Comprehensive Outpatient Rehabilitation Facilities
High Medicare Payments in Florida Raise Program Integrity Concerns Gao ID: GAO-04-709 August 12, 2004Comprehensive Outpatient Rehabilitation Facilities (CORF) are highly concentrated in Florida. These facilities, which provide physical therapy, occupational therapy, speech-language pathology services, and other related services, have been promoted as lucrative business opportunities for investors. Aware of such promotions, the Chairman, Senate Committee on Finance, raised concerns about whether Medicare could be vulnerable to overbilling for CORF services. In this report, focusing our review on Florida, we (1) compared Medicare's outpatient therapy payments to CORFs in 2002 with its payments that year to other facility-based outpatient therapy providers and (2) assessed the program's effectiveness in ensuring that payments to CORFs complied with Medicare rules.
In Florida, CORFs were by far the most expensive type of outpatient therapy provider in the Medicare program in 2002. Per-patient payments to CORFs for therapy services were 2 to 3 times higher than payments to other types of facility-based therapy providers. Higher therapy payments were largely due to the higher volume of services--more visits or more intensive therapy per visit--delivered to CORF patients. This pattern of relatively high CORF payments was evident in each of the eight metropolitan statistical areas (MSA) of the state where nearly all Florida CORFs operated and the vast majority of CORF patients were treated. A consistent pattern of high payments and service levels was also evident for patients in each of the diagnosis categories most commonly treated by CORFs. Differences in patient characteristics--age, sex, disability, and prior inpatient hospitalization--did not explain the higher payments that Florida CORFs received compared to other types of outpatient therapy providers. Steps taken by Medicare's claims administration contractor for Florida have not been sufficient to mitigate the risk of improper billing by CORFs. After examining state and national trends in payments to CORFs in 1999, the contractor increased its scrutiny of CORF claims to ensure that Medicare payments made to CORFs were appropriate. It found widespread billing irregularities in Florida CORF claims, including high rates of medically unnecessary therapy services. Since late 2001, the contractor has intensified its review of claims from new CORF providers and required medical documentation to support certain CORF services considered at high risk for billing errors. It has also required that supporting medical records documentation be submitted with all CORF claims for about 650 beneficiaries who had previously been identified as receiving medically unnecessary services. The contractor's analysis of 2002 claims data for this limited group of beneficiaries suggests that, as a result of these oversight efforts, Florida CORFs billed Medicare for substantially fewer therapy services than in previous years. However, our analysis of all CORF therapy claims for that year indicates that the contractor's program safeguards were not completely effective in controlling per-patient payments to CORFs statewide. With oversight focused on a small fraction of CORF patients, CORF facilities continued to provide high levels of services to beneficiaries whose claims were not targeted by the contractor's intensified reviews.
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Report to the Chairman, Committee on Finance, U.S. Senate:
United States Government Accountability Office:
GAO:
August 2004:
Comprehensive Outpatient Rehabilitation Facilities:
High Medicare Payments in Florida Raise Program Integrity Concerns:
GAO-04-709:
GAO Highlights:
Highlights of GAO-04-709, a report to the Chairman, Committee on
Finance, U.S. Senate:
Why GAO Did This Study:
Comprehensive Outpatient Rehabilitation Facilities (CORF) are highly
concentrated in Florida. These facilities, which provide physical
therapy, occupational therapy, speech-language pathology services, and
other related services, have been promoted as lucrative business
opportunities for investors. Aware of such promotions, you raised
concerns about whether Medicare could be vulnerable to overbilling for
CORF services. In this report, focusing our review on Florida, we (1)
compared Medicare‘s outpatient therapy payments to CORFs in 2002 with
its payments that year to other facility-based outpatient therapy
providers and (2) assessed the program‘s effectiveness in ensuring
that payments to CORFs complied with Medicare rules.
What GAO Found:
In Florida, CORFs were by far the most expensive type of outpatient
therapy provider in the Medicare program in 2002. Per-patient payments
to CORFs for therapy services were 2 to 3 times higher than payments to
other types of facility-based therapy providers. Higher therapy
payments were largely due to the higher volume of services”more visits
or more intensive therapy per visit”delivered to CORF patients. This
pattern of relatively high CORF payments was evident in each of the
eight metropolitan statistical areas (MSA) of the state where nearly
all Florida CORFs operated and the vast majority of CORF patients were
treated. A consistent pattern of high payments and service levels was
also evident for patients in each of the diagnosis categories most
commonly treated by CORFs. Differences in patient characteristics”age,
sex, disability, and prior inpatient hospitalization”did not explain
the higher payments that Florida CORFs received compared to other types
of outpatient therapy providers.
Steps taken by Medicare‘s claims administration contractor for Florida
have not been sufficient to mitigate the risk of improper billing by
CORFs. After examining state and national trends in payments to CORFs
in 1999, the contractor increased its scrutiny of CORF claims to
ensure that Medicare payments made to CORFs were appropriate. It found
widespread billing irregularities in Florida CORF claims, including
high rates of medically unnecessary therapy services. Since late 2001,
the contractor has intensified its review of claims from new CORF
providers and required medical documentation to support certain CORF
services considered at high risk for billing errors. It has also
required that supporting medical records documentation be submitted
with all CORF claims for about 650 beneficiaries who had previously
been identified as receiving medically unnecessary services. The
contractor‘s analysis of 2002 claims data for this limited group of
beneficiaries suggests that, as a result of these oversight efforts,
Florida CORFs billed Medicare for substantially fewer therapy services
than in previous years. However, our analysis of all CORF therapy
claims for that year indicates that the contractor‘s program safeguards
were not completely effective in controlling per-patient payments to
CORFs statewide. With oversight focused on a small fraction of CORF
patients, CORF facilities continued to provide high levels of services
to beneficiaries whose claims were not targeted by the contractor‘s
intensified reviews.
What GAO Recommends:
GAO recommends that CMS direct the Florida contractor to medically
review a larger number of CORF claims. While CMS agreed with our
findings, it noted that the contractor is already taking appropriate
steps to monitor CORF claims. However, given that CORFs continued to
bill significantly more per beneficiary than other outpatient therapy
providers under the current level of scrutiny, we maintain that
enlarging the number of CORF claims reviewed would promote compliance
in this vulnerable area.
www.gao.gov/cgi-bin/getrpt?GAO-04-709.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Leslie G. Aronovitz at
(312) 220-7600.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Florida CORFs Received Higher Average Therapy Payments, Despite
Treating Similar Patients:
Actions by the Florida Contractor Were Not Sufficient to Ensure
Appropriate Payments to CORFs:
Conclusions:
Recommendation:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Centers for Medicare & Medicaid
Services:
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Acknowledgments:
Tables:
Table 1: Therapy Payments and Units of Service Per Patient by Type of
Provider, Florida, 2002:
Table 2: Therapy Payments Per Patient by Type of Provider in Selected
Florida MSAs, 2002:
Table 3: Therapy Payments Per Patient by Provider Type for Selected
Diagnosis Categories, Florida, 2002:
Table 4: Units of Therapy Service Per Patient by Provider Type for
Selected Diagnosis Categories, Florida, 2002:
Table 5: Medicare Payments to Selected Florida CORFs for All Types of
Services, 2002:
Abbreviations:
CMS: Centers for Medicare & Medicaid Services:
CORF: Comprehensive Outpatient Rehabilitation Facility:
CWF: Common Working File:
HHS OIG: Department of Health and Human Services Office of Inspector
General:
MSA: metropolitan statistical area:
NCH: National Claims History File
OPD: outpatient department:
PIP-DCG: Principal Inpatient Diagnostic Cost Group:
SNF: skilled nursing facility:
United States Government Accountability Office:
Washington, DC 20548:
August 12, 2004:
The Honorable Charles E. Grassley:
Chairman:
Committee on Finance:
United States Senate:
Dear Mr. Chairman:
Outpatient therapy services are a covered benefit under Medicare--the
federal program that finances health services for approximately 40
million elderly and disabled individuals. Each year, about 9 percent of
Medicare beneficiaries use outpatient therapy services--defined by the
Medicare program as physical therapy, occupational therapy, and speech-
language pathology services--to improve mobility and
functioning.[Footnote 1] To qualify for coverage of outpatient therapy
services under Medicare, beneficiaries must be referred by a physician,
have a written treatment plan that is reviewed periodically by a
physician, and need therapy for rehabilitation rather than maintenance
purposes.[Footnote 2] Several types of facility-based providers offer
outpatient therapy services, including outpatient departments (OPD) at
hospitals and skilled nursing facilities (SNF), and rehabilitation
agencies. These providers deliver services in ambulatory settings such
as clinics and community hospital outpatient departments.
In many states, therapy services are also available through
Comprehensive Outpatient Rehabilitation Facilities (CORF). In 1980,
Congress recognized CORFs as potential Medicare participating providers
to allow beneficiaries access to both physician and therapy services in
one stand-alone outpatient facility.[Footnote 3] CORFs are different
from other types of Medicare-certified outpatient therapy providers in
that, in addition to physical therapy, regulations require that they
offer psychological or social services and the services of a physician
who specializes in rehabilitation medicine.[Footnote 4] They are also
unique in their authority to provide a variety of nontherapy services-
-such as respiratory treatment or nursing care--as medically necessary
in the context of a patient's rehabilitation therapy treatment
plan.[Footnote 5] In general, services must be provided on the CORF
premises at a single, fixed location. However, physical therapy,
occupational therapy, and speech-language pathology services may be
provided in places other than the CORF's main location, such as in a
patient's home. Back disorders, arthritis, soft tissue injuries (such
as joint sprains and strains), and neurologic disorders (such as
concussion) are common conditions treated at CORFs.
In recent years, CORF marketing consultants have actively promoted the
establishment of CORFs as lucrative business opportunities for
investors. For example, one consultant's marketing materials stated
that "every new CORF office is expected to pre-tax net at least
$400,000 to $500,000 after a start-up period. . . With or without any
medical background, you can own a small medical facility." Aware of
such promotions, you raised concerns about whether Medicare could be
vulnerable to overbilling for CORF services. In fact, in 2000, the
Department of Health and Human Services Office of Inspector General
(HHS OIG) reported a high level of improper billing by outpatient
therapy providers in several states.[Footnote 6]
In this report, we (1) compared Medicare's outpatient therapy payments
to CORFs in 2002 with its payments that year to other facility-based
outpatient therapy providers and (2) assessed the program's
effectiveness in ensuring that payments to CORFs complied with Medicare
rules. As agreed with your staff, we focused our review on Florida
providers and Medicare's Florida claims administration contractor
because, with nearly 200 CORFs in operation at the end of 2002, that
state had one-third of the nation's CORFs and far more of these
facilities than any other state.
To address these issues, we analyzed Medicare claims data for services
provided in 2002 (the most current data available) by CORFs,
rehabilitation agencies, hospital OPDs, and SNF OPDs. We also
interviewed officials at the Centers for Medicare & Medicaid Services
(CMS)--the federal agency that oversees the Medicare program--the
Florida contractor responsible for processing and paying Medicare's
CORF claims, federal law enforcement agencies, and therapy industry
experts. In addition, we reviewed relevant investigative reports by the
HHS OIG and the Florida claims administration contractor on the
improper billing activities of some CORFs. (For a detailed description
of our methodology and procedures we followed for evaluating the
reliability of the data we used, see app. I.) This work was performed
from May 2003 through July 2004 in accordance with generally accepted
government auditing standards.
Results in Brief:
In Florida, CORFs were by far the most expensive type of outpatient
therapy provider in the Medicare program in 2002. Per-patient payments
to CORFs for therapy services were 2 to 3 times higher than payments to
other types of facility-based therapy providers. Higher therapy
payments were largely due to the higher volume of services--more visits
or more intensive therapy per visit--delivered to CORF patients. This
pattern of relatively high CORF payments was evident in each of the
eight metropolitan statistical areas (MSA) of the state where nearly
all Florida CORFs operated and the vast majority of CORF patients were
treated. A consistent pattern of high payments and service levels was
also evident for patients in each of the diagnosis categories most
commonly treated by CORFs. Differences in patient characteristics--age,
sex, disability, and prior inpatient hospitalization--did not explain
the higher payments that Florida CORFs received compared to other
outpatient therapy provider types.
Steps taken by Medicare's claims administration contractor for Florida
have not been sufficient to mitigate the risk of improper billing by
CORFs. After examining state and national trends in payments to CORFs
in 1999, the contractor increased its scrutiny of CORF claims to ensure
that Medicare payments made to CORFs were appropriate. It found
widespread billing irregularities in Florida CORF claims, including
high rates of medically unnecessary therapy services. Since late 2001,
the contractor has intensified its review of claims from new CORF
providers and required medical documentation to support certain CORF
services considered at high risk for billing errors. It has also
required that supporting medical records documentation be submitted
with all CORF claims for about 650 beneficiaries who had previously
been identified as receiving medically unnecessary services. The
contractor's analysis of 2002 claims data for this limited group of
beneficiaries suggests that, as a result of these oversight efforts,
Florida CORFs billed Medicare for substantially fewer therapy services
than in previous years. However, our analysis of all CORF therapy
claims for that year indicates that the contractor's program safeguards
were not completely effective in controlling per-patient payments to
CORFs statewide. With oversight focused on a small fraction of CORF
patients, CORF facilities continued to provide high levels of services
to beneficiaries whose claims were not targeted by the contractor's
intensified reviews.
We recommend that CMS direct the Florida claims administration
contractor to medically review a larger number of CORF claims.
In commenting on a draft of this report, CMS agreed with our findings
but noted that contractors have limited resources for medical review.
The agency also stated that the Florida claims administration
contractor is already taking appropriate steps to address concerns
about CORF billing. We recognize that contractors can achieve
efficiencies by targeting their medical review activities on areas
where the financial risk to Medicare is greatest. However, the impact
of medical review comes, in part, from the sentinel effect of
consistently applying medical review to providers' claims. Given that
Florida CORFs continued to bill significantly more per beneficiary than
other outpatient therapy providers even after the contractor took steps
to examine some claims, we maintain that the Florida contractor could
enhance compliance in this area of program vulnerability by enlarging
the number of CORF claims reviewed.
Background:
Medicare Coverage Rules for Outpatient Therapy:
All outpatient therapy providers are subject to Medicare part B payment
and coverage rules.[Footnote 7] Payment amounts for each type of
outpatient therapy service are based on the part B physician fee
schedule.[Footnote 8] In 2000, Medicare paid approximately $2.1 billion
for all outpatient therapy services, of which $87.1 million was paid to
CORFs.
To meet Medicare reimbursement requirements, outpatient therapy
services must be:
* appropriate for the patient's condition,
* expected to improve the patient's condition,
* reasonable in amount, frequency, and duration,
* furnished by a skilled professional,
* provided with a physician available on call to furnish emergency
medical care, and:
* part of a written treatment program that is reviewed periodically by
a physician.
CMS relies on its claims administration contractors to monitor provider
compliance with program requirements. Contractors regularly examine
claims data to identify billing patterns by specific providers or for
particular services that are substantially different from the norm.
Claims submitted by these groups of providers--or for specific
services--are then selected for additional scrutiny. Whether such
reviews occur prior to payment (prepayment reviews) or after claims
have been paid (postpayment reviews), the provider is generally
required to submit patient records to support the medical necessity of
the services billed. This routine oversight may lead to additional
claim reviews or provider education about Medicare coverage or billing
issues.
Florida CORF Industry:
With 567 facilities nationwide at the end of 2002, the CORF industry is
relatively small. Although CORFs operated in 41 states at the end of
2002, the industry is highly concentrated in Florida, where 191 (one-
third) of all Medicare-certified CORFs are located. By contrast, the
state with the second largest number of CORFs at the end of 2002 was
Texas, with 53 CORFs.
The number of CORF facilities in Florida grew about 30 percent during
2002 and the industry is now largely composed of relatively new, for-
profit providers. The CORF industry in Florida continued to grow in
2003, reaching 220 facilities by year's end, of which 96 percent were
for profit. The growth in Florida CORFs came after a period of
substantial turnover among CORF owners (many closures and new
entrants).[Footnote 9]
From 1999 to 2002, Medicare payments to Florida CORFs rose
substantially and far outpaced growth in the number of beneficiaries
that used CORFs. The number of Medicare beneficiaries receiving
services from CORFs grew 13 percent, increasing from 33,653 in 1999 to
38,024 in 2002. However, during the same time period, Medicare
expenditures for services billed by CORFs rose significantly, with
total payments increasing 61 percent, from $48.1 million to $77.4
million. Half of all Florida CORFs received an annual payment of
$91,693 or more from Medicare in 1999; by 2002, the median annual
payment more than doubled to $187,680.[Footnote 10]
Although CORFs were added to the Medicare program to offer
beneficiaries a wide range of nontherapy services at the same location
where they receive therapy, most Florida CORFs do not provide these
types of services. For those that do, only a small proportion of
Medicare payments are accounted for by these services. In 2002, 98
percent of Medicare payments to Florida CORFs went to furnish physical
and occupational therapy or speech-language pathology services. The mix
of services reimbursed by Medicare was very different in 1999, when
such therapy accounted for 68 percent of all payments, and the
remainder paid for nontherapy services, such as pulmonary treatments
and psychiatric care.[Footnote 11]
In recent years, payments to Florida CORFs have increasingly shifted
toward those made for patients with back and musculoskeletal
conditions. Most notably, patients who presented with back disorders
accounted for 16 percent of all Medicare payments to Florida CORFs in
1999 and 29 percent of payments in 2002. In addition, payments for
treating patients diagnosed with soft tissue injuries increased from 8
percent of Florida CORF payments in 1999 to 24 percent in 2002. One
diagnosis group for which there was a notable decrease in the
proportion of Medicare payments was pulmonary disorders, which fell
from 30 percent of all payments in 1999 to 2 percent in 2002.
In 2002, most of the 191 CORFs in Florida were small, with the median
CORF in the state treating 150 beneficiaries. CORFs accounted for 15
percent of all Florida Medicare beneficiaries who received outpatient
therapy from facility-based providers that year, and 30 percent of
Medicare's payments for outpatient therapy services to Florida
facility-based providers. In a few areas, however, CORFs represented a
substantial share of the outpatient therapy market, particularly in
south Florida. For example, CORFs were the predominate providers of
outpatient therapy services in Miami, with 53 percent of all facility-
based outpatient therapy patients, and treated 29 percent of patients
who received outpatient therapy from facility-based providers in nearby
Fort Lauderdale.
Florida CORFs Received Higher Average Therapy Payments, Despite
Treating Similar Patients:
In 2002, Medicare's therapy payments per patient to Florida CORFs were
several times higher than therapy payments made to other facility-based
outpatient therapy providers in the state. This billing pattern was
evident in each of the eight Florida MSAs that accounted for the
majority of Medicare CORF facilities and patients. Differences in prior
hospitalization diagnoses and patient demographic information did not
explain the disparities in per-patient therapy payments.
Average Therapy Payments to CORFs Substantially Exceeded Payments to
Other Facility-Based Providers:
Our analysis of claims payment data showed that per-patient therapy
payments to Florida CORFs were about twice as high as therapy payments
to rehabilitation agencies and SNF outpatient departments, and more
than 3 times higher than therapy payments to hospital outpatient
departments. (See table 1.) Specifically, at $2,327 per patient,
therapy payments for CORF patients were 3.1 times higher than the per-
patient payment of $756 for those treated by outpatient hospital-based
therapists.
Table 1: Therapy Payments and Units of Service Per Patient by Type of
Provider, Florida, 2002:
Payments per patient;
CORFs: $2,327;
Hospital OPDs: $756;
Rehabilitation agencies: $1,094;
SNF OPDs: $1,167.
Units of service per patient;
CORFs: 108;
Hospital OPDs: 37;
Rehabilitation agencies: 59;
SNF OPDs: 53.
Source: GAO analysis of CMS claims data.
Note: Table provides average payments and units for therapy services
only.
[End of table]
Higher therapy payments for Medicare patients treated at CORFs were
largely due to the greater number of services that CORF patients
received.[Footnote 12] As shown in table 1, on average, CORF patients
received 108 units of therapy compared with 37 to 59 units of
outpatient therapy, on average, at the other types of outpatient
providers. Typically, a unit of therapy service represents about 15
minutes of treatment with a physical therapist, occupational therapist,
or speech-language pathologist.
The pattern of relatively high payments to CORFs was evident in all of
the localities where CORFs were concentrated. In 8 of the 14 MSAs in
Florida that had CORFs in 2002, CORF payments per patient were higher
than payments to all other types of facility-based outpatient therapy
providers. These MSAs together accounted for 86 percent of all Florida
CORF beneficiaries and 90 percent of the state's CORF facilities. In
these localities, per-patient payments to CORFs ranged from 1.2 to 7.4
times higher than payments to the provider type with the next highest
payment amount.[Footnote 13] For example, in Fort Lauderdale, the 2002
average CORF therapy payment was $2,900--more than twice the average
payment of $1,249 made for beneficiaries treated by rehabilitation
agencies. (See table 2.)
Table 2: Therapy Payments Per Patient by Type of Provider in Selected
Florida MSAs, 2002:
Dollars:
MSA: Fort Lauderdale;
CORFs: $2,900;
Hospital OPDs: $916;
Rehabilitation agencies: $1,249;
SNF OPDs: $889.
MSA: Fort Myers-Cape Coral;
CORFs: $1,729;
Hospital OPDs: $775;
Rehabilitation agencies: $1,084;
SNF OPDs: $911.
MSA: Miami;
CORFs: $2,686;
Hospital OPDs: $998;
Rehabilitation agencies: $1,914;
SNF OPDs: $2,025.
MSA: Naples;
CORFs: $1,986;
Hospital OPDs: $859;
Rehabilitation agencies: $1,317;
SNF OPDs: $856.
MSA: Orlando;
CORFs: $3,394;
Hospital OPDs: $609;
Rehabilitation agencies: $1,037;
SNF OPDs: $1,266.
MSA: Panama City;
CORFs: $6,050;
Hospital OPDs: $816;
Rehabilitation agencies: $793;
SNF OPDs: N/A[A].
MSA: Tampa-St. Petersburg-Clearwater;
CORFs: $1,495;
Hospital OPDs: $801;
Rehabilitation agencies: $1,131;
SNF OPDs: $1,278.
MSA: West Palm Beach-Boca Raton;
CORFs: $2,169;
Hospital OPDs: $771;
Rehabilitation agencies: $1,092;
SNF OPDs: $1,091.
Statewide;
CORFs: $2,327;
Hospital OPDs: $756;
Rehabilitation agencies: $1,094;
SNF OPDs: $1,167.
Source: GAO analysis of CMS claims data.
Note: Table provides average payments for therapy services only.
[A] We found no 2002 outpatient therapy claims for Medicare
beneficiaries treated by SNFs in this MSA.
[End of table]
Patient Characteristics Did Not Explain Higher Average Therapy Payments
to Florida CORFs:
Some factors that could account for differences in therapy payment
amounts--patient diagnosis and indicators of patient health care needs-
-did not explain the higher payments that some Florida CORFs received
compared with other types of facility-based outpatient therapy
providers.
Average Therapy Payment by Diagnosis:
We found that CORFs received higher per-patient therapy payments than
other facility-based providers for patients in each of the four leading
diagnosis categories treated at CORFs. For patients with neurologic
disorders, arthritis, soft tissue injuries, and back disorders,
payments to CORFs were 66 percent to 159 percent higher than payments
to rehabilitation agencies and SNF OPDs and higher yet than payments to
hospital OPDs.[Footnote 14] (See table 3.) Patients treated for back
disorders made up the largest share of Florida CORF patients, at 25
percent. For patients with this diagnosis, average payments to CORFs--
at $1,734--were twice as high as the average payment of $867 made to
rehabilitation agencies--the next highest paid provider type.
Table 3: Therapy Payments Per Patient by Provider Type for Selected
Diagnosis Categories, Florida, 2002:
Dollars:
Diagnosis category: Neurologic disorders[A];
CORFs: $2,676;
Hospital OPDs: $545;
Rehabilitation agencies: $1,311;
SNF OPDs: $1,032.
Diagnosis category: Arthritis[A];
CORFs: $2,168;
Hospital OPDs: $679;
Rehabilitation agencies: $979;
SNF OPDs: $1,029.
Diagnosis category: Soft tissue injuries[A];
CORFs: $1,835;
Hospital OPDs: $625;
Rehabilitation agencies: $929;
SNF OPDs: $1,105.
Diagnosis category: Back disorders[A];
CORFs: $1,734;
Hospital OPDs: $532;
Rehabilitation agencies: $867;
SNF OPDs: $743.
All diagnosis categories;
CORFs: $2,327;
Hospital OPDs: $756;
Rehabilitation agencies: $1,094;
SNF OPDs: $1,167.
Source: GAO analysis of CMS claims data.
Note: Table provides average payments for therapy services only.
[A] These four diagnosis categories accounted for 74 percent of all
Medicare beneficiaries receiving therapy services exclusively from
Florida CORFs in 2002.
[End of table]
The higher therapy payments to CORFs were driven by the higher volume
of therapy services that CORFs provided to their Medicare patients,
compared with the volume of services other facility-based outpatient
therapy providers furnished to patients in the same diagnosis group.
As shown in table 4, for all four leading diagnosis categories, CORF
Medicare patients received far more units of therapy, on average, than
Medicare patients treated by other outpatient therapy providers.
[Footnote 15] Differences across provider types were particularly
pronounced for Medicare patients with arthritis. CORFs furnished an
average of 100 units of therapy to beneficiaries treated for
arthritis. In contrast, non-CORF outpatient therapy providers
delivered an average of 33 to 53 units of therapy to Medicare
arthritis patients.
Table 4: Units of Therapy Service Per Patient by Provider Type for
Selected Diagnosis Categories, Florida, 2002:
Diagnosis category: Neurologic disorders[A];
CORFs: 115;
Hospital OPDs: 28;
Rehabilitation agencies: 86;
SNF OPDs: 45.
Diagnosis category: Arthritis[A];
CORFs: 100;
Hospital OPDs: 33;
Rehabilitation agencies: 53;
SNF OPDs: 49.
Diagnosis category: Soft tissue injuries[A];
CORFs: 87;
Hospital OPDs: 32;
Rehabilitation agencies: 48;
SNF OPDs: 54.
Diagnosis category: Back disorders[A];
CORFs: 84;
Hospital OPDs: 27;
Rehabilitation agencies: 49;
SNF OPDs: 38.
All diagnosis categories;
CORFs: 108;
Hospital OPDs: 37;
Rehabilitation agencies: 59;
SNF OPDs: 53.
Source: GAO analysis of CMS claims data.
Note: Table provides average units for therapy services only.
[A] These four diagnosis categories accounted for 74 percent of all
Medicare beneficiaries receiving services exclusively from Florida
CORFs in 2002.
[End of table]
Patient Demographics and Prior-Year Hospitalizations:
Differences in patient demographic characteristics and prior-year
hospital diagnoses--factors that could indicate variation in patient
health care needs--did not explain most of the wide disparities in
therapy payments per patient across settings.[Footnote 16] When we
considered differences in patient age, sex, disability, Medicaid
enrollment, and 2001 inpatient hospital diagnoses across provider
types, the data showed that patients served by CORFs could be expected
to use slightly more health care services than patients treated by
other facility-based therapy providers.[Footnote 17] However, we found
that, after controlling for these patient differences, average payments
for CORF patients remained 2 to 3 times greater than for those treated
by other provider types.[Footnote 18]
Consistent with this finding, therapy industry representatives we spoke
with--including those representing CORFs--reported that, in the
aggregate, CORF patients were not more clinically complex or in need of
more extensive care than patients treated by other outpatient therapy
providers. They told us that patients are referred to different types
of outpatient therapy providers based on availability and convenience
rather than on their relative care needs. One private consultant to
CORFs and other outpatient provider groups noted that there are no
criteria to identify and direct patients to a particular setting for
outpatient care, and that physicians generally refer patients to
therapy providers with whom they have a relationship.
Actions by the Florida Contractor Were Not Sufficient to Ensure
Appropriate Payments to CORFs:
Despite the Florida contractor's increased scrutiny of CORF claims, our
analysis of Florida CORFs' 2002 billing patterns suggests that some
providers received inappropriate payments that year. In late 2001,
after finding widespread billing irregularities among CORF claims, the
Florida claims administration contractor implemented new strategies for
reviewing claims that were maintained throughout 2002. Although these
strategies were successful at ensuring appropriate claims payments for
a limited number of beneficiaries, our analysis of 2002 CORF claims
found that many CORFs continued to receive very high per-patient
payments.
2001 Investigation by Florida Claims Contractor Revealed Pattern of
Inappropriate CORF Billing:
In 2001, the Medicare claims administration contractor for Florida
reviewed about 2,500 claims submitted by CORFs and other facility-based
outpatient therapy providers for services provided from January 1999
through February 2001.[Footnote 19] Among these claims, the contractor
found widespread billing for medically unnecessary therapy services.
These were therapy services related to maintaining rather than
improving a patient's functioning, as required by Medicare
reimbursement requirements for covering outpatient therapy.
Reviews also found claims for the same beneficiary, made by more than
one CORF, sometimes on the same day.[Footnote 20] The unlikelihood that
a patient would receive treatment from more than one CORF provider when
each one was equipped to provide the patient's full range of needed
services caused the contractor to investigate further. After
interviewing a sample of beneficiaries treated by multiple CORFs, the
contractor found that some of the facilities treating these
beneficiaries had common owners. It reported that the common ownership
was significant, suggesting efforts by the owners to distribute
billings for a patient's services across several providers. The
contractor stated that this would allow the CORFs' owners to avoid the
scrutiny of the Medicare contractor, which typically screens claims
aggregated by facility rather than by beneficiary. After conducting
additional reviews of a sample of paid claims from these CORFs, it
found that 82 percent of payments made were inappropriate, largely due
to questions about medical necessity. As a result, the contractor
required these CORFs to repay Medicare approximately 1 million dollars
and referred some of the CORFs to CMS and the HHS OIG for further
investigation.[Footnote 21]
In late 2001, the Florida claims administration contractor implemented
additional claim review strategies targeting CORF claims. For any new
CORF, the contractor began reviewing for medical necessity, prior to
payment, about 30 of the first claims submitted. The contractor also
began reviewing all therapy claims submitted on behalf of about 650
beneficiaries identified as having high levels of therapy use from
multiple CORFs and other facility-based outpatient therapy providers
during the 2001 investigation. CORFs and other providers submitting
therapy claims for these beneficiaries had to supply documentation of
medical necessity before claims were paid. The contractor also
conducted prepayment reviews for specific therapy services determined
to be at high risk for inappropriate payments, regardless of the
beneficiary receiving services.[Footnote 22] The contractor maintained
these intensified claim documentation and review requirements
throughout 2002.
The contractor indicated that the oversight measures put in place for
specific beneficiaries were effective at improving the appropriateness
of claims payments for therapy services made for those beneficiaries.
Specifically, the contractor reported that Florida CORFs billed
Medicare $12.1 million for this group in 2000, $10.2 million in 2001,
and $7.3 million during 2002. In addition, the contractor denied an
increasing percentage of the amount billed each year--46 percent in
2001, and 53 percent in 2002--based on its medical records
reviews.[Footnote 23]
Florida CORFs' High Medicare Payments Continued After Intensified Claim
Reviews:
While the contractor succeeded in ensuring that payments to CORFs for
this limited group of beneficiaries met Medicare rules, our own
analysis of CORF claims submitted in 2002 found several indications
that billing irregularities continued. The indicators included a high
rate of beneficiaries who received services from multiple CORFs, some
CORFs that did not provide any therapy services, and many facilities
with very high per-patient payments.
Our analysis of 2002 Florida CORF claims by facility showed that the
Florida claims administration contractor's efforts to ensure
appropriate CORF payments were not completely effective. We found that
11 percent of the beneficiaries who received CORF services in Florida
were treated by more than one CORF facility during the year. While
Medicare rules do not prohibit beneficiaries from receiving services
from multiple providers in a single year, this occurs much more
frequently among Florida CORFs than among CORFs in other states.
Specifically, in the five other states with the greatest numbers of
CORFs at the end of 2001 (Alabama, California, Kentucky, Pennsylvania,
and Texas), fewer than 4 percent of beneficiaries received services
from more than one CORF during 2002, and in most of these states, the
rate was 1 percent or less.
Although many CORFs treated a few patients who received services from
multiple providers during 2002, a small group of Florida CORFs had very
high rates of "shared" patients that year--suggesting that some CORFs
may have continued to operate in the patterns first detected by the
Florida contractor during its 2001 review. Of the CORFs operating in
Florida in 2002, 32 facilities shared more than half of their patients
with other CORF providers. At four CORFs, more than 75 percent of the
beneficiaries were treated by multiple CORF providers during the year.
Staff from the Florida contractor told us that these patterns of
therapy use--receiving services from multiple providers during the same
time period--complicate their ability to monitor appropriate use of
therapy services. Contractor staff routinely analyze claims data to
evaluate appropriate levels of service use and identify trends that may
suggest excessive use. However, these analyses are normally conducted
on claims data aggregated by CORF provider, not aggregated per
beneficiary. When beneficiaries receive outpatient therapy services
from multiple providers, traditional methods of oversight are less
likely to detect high levels of service use and payments.
Our review of 2002 Florida claims data also showed that some CORFs were
not complying with Medicare program rules about furnishing required
services. Although CORFs are permitted to provide nontherapy services,
they must be delivered as part of a beneficiary's overall therapy plan
of care. However, three Florida CORFs received payments exclusively for
nontherapy services--such as pulmonary treatment and oxygen saturation
tests--in 2002.[Footnote 24] Four additional providers billed Medicare
primarily for nontherapy services, with therapy care accounting for
less than 10 percent of their annual Medicare payments.
In addition, we found that a number of the CORFs identified during the
Florida contractor's 2001 investigation continued to have very high
average payments for all services provided in 2002.[Footnote 25] As
shown in table 5, several of these facilities were among 21 CORFs with
per-patient payments that exceeded the statewide CORF average by more
than 50 percent. Among this group of high-cost facilities, the per-
patient payment in 2002 ranged from $3,099 to $6,080, substantially
above the average payment of $2,036 across all Florida CORFs.[Footnote
26]
Table 5: Medicare Payments to Selected Florida CORFs for All Types of
Services, 2002:
CORF: A;
Total Medicare payments: $6,080;
Number of beneficiaries treated: 1;
Average payment per beneficiary: $6,080.
CORF: B;
Total Medicare payments: $400,355;
Number of beneficiaries treated: 70;
Average payment per beneficiary: $5,719.
CORF: C;
Total Medicare payments: $346,893;
Number of beneficiaries treated: 69;
Average payment per beneficiary: $5,027.
CORF: D;
Total Medicare payments: $1,260,324;
Number of beneficiaries treated: 255;
Average payment per beneficiary: $4,942.
CORF: E;
Total Medicare payments: $1,648,748;
Number of beneficiaries treated: 337;
Average payment per beneficiary: $4,892.
CORF: F;
Total Medicare payments: $879,629;
Number of beneficiaries treated: 193;
Average payment per beneficiary: $4,558.
CORF: G;
Total Medicare payments: $1,709,567;
Number of beneficiaries treated: 390;
Average payment per beneficiary: $4,384.
CORF: H;
Total Medicare payments: $740,252;
Number of beneficiaries treated: 169;
Average payment per beneficiary: $4,380.
CORF: I;
Total Medicare payments: $154,780;
Number of beneficiaries treated: 36;
Average payment per beneficiary: $4,299.
CORF: J;
Total Medicare payments: $914,198;
Number of beneficiaries treated: 241;
Average payment per beneficiary: $3,793.
CORF: K[A];
Total Medicare payments: $6,066,325;
Number of beneficiaries treated: 1,600;
Average payment per beneficiary: $3,791.
CORF: L;
Total Medicare payments: $705,499;
Number of beneficiaries treated: 189;
Average payment per beneficiary: $3,733.
CORF: M;
Total Medicare payments: $309,082;
Number of beneficiaries treated: 88;
Average payment per beneficiary: $3,512.
CORF: N;
Total Medicare payments: $631,009;
Number of beneficiaries treated: 184;
Average payment per beneficiary: $3,429.
CORF: O[A];
Total Medicare payments: $398,526;
Number of beneficiaries treated: 117;
Average payment per beneficiary: $3,406.
CORF: P;
Total Medicare payments: $544,950;
Number of beneficiaries treated: 163;
Average payment per beneficiary: $3,343.
CORF: Q;
Total Medicare payments: $1,467,888;
Number of beneficiaries treated: 447;
Average payment per beneficiary: $3,284.
CORF: R[A];
Total Medicare payments: $5,387,964;
Number of beneficiaries treated: 1,723;
Average payment per beneficiary: $3,127.
CORF: S[A];
Total Medicare payments: $2,415,257;
Number of beneficiaries treated: 775;
Average payment per beneficiary: $3,116.
CORF: T;
Total Medicare payments: $632,862;
Number of beneficiaries treated: 204;
Average payment per beneficiary: $3,102.
CORF: U[A];
Total Medicare payments: $1,152,947;
Number of beneficiaries treated: 372;
Average payment per beneficiary: $3,099.
CORF: All others;
Total Medicare payments: $49,656,466;
Number of beneficiaries treated: 30,401;
Average payment per beneficiary: $1,633.
Total;
Total Medicare payments: $77,429,600;
Number of beneficiaries treated: 38,024;
Average payment per beneficiary: $2,036.
Source: GAO analysis of CMS claims data.
Note: This analysis includes all Medicare payments to Florida CORFs for
therapy services (physical therapy, occupational therapy, and speech-
language pathology services) and other types of CORF services. In 2002,
98 percent of Medicare payments to Florida CORFs were for therapy
services. We included all beneficiaries in this analysis, regardless of
their total therapy payments for the year and duration of Medicare fee-
for-service enrollment.
[A] These facilities were among those identified by the Florida claims
administration contractor during its 2001 investigation as having high
levels of medically unnecessary services and questionable billing
practices.
[End of table]
These relatively high 2002 payments suggested that Florida CORFs
responded to the contractor's targeted medical reviews selectively by
reducing the services provided to the small number of patients whose
claims were under scrutiny. Other patients, outside the scope of the
contractor's criteria for medical review, continued to receive high
levels of services. The contractor continues to rely on the medical
review criteria originally established in late 2001. However,
contractor staff reported ongoing concerns about the extent to which
CORFs bill for services that may not meet the program's requirements
for payment. In particular, they cited the practice of delivering
therapy services over relatively long periods of time that only
maintain, rather than improve, a patient's functional status.[Footnote
27]
Conclusions:
Sizeable disparities between Medicare therapy payments per patient to
Florida CORFs and other facility-based outpatient therapy providers in
2002--with no clear indication of differences in patient needs--raise
questions about the appropriateness of CORF billing practices. After
finding high rates of medically unnecessary therapy services to CORFs,
CMS's claims administration contractor for Florida took steps to ensure
appropriate claim payments for a small, targeted group of CORF
patients. Despite its limited success, billing irregularities continued
among some CORFS and many CORFs continued to receive relatively high
payments the following year. This suggests that the contractor's
efforts were too limited in scope to be effective with all CORF
providers.
Recommendation:
To ensure that Medicare only pays for medically necessary care as
outlined in program rules, CMS should direct the Florida claims
administration contractor to medically review a larger number of CORF
claims.
Agency Comments and Our Evaluation:
CMS officials reviewed a draft of this report and agreed with its
findings. Specifically, the agency noted that "disproportionately high
payments made to CORFs indicate a need for medical review of these
providers." The agency also pointed out that, given the high volume of
claims submitted by providers, contractors must allocate their limited
resources for medical review in such a way as to maximize returns.
Furthermore, CMS stated that the Florida claims administration
contractor is already taking appropriate steps to address concerns
about CORF billing and is prepared to take additional steps if
necessary.
We recognize that contractors can achieve efficiencies by targeting
their medical review activities at providers or services that place the
Medicare trust funds at the greatest risk. However, the impact of
medical review comes, in part, from the sentinel effect of consistently
applying medical review to providers' claims. Thus, while we support
the contractor's focus on new CORF providers, we continue to believe
that enlarging the number of CORF claims reviewed would promote
compliance with medical necessity requirements. Given that Florida
CORFs continued to bill significantly more per beneficiary than other
outpatient therapy providers even after the contractor took steps to
examine some claims, compliance could be enhanced by aggressively
addressing this vulnerability. CMS's comments appear in appendix II.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution of it until 30
days from its issue date. At that time, we will send copies of this
report to the Administrator of CMS and to other interested parties. In
addition, this report will be available at no charge on GAO's Web site
at http://www.gao.gov. We will also make copies available to others
upon request.
If you or your staff have any questions about this report, please call
me at (312) 220-7600. Another contact and key contributors are listed
in appendix III.
Sincerely yours,
Signed by:
Leslie G. Aronovitz,
Director, Health Care--Program Administration and Integrity Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
In this report we (1) compared Medicare's outpatient therapy payments
to CORFs in 2002 with its payments that year to other facility-based
outpatient therapy providers and (2) assessed the program's
effectiveness in ensuring that payments to CORFs complied with Medicare
rules. As agreed with the requester's staff, we limited the scope of
our review to facility-based outpatient therapy providers and
beneficiaries in Florida. Florida accounted for one-third of all CORF
facilities at the end of 2002.
Our primary data source was CMS's National Claims History (NCH) 100%
Nearline File. The NCH file contains all institutional and
noninstitutional claims from the Common Working File (CWF)--the system
that CMS uses to process and pay Medicare claims through its
contractors across the country. We also reviewed data from CMS's
Medicare Provider of Service Files, which contain descriptive
information on CORF facility characteristics, such as location, type of
ownership, and the date of each provider's initial program
certification. Finally, we interviewed representatives of CMS's central
and regional offices, the Florida claims administration contractor,
federal law enforcement agencies, and the therapy industry.
To describe the Florida CORF industry and operations, we gathered
Medicare claims data from CMS's NCH File for the years 1999 through
2002. In addition to reviewing trends in total Medicare payments to
CORFs, we examined changes in the patient case mix by identifying the
primary diagnoses listed on claims for beneficiaries treated by CORFs.
We also obtained descriptive information on CORFs' characteristics from
the Provider of Service Files for 1999 through 2003.
This work was performed from May 2003 through July 2004 in accordance
with generally accepted government auditing standards.
Comparison of Medicare Outpatient Therapy Payments by Provider Type:
In this analysis, we compared Medicare therapy payments to four types
of facility-based outpatient therapy providers: CORFs, rehabilitation
agencies, hospital OPDs, and SNF OPDs. Although CORFs are authorized to
offer a wide range of services, we limited our comparison to a common
set of therapy services: physical therapy services, occupational
therapy services, and speech-language pathology services.
To compare Medicare's therapy payments to Florida CORFs with therapy
payments to other types of facility-based outpatient rehabilitation
therapy providers, we examined 2002 Medicare beneficiary claims data
from the NCH File.[Footnote 28] We used the NCH file to identify all
beneficiaries who resided in Florida and received outpatient therapy
services from in-state providers during 2002. By limiting our review to
beneficiaries who were enrolled in part B for all 12 months of the
year, we excluded those in managed care and those with less than a full
year of fee-for-service coverage. Using beneficiary identification
numbers, we aggregated each beneficiary's total outpatient therapy
claims from all provider types. We summed the annual number of therapy
units billed for each beneficiary as well as the annual line-item
payment amounts.[Footnote 29] This allowed us to assign each
beneficiary to a provider comparison group.
To compare Medicare expenditures for similar patients, we assigned each
beneficiary to a diagnosis category based on the primary diagnoses
listed in their outpatient therapy claims for the year.[Footnote 30]
Our diagnosis groups included:
* stroke,
* spinal cord injury,
* neurologic disorders,
* hip fractures,
* back disorders,
* amputation,
* cardiovascular disorders--circulatory,
* cardiovascular disorders--pulmonary,
* rehabilitation for unspecified conditions,
* arthritis,
* soft tissue/musculoskeletal injuries,
* ortho-surgical,
* multiple diagnoses[Footnote 31] and:
* other.
To consider differences in payment by provider type at the substate
level, we compared annual per-patient payments for CORFs and other
outpatient facility providers in each of Florida's 20 metropolitan
statistical areas.
Variation in treatment patterns and payments (for the same diagnosis
category) across provider types may suggest that one type of provider
treats a patient population with greater needs for service. To consider
patient differences, we applied CMS's Principal Inpatient Diagnostic
Cost Group (PIP-DCG) model.[Footnote 32] By comparing patients' use of
hospital services and inpatient diagnoses (in the calendar year prior
to the year they received therapy) and demographic information such as
age, sex, disability, and Medicaid enrollment, the PIP-DCG model
allowed a comparison of anticipated patient care needs across provider
types. We used the PIP-DCG score developed for each beneficiary in
combination with the 2002 therapy payment data to conduct an analysis
of covariance.
Evaluation of the Florida Contractor's Efforts to Ensure Appropriate
CORF Claim Payments:
To review strategies used by the Florida claims administration
contractor to ensure proper CORF payments, we interviewed
representatives of CMS's central and regional offices and
representatives from the contractor. The contractor provided us with
the results of its 2001 investigation of Florida CORFs and its
subsequent reports on CORF billing patterns. In addition, we
interviewed federal law enforcement agencies involved in investigations
of Florida CORF facilities.
To assess the effectiveness of the contractor's oversight strategies,
we reviewed information developed by the contractor on changes in CORF
billing practices. We also analyzed 2002 claims data for CORF services
to identify any CORFs with disproportionately high Medicare payments.
This analysis included payment data for all claims--for both therapy
and nontherapy services. In contrast to our comparison of per-patient
payments by provider type, in this analysis we included all
beneficiaries, regardless of their total annual therapy payments and
duration of Medicare fee-for-service enrollment.
Assessment of Data Reliability:
We did not independently verify the reliability of CMS's Medicare
claims data. However, we determined that CMS's Medicare claims data
were sufficiently reliable for the purposes of this engagement. CMS
operates a Quality Assurance System designed to ensure the accuracy of
its Medicare NCH and CWF data files. Specifically, the agency has
procedures in place to (1) ensure that files have been transmitted
properly and completely, (2) check the functioning of contractor claims
edits, and (3) sample claims from the files that exhibit unusual or
inconsistent coding practices (indicating that data elements may be
unreliable). In addition, we consulted with CMS's technical staff as
necessary to ensure the accuracy and relevance of the data elements
used in our analysis. We also screened the files and excluded claims
that were denied, claims superseded by an adjustment claim, and claims
for services in other years.
[End of section]
Appendix II: Comments from the Centers for Medicare & Medicaid
Services:
DEPARTMENT OF HEALTH & HUMAN SERVICES:
Centers for Medicare & Medicaid Services:
Administrator:
Washington, DC 20201:
DATE: JUL 27 2004:
TO: Leslie G. Aronovitz:
Director, Health Care-Program Administration and Integrity Issues:
General Accounting Office:
FROM: Mark B. McClellan, M.D., Ph.D.:
Administrator:
SUBJECT: General Accounting Office Draft Report:"Comprehensive
Outpatient Rehabilitation Facilities: High Medicare Payments in Florida
Raise Program Integrity Concerns" (GAO-04-709):
Thank you for the opportunity to review the General Accounting Office
(GAO) draft report entitled"Comprehensive Outpatient Rehabilitation
Facilities: High Medicare Payments in Florida Raise Program Integrity
Concerns" (GAO-04-709).
A comprehensive outpatient rehabilitation facility (CORF) is defined in
42 CFR 485.51 as a"nonresidential facility that is established and
operated for the purpose of providing diagnostic, therapeutic, and
restorative services to outpatients for the rehabilitation of injured,
disabled, or sick persons, at a single fixed location, by or under the
supervision of a physician."
Pursuant to 42 CFR 410.105 (c), the services must be furnished under a
written plan of treatment that is established and signed by a physician
before treatment is begun. The plan must be reviewed at least every
sixty days by a facility physician who, when appropriate, consults with
the professional personnel providing the services. Upon that review,
the physician must certify or recertify that the plan is being
followed, the patient is making progress in attaining the
rehabilitation goals, and the treatment is having no harmful effect on
the patient.
Medicare permits a beneficiary to receive care from more than one CORF
as long as there are different plans of treatment for each CORF. There
could be two different episodes of care, which would require different
plans of treatment and also different CORFs. The beneficiary has the
right to decide from which provider to receive those services. However,
42 CFR 485.51 states that a CORF should be able to provide all
necessary therapeutic, diagnostic and restorative services at a single
fixed location.
GAO Recommendation:
The GAO recommends that the Centers for Medicare & Medicaid Services
(CMS) direct the Florida claims administration contractor to medically
review a larger number of Comprehensive Outpatient Rehabilitation
Facilities (CORFs) claims.
CMS Response to the GAO Recommendation:
The Centers for Medicare & Medicaid Services (CMS) recognizes the
importance of using medical review to ensure correct payment. The goal
of the medical review program is to reduce payment error by identifying
and addressing billing errors concerning coverage and coding made by
providers. In order to meet this goal, our Program Integrity Manual
provides that contractors have the authority to review any claim at any
time. However, the claims volume of the Medicare program prohibits
review of every claim. Resources dictate that in attempting to make
only correct payments, contractors make deliberate decisions on the
best uses of limited resources to maximize returns. We agree that
disproportionately high payments made to CORFs indicate a need for
medical review of these providers, and believe the contractor is
already taking appropriate steps to address this problem.
From our discussions with First Coast Service Options (FCSO), the
Medicare contractor in the state of Florida, we understand that they
currently place every new CORF on medical review, and continually
monitor new CORFs, through prepayment review, until they maintain at
least an 80 percent correct payment rate through prepayment review and
display no aberrancies. Furthermore, FCSO provides education to all
CORFs on prepayment review on an ongoing basis. Additionally, once a
provider is removed from prepayment review, FCSO periodically checks to
see if the provider's billing patterns are still acceptable. If FCSO
observes an anomalous claim submission pattern, FCSO typically obtains
a small postpayment sample to identify any new problems. The FCSO is
prepared to take additional steps to address CORF issues if necessary.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Rosamond Katz, (202) 512-7148:
Acknowledgments:
In addition to the contact named above, Jennifer Grover, Rich Lipinski,
and Hannah Fein made key contributions to this report.
FOOTNOTES
[1] Physical therapy treatments--such as whirlpool baths, ultrasound,
and therapeutic exercises--are designed to improve mobility, strength,
and physical functioning, and limit the extent of disability resulting
from injury or disease. Occupational therapy helps patients learn the
skills necessary to perform daily tasks and function independently.
Speech-language pathology services include the diagnosis and treatment
of speech, language, and swallowing disorders.
[2] Medicare does not cover maintenance therapy--therapy services
performed to maintain, rather than improve, a beneficiary's level of
functioning. Examples of maintenance therapy are when a patient's
restoration potential is insignificant in relation to the therapy
required to achieve such potential, when it has been determined that
the treatment goals will not materialize, or when the therapy performed
is considered to be a general exercise program.
[3] The conditions under which Medicare will pay for outpatient therapy
services provided by a CORF were established by the Omnibus
Reconciliation Act of 1980, Pub. L. No. 96-499, § 933, 94 Stat. 2599,
2635.
[4] Rehabilitation medicine is the treatment of individuals with
disabling conditions and diseases, designed to yield improvement in
function, level of independence, and quality of life.
[5] While CORFs must be able to provide all of the therapy and related
nontherapy services required by each patient's treatment plan, they are
not permitted to provide nontherapy services alone; such services must
be delivered as a component of each patient's rehabilitative therapy
treatment. Furthermore, although each CORF chooses which of these
services to offer, a facility cannot accept a patient unless it can
provide all required services.
[6] States included in the study were Florida, Louisiana, Michigan, New
Jersey, Pennsylvania, and Texas. See HHS/OIG, Six-State Review of
Outpatient Rehabilitation Facilities, pub. A-04-99-01193 (Washington
D.C.: March 2000).
[7] Part B covers physician services and payments to other licensed
practitioners, clinical laboratory and diagnostic services, surgical
supplies and durable medical equipment, and ambulance services. Part A
covers hospital and certain other services.
[8] Medicare pays 80 percent of the payment amount with a 20 percent
coinsurance payment required from the beneficiary.
[9] In part, turnover in the industry may be the result of a new
payment system for Medicare outpatient therapy services that took
effect in 1999. That year, facility providers were switched from a
cost-based reimbursement system--under which payments were based on the
cost to the provider of delivering services--to a fee schedule--where
payments are based on pre-established amounts. Previously, the fee
schedule had only applied to therapy provided by physician practices
and independent practitioners.
[10] These changes in Medicare payments since 1999 reflect, in part,
the industry's varied responses to the new Medicare payment rules for
outpatient therapy. A 2001 study by the Urban Institute reported that
CORF payments per patient for therapy services declined 55 percent
nationwide, from $1,642 in 1998 to $743 in 1999--the first year under
the fee schedule payment system. The study also showed that this
adjustment year was followed by a 61 percent "rebound" in average
payments of $1,199 in 2000. See S. Maxwell, C. Baseggio, and M.
Storeygard, Part B Therapy Services Under Medicare in 1998-2000: Impact
of Extending Fee Schedule Payments and Coverage Limits, (Washington,
D.C.: The Urban Institute, September 2001).
[11] Payments for physical therapy services made up the largest share
of Medicare payments to Florida CORF facilities. Physical therapy
payments climbed from 49 percent of all Medicare payments to CORFs in
1999 to 64 percent in 2002. Payments for occupational therapy also
increased, changing from 18 percent of payments in 1999 to 32 percent
in 2002. The CORF service for which there was a substantial decline in
payments was respiratory treatments, which changed from 29 percent of
Florida CORF payments in 1999 to 2 percent of payments in 2002.
[12] On average, Medicare fees per unit of therapy provided by Florida
CORFs were about the same as the fees per unit of service furnished by
other provider types. In 2002, fees averaged about $22 (CORFs), $22
(SNF OPD), $21 (hospital OPD), and $19 (rehabilitation agencies).
[13] Five MSAs with elevated CORF payments were in southern Florida
(Fort Lauderdale, Fort Myers-Cape Coral, Miami, Naples, and West Palm
Beach-Boca Raton); two were in the middle of the state (Orlando and
Tampa-St. Petersburg-Clearwater), and one was in the northwest (Panama
City). CORFs operating in Panama City had the highest per-patient
payments, but treated only 37 Medicare patients in 2002. In contrast,
CORFs in Miami provided services to 6,069 Medicare patients that year.
[14] While grouping beneficiaries with the same diagnosis allows for
comparison of similar patients, some patients in each grouping are
likely to have higher levels of health care needs than others.
[15] Just as CORFs consistently provided high levels of therapy
services, hospital OPDs were uniformly low across the four common
diagnosis categories in the amount of therapy services delivered. A CMS
official remarked that this may be driven by the traditional practice
of hospitals to employ the same set of therapists for both their
inpatient and outpatient care. Because Medicare's payment system for
inpatient hospitalization provides a set payment amount, based on
patient diagnosis, for each hospital stay, hospital-based therapists
may be accustomed to discharging inpatients from therapy quickly. They
may approach outpatient care in much the same way, despite the fact
that Medicare pays on a fee schedule for therapy patients treated in
hospital outpatient departments.
[16] Recent hospitalization records are one indicator of patient health
care needs. To compare differences in predicted patient health care use
across outpatient therapy provider types, we used CMS's Principal
Inpatient Diagnostic Cost Group (PIP-DCG) model, which uses demographic
information and hospitalization data to predict health care
expenditures for each beneficiary. Among all Florida beneficiaries who
received outpatient therapy services during 2002, 26 percent were
hospitalized during 2001.
[17] We found two exceptions to this finding. First, among patients
with neurologic disorders, those treated by CORFs appeared to be
similar in health status to patients treated by other types of
providers. Second, patients treated by CORFs were shown to require
slightly less health care services than patients using SNF OPDs. The
patients using SNF OPDs comprise only 5 percent of all Florida
beneficiaries who received facility-based outpatient therapy services.
[18] We used the PIP-DCG score developed for each beneficiary in
combination with 2002 claims payment data to conduct an analysis of
covariance. We found that differences in average payments were
statistically significant at the .01 level across comparative provider
types for every diagnosis category except for beneficiaries with
neurologic disorders and amputations. However, the overall R-Square for
the analysis was 0.18, which indicates that much of the difference we
found in average payments across provider types remains unexplained by
patient demographics and prior hospital diagnosis.
[19] The investigation included claims submitted by CORFs and
rehabilitation agencies.
[20] Although Medicare does not prohibit beneficiaries from receiving
the same type of services from multiple providers during the same day,
contractor staff indicated that such a situation raises questions about
the medical necessity of services provided.
[21] An outpatient therapy company that owned several CORFs in Florida
was later investigated by the Department of Justice. A settlement in
December 2002 for $600,000 resolved allegations of billing for
medically unnecessary services, falsifying patient and facility
records, and providing services outside the state in which the
facilities were licensed to operate.
[22] These reviews were conducted on claims submitted from all provider
types.
[23] Other therapy providers subject to these reviews also reduced the
amount of therapy services billed to Medicare. Rehabilitation agencies
billed Medicare $1.5 million for this group of beneficiaries in 2000,
$827,000 in 2001, and $709,000 during 2002. The Florida contractor
denied 36 percent of the amount billed by rehabilitation agencies in
2001, and 48 percent in 2002.
[24] An official from the CMS regional office with oversight
responsibility for Florida reported that some facilities marketing
themselves as "specialized" CORFs have had problems complying with
Medicare requirements. Specifically, the regional office found that
some CORFS were paying a fee to providers (such as therapists or
psychologists) to have the provider's name included on the initial CORF
application for Medicare certification. However, after certification
was granted, these providers never worked for the CORF; in fact, the
facilities were only providing specialized services and not the core
CORF services required by Medicare.
[25] Includes payment for therapy services and other types of services
provided by CORFs, such as physician and nursing services,
psychological services, and pulmonary treatments. In 2002, 2 percent of
all Medicare payments to Florida CORFs were for nontherapy services.
[26] Overall, we found considerable variation in Medicare per-patient
payments across Florida CORFs. The top quartile of CORFs received
payments of $2,070 or more, while the lowest quartile received payments
of $982 or less. The median per-patient payment across all Florida
CORFs was $1,498.
[27] One Medicare rule offers CORFs unique operating circumstances that
may contribute to providing services over longer periods of time. CORFs
may provide therapy services for 60 days before the patient's physician
must reevaluate the patient and certify that continuing therapy
services would result in continuing improvement of patient function. 42
C.F.R. § 410.105 (c)(2)(2003). In contrast, other facility-based
outpatient therapy providers must reevaluate patients every 30 days. 42
C.F.R. § 424.24 (c)(4).
[28] This was the latest year for which complete CMS claims data were
available.
[29] To ensure that each beneficiary included in our study received
services from only one type of outpatient rehabilitation therapy
provider during 2002, we also examined therapy claims from physician
practices and therapists in independent practice. Beneficiaries who
received services from more than one type of facility-based provider,
or from a facility-based provider and a nonfacility-based provider
(such as a physician's office), were excluded from our analysis. In
addition, we limited the analysis to beneficiaries whose annual therapy
payments were $100 or more.
[30] We based our diagnosis categories on an approach originally
developed by rehabilitation researchers. See Joan L. Buchanan, J. David
Rumpel, and Helen Hoenig, "Outpatient Institutional Rehabilitation
Services 1987-1990: Who Provides Them and How Do They Compare?" (Santa
Monica, CA: RAND/UCLA/Harvard Center for Health Care Financing Policy
Research, 1993).
[31] Florida beneficiaries with more than one condition listed as their
primary diagnosis on therapy claims in 2002 were assigned to the
multiple diagnosis category.
[32] The PIP-DCG model is an algorithm that uses base-year inpatient
diagnoses, along with demographic factors, to predict total health
spending in the following year. CMS has used the PIP-DCG model to
determine relative risk factors and predict health expenditures for
beneficiaries enrolled in its Medicare+Choice program and, as a result,
has risk adjusted payments to participating health plans.
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