Medicare

Tighter Rules Needed to Curtail Overcharges for Therapy in Nursing Homes Gao ID: HEHS-95-23 March 30, 1995

Nursing homes and rehabilitation centers are taking advantage of ambiguous payment rules and lack of guidelines to bill Medicare at inflated rates for therapy services. State averages for physical, occupational, and speech therapists' salaries range from about $12 to $25 per hour, but Medicare has been charged upwards of $600 per hour. The extent of overcharging and its precise impact on Medicaid outlays are unclear; however, billing schemes uncovered in recent years suggest that the problem is nationwide and growing in magnitude. Extraordinary markups on therapy can result from providers exploiting regulatory ambiguity and weaknesses in Medicare's payment rules. Payment rules and procedures developed when the therapy industry was much smaller and less sophisticated have proved no match for increasingly complex business practices designed to generate increased Medicare revenue and skirt program controls. Although the overbilling problem has been known since 1990, no action has been taken to close loopholes that allow payment for these overcharges.

GAO found that: (1) the providers responsible for overcharges for therapy services are often rehabilitation companies or nursing homes; (2) the problem of overcharging is national in scope and growing in magnitude; (3) markups on therapy services result from providers exploiting weaknesses in Medicare's payment rules; (4) Medicare has been charged $600 per hour or more for therapists' salaries of $12 to $25 per hour; (5) the Health Care Financing Administration's (HCFA) rules regarding abusive therapy billing practices are not adequate to combat new business practices designed to generate increased Medicare revenue; (6) HCFA has known of the billing problem since 1990, but has yet to develop rules to improve Medicare reimbursement policies; and (7) implementation of such rules could be a lengthy process.

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