Therapy overpayments may surpass $700 million a year, OIG suggests

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OIG says outpatient therapy is plagued by improper billing
OIG says outpatient therapy is plagued by improper billing

A federal review of outpatient physical therapy payments found Medicare likely overpaid $367 million during a six-month period.

The Department of Health and Human Services' Office of Inspector General examined a random sample of 300 claims and found 61% did not meet medical necessity-, coding- or documentation requirements.

The OIG issued its report Friday, extrapolating that the same rate of improper payments that led to $12,741 in improper reimbursement over a six-month period would equate to $367 million system wide.

Only 116 of the 300 examined claims were properly filed, the OIG said.

“These overpayments occurred because the Centers for Medicare & Medicaid Services' controls were not effective in preventing unallowable payments for outpatient physical therapy services,” the report said. “We recommended that CMS (1) instruct the Medicare Administrative Contractors to notify providers of potential overpayments so that those providers can exercise reasonable diligence to investigate and return any identified overpayments, in accordance with Medicare guidelines, (2) establish mechanisms to better monitor the appropriateness of outpatient physical therapy claims, and (3) educate providers about Medicare requirements for submitting outpatient physical therapy claims for reimbursement.

For its part, CMS disagreed with the findings and the OIG's recommendation to communicate overpayment concerns to providers. CMS argued that further analysis would be needed to determine if claims actually met Medicare requirements.