Compliance Matters: Outpatient Therapy External Audits

by Deborah Alexander, Director on October 14, 2020

2020 has proven to be one of the most challenging years, specifically for healthcare delivery shifts during the declared public health emergency (PHE). During this PHE, the Office of the Inspector General (OIG) had been somewhat silent on posting civil and criminal audit and fraud findings, at least until now.

Since August 2020, two corporate integrity agreements (CIA) settled with outpatient therapy providers, one on August 13, 2020 and one on September 14, 2020. On October 2, 2020, the Department of Justice (DOJ)’s Eastern District of New York released the civil settlement with one of these therapy providers for $4 million. The physical therapy practice resolved allegations of falsely billing Medicare, Medicaid, the Federal Employee’s Compensation Act (FECA), and the Federal Employee’s Health Benefits Program (FEHBP) for physical therapy services rendered from 2008 to 2018.




What were the October 2, 2020 findings?

  • False claims were submitted to Federal healthcare programs for physical therapy services provided or supervised by someone other than the licensed physical therapist identified on the claim, including unlicensed aides.
  • The settlement resolves allegations of wrongfully backdated services after treatment authorization had expired.

As part of this settlement, not including the $4 million to be paid, the therapy provider is being placed on a three-year Corporate Integrity Agreement (CIA). In order to comply with the CIA, the therapy provider must obtain an Independent Review Organization (IRO) to conduct quarterly claims and documentation audits for three years.

What are Some Key Integrity Obligations Required of These Therapy Practices Under the CIAs?

  • Practices must establish and maintain a compliance program to include the following:
    • Post HHS OIG Hotline telephone number prominently in the facility.
    • Provide at least three hours of training and education with the training being pre-approved by the OIG to all covered persons. New covered persons must receive training within 90 days.
    • Training records are to be maintained and contain the type of training record, the individual name, and date received.
    • Engagement of an IRO is required to report all training activities.
  • Practice will undergo quarterly claims reviews process with an IRO, who will certify the independence and objectivity of the claims review conducted over a three-year period. The 30 sample claims reviews will be pulled with the use of RAT-STATS by the IRO.
  • Practice must implement an OIG Exclusion monitoring process.
  • Overpayments identified will be returned in accordance with the Overpayment Rule.

What Must Practices Have in Place According to the OIG?

Practices must keep in mind the requirement by most payers to have an effective compliance program in place to minimize the risk of fraud, waste, and abuse within the practice. Let us examine this in a little more detail. In 2017, the OIG released a resource to compliance officers, “Measuring Compliance Program Effectiveness: A Resource Guide.” Although this resource guide is quite detailed and has elements which do not apply to outpatient therapy providers, there are several key elements which do apply. These are the areas we will be discussing further.

The OIG has been clear there is a need for an objective, external review of a provider’s internal compliance program. In fact, within the OIG compliance resource guide, the OIG lists having an external consultant involved in assessing a provider’s compliance program, including policies and procedures, audit inventories, and compliance investigations.

Where are These Elements Located in the OIG’s Resource Guide?

Below you will see where you can find these elements in the OIG Resource Guide for any additional information provided by the OIG:

  • 1.25: Policies and Procedures–Request review from external experts.

  • 2.36: Compliance Plan Assessment–Is there an external review conducted periodically?

  • 5.42: Audit Inventory–Document review. Is there an inventory of all audits being conducted either by internal staff or external consultants in the organization?

  • 7.2: Effectiveness of the Investigative Process–Is there something that triggers a sentinel event, immediate reporting, the need for external consultants or attorneys?

Key Steps to Take in 2021

  • 2021 will be a new year and compliance audits will be a focus, given the monetary forgiveness and loan dollars provided to businesses during the PHE. If you have not started your compliance program assessment, LW Consulting Inc’s experts can help.
  • Medical Necessity is discussed in both of these therapy-specific CIAs. The recommendation is to have an external consultant conduct documentation audits to assess the practice’s documentation risk and support combating fraud, and ensure the documentation supports the unique skilled needs of a therapist, medical necessity, and reasonableness of the care in conjunction with the claims review audits.
  • Establish a process to conduct monthly, OIG Exclusions monitoring which is required by most insurance payers contractually. Payers can request payment be returned for non-compliance with contract terms when monthly exclusion checks are not conducted.


Not sure where to start with your 2021 Compliance and Audit Plan? Contact Deborah Alexander at
717-213-3122 or email

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Topics: Compliance