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OIG: Medicare Could Save $367M by Auditing Improper Payments

OIG found that Medicare could have saved nearly $367 million by auditing improper payments to providers and healthcare organizations.

OIG identified $367 million in improper payments that could have been audited.

Source: Thinkstock

By Thomas Beaton

- CMS auditing systems failed to recognize that 61 percent of Medicare payments for outpatient physical therapy claims in 2013 were improperly filed, which cost the Medicare program nearly $367 million, says a new report by the OIG.

Only 116 out of 300 sample claims were submitted correctly, the report states. The remaining 184 claims were improperly filed for $12,741. OIG used the sample findings to determine that the majority of Medicare physical therapy claims from July 1, 2013 to December 1, 2013 were improperly filed.  

“These overpayments occurred because the Centers for Medicare & Medicaid Services’ controls were not effective in preventing improper payments for outpatient physical therapy services,” OIG said.

OIG believes that CMS did not have the tools to identify medical necessity of physical claims, several coding errors, and documentation deficiencies, according to the observed sample.

Physical therapy claims contained various medical necessity errors which would have potentially voided provider payments if captured in an effective audit, OIG explained.

The observed sample contained 91 claims where therapists received payments for physical therapy services even though a beneficiary’s medical record suggested these services were not necessary for treatment.

Additionally, 89 claims indicated that the amount, frequency, and duration of the physical therapy services were not reasonable. Thirty claims were filed for therapy services that were not deemed effective treatments for the beneficiary’s condition.

Several physical therapy claims had various coding standard errors, according to the report’s sample.

Eighty-six claims contained errors related to the length of services submitted to Medicare. These time periods were longer than the actual time patients receive physical therapy.

OIG also found that 78 claims were not filed with a G-code or other claims modifier that indicates a beneficiary’s treatment status.

“For example, a claim form for a Medicare beneficiary did not contain the required G-codes or modifiers to show the beneficiary’s functional status as required at that interval of his or her treatment,” OIG said. “Thus, the claims should not have been processed and paid.”

OIG also found that 80 physical therapy claims had plan-of-care deficiencies including vague plan-of-care goals for Medicare beneficiaries, no signature from providers or non-physician practitioners, and a lack of information on the duration or frequency of services.

OIG provided three recommendations to help CMS identify auditing opportunities for improper payments.

The first recommendation suggested that CMS should instruct Medicare Administrative Contractors (MACs) to notify providers of potential overpayments so providers can investigate and return overpayments to Medicare.

OIG also said that CMS should establish new systems and monitoring to evaluate the appropriateness of physical therapy claims and increase provider education about how to properly submit physical therapy claims.

CMS did not agree with the OIG’s findings. The agency contends that more analysis is needed to determine if physical therapy claims met Medicare requirements.

CMS also did not agree with OIG’s recommendation to instruct MACs to notify providers about overpayments, but did concur with other suggestions to establish new monitoring systems and increase provider education.

“We maintain that the remaining error determinations by our medical reviewer were correct and that all of our associated recommendations are valid and consistent with similar reviews of physical therapy services at individual providers,” OIG concluded.


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