Recent Physical Therapy Enforcement Actions Highlight Compliance Concerns

June 19, 2020

The government has stepped up efforts to monitor physical therapy billing fraud and recoup overpayments. While the Department of Health and Human Services (HHS) and the Department of Justice (DOJ) have long policed fraudulent behavior in healthcare, the focus of such efforts has often been higher-cost services with more lucrative recoveries. However, lower-cost services such as physical therapy have not gone unnoticed, especially where providers bill federal health programs like Medicare and Medicaid in violation of those programs’ requirements.

Several enforcement actions from the past year demonstrate the government’s mounting focus on physical therapy and the potential for substantial civil and criminal liability for physical therapy providers.

  • In May 2019, the U.S. Attorney’s Office for the District of South Carolina announced a $790,000 settlement with Carolina Physical Therapy and Sports Medicine Inc., following a whistleblower’s complaint against the practice. The former employee’s complaint alleged that Carolina Physical Therapy and Sports Medicine submitted claims for services provided to multiple patients simultaneously as though those services were provided to one patient at a time.
  • In June 2019, Fusion PT & Sports Wellness reached a settlement with the U.S. Attorney’s Office for the Southern District of New York after admitting that it had submitted claims to Medicare for services rendered or supervised by a Medicare-credentialed physical therapist when such services had, in fact, been provided by non-credentialed personnel.
  • Also in June 2019, Quality Therapy & Consultation Inc. and its owner, Frances Parise, settled with the U.S. Attorney’s Office for the Northern District of Illinois for $9.7 million to resolve allegations that Quality Therapy & Consultation sought to increase Medicare reimbursement at four skilled nursing facilities by “upcoding” their patients’ “Resource Utilization Group” scores and rendering skilled therapy to patients who did not need it or could not benefit from it. In connection to the settlement, Parise was excluded from participation in federal healthcare programs for five years.
  • In August 2019, Baldwin Bone & Joint P.C. reached a settlement with the U.S. Attorney’s Office for the Southern District of Alabama for $1.2 million after allegations that, among other problems, the practice billed Medicare and TRICARE for physical therapy services performed by athletic trainers, exercise physiologists and other unauthorized providers.
  • In February 2020, former chiropractor David Y. Kim was sentenced to 30 months in federal prison by the U.S. District Court for the Central District of California for his role in a $15 million Medicare fraud scheme in which claims were submitted for physical therapy services that either were not provided or were provided by unlicensed staff and not reimbursable under Medicare guidelines.
  • In February 2020, Diversicare Health Services Inc. agreed to pay $9.5 million in a settlement with the U.S. Attorney’s Office for the Middle District of Tennessee to resolve various allegations centered on the company’s provision of unreasonable, unnecessary or unskilled therapy services. Diversicare was also required to enter into a five-year corporate integrity agreement with the Office of Inspector General (OIG).

This recent slew of enforcement actions against physical therapy practices serves to remind providers of physical therapy services to accurately document and submit claims, particularly when billing Medicare, Medicaid or TRICARE. Based on a review of these recent enforcement actions, service providers and investors should be mindful of the following key takeaways:

  1. Accurately Record the Duration of Services.

Physical therapy practices must accurately report the duration of services provided, as many physical therapy services are billed using time-based codes. In multiple enforcement actions, physical therapists submitted claims for reimbursement for services they could not possibly have performed. For example, a therapist at Carolina Physical Therapy and Sports Medicine allegedly fraudulently reported four simultaneous, hour-long, one-on-one appointments. Buyers in transactions may find through a billing and coding audit that schedules do not support billing on a given day. Providers must remain cognizant of billing rules, should self-audit routinely to avoid negative consequences from regulators, and thoroughly vet the documentation practices of potential transaction partners.

  1. Beware of Rounding Up and Inflating Time.

A common billing mistake leading to healthcare fraud claims involves defendants “rounding up” appointment times to maximize potential reimbursement. Providers may also face liability for providing unnecessary services as a method for inflating the time spent with a patient. In Diversicare Health Services’ case, the government alleged that the company engaged patients in repetitive and unskilled exercises that were not in line with plan-of-care goals in order to obtain additional minutes. While the practices in which Diversicare and other providers are an extreme example, any tendency to exaggerate services may potentially draw the attention of regulators and increase the likelihood that a practice will be audited. To avoid penalties, it is imperative that claims submitted to payors reflect actual physical therapy services provided and documented. Medicare and other payors have differing rules that outline when providers may round up past the midpoint of a time-based code or combine services, and providers should ensure clinical staff understand these rules and closely follow them.

  1. Qui Tam Relators Remain Government’s Key Tool.

Enacted in 1863, the False Claims Act (FCA) provides an incentive for employees to blow the whistle on current or former employers if they suspect fraud. Such whistleblowers, known as qui tam relators, may recover significant sums — up to one-third of any assessed damages — for reporting any wrongdoing. For instance, Carolina Physical Therapy and Sports Medicine’s billing practices were brought to the government’s attention by a former secretary of the practice who had witnessed the fraudulent billing schemes and served as the qui tam relator in that case; she and her attorneys received over $180,000 for their efforts. To minimize the chances of a qui tam action, physical therapy practices should adopt compliance plans and policies and should address any employee concerns related to compliance or billing issues, including conducting robust internal investigations and taking corrective actions when necessary. Further, by instituting formal exit interviews, a practice may learn about issues that an employee would otherwise avoid discussing and later raise as a qui tam relator. Simple, proactive measures with staff members that demonstrate that a company takes compliance seriously can significantly diminish the likelihood of future qui tam actions.

  1. An Aide Is an Aide.

Often, healthcare programs pay only for the services personally rendered by a licensed physical therapist. For instance, under Medicare, “[services] provided by aides, even if under the supervision of a therapist, are … not covered.” (See Medicare Benefit Policy Manual, Rev. 256, Chapter 15, Section 230.1(C), Feb. 1, 2019.) Medicare will, however, cover services provided by a licensed, registered or certified physical therapy assistant if properly supervised. (See Medicare Benefit Policy Manual, Rev. 259, Chapter 15, Section 220(A), July 12, 2019.) Additionally, while aides and other personnel may provide unskilled services, those services are also not covered by Medicare. In several enforcement actions, physical therapists have sought reimbursement for care provided by unsupervised and unauthorized personnel, in violation of billing requirements. The qui tam relator who blew the whistle on Baldwin Bone & Joint fell into this category and routinely observed the practice billing for physical therapy services performed by unqualified and unauthorized providers.

  1. Errors Can Add Up Quickly.

If a physical therapy practice has made billing errors, even if as the innocent result of misunderstanding a rule, the number of potential FCA violations can add up quickly. A systemic problem with documentation of therapy minutes could turn into thousands of potential false claims in a matter of weeks or months, resulting in potential liability including treble damages and a per-claim penalty of between $11,463 and $23,331 (even for services routinely reimbursed at less than $100). Having a robust auditing and monitoring process as part of an organization’s compliance program can help physical therapy providers identify errors and correct improper documentation or billing practices before they add up to potentially devastating amounts of liability under the FCA.

  1. There May Be Collateral Consequences and Criminal Liability.

In addition to civil liability under the FCA, improper billing of physical therapy services can result in exclusion from participation in federal healthcare programs, corporate integrity agreements (CIAs) with the OIG, and potential criminal liability for healthcare fraud. In the Quality Therapy & Consultation case, the physical therapist-owner agreed to be excluded from all participation as a provider in Medicare, Medicaid and all federal healthcare programs for a period of five years. Such an exclusion can effectively limit a physical therapy provider’s ability to stay in business, as many if not most commercial payor contracts can be terminated on the basis of federal healthcare program exclusion.

In connection with a substantial FCA settlement, the OIG may impose a CIA on a provider as was the case in Diversicare Health Services. The CIA acts as an extra layer of oversight to ensure that the provider implements and maintains an effective compliance program; performs internal and external auditing and monitoring, often through an independent review organization; and reviews and addresses evolving compliance risks to the organization.

A criminal conviction can result in lengthy prison sentences: up to 10 years for substantive healthcare fraud and up to 20 years for conspiracy to commit healthcare fraud.

Although most enforcement actions will not involve enormous settlements or lengthy prison sentences, providers should adopt compliance plans to safeguard their practices from auditors and regulators. Investors in physical therapy practices should likewise verify historic compliance by target practices through billing audits and other diligence. Even innocent mistakes can have large penalties, making proactive compliance efforts to ensure appropriate training and claim submission critical to mitigating risk to physical therapy practices.