Medicare Physical Therapy: Self-Referring Providers Generally Referred More Beneficiaries but Fewer Services per Beneficiary
Published: 2014-04-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Rising Medicare expenditures for PT services have long been of concern, and questions have been raised about the role of self-referral in this growth. Self-referral occurs when a provider refers patients to entities in which the provider or the provider's family members have a financial interest.
GAO was asked to examine self-referral for PT services and Medicare spending for these services. This report examines (1) trends in the number of and expenditures for self-referred and non-self-referred Medicare PT services and (2) how provision of these services differs among providers on the basis of whether they self-refer. GAO analyzed Medicare Part B claims data from 2004 through 2010 and examined three measures of PT referral for each referring provider: number of PT services referred, number of beneficiaries referred, and number of PT services provided per beneficiary. GAO compared PT referrals for self-referring and non-self-referring providers after accounting for referring provider specialty, Medicare beneficiary practice size, and geographic (urban or rural) location. GAO also compared selected characteristics of the beneficiaries referred by self-referring and non-self-referring providers.
The Department of Health and Human Services stated that it had no comments on a draft of this report.
section_title: What GAO Found
paragraphs: From 2004 to 2010, non-self-referred physical therapy (PT) services increased at a faster rate than self-referred PT services. During this period, the number of self-referred PT services per 1,000 Medicare fee-for-service beneficiaries was generally flat, while non-self-referred PT services grew by about 41 percent. Similarly, the growth rate in expenditures associated with non-self-referred PT services was also higher than for self-referred services.
The relationship between provider self-referral status and PT referral patterns was mixed and varied on the basis of referring provider specialty, Medicare beneficiary practice size, and geography. GAO examined three measures of PT referral for each referring provider for the three provider specialties that referred nearly 75 percent of PT services in 2010—family practice, internal medicine, and orthopedic surgery.
The overall relationship between provider referral status and the first measure of PT referrals—the average number of PT services referred per provider—was mixed. GAO found that self-referring family practice and internal medicine providers in urban areas, on average, generally referred more PT services than their non-self-referring counterparts. In contrast, self-referring orthopedic surgeons, on average, generally referred fewer PT services than non-self-referring orthopedic surgeons.
Self-referring providers in all three specialties that GAO examined generally referred more beneficiaries for PT services, on average, but for fewer PT services per beneficiary compared with non-self-referring providers. For these two measures of PT referrals, differences between self-referring and non-self-referring providers generally persisted after accounting for referring providers' specialty, Medicare beneficiary practice size, and geographic location, although the magnitude of these differences varied on the basis of these factors. For example, the average number of beneficiaries referred by self-referring family practice providers in urban areas was approximately 43 to 87 percent higher than for their non-self-referring counterparts, depending on Medicare practice size. In contrast, beneficiaries referred by self-referring family practice providers in urban areas received 12 to 28 percent fewer PT services, on average, depending on practice size, compared with their non-self-referring counterparts.
GAO also found that in the year a provider began to self-refer, PT service referrals increased at a higher rate relative to non-self-referring providers of the same specialty. For example, family practice providers that began self-referring in 2009 increased PT referrals 33 percent between 2008 and 2010. In contrast, non-self-referring family practice providers increased their PT service referrals 14 percent during this same period.

section_title: Letter
paragraphs: Rising Medicare spending for outpatient therapy services, including  physical therapy (PT), has long been an issue. Between 2006 and 2009,  Medicare expenditures for outpatient PT increased by approximately   28 percent, while the national economy grew about 4 percent. In 2011,  Medicare paid about $4.1 billion for outpatient PT services provided to  about 4.3 million Medicare beneficiaries. PT services, such as therapeutic  exercises, are designed to improve mobility, strength, and physical  functioning, and to limit the extent of disability resulting from injury or  disease. An aging U.S. population that remains active later than previous  generations may have contributed to an increase in demand for such  services. However, there is concern that not all PT services may be  medically necessary, and selected legislation has focused on reforming  how the Centers for Medicare & Medicaid Services (CMS)—the agency  that administers the Medicare program—pays for and manages the  outpatient therapy benefit. For example, under the Balanced Budget Act  of 1997 (BBA), CMS was required to apply per beneficiary financial limits,  known as therapy caps, to help control spending growth and discourage  medically unnecessary use of outpatient therapy services, including PT.  More recently, the Middle Class Tax Relief and Job Creation Act of 2012  required CMS to gather information on patient function during the course  of therapy to better understand patient condition and outcomes for  outpatient therapy claims, including PT, beginning January 1, 2013.
Some policymakers also have expressed concern that some of the  growth in PT may be the result of provider self-referral, which occurs  when providers refer their patients for services delivered by entities— such as their own solo or group practice—in which they or a member of  their family have a financial relationship. While federal law generally  prohibits self-referral under Medicare, there are exceptions for certain  services and arrangements, including PT. Opponents of self-referral for  PT suggest that financial incentives may lead providers to initiate PT  services more frequently than is necessary, leading to overutilization and  increased Medicare spending. Proponents of PT self-referral suggest that  such arrangements allow providers to improve coordination of care and  provide patients with convenient access to PT services. Some proponents  also have argued that physical therapists practicing independently can  have a financial incentive to recommend additional PT visits and perform  more PT procedures per visit than may be medically necessary.
We have recently reported on self-referral for advanced imaging,  anatomic pathology, and intensity modulated radiation therapy. We  generally found that providers who self-refer tended to use more of these  health care services, in some cases resulting in additional Medicare  spending. You also asked us to examine provider self-referral for PT  services and Medicare spending for these services. In this report, we  provide information on (1) trends in the number of and expenditures for  self-referred and non-self-referred Medicare PT services from 2004  through 2010 and (2) how provision of these services differs among  providers on the basis of whether they self-refer.
Medicare data from the Carrier file include data from the CMS-1500, which is the  standard claim form used by noninstitutional providers, such as physicians’ offices and  physical therapists’ private practices, to bill Medicare. Some of the PT services reported  on the CMS-1500 may be provided in patients’ homes. We used Healthcare Common  Procedure Coding System (HCPCS) codes to identify PT services, and included claims for  all office-based PT services that were covered by Medicare. service had a financial relationship with the same entity. We classified  services as non-self-referred if the provider shown in the referring  provider field for PT services had no financial relationship with the  provider who performed the PT service. After we classified PT services  as self-referred or non-self-referred, we used the claims to identify trends  in the number of self-referred and non-self-referred PT services and  expenditures for PT services performed from 2004 through 2010.app. I for more details on our scope and methodology.)
To determine the extent to which the referral of PT services differed for  providers who self-referred when compared with other providers, we  classified providers into subgroups based on characteristics that may be  associated with the amount of PT referrals. We then performed two  analyses using 100 percent of Medicare Part B claims for PT services  provided in both professional offices and facility settings. For the first  analysis, we compared PT referrals during 2010 by providers who self- referred at least one beneficiary for PT services (“self-referring” providers)  with providers who referred all beneficiaries for PT services to provider(s)  with whom they had no financial relationship (“non-self-referring”  providers). Because the amount, frequency, and duration of PT services may vary for each beneficiary, we examined three PT referral measures  for each referring provider: total number of PT services referred, total  number of beneficiaries referred, and average number of PT services  received by each beneficiary referred. Differences in these measures of  PT referrals between providers may reflect differences due to self-referral  status, provider characteristics, or beneficiary characteristics. To account  for provider characteristics that may be associated with the amount of PT  referrals, we categorized self-referring and non-self-referring providers  into subgroups of similar specialties, geographic areas (urban/rural  location), and beneficiary practice size (i.e., the number of Medicare FFS  beneficiaries treated in a professional office for any medical condition),  and examined our three PT referral measures for self-referring and non- self-referring providers of each subgroup. We examined PT referral  measures for providers in three specialties that we found referred nearly  75 percent of PT services in 2010—family practice, internal medicine, and  orthopedic surgery. To account for differences in beneficiary  characteristics, we compared selected characteristics of the beneficiaries  referred by self-referring and non-self-referring providers, such as  beneficiary age and disability status.
For our second analysis, we analyzed the extent to which the total  number of PT services referred changed the year after providers began to  self-refer. Specifically, we identified a group of providers that began to  self-refer PT services in 2009. We then calculated the difference in the  percentage change in the number of PT services referred by two groups  of providers—”switchers” and non-self-referring providers. Switchers were  non-self-referring during 2008 and self-referring during 2009 and 2010.  Switchers may have begun to self-refer in 2009 by hiring PT provider(s)  or joining a group practice that self-referred. Non-self-referring providers  were providers who were non-self-referring throughout 2008, 2009, and  2010.
Our study has some limitations. First, we may not have identified all self- referred PT services because CMS uses the referring provider identifier  on PT claims to identify the provider who certified the beneficiary’s plan of  care, and in some cases the referring provider may be different from the  certifying provider. In addition, Medicare claims data do not capture all  financial relationships between performing and referring providers.  Second, we may have understated the occurrence of certain self-referral  arrangements, such as referring physician ownership of hospitals, by  assuming that all PT services referred to facilities were non-self-referred.  Third, our analysis that compares PT diagnostic categories for  beneficiaries referred by self-referring and non-self-referring providers is  based on data that CMS does not use to determine payment for PT  services. Consequently, providers do not have a financial incentive to  accurately report diagnostic data for PT services on Medicare claims.  Finally, it is outside the scope of this report to examine the medical  necessity, clinical appropriateness, or effectiveness of PT services  beneficiaries received.
We assessed the reliability of the CMS data we used by interviewing  officials responsible for overseeing these data sources, reviewing relevant  documentation, comparing means and frequencies of selected variables  with published data, and examining the data for obvious errors. We  determined that the data were sufficiently reliable for the purposes of this  report.
We conducted this performance audit from February 2012 through April  2014 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: PT treatment consists of a planned program to relieve symptoms,  improve function, and prevent further disability for individuals disabled by  chronic or acute disease or injury. Health conditions that require physical  rehabilitation, such as low back pain, bursitis, stroke, Parkinson’s  disease, or arthritis, may benefit from PT services. Beneficiaries are  eligible to receive outpatient PT under Medicare Part B, which covers  diagnosis and treatment of impairments, functional limitations, disabilities,  or changes in physical function and health status. Medicare-covered  outpatient PT services are provided in institutional settings such as  hospital outpatient departments and skilled nursing facilities, as well as  noninstitutional settings such as physicians’ offices and PT clinics.
To be covered by Medicare, outpatient PT services must be medically  necessary, furnished while the beneficiary is or was under the care of a  physician, and provided under a written plan of care established by an  appropriate medical professional, such as a physician or physical  therapist. The plan of care is required to contain, among other  information, the amount, duration, and frequency of PT services. The  plan of care must be certified by a physician or nonphysician practitioner  within 30 days of the initial therapy treatment, and must be recertified at  least every 90 days after the initial treatment. Medicare does not require  that a beneficiary obtain a physician referral to initiate PT services.
However, if a physician referral for PT services is documented in the  medical record, it provides evidence that the patient was under the care  of a physician.
PT services are billed using Healthcare Common Procedure Coding  System (HCPCS) codes; examples of HCPCS codes for PT services  include therapeutic exercises and massage therapy. Each Medicare claim  for PT can include one or more HCPCS codes, as well as one or more  15-minute “units” for each timed code.
section_title: Self-Referred PT Services and Expenditures from 2004 through 2010 Were Generally Flat, While Non-Self- Referred PT Services and Expenditures Increased
paragraphs: The total number of PT services provided to Medicare beneficiaries  increased nearly 30 percent from 2004 through 2010. Over this period,  the number of self-referred PT services was generally flat, while the  number of non-self-referred PT services increased. In addition,  expenditures increased over this time period for both self-referred and  non-self-referred PT services, but this increase was larger for services  that were not self-referred.
subsections: section_title: Self-Referred PT Services Were Generally Flat; Non- Self-Referred Services Increased About 40 Percent
paragraphs: The total number of PT services provided to Medicare beneficiaries  increased nearly 30 percent from 2004 through 2010, despite a small  decrease in the total number of FFS beneficiaries over this same period.  From 2004 to 2010, the number of services per 1,000 FFS beneficiaries  that we identified as self-referred was generally flat—about 320 services  in both 2004 and 2010 (see fig. 1).referred PT services per 1,000 FFS beneficiaries grew by about   41 percent, from about 903 in 2004 to about 1,275 services in 2010.  Because of the rapid growth in non-self-referred PT services, the   In contrast, the number of non-self- proportion of PT services that were self-referred decreased from about   24 percent in 2004 to about 18 percent in 2010.
The overall increase in PT services is likely due, in part, to an increase in  the proportion of Medicare beneficiaries receiving these services. In 2004,  approximately 4 percent of all Medicare FFS beneficiaries received PT  services; this increased to approximately 6 percent in 2010. However,  from 2004 through 2010, the number of beneficiaries that received self- referred PT services increased only 12 percent, while the number of  beneficiaries that received non-self-referred PT services increased nearly  44 percent. In addition, the number of both self-referred and non-self- referred PT services temporarily declined in 2006, likely due to the  reinstatement of the therapy payment cap on PT services.
section_title: Expenditures for Self- Referred PT Services Increased About 10 Percent; Expenditures for Non-Self-Referred Services Increased Nearly 60 Percent
paragraphs: Expenditures for both self-referred and non-self-referred PT services  grew from 2004 to 2010, but the increase was smaller for self-referred  services (see fig. 2). Specifically, expenditures for self-referred services  increased from $389 million to $428 million, an increase of about   10 percent. In contrast, expenditures for non-self-referred services  increased from $1.2 billion in 2004 to $1.9 billion in 2010, an increase of  about 57 percent. The larger increase in non-self-referred expenditures  from 2004 to 2010 reflects the disproportionate increase in the number of  beneficiaries receiving non-self-referred PT services over this period as  well as more rapid growth in the number of 15-minute units billed for non- self-referred PT services.
section_title: PT Referral Patterns Differed on the Basis of Whether the Providers Self- Referred
paragraphs: The overall relationship between provider referral status and the average  number of PT services referred per provider was mixed and varied on the  basis of referring provider specialty, Medicare beneficiary practice size,  and geography. For example, self-referring family practice and internal  medicine providers in urban areas, on average, generally referred more  PT services in 2010 than their non-self-referring counterparts. Self- referring orthopedic surgeons, on average, generally referred fewer PT  services than non-self-referring orthopedic surgeons. In addition, self- referring providers generally referred more beneficiaries for PT services,  on average, than non-self-referring providers after accounting for  differences in provider specialty, Medicare beneficiary practice size, and  geography.fewer PT services per beneficiary than non-self-referring providers.  Providers’ referrals for PT services increased the year after they began to  self-refer at a greater rate than non-self-referring providers.
subsections: section_title: Overall Relationship between Provider Referral Status and Average Number of PT Services Referred Was Mixed
paragraphs: In 2010, the relationship between provider referral status and number of  PT services referred across all beneficiaries differed on the basis of  geography, provider specialty, and Medicare beneficiary practice size. In  urban areas, self-referring providers generally referred more PT services,  on average, than non-self-referring providers, with some exceptions (see  table 1). For example, self-referring family practice providers in urban  areas referred more services, on average, than non-self-referring family  practice providers in every beneficiary practice size category. In contrast,  self-referring orthopedic surgeons in urban areas referred fewer PT  services, on average, in every beneficiary practice size category except  the middle category (101 to 250 beneficiaries).
In rural areas, self-referring providers in the three specialties generally  referred fewer PT services, on average, than non-self-referring providers,  with some exceptions, as shown in table 2. For example, self-referring  family practice providers with a beneficiary practice size greater than 500,  and orthopedic surgeons in rural areas with a beneficiary practice size of  251 through 500 beneficiaries referred more PT services, on average.
section_title: In 2010, Self-Referring Providers Generally Referred More Beneficiaries, on Average, but Referred Fewer PT Services per Beneficiary
paragraphs: Self-referring providers generally referred more beneficiaries for PT  services during 2010, on average, but referred fewer PT services per  beneficiary compared with non-self-referring providers. Specifically, in  urban areas, self-referring providers in family practice, internal medicine,  and orthopedic surgery referred more beneficiaries for PT services on  average, than their non-self-referring counterparts in every Medicare  beneficiary practice size category. However, the magnitude of the  differences between the two groups varied by specialty and practice size.  For example, the average number of beneficiaries referred by self- referring orthopedic surgeons was 13 to 29 percent higher than for their  non-self-referring counterparts, depending on the beneficiary practice size  category, while the average number of beneficiaries referred by self- referring family practice providers was approximately 43 to 87 percent  higher than for their non-self-referring counterparts, depending on the  beneficiary practice size category (see table 3).
In general, self-referring providers in rural areas also tended to refer more  beneficiaries for PT services across provider specialties and practice size  categories. In rural areas, self-referring providers in family practice in our  smallest beneficiary practice size category and orthopedic surgery with a  practice size of 51 to 100 beneficiaries referred fewer beneficiaries for PT  services, on average, than their non-self-referring counterparts. However,  in all other instances, self-referring providers in rural areas referred more  beneficiaries for PT services, on average, than their non-self-referring  counterparts. For example, self-referring internal medicine providers in  rural areas referred about 25 to 94 percent more beneficiaries than their  non-self-referring counterparts, depending on the beneficiary practice size  category (see table 4).
While self-referring providers generally referred more beneficiaries during  2010, beneficiaries referred by self-referring providers in family practice,  internal medicine, and orthopedic surgery received fewer PT services, on  average, compared with beneficiaries referred by non-self-referring  providers. For example, in urban areas, beneficiaries referred by self- referring family practice providers received 12 to 28 percent fewer PT  services, on average, compared with beneficiaries referred by non-self- referring family practice providers, depending on the beneficiary practice  size category (see table 5).
In rural areas, beneficiaries referred by self-referring providers in family  practice, internal medicine, and orthopedic surgery received fewer PT  services, on average, than their non-self-referring counterparts in every  practice size category (see table 6).
Observed differences between self-referring and non-self-referring  providers within each specialty in the number of PT services referred are  not likely due to differences in the overall health status of the beneficiaries  they referred. We found that self-referring and non-self-referring providers  referred beneficiaries who were similar with respect to their average  Medicare risk scores and disability status (see table 7). For example,  self-referring and non-self-referring family practice providers referred  beneficiaries whose average estimated cost to Medicare in 2010 was  about 30 percent higher than for the average FFS beneficiary (31 and   33 percent higher, respectively).
Some of the differences between self-referring and non-self-referring  providers in the number of PT referrals may be due to differences in the  severity or type of medical conditions of the beneficiaries that they  referred for PT treatment. Although data on the severity of beneficiaries’  medical conditions requiring PT treatment were not available for our study  period, we found some differences in the extent to which self-referring  and non-self-referring providers referred beneficiaries for selected  diagnoses (see table 8). For example, self-referring family practice,  internal medicine, and orthopedic surgery providers were more likely to  refer beneficiaries who were treated for spine conditions. Non-self- referring providers in these specialties were more likely to refer  beneficiaries who were treated for neurologic conditions or rehabilitation.
In addition, we found some differences in the types of PT treatments used  by self-referring and non-self-referring providers. For example, during  2010, self-referring providers in family practice and internal medicine  were more likely to refer beneficiaries who were treated with ancillary  services such as massage therapy and electrical stimulation. In contrast,  non-self-referring providers in these specialties were more likely to refer  beneficiaries who were treated with gait training and therapeutic activities  (see app. II, which presents tables that show the distribution of PT  services by provider specialty and self-referral status).
section_title: Providers’ Referrals for PT Services Increased the Year After They Began to Self-Refer
paragraphs: PT service referrals for providers in family practice, internal medicine, and  orthopedic surgery increased the year after they began to self-refer at a  higher rate relative to non-self-referring providers of the same specialty.  We compared the average number of PT service referrals made by  providers that began self-referring beneficiaries for PT services in 2009  and continued doing so in 2010 (“switchers”) with the average number of  service referrals made by providers who were non-self-referring between  2008 and 2010. The percentage increase in average PT service referrals  for switchers between 2008 and 2010 ranged from approximately   7 percent for orthopedic surgeons to 33 percent for family practice  providers. In contrast, the percentage increase in the average number of  PT service referrals for non-self-referring providers during this time was  lower, ranging from approximately 4 percent for orthopedic surgeons to  14 percent for family practice providers (see table 9). The percentage  point difference in the number of PT services referred between switchers  and non-self-referring providers was higher for family practice and internal  medicine providers (approximately 20 percent and 18 percent,  respectively) and lower for orthopedic surgeons (approximately   4 percent). This is consistent with our earlier finding that self-referring  family practice and internal medicine providers tended to have higher  relative referral rates, on average, than their non-self-referring  counterparts in 2010, while this effect was much more limited for  orthopedic surgeons.
section_title: Concluding Observations
paragraphs: By improving patients’ physical functioning, strength, or mobility, PT  treatment offers many Medicare beneficiaries the opportunity to restore  function that they may have lost due to illness or injury. Proponents of PT  self-referral contend that it has the potential to improve coordination of  care and provide convenient access to PT services. Our review indicates  that PT service use and expenditures grew considerably from 2004 to  2010, despite a slight decrease in the total number of FFS beneficiaries  over this period. The primary driver of this growth was growth in non-self- referred services. These results differ from our prior work on self-referral  of other Medicare services—namely, advanced imaging, anatomic  pathology, and intensity-modulated radiation therapy—in which we  reported that self-referred services and expenditures grew faster than  non-self-referred services and expenditures. One potential reason for this  difference is that non-self-referred PT services can be performed by  providers who can directly influence the amount, duration, and frequency  of PT services through the written plan of care required by Medicare. In  contrast, non-self-referred services we examined for our prior work tend  to be performed by providers who have more limited ability to generate  additional services or referrals; for example, radiologists generally do not  have the discretion to order more imaging services or more intense  imaging procedures.
Regardless, substantial growth in PT services raises concerns about  higher costs for Medicare and beneficiaries. Although this growth is  primarily due to non-self-referred services, we found notable differences  between non-self-referring and self-referring providers. For example, we  found that average PT service referrals, average PT beneficiary referrals,  and average PT services per beneficiary differed based on whether the  providers self-referred; further, PT service referrals increased the year  after a provider began to self-refer at a higher relative rate to non-self- referring providers of the same specialty. Better understanding the  differences in referral patterns between self-referring and non-self- referring providers may provide useful information to help manage growth  in PT services. In 2013, CMS began collecting additional information on  beneficiary functional status on all PT claims. These data may help CMS  to better assess the appropriateness and effectiveness of PT treatment  provided by both self-referring and non-self-referring providers.
section_title: Agency and Third- Party Comments and Our Evaluation
paragraphs: We provided a draft of this report to HHS, which oversees CMS, for  comment. HHS thanked GAO for the opportunity to review the draft and  stated that it had no comments. We obtained written comments from four  professional associations selected because they represent an array of  stakeholders with specific involvement in referring PT services: the  American Academy of Family Physicians (AAFP), which represents  physicians in family practice; the American Academy of Orthopaedic  Surgeons (AAOS), which represents orthopedic surgeons; the American  College of Physicians (ACP), which represents physicians in internal  medicine; and the American Physical Therapy Association (APTA), which  represents physical therapists. The following sections contain a summary  of these organizations’ comments on our methodology and findings and  our response to these comments. We incorporated any technical  comments provided where appropriate.
subsections: section_title: American Academy of Family Physicians
paragraphs: AAFP appreciated the opportunity to review the draft report, but  expressed a concern that our methodology to define self-referring  providers as those with at least one self-referred PT service to a  professional office may skew our results if the majority of the PT services  referred by several self-referring providers were not self-referred. We  applied this same threshold in our previous work on self-referral, as it is a  conservative method for determining providers’ self-referral status.  Furthermore, we examined the distribution of self-referred PT services to  professional offices during 2010 and found that providers who self-refer  tended to self-refer a majority of the PT services utilized.
AAFP also provided some context for our findings, noting that some  factors may account for our finding that overall spending for PT services  increased. For example, AAFP stated that health insurers have  encouraged providers to use imaging procedures, surgery for back pain,  and medications that manage pain (such as opioids) less frequently.  According to AAFP, some providers may be choosing to use less imaging  and treat fewer patients with surgery or opioids and instead manage  these patients by referring them for PT services. AAFP considers PT a  more cost-effective yet less invasive way to treat patients. In addition,  AAFP believes that one possible explanation for GAO's finding that self- referring providers referred fewer PT services per beneficiary, on  average, than non-self-referring providers, is that providers who self-refer  are likely to fully understand the variety of services that are available in  the PT facility for which they have an ownership interest.
section_title: American Academy of Orthopaedic Surgeons
paragraphs: AAOS appreciated the opportunity to review the draft report and was  pleased to see that the data showed that self-referring orthopedic  practices generally self-referred the smallest number of PT services per  beneficiary on average when compared to other specialty groups in our  study. However, AAOS stated that it did not believe there was a rationale  for examining “switchers”—providers who became self-referrers during  our period of study—because we found that self-referring providers  referred fewer services per beneficiary on average. We conducted an  analysis of switchers to isolate the effects of self-referral, using a  methodology similar to our previous reports on self-referral in Medicare.  As noted in the draft report, the average number of PT service referrals  made by providers that began self-referring beneficiaries for PT services  in 2009 increased at a higher rate relative to non-self-referring providers  of the same specialty during our period of study. Specifically, among  these “switchers,” the percentage increase in average PT service  referrals between 2008 and 2010 was approximately 4 percentage points  higher for orthopedic surgeons, 18 percentage points higher for internal  medicine providers, and 20 percentage points higher for family practice  providers.
AAOS made two additional points for our consideration. First, AAOS  noted that self-referring orthopedic surgeons may also refer some  services outside of their practice. Our analyses provided a picture of self- referral at both the service and provider levels. Specifically, for our  analysis of trends between 2004 and 2010 in the utilization of and  expenditures for self-referred and non-self-referred services, we  examined each PT service to determine if it was self-referred or not by  matching the Taxpayer Identification Number (TIN) on the claim with a  crosswalk of the TINs associated with each provider submitting claims.  This method allowed us to examine utilization and spending for each PT  service—self-referred and non-self-referred. For our analysis of self- referring providers, as we note in the draft report, we considered a  provider to be non-self-referring if the provider referred at least one  beneficiary for a PT service in a professional office and did not self-refer  any PT services. Conversely, we considered a provider to be self- referring if the provider self-referred at least one beneficiary for a PT  service that was provided in a professional office during our period of  study. Second, AAOS noted that nine states have changed their laws  governing self-referral to PT services during the study period and that this  may impact our results. We agree that this may impact our results, but  examining state laws governing self-referral were outside the scope of  this report.
section_title: American College of Physicians
paragraphs: ACP stated that a major conclusion of our report, that the primary driver  of growth in Medicare expenditures and utilization of PT services was due  to non-self-referred PT services, differs from our prior work on self-referral  for advanced imaging, anatomic pathology, and intensity-modulated  radiation therapy services. According to ACP, this finding demonstrates  the complex effects of self-referral on Medicare utilization and  expenditures, which may be influenced by type of service as well as the  other variables outlined in this report, such as provider specialty,  geographic location, and Medicare beneficiary practice size. ACP also  stated that the primary payment model can also affect the relationship  between self-referral, expenditures, and utilization. For example,   and other value- practices that participate in Medicare Shared Savingsbased payment models likely refer in a different manner than those paid  predominantly through the traditional Medicare FFS payment system.  While we agree that different payment models could affect physicians’  referral patterns, such payment models generally had not been  implemented by Medicare at the time of our study. ACP also stated that it  is important to consider the extent to which services are ordered on the  basis of recognized appropriate use criteria. However, using appropriate  use criteria can involve assessing the severity of symptoms in order to  determine the appropriate course of treatment, and data on severity were  not available at the time of our study. ACP believes that self-referral alone  cannot explain expenditure growth differences and that, if utilized  appropriately, self-referral allows for increased quality oversight by  ordering physicians, better care coordination, and the potential for the  provision of lower-cost care compared to alternative settings, such as  hospitals.
section_title: American Physical Therapy Association
paragraphs: APTA acknowledged the thoroughness of the draft report and appreciated  our comprehensive analysis. According to APTA, our findings that self- referring providers referred more beneficiaries for PT services, and that  PT referrals for switchers in the three specialties we examined increased  relative to non-self-referring providers, are consistent with other studies  that found that providers have a financial interest to self-refer. However,  APTA also expressed concerns about some of our results. Specifically,  APTA noted that patient condition, physical impairments, and  comorbidities have a major impact on the amount, duration, and  frequency of PT services provided, and without this information it is  difficult to draw conclusions about the impact of self-referral  arrangements on the frequency of PT services. For example, APTA noted  that the frequency of PT use could be attributed to differences in the  complexity of the conditions of patients treated by self-referring compared  with non-self-referring providers. It also expressed concern that the  measures of health status in this report—such as disability status,  average risk score, and Clinical Classification Software (CCS) diagnostic  categories—are limited in their ability to explain differences in PT  frequency. In this report, we state that some of the differences between  self-referring and non-self-referring providers in the number of PT  referrals may be due to differences in the severity or type of medical  conditions of the beneficiaries that they referred for PT treatment. We  also acknowledge that data on the severity of beneficiaries' medical  conditions requiring PT treatment were not available for our study period.  Given the lack of severity data, we examined risk scores, age, and  disability status, and described these measures as "overall health status  variables," and we present data on beneficiary diagnostic categories  without labeling them as measures of severity. We also note that APTA  agreed with our conclusion that data CMS began collecting in 2013 may  help the agency to better assess the appropriateness and effectiveness of  PT treatment for both self-referring and non self-referring providers.
APTA also expressed concerns that including data on PT referrals to  facilities, such as outpatient hospitals and skilled nursing facilities, may  have affected the results shown in the tables in appendix II of this report,  which compare the distribution of Medicare PT services for self-referring  and non-self-referring providers. According to APTA, our assumption that  all PT services referred to facilities were non-self-referred neglects a  significant portion of self-referral arrangements. APTA also stated that  because patients in facility settings tend to be more medically complex  than patients seen in physician offices, these tables may make an unfair  comparison. As we note in the limitations section of this report, we  acknowledge that we may have understated the occurrence of certain  self-referral arrangements, such as referring physician ownership of  hospitals, by assuming that all PT services referred to facilities were non- self-referred. For example, some providers may have referred  beneficiaries for PT services to hospital(s) in which they had a financial  interest in the entire hospital, and, due to data limitations, we did not  analyze the extent to which this type of referral may have occurred.
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section_title: Appendix I: Scope and Methodology
paragraphs: This appendix describes the scope and methodology used to analyze our  study objectives: (1) trends in the number of and expenditures for self- referred and non-self-referred Medicare physical therapy (PT) services  from 2004 through 2010, and (2) how provision of these services differs  among providers on the basis of whether they self-refer. For both  objectives, we used 100 percent of fee-for-service (FFS) claims from the  Medicare Part B Carrier file, which contains final action Medicare Part B  claims for noninstitutional providers, such as physicians. For the second  objective, we also used 100 percent of FFS claims from the Medicare  Outpatient Claims file, which includes final action Medicare Part B claims  for five types of facilities that also provide PT services: outpatient  hospitals, skilled nursing facilities, comprehensive outpatient rehabilitation  facilities, rehabilitation agencies, and home health agencies.
Each Medicare claim contains data for one or more services for a  particular beneficiary. Each service is identified on a claim by its  Healthcare Common Procedure Coding System (HCPCS) code, which  the Centers for Medicare & Medicaid Services (CMS) assigns to products,  supplies, and services for billing purposes. To identify all PT services  covered by Medicare, we used outpatient therapy HCPCS codes  published in the Federal Register and in CMS’s Annual Therapy Update  to identify the universe of outpatient therapy HCPCS codes in use from  2004 through 2010. We then used the HCPCS code claim modifier (for  Carrier file claims) and Revenue Center code (for Outpatient file claims)  to distinguish PT services from occupational therapy or speech-language  pathology services. Because there is no indicator or flag on the claim that  identifies whether services were self-referred or non-self-referred, we  developed a claims-based methodology to identify services as either self- referred or non-self-referred. Specifically, we classified services as self- referred if the provider that referred the beneficiary for a PT service and  the provider that performed the PT service were identical or had a   To determine providers’ financial relationships, we  financial relationship.used the Taxpayer Identification Number (TIN), which is either the Social  Security Number or Employer Identification Number that an individual or  organization uses to report tax information to the Internal Revenue  Service. A TIN could be that of the provider, the provider’s employer, or  another entity to which the provider reassigns payment. There may be  one or multiple TINs for a medical group practice depending on the  organizational structure of the practice. To identify the associated TINs  for the referring and performing providers, we created a crosswalk of the  performing provider’s unique physician identification number, or national  provider identifier (NPI), to the TIN that appeared on the claim and used  that to assign TINs to the referring and performing providers.
To describe the trends in the number of and expenditures for self-referred  PT services from 2004 through 2010, we used the 100 percent Medicare  Part B Carrier file for each year to calculate utilization and expenditures  for self-referred and non-self-referred PT services. We focused on PT  referrals to professional offices, such as physician offices or PT clinics,  because the financial incentive for providers to self-refer is most direct  when the service is performed in a professional office. To calculate  utilization, we counted the number of PT HCPCS codes. We also  calculated the average number of 15-minute units provided per PT  service.variable, which includes payments by Medicare and the beneficiary.
We also conducted some analyses with an alternative definition of “non-self-referring  provider.” Our alternative definition of “non-self-referring provider” included providers who  referred at least one beneficiary for a PT service in a professional office or a facility and  did not self-refer any PT services. This alternative definition included an additional 49,062  providers in family practice, internal medicine, and orthopedic surgery who referred  beneficiaries for PT services exclusively to facilities during 2010. With this alternative  definition, we computed higher relative rates of self-referral for the average number of  Medicare beneficiary referrals for PT services and for the average number of PT services  provided per beneficiary (except for family practice providers). We decided to use our  original definition of non-self-referring provider because it generally produced more  conservative results. provider location). We identified providers’ specialties on the basis of the  specialties listed on the claims. We report results for three physician  specialties that referred nearly 75 percent of PT services during 2010 that  had a unique referring provider identification number—family practice   (20 percent), internal medicine (26 percent), and orthopedic surgery   (28 percent). We calculated beneficiary practice size by computing the  number of unique Medicare FFS beneficiaries that providers treated in a  professional office in 2010 for any medical condition covered by  Medicare. We defined urban settings as metropolitan statistical areas, a  geographic entity defined by the Office of Management and Budget as a  core urban area of 50,000 or more population. We used rural-urban  commuting area codes—a Census tract-based classification scheme that  utilizes the standard Bureau of Census Urbanized Area and Urban  Cluster definitions in combination with work commuting information to  characterize all of the nation’s Census tracts regarding their rural and  urban status—to identify providers as practicing in metropolitan statistical  areas. We considered all other settings to be rural.
In addition, we examined the extent to which the characteristics of the  beneficiaries referred by self-referring and non-self-referring providers  differed. We used CMS’s risk score file to identify each beneficiary’s risk  score, age (specifically, whether the beneficiary was age 85 or older), and  disability status. The risk score is an estimate of each beneficiary’s overall health status. It is the ratio of expected Medicare payments for  that beneficiary under Medicare FFS relative to the average health care  payments for all Medicare FFS beneficiaries.Classification Software (CCS) categories maintained by the U.S. Agency  for Healthcare Research and Quality to identify the diagnostic category  for which each beneficiary received PT treatment. The CCS categories  are based on International Classification of Diseases, 9th Revision,  Clinical Modification (ICD-9-CM), a uniform and standardized diagnostic  and procedural coding system. The CCS categories group ICD-9-CM  codes into a smaller number of clinically meaningful categories. The CCS  diagnostic categories for PT that we used include Arthritis/Other  Connective Tissue and Joint Disorders, Fractures/Traumatic Joint  Disorders, Neurological, Spine, Sprains/Strains, V codes/Miscellaneous  Rehab, and Other PT diagnoses.
For the second analysis, we determined the extent to which the number  of PT service referrals made by providers changed after they began to  self-refer. Specifically, we identified a group of providers, whom we called  “switchers,” that were non-self-referring in 2008 and self-referring in 2009  and 2010. We then calculated the change in the number of PT referrals  made from 2008 (i.e., the year before the switchers began self-referring)  to 2010 (i.e., the year after they began self-referring). We compared the  change in the number of referrals made by these providers to the change  in the number of referrals made over the same time period by providers  who were non-self-referring between 2008 and 2010. Differences in the  average number of PT services referred by non-self-referring providers  between 2008 and 2010 reflect changes during this period that were not  related to self-referral, such as changes in the number of beneficiaries  who needed PT services or changes in the severity or types of the  medical conditions treated with PT. Differences in the average number of  PT services referred by switchers may reflect these changes as well as  changes associated with self-referral. The difference in the percentage  change in the number of PT services referred by switchers and non-self- referring providers is an estimate of the change in providers’ referrals for  PT services that may be associated with self-referral.
Our study has some limitations. First, we may not have identified all self- referred PT services, because CMS uses the referring provider identifier  on PT claims to identify the provider who certified the beneficiary’s plan of  care, and in some cases the referring provider may be different from the  certifying provider. In addition, Medicare claims data do not capture all  financial relationships between performing and referring providers.  Second, we may have understated the occurrence of certain self-referral  arrangements, such as referring physician ownership of hospitals, by  assuming that all PT services referred to facilities were non-self-referred.  Third, our analysis that compares PT diagnostic categories for  beneficiaries referred by self-referring and non-self-referring providers is  based on data that CMS does not use to determine payment for PT  services. Consequently, providers do not have a financial incentive to  accurately report diagnostic data for PT services on Medicare claims.  Finally, it is outside the scope of this report to examine the medical  necessity, clinical appropriateness, or effectiveness of PT services  beneficiaries received.
We took several steps to ensure that the data used to produce this report  were sufficiently reliable. Specifically, we assessed the reliability of the  CMS data we used by interviewing officials responsible for overseeing  these data sources, including CMS and Medicare contractor officials. We  also reviewed relevant documentation, compared means and frequencies  of selected variables with published data, and examined the data for  obvious errors, such as missing values and values outside of expected  ranges. We determined that the data were sufficiently reliable for the  purposes of our study, as they are used by the Medicare program as a  record of payments to health care providers. As such, they are subject to  routine CMS scrutiny.
We conducted this performance audit from February 2012 through April  2014 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Distribution of Medicare Physical Therapy Services for Self-Referring and Non-Self-Referring Providers, 2010
paragraphs: Appendix II: Distribution of Medicare Physical  Therapy Services for Self-Referring and Non- Self-Referring Providers, 2010 Physical therapy (PT)  service  Electrical stimulation  (HCPCS 97032)
Electrical stimulation,  other than wound  (HCPCS G0283)
Gait training therapy  (HCPCS 97116)
Manual therapy  (HCPCS 97140)
Massage therapy  (HCPCS 97124)
Neuromuscular reeducation  (HCPCS 97112)
Physical therapy evaluation  (HCPCS 97001)
Therapeutic activities  (HCPCS 97530)
Therapeutic exercises  (HCPCS 97110)
Ultrasound therapy  (HCPCS 97035)
Electrical stimulation,  other than wound  (HCPCS G0283)
Gait training therapy  (HCPCS 97116)
Manual therapy  (HCPCS 97140)
Massage therapy  (HCPCS 97124)
Neuromuscular reeducation  (HCPCS 97112)
Physical therapy evaluation  (HCPCS 97001)
Therapeutic activities  (HCPCS 97530)
Therapeutic exercises  (HCPCS 97110)
Ultrasound therapy  (HCPCS 97035)
Electrical stimulation,  other than wound  (HCPCS G0283)
Gait training therapy  (HCPCS 97116)
Manual therapy  (HCPCS 97140)
Massage therapy  (HCPCS 97124)
Neuromuscular  reeducation  (HCPCS 97112)
Physical therapy evaluation  (HCPCS 97001)
Therapeutic activities  (HCPCS 97530)
Therapeutic exercises  (HCPCS 97110)
Ultrasound therapy  (HCPCS 97035)
section_title: Appendix III: Providers Who Referred Medicare Physical Therapy Services, by Selected Characteristics, 2010
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Jessica Farb, Assistant Director;  Thomas Walke, Assistant Director; Daniel Lee; Elizabeth Morrison;  Merrile Sing; Jennifer Whitworth; and Rachael Wojnowicz made key  contributions to this report.