OIG Audit Report: 
Outpatient Rehabilitation Therapy Services’ Non-Compliance with Medicare Requirements

OIG published an audit report last March 2018 detailing the non-compliance of many Medicare claims for outpatient physical therapy services to Medicare requirements. It is crucial to discuss this topic to providers, as Medicare does numerous audits on Outpatient Physical and Occupational Therapy Services.

According to OIG, the main issues on non-compliance were related to the following: lack of medical necessity, contained coding deficiencies, or not being able to meet documentation requirements. Figure 1 shows the claims grouped by type of error:

Main Issues Related to Non-compliance

To have a detailed idea regarding these issues, here are more information related to Medicare non-compliance on Outpatient Physical Therapy Services.

Services were not medically-necessary

For 91 claims, therapists received Medicare reimbursement when the beneficiaries’ medical records did not support the medical necessity of the services. 

  • Services were not reasonable

Medical reviewers found out that for 89 claims the amount, frequency, and duration of the physical therapy services were not reasonable and were inconsistent with the standard of practice.


The total errors exceeded 91 because some claims contained more than one error. 


  • No evidence that the services would be effective

For 30 claims, the medical reviewers did not find any evidence that the medical records implied the effectiveness of such services. For example, a Medicare beneficiary was receiving therapy for lumbago and spinal stenosis. However, the medical review determined that the patient had already reached a functional plateau before the date of the service reviewed. 

  • Services Did Not Require the Skills of a Therapist

For 28 claims, the therapy services did not require the skills of a therapist. For example, a Medicare beneficiary’s medical record failed to substantiate that skilled intervention by a physical therapist was necessary. 

  • No Expectation of Significant Improvement

For 26 claims, all of which were for beneficiaries who were on rehabilitative programs, the medical reviewers determined that the expected rehabilitation potential was insignificant in relation to the extent and duration of the physical therapy services required to achieve that potential or that the beneficiary did not improve significantly enough in a reasonable period of time to justify continued treatment.


Coding did not meet Medicare requirements

Medical reviewers found out that 145 claims did not meet coding requirements. 

The total errors exceeded 145 because some claims contained more than one error.

  • Timed Units Claimed Did Not Match Units in Treatment Notes

For 86 claims, the number of timed units claimed did not match the number of timed units documented in the treatment notes. 

  •  Missing modifiers

For 78 claims that CMS required to contain functional reporting information*, the medical record or claim, or both, were missing the proper G-codes or modifiers. 

*Functional status reporting was discontinued in 2019. 

  • Incorrect Codes

For 59 claims, providers incorrectly coded the services. 

Documentation did not meet Medicare requirements

Medical reviewers found out that 112 claims had documentation that did not meet Medicare requirements.


The total errors exceeded 112 because some claims contained more than one error.

  • Plan-of-Care Deficiencies

For 80 claims, there were plan-of-care deficiencies. For example, the medical reviewer deemed a Medicare beneficiary’s plan of care to contain vague goals, and where the duration and frequency of the therapies were missing. 

  • Treatment Note Deficiencies

For 74 claims, there were treatment note deficiencies. For example, a Medicare beneficiary’s treatment notes did not contain total treatment minutes for timed codes or total minutes for the entire therapy session. 

  •  Recertification Deficiencies

For 9 claims, there were recertification deficiencies. For example, a Medicare beneficiary’s medical record did not contain recertification justifying the need for additional therapy after the initial therapy phase under the original plan of care. However, the beneficiary received the therapy anyway.


You can access the OIG Audit report here. CMS also developed a guide to help Outpatient Rehabilitation Therapy providers to stay in compliance with documentation requirements, bill correctly, reduce common errors and avoid overpayments.

Make sure you are in compliance with Medicare requirements before the audit knocks on your door.

WCH Can Help you protect yourself and the future of your practice by Medical Auditing performed by Certified Professional Coders and Certified Professional Medical Auditors.

Contact us today to know how we can help you!