This billing pattern was evident  in each of the eight Florida MSAs that accounted for the majority of  Medicare CORF facilities and patients. 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. The pattern of relatively high payments to CORFs was evident in all of the  localities where CORFs were concentrated. 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. 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. 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. Among these claims, the contractor found  widespread billing for medically unnecessary therapy services. 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. 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. 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. Our review of 2002 Florida claims data also showed that some CORFs  were not complying with Medicare program rules about furnishing  required services. 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. This suggests that the contractor’s efforts were too  limited in scope to be effective with all CORF providers. 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. 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 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.
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, 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.

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.