical documentation to support certain CORF services considered at high risk for billing errors. It has also required that supporting medical records documentation be submitted with all CORF claims for about 650 beneficiaries who had previously been identified as receiving medically unnecessary services. The contractor's analysis of 2002 claims data for this limited group of beneficiaries suggests that, as a result of these oversight efforts, Florida CORFs billed Medicare for substantially fewer therapy services than in previous years. However, our analysis of all CORF therapy claims for that year indicates that the contractor's program safeguards were not completely effective in controlling per-patient payments to CORFs statewide. With oversight focused on a small fraction of CORF patients, CORF facilities continued to provide high levels of services to beneficiaries whose claims were not targeted by the contractor's intensified reviews.

section_title: Letter
paragraphs: Outpatient therapy services are a covered benefit under Medicare—the  federal program that finances health services for approximately 40 million  elderly and disabled individuals. Each year, about 9 percent of Medicare  beneficiaries use outpatient therapy services—defined by the Medicare  program as physical therapy, occupational therapy, and speech-language  pathology services—to improve mobility and functioning. To qualify for  coverage of outpatient therapy services under Medicare, beneficiaries  must be referred by a physician, have a written treatment plan that is  reviewed periodically by a physician, and need therapy for rehabilitation  rather than maintenance purposes. Several types of facility-based  providers offer outpatient therapy services, including outpatient  departments (OPD) at hospitals and skilled nursing facilities (SNF), and  rehabilitation agencies. These providers deliver services in ambulatory  settings such as clinics and community hospital outpatient departments.
In many states, therapy services are also available through Comprehensive  Outpatient Rehabilitation Facilities (CORF). In 1980, Congress recognized  CORFs as potential Medicare participating providers to allow beneficiaries  access to both physician and therapy services in one stand-alone  outpatient facility. CORFs are different from other types of Medicare- certified outpatient therapy providers in that, in addition to physical  therapy, regulations require that they offer psychological or social services  and the services of a physician who specializes in rehabilitation medicine.  They are also unique in their authority to provide a variety of nontherapy  services—such as respiratory treatment or nursing care—as medically  necessary in the context of a patient’s rehabilitation therapy treatment  plan. In general, services must be provided on the CORF premises at a  single, fixed location. However, physical therapy, occupational therapy,  and speech-language pathology services may be provided in places other  than the CORF’s main location, such as in a patient’s home. Back  disorders, arthritis, soft tissue injuries (such as joint sprains and strains),  and neurologic disorders (such as concussion) are common conditions  treated at CORFs.
In recent years, CORF marketing consultants have actively promoted the  establishment of CORFs as lucrative business opportunities for investors.  For example, one consultant’s marketing materials stated that “every new  CORF office is expected to pre-tax net at least $400,000 to $500,000 after a  start-up period. . . With or without any medical background, you can own a  small medical facility.” Aware of such promotions, you raised concerns  about whether Medicare could be vulnerable to overbilling for CORF  services. In fact, in 2000, the Department of Health and Human Services  Office of Inspector General (HHS OIG) reported a high level of improper  billing by outpatient therapy providers in several states.
In this report, we (1) compared Medicare’s outpatient therapy payments to  CORFs in 2002 with its payments that year to other facility-based  outpatient therapy providers and (2) assessed the program’s effectiveness  in ensuring that payments to CORFs complied with Medicare rules. As  agreed with your staff, we focused our review on Florida providers and  Medicare’s Florida claims administration contractor because, with nearly  200 CORFs in operation at the end of 2002, that state had one-third of the  nation’s CORFs and far more of these facilities than any other state.
To address these issues, we analyzed Medicare claims data for services  provided in 2002 (the most current data available) by CORFs,  rehabilitation agencies, hospital OPDs, and SNF OPDs. We also  interviewed officials at the Centers for Medicare & Medicaid Services  (CMS)—the federal agency that oversees the Medicare program—the  Florida contractor responsible for processing and paying Medicare’s  CORF claims, federal law enforcement agencies, and therapy industry  experts. In addition, we reviewed relevant investigative reports by the HHS  OIG and the Florida claims administration contractor on the improper  billing activities of some CORFs. (For a detailed description of our  methodology and procedures we followed for evaluating the reliability of  the data we used, see app. I.) This work was performed from May 2003  through July 2004 in accordance with generally accepted government  auditing standards.
subsections: section_title: Background
subsections: section_title: Medicare Coverage Rules for Outpatient Therapy
paragraphs: All outpatient therapy providers are subject to Medicare part B payment  and coverage rules. Payment amounts for each type of outpatient therapy  service are based on the part B physician fee schedule. In 2000, Medicare  paid approximately $2.1 billion for all outpatient therapy services, of  which $87.1 million was paid to CORFs.
To meet Medicare reimbursement requirements, outpatient therapy  services must be:    appropriate for the patient’s condition,    expected to improve the patient’s condition,  reasonable in amount, frequency, and duration,  furnished by a skilled professional,    provided with a physician available on call to furnish emergency medical    part of a written treatment program that is reviewed periodically by a  physician.
CMS relies on its claims administration contractors to monitor provider  compliance with program requirements. Contractors regularly examine  claims data to identify billing patterns by specific providers or for  particular services that are substantially different from the norm. Claims  submitted by these groups of providers—or for specific services—are then  selected for additional scrutiny. Whether such reviews occur prior to  payment (prepayment reviews) or after claims have been paid  (postpayment reviews), the provider is generally required to submit  patient records to support the medical necessity of the services billed. This  routine oversight may lead to additional claim reviews or provider  education about Medicare coverage or billing issues.
section_title: Florida CORF Industry
paragraphs: With 567 facilities nationwide at the end of 2002, the CORF industry is  relatively small. Although CORFs operated in 41 states at the end of 2002,  the industry is highly concentrated in Florida, where 191 (one-third) of all  Medicare-certified CORFs are located. By contrast, the state with the  second largest number of CORFs at the end of 2002 was Texas, with 53  CORFs.
The number of CORF facilities in Florida grew about 30 percent during  2002 and the industry is now largely composed of relatively new, for-profit  providers. The CORF industry in Florida continued to grow in 2003,  reaching 220 facilities by year’s end, of which 96 percent were for profit.  The growth in Florida CORFs came after a period of substantial turnover  among CORF owners (many closures and new entrants).
From 1999 to 2002, Medicare payments to Florida CORFs rose  substantially and far outpaced growth in the number of beneficiaries that  used CORFs. The number of Medicare beneficiaries receiving services  from CORFs grew 13 percent, increasing from 33,653 in 1999 to 38,024 in  2002. However, during the same time period, Medicare expenditures for  services billed by CORFs rose significantly, with total payments increasing  61 percent, from $48.1 million to $77.4 million. Half of all Florida CORFs  received an annual payment of $91,693 or more from Medicare in 1999; by  2002, the median annual payment more than doubled to $187,680.
Although CORFs were added to the Medicare program to offer  beneficiaries a wide range of nontherapy services at the same location  where they receive therapy, most Florida CORFs do not provide these  types of services. For those that do, only a small proportion of Medicare  payments are accounted for by these services. In 2002, 98 percent of  Medicare payments to Florida CORFs went to furnish physical and  occupational therapy or speech-language pathology services. The mix of  services reimbursed by Medicare was very different in 1999, when such  therapy accounted for 68 percent of all payments, and the remainder paid  for nontherapy services, such as pulmonary treatments and psychiatric  care.
In recent years, payments to Florida CORFs have increasingly shifted  toward those made for patients with back and musculoskeletal conditions.  Most notably, patients who presented with back disorders accounted for  16 percent of all Medicare payments to Florida CORFs in 1999 and 29  percent of payments in 2002. In addition, payments for treating patients  diagnosed with soft tissue injuries increased from 8 percent of Florida  CORF payments in 1999 to 24 percent in 2002. One diagnosis group for  which there was a notable decrease in the proportion of Medicare  payments was pulmonary disorders, which fell from 30 percent of all  payments in 1999 to 2 percent in 2002.
In 2002, most of the 191 CORFs in Florida were small, with the median  CORF in the state treating 150 beneficiaries. CORFs accounted for 15  percent of all Florida Medicare beneficiaries who received outpatient  therapy from facility-based providers that year, and 30 percent of  Medicare’s payments for outpatient therapy services to Florida facility- based providers. In a few areas, however, CORFs represented a substantial  share of the outpatient therapy market, particularly in south Florida. For  example, CORFs were the predominate providers of outpatient therapy  services in Miami, with 53 percent of all facility-based outpatient therapy  patients, and treated 29 percent of patients who received outpatient  therapy from facility-based providers in nearby Fort Lauderdale.
section_title: Florida CORFs Received Higher Average Therapy Payments, Despite Treating Similar Patients
paragraphs: In 2002, Medicare’s therapy payments per patient to Florida CORFs were  several times higher than therapy payments made to other facility-based  outpatient therapy providers in the state. This billing pattern was evident  in each of the eight Florida MSAs that accounted for the majority of  Medicare CORF facilities and patients. Differences in prior hospitalization  diagnoses and patient demographic information did not explain the  disparities in per-patient therapy payments.
subsections: section_title: Average Therapy Payments to CORFs Substantially Exceeded Payments to Other Facility-Based Providers
paragraphs: Our analysis of claims payment data showed that per-patient therapy  payments to Florida CORFs were about twice as high as therapy payments  to rehabilitation agencies and SNF outpatient departments, and more than  3 times higher than therapy payments to hospital outpatient departments.  (See table 1.) Specifically, at $2,327 per patient, therapy payments for  CORF patients were 3.1 times higher than the per-patient payment of $756  for those treated by outpatient hospital-based therapists.
Higher therapy payments for Medicare patients treated at CORFs were  largely due to the greater number of services that CORF patients  received. As shown in table 1, on average, CORF patients received 108  units of therapy compared with 37 to 59 units of outpatient therapy, on  average, at the other types of outpatient providers. Typically, a unit of  therapy service represents about 15 minutes of treatment with a physical  therapist, occupational therapist, or speech-language pathologist.
The pattern of relatively high payments to CORFs was evident in all of the  localities where CORFs were concentrated. In 8 of the 14 MSAs in Florida  that had CORFs in 2002, CORF payments per patient were higher than  payments to all other types of facility-based outpatient therapy providers.  These MSAs together accounted for 86 percent of all Florida CORF  beneficiaries and 90 percent of the state’s CORF facilities. In these  localities, per-patient payments to CORFs ranged from 1.2 to 7.4 times  higher than payments to the provider type with the next highest payment  amount. For example, in Fort Lauderdale, the 2002 average CORF  therapy payment was $2,900—more than twice the average payment of  $1,249 made for beneficiaries treated by rehabilitation agencies. (See table  2.)
section_title: Patient Characteristics Did Not Explain Higher Average Therapy Payments to Florida CORFs
paragraphs: Some factors that could account for differences in therapy payment  amounts—patient diagnosis and indicators of patient health care needs— did not explain the higher payments that some Florida CORFs received  compared with other types of facility-based outpatient therapy providers.
subsections: section_title: Average Therapy Payment by Diagnosis
paragraphs: We found that CORFs received higher per-patient therapy payments than  other facility-based providers for patients in each of the four leading  diagnosis categories treated at CORFs. For patients with neurologic  disorders, arthritis, soft tissue injuries, and back disorders, payments to  CORFs were 66 percent to 159 percent higher than payments to  rehabilitation agencies and SNF OPDs and higher yet than payments to  hospital OPDs. (See table 3.) Patients treated for back disorders made up  the largest share of Florida CORF patients, at 25 percent. For patients with  this diagnosis, average payments to CORFs—at $1,734—were twice as  high as the average payment of $867 made to rehabilitation agencies—the  next highest paid provider type.
The higher therapy payments to CORFs were driven by the higher volume  of therapy services that CORFs provided to their Medicare patients,  compared with the volume of services other facility-based outpatient  therapy providers furnished to patients in the same diagnosis group. As  shown in table 4, for all four leading diagnosis categories, CORF Medicare  patients received far more units of therapy, on average, than Medicare  patients treated by other outpatient therapy providers. Differences across  provider types were particularly pronounced for Medicare patients with  arthritis. CORFs furnished an average of 100 units of therapy to  beneficiaries treated for arthritis. In contrast, non-CORF outpatient  therapy providers delivered an average of 33 to 53 units of therapy to  Medicare arthritis patients.
Differences in patient demographic characteristics and prior-year hospital  diagnoses—factors that could indicate variation in patient health care  needs—did not explain most of the wide disparities in therapy payments  per patient across settings. When we considered differences in patient  age, sex, disability, Medicaid enrollment, and 2001 inpatient hospital  diagnoses across provider types, the data showed that patients served by  CORFs could be expected to use slightly more health care services than  patients treated by other facility-based therapy providers. However, we  found that, after controlling for these patient differences, average  payments for CORF patients remained 2 to 3 times greater than for those  treated by other provider types.
Consistent with this finding, therapy industry representatives we spoke  with—including those representing CORFs—reported that, in the  aggregate, CORF patients were not more clinically complex or in need of  more extensive care than patients treated by other outpatient therapy  providers. They told us that patients are referred to different types of  outpatient therapy providers based on availability and convenience rather  than on their relative care needs. One private consultant to CORFs and  other outpatient provider groups noted that there are no criteria to identify  and direct patients to a particular setting for outpatient care, and that  physicians generally refer patients to therapy providers with whom they  have a relationship.
section_title: Actions by the Florida Contractor Were Not Sufficient to Ensure Appropriate Payments to CORFs
paragraphs: Despite the Florida contractor’s increased scrutiny of CORF claims, our  analysis of Florida CORFs’ 2002 billing patterns suggests that some  providers received inappropriate payments that year. In late 2001, after  finding widespread billing irregularities among CORF claims, the Florida  claims administration contractor implemented new strategies for  reviewing claims that were maintained throughout 2002. Although these  strategies were successful at ensuring appropriate claims payments for a  limited number of beneficiaries, our analysis of 2002 CORF claims found  that many CORFs continued to receive very high per-patient payments.
subsections: section_title: 2001 Investigation by Florida Claims Contractor Revealed Pattern of Inappropriate CORF Billing
paragraphs: In 2001, the Medicare claims administration contractor for Florida  reviewed about 2,500 claims submitted by CORFs and other facility-based  outpatient therapy providers for services provided from January 1999  through February 2001. Among these claims, the contractor found  widespread billing for medically unnecessary therapy services. These were  therapy services related to maintaining rather than improving a patient’s  functioning, as required by Medicare reimbursement requirements for  covering outpatient therapy.
Reviews also found claims for the same beneficiary, made by more than  one CORF, sometimes on the same day. The unlikelihood that a patient  would receive treatment from more than one CORF provider when each  one was equipped to provide the patient’s full range of needed services  caused the contractor to investigate further. After interviewing a sample of  beneficiaries treated by multiple CORFs, the contractor found that some  of the facilities treating these beneficiaries had common owners. It  reported that the common ownership was significant, suggesting efforts by  the owners to distribute billings for a patient’s services across several  providers. The contractor stated that this would allow the CORFs’ owners  to avoid the scrutiny of the Medicare contractor, which typically screens  claims aggregated by facility rather than by beneficiary. After conducting  additional reviews of a sample of paid claims from these CORFs, it found  that 82 percent of payments made were inappropriate, largely due to  questions about medical necessity. As a result, the contractor required  these CORFs to repay Medicare approximately 1 million dollars and  referred some of the CORFs to CMS and the HHS OIG for further  investigation.
In late 2001, the Florida claims administration contractor implemented  additional claim review strategies targeting CORF claims. For any new  CORF, the contractor began reviewing for medical necessity, prior to  payment, about 30 of the first claims submitted. The contractor also began  reviewing all therapy claims submitted on behalf of about 650  beneficiaries identified as having high levels of therapy use from multiple  CORFs and other facility-based outpatient therapy providers during the  2001 investigation. CORFs and other providers submitting therapy claims  for these beneficiaries had to supply documentation of medical necessity  before claims were paid. The contractor also conducted prepayment  reviews for specific therapy services determined to be at high risk for  inappropriate payments, regardless of the beneficiary receiving services.  The contractor maintained these intensified claim documentation and  review requirements throughout 2002.
The contractor indicated that the oversight measures put in place for  specific beneficiaries were effective at improving the appropriateness of  claims payments for therapy services made for those beneficiaries.  Specifically, the contractor reported that Florida CORFs billed Medicare  $12.1 million for this group in 2000, $10.2 million in 2001, and $7.3 million  during 2002. In addition, the contractor denied an increasing percentage of  the amount billed each year—46 percent in 2001, and 53 percent in 2002— based on its medical records reviews.
section_title: Florida CORFs’ High Medicare Payments Continued After Intensified Claim Reviews
paragraphs: While the contractor succeeded in ensuring that payments to CORFs for  this limited group of beneficiaries met Medicare rules, our own analysis of  CORF claims submitted in 2002 found several indications that billing  irregularities continued. The indicators included a high rate of  beneficiaries who received services from multiple CORFs, some CORFs  that did not provide any therapy services, and many facilities with very  high per-patient payments.
Our analysis of 2002 Florida CORF claims by facility showed that the  Florida claims administration contractor’s efforts to ensure appropriate  CORF payments were not completely effective. We found that 11 percent  of the beneficiaries who received CORF services in Florida were treated  by more than one CORF facility during the year. While Medicare rules do  not prohibit beneficiaries from receiving services from multiple providers  in a single year, this occurs much more frequently among Florida CORFs  than among CORFs in other states. Specifically, in the five other states  with the greatest numbers of CORFs at the end of 2001 (Alabama,  California, Kentucky, Pennsylvania, and Texas), fewer than 4 percent of  beneficiaries received services from more than one CORF during 2002, and  in most of these states, the rate was 1 percent or less.
Although many CORFs treated a few patients who received services from  multiple providers during 2002, a small group of Florida CORFs had very  high rates of “shared” patients that year—suggesting that some CORFs  may have continued to operate in the patterns first detected by the Florida  contractor during its 2001 review. Of the CORFs operating in Florida in  2002, 32 facilities shared more than half of their patients with other CORF  providers. At four CORFs, more than 75 percent of the beneficiaries were  treated by multiple CORF providers during the year.
Staff from the Florida contractor told us that these patterns of therapy  use—receiving services from multiple providers during the same time  period—complicate their ability to monitor appropriate use of therapy  services. Contractor staff routinely analyze claims data to evaluate  appropriate levels of service use and identify trends that may suggest  excessive use. However, these analyses are normally conducted on claims  data aggregated by CORF provider, not aggregated per beneficiary. When  beneficiaries receive outpatient therapy services from multiple providers,  traditional methods of oversight are less likely to detect high levels of  service use and payments.
Our review of 2002 Florida claims data also showed that some CORFs  were not complying with Medicare program rules about furnishing  required services. Although CORFs are permitted to provide nontherapy  services, they must be delivered as part of a beneficiary’s overall therapy  plan of care. However, three Florida CORFs received payments  exclusively for nontherapy services—such as pulmonary treatment and  oxygen saturation tests—in 2002. Four additional providers billed  Medicare primarily for nontherapy services, with therapy care accounting  for less than 10 percent of their annual Medicare payments.
In addition, we found that a number of the CORFs identified during the  Florida contractor’s 2001 investigation continued to have very high  average payments for all services provided in 2002. As shown in table 5,  several of these facilities were among 21 CORFs with per-patient payments  that exceeded the statewide CORF average by more than 50 percent.  Among this group of high-cost facilities, the per-patient payment in 2002  ranged from $3,099 to $6,080, substantially above the average payment of  $2,036 across all Florida CORFs.
These relatively high 2002 payments suggested that Florida CORFs  responded to the contractor’s targeted medical reviews selectively by  reducing the services provided to the small number of patients whose  claims were under scrutiny. Other patients, outside the scope of the  contractor’s criteria for medical review, continued to receive high levels of  services. The contractor continues to rely on the medical review criteria  originally established in late 2001. However, contractor staff reported  ongoing concerns about the extent to which CORFs bill for services that  may not meet the program’s requirements for payment. In particular, they  cited the practice of delivering therapy services over relatively long  periods of time that only maintain, rather than improve, a patient’s  functional status.
section_title: Conclusions
paragraphs: Sizeable disparities between Medicare therapy payments per patient to  Florida CORFs and other facility-based outpatient therapy providers in  2002—with no clear indication of differences in patient needs—raise  questions about the appropriateness of CORF billing practices. After  finding high rates of medically unnecessary therapy services to CORFs,  CMS’s claims administration contractor for Florida took steps to ensure  appropriate claim payments for a small, targeted group of CORF patients.  Despite its limited success, billing irregularities continued among some  CORFS and many CORFs continued to receive relatively high payments  the following year. This suggests that the contractor’s efforts were too  limited in scope to be effective with all CORF providers.
section_title: Recommendation
paragraphs: To ensure that Medicare only pays for medically necessary care as  outlined in program rules, CMS should direct the Florida claims  administration contractor to medically review a larger number of CORF  claims.
section_title: Agency Comments and Our Evaluation
paragraphs: CMS officials reviewed a draft of this report and agreed with its findings.  Specifically, the agency noted that “disproportionately high payments  made to CORFs indicate a need for medical review of these providers.”  The agency also pointed out that, given the high volume of claims  submitted by providers, contractors must allocate their limited resources  for medical review in such a way as to maximize returns. Furthermore,  CMS stated that the Florida claims administration contractor is already  taking appropriate steps to address concerns about CORF billing and is  prepared to take additional steps if necessary.
We recognize that contractors can achieve efficiencies by targeting their  medical review activities at providers or services that place the Medicare  trust funds at the greatest risk. However, the impact of medical review  comes, in part, from the sentinel effect of consistently applying medical  review to providers’ claims. Thus, while we support the contractor’s focus  on new CORF providers, we continue to believe that enlarging the number  of CORF claims reviewed would promote compliance with medical  necessity requirements. Given that Florida CORFs continued to bill  significantly more per beneficiary than other outpatient therapy providers  even after the contractor took steps to examine some claims, compliance  could be enhanced by aggressively addressing this vulnerability. CMS’s  comments appear in appendix II.
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If you or your staff have any questions about this report, please call me at  (312) 220-7600. Another contact and key contributors are listed in  appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: In this report we (1) compared Medicare’s outpatient therapy payments to  CORFs in 2002 with its payments that year to other facility-based  outpatient therapy providers and (2) assessed the program’s effectiveness  in ensuring that payments to CORFs complied with Medicare rules. As  agreed with the requester’s staff, we limited the scope of our review to  facility-based outpatient therapy providers and beneficiaries in Florida.  Florida accounted for one-third of all CORF facilities at the end of 2002.
Our primary data source was CMS’s National Claims History (NCH) 100%  Nearline File. The NCH file contains all institutional and noninstitutional  claims from the Common Working File (CWF)—the system that CMS uses  to process and pay Medicare claims through its contractors across the  country. We also reviewed data from CMS’s Medicare Provider of Service  Files, which contain descriptive information on CORF facility  characteristics, such as location, type of ownership, and the date of each  provider’s initial program certification. Finally, we interviewed  representatives of CMS’s central and regional offices, the Florida claims  administration contractor, federal law enforcement agencies, and the  therapy industry.
To describe the Florida CORF industry and operations, we gathered  Medicare claims data from CMS’s NCH File for the years 1999 through  2002. In addition to reviewing trends in total Medicare payments to  CORFs, we examined changes in the patient case mix by identifying the  primary diagnoses listed on claims for beneficiaries treated by CORFs. We  also obtained descriptive information on CORFs’ characteristics from the  Provider of Service Files for 1999 through 2003.
This work was performed from May 2003 through July 2004 in accordance  with generally accepted government auditing standards.
subsections: section_title: Comparison of Medicare Outpatient Therapy Payments by Provider Type
paragraphs: In this analysis, we compared Medicare therapy payments to four types of  facility-based outpatient therapy providers: CORFs, rehabilitation  agencies, hospital OPDs, and SNF OPDs. Although CORFs are authorized  to offer a wide range of services, we limited our comparison to a common  set of therapy services: physical therapy services, occupational therapy  services, and speech-language pathology services.
To compare Medicare’s therapy payments to Florida CORFs with therapy  payments to other types of facility-based outpatient rehabilitation therapy  providers, we examined 2002 Medicare beneficiary claims data from the  NCH File. We used the NCH file to identify all beneficiaries who resided in  Florida and received outpatient therapy services from in-state providers  during 2002. By limiting our review to beneficiaries who were enrolled in  part B for all 12 months of the year, we excluded those in managed care  and those with less than a full year of fee-for-service coverage. Using  beneficiary identification numbers, we aggregated each beneficiary’s total  outpatient therapy claims from all provider types. We summed the annual  number of therapy units billed for each beneficiary as well as the annual  line-item payment amounts. This allowed us to assign each beneficiary to  a provider comparison group.
To compare Medicare expenditures for similar patients, we assigned each  beneficiary to a diagnosis category based on the primary diagnoses listed  in their outpatient therapy claims for the year. Our diagnosis groups  included    stroke,    spinal cord injury,    neurologic disorders,    hip fractures,    back disorders,    amputation,    cardiovascular disorders—circulatory,    cardiovascular disorders—pulmonary,   rehabilitation for unspecified conditions,    arthritis,    soft tissue/musculoskeletal injuries,    ortho-surgical,    multiple diagnoses and    other.
To consider differences in payment by provider type at the substate level,  we compared annual per-patient payments for CORFs and other outpatient  facility providers in each of Florida’s 20 metropolitan statistical areas.
Variation in treatment patterns and payments (for the same diagnosis  category) across provider types may suggest that one type of provider  treats a patient population with greater needs for service. To consider  patient differences, we applied CMS’s Principal Inpatient Diagnostic Cost  Group (PIP-DCG) model. By comparing patients’ use of hospital services  and inpatient diagnoses (in the calendar year prior to the year they  received therapy) and demographic information such as age, sex,  disability, and Medicaid enrollment, the PIP-DCG model allowed a  comparison of anticipated patient care needs across provider types. We  used the PIP-DCG score developed for each beneficiary in combination  with the 2002 therapy payment data to conduct an analysis of covariance.
section_title: Evaluation of the Florida Contractor’s Efforts to Ensure Appropriate CORF Claim Payments
paragraphs: To review strategies used by the Florida claims administration contractor  to ensure proper CORF payments, we interviewed representatives of  CMS’s central and regional offices and representatives from the  contractor. The contractor provided us with the results of its 2001  investigation of Florida CORFs and its subsequent reports on CORF billing  patterns. In addition, we interviewed federal law enforcement agencies  involved in investigations of Florida CORF facilities.
To assess the effectiveness of the contractor’s oversight strategies, we  reviewed information developed by the contractor on changes in CORF  billing practices. We also analyzed 2002 claims data for CORF services to  identify any CORFs with disproportionately high Medicare payments. This  analysis included payment data for all claims—for both therapy and  nontherapy services. In contrast to our comparison of per-patient  payments by provider type, in this analysis we included all beneficiaries,  regardless of their total annual therapy payments and duration of  Medicare fee-for-service enrollment.
section_title: Assessment of Data Reliability
paragraphs: We did not independently verify the reliability of CMS’s Medicare claims  data. However, we determined that CMS’s Medicare claims data were  sufficiently reliable for the purposes of this engagement. CMS operates a  Quality Assurance System designed to ensure the accuracy of its Medicare  NCH and CWF data files. Specifically, the agency has procedures in place  to (1) ensure that files have been transmitted properly and completely, (2)  check the functioning of contractor claims edits, and (3) sample claims  from the files that exhibit unusual or inconsistent coding practices  (indicating that data elements may be unreliable). In addition, we  consulted with CMS’s technical staff as necessary to ensure the accuracy  and relevance of the data elements used in our analysis. We also screened  the files and excluded claims that were denied, claims superseded by an  adjustment claim, and claims for services in other years.
section_title: Appendix II: Comments from the Centers for Medicare & Medicaid Services
section_title: Appendix III: GAO Contact and Staff Acknowledgments
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section_title: Acknowledgments
paragraphs: In addition to the contact named above, Jennifer Grover, Rich Lipinski,  and Hannah Fein made key contributions to this report.
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