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. 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. 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. 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. 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. 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. 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.