Physician owned physical therapy services have provided an alternate source of income to many physicians who have been forced to cope with declining reimbursement. In structuring these clinics, physicians must comply with the federal Anti-kickback statute and Stark laws. After satisfying these structural requirements, the physician is faced with an even greater challenge – adhering to the intricacies of Medicare billing requirements for physical therapy and steering clear of fraud and abuse.
To combat reimbursement cutbacks from Medicare and other insurers, many physicians have sought alternate streams of revenue. Physician owned physical therapy services are an attractive adjunct to many medical practices. Physicians who participate with Medicare and other federal health benefit programs must structure their ownership in physical therapy clinics to comply with federal laws. In particular, the federal Anti-kickback statute and Stark laws loom in the background. But, both of these laws provide safe harbors or exceptions which make physician ownership possible, in light of these statutes. After satisfying these legal-structural requirements, the physician is faced with an even greater challenge – adhering to the intricacies of Medicare billing requirements for physical therapy and steering clear of fraud and abuse.
The Distinction between Physician CPT Codes and Physical Therapy CPT Codes
In 2008, the United States government prosecuted Gregory Salko, MD for health care fraud, in violation of 18 U.S.C. § 1347. Under that code section, it is a felony to knowingly defraud any health benefit program or to fraudulently receive payment from any health benefit program. Salko was also charged under 18 U.S.C. § 1035, which makes it a felony to willfully make fraudulent statements or representations in connection with the receipt of payments for health care benefits. One of the theories used by the government in prosecuting Dr. Salko for health care fraud was the “Impossible Day” scenario. That is, government prosecutors alleged that it was virtually impossible for Dr. Salko to have performed all of the medical services he billed for on particular days.
In a criminal prosecution, the government has the burden of proof to establish that the evidence demonstrates that the defendant committed the offense. The government’s case must satisfy the, “beyond a reasonable doubt” standard to obtain a conviction. In attempting to satisfy their burden of proof, the government compiled all of Dr. Salko’s billings to all insurance carriers. They offered evidence suggesting that Dr. Salko billed for more hours than which actually existed in a twenty-four hour period. Dr. Salko’s billings generally consisted of office visit codes, ranging from levels I through V, depending on the complexity of the patient’s medical condition. For example, CPT code 99214 describes the requirements for an established patient having a moderately severe problem involving moderately complex medical decision making. The time ascribed to this procedure is twenty-five minutes. Using the time delineated in the CPT coding manual, the government calculated the time assigned to each level of office visit billed by Salko and arrived at a number which exceed twenty-four hours for many dates of service.
Dr. Salko’s attorneys were successful in excluding this CPT evidence from trial, even though the trial proceeded on other evidence. At issue were the subtle distinctions in the characterization of the CPT coding requirement and implications. Medicare’s procedure manual describes the time requirement for physician office visits with a slight variation from the American Medical Association’s CPT manual. For the CPT code 99214, Medicare indicates that “[T]he physician should typically spend 25 minutes face-to-face with the patient…” Because Medicare specified that the CPT code times were typical times, and not required times, this evidence could not be used to establish how many hours Dr. Salko should have been in the office. The court stated that “[t]he evidence leads to the assumption that he [Dr. Salko] acted fraudulently because he did not spend the time he was supposed to spend with patients. This improperly converts what a doctor typically does into what is required of him.”
The Implication for Physical Therapy Billing
The CPT coding for physical therapy is not nebulous. Medicare’s rules governing outpatient physical therapy are applicable whether the physical therapy clinic is owned by a physician or a physical therapist. Medicare has clearly indicated the amount of time that is required to substantiate the billing of certain CPT procedures requiring “direct one-on-one patient contact”. Physical therapy billing is governed by “actual” times, rather than “typical” times spent with patients. Many physical therapists who treat Medicare Part B patients are familiar with the infamous eight-minute rule. The eight-minute rule states that “[p]roviders should not bill for services performed for less than 8 minutes.” The CMS transmittal goes on to provide a complete delineation of time thresholds which quantify the required amount of time to bill a unit of service and additional units of service. Some CPT codes are untimed, and do not require direct one-on-one patient contact. In particular, electrical stimulation (97014) and ultrasound (97035) do not require the constant attendance of a physical therapist. These procedures, nonetheless still must exceed the eight minute threshold. These procedures can be done under the physical therapist’s supervision, but can be performed simultaneously to several patients at a time.
The challenge in billing for physical therapy lies in the correct billing of these procedures when the physical therapist treats several Medicare patients simultaneously. For physical therapy, Medicare’s rules require a literal interpretation of “one-on-one”care. That is, two Medicare patients cannot simultaneously receive procedures requiring direct one-on-one contact by the physical therapist. If two Medicare patients are treated during the course of an hour, and billed for hands-on procedures requiring one-on-one contact, four units would be the most that could be billed between them. Each patient could be billed two units apiece, but the total number of units billed between the patients could not exceed four.
It is important to note that these Medicare rules are binding on the physical therapist for the Medicare patients that are treated. In the clinic, a Medicare patient and a non-Medicare patient may be on the physical therapist’s schedule at the same time. Medicare’s rules are not binding on commercial insurances, motor vehicle insurance or workers compensation, unless required by the language of the insurance contract or by state statute. Nevertheless, when a Medicare patient is treated alongside a non-Medicare patient, the billing for the Medicare patient must follow the literal meaning of direct one-on-one contact to substantiate the number of units.
Billing for Medicare patients can be complicated, in light of the eight-minute rule and the literal requirement of one-on-one treatment. To throw another wrinkle into the mix, the group therapy code must also be considered. The group therapy code is required when the physical therapist performs treatment to two or more patients simultaneously. The important distinction here is the timing of the delivery of services. With direct one-on-one patient contact, there is no requirement that the delivery of services be continuous. Over the course of an hour, the therapist can bounce back and forth between two Medicare patients and provide direct treatment. The therapist can spend five minutes with patient “A”, and then five minutes with patient “B” during that hour and substantiate the billing of two units to each patient. In contrast, group therapy, by definition involves concurrent therapy, where the therapist is not spending direct time with the patient in a one-on-one fashion. The group therapy code should be used when the delivery of services is in a supervisory nature, rather than encompassing direct, one-on-on care. For example, if two Medicare patients are walking on a treadmill at the same time, the therapist’s role is supervisory, unless the therapist is placing manual contacts on the patient to assist with weight shifting or other intervention requiring one-on-one contact. As you might expect, there is a significant difference in Medicare’s reimbursement for group codes versus hands-on codes.
Turning a Blind Eye
The practice should take no comfort in claiming lack of knowledge or that they were mistaken about the law or the participation requirements. Every entity and provider who participates with the Medicare program has pledged to comply with Medicare rules and regulations upon their execution of the CMS 855i enrollment form. Furthermore, with every claims submission to Medicare, the physical therapist and billing group attests to the certifications contained on the reverse of the CMS 1500 claim form. Despite the complexity of these rules, Medicare participants are expected to know and abide by them. The statutes governing health care fraud do not provide leniency for a provider’s lack of knowledge. The health care fraud statutes equate lack of knowledge with having knowledge if the provider acts in deliberate ignorance of the truth or acts in reckless disregard of the truth. With respect to proving billing fraud, the provider cannot place his/her head in the sand or turn a blind eye to the delivery of therapy services and corresponding billing for those services. If the rules are not understood, the provider has an obligation to seek clarification.
The Potential Exposures
Running afoul of participation requirements may expose the practice to civil or criminal liability. The False Claims Act encompasses government-paid programs such as Medicare. The False Claims Act is a civil statute which not only allows the government to recoup its monetary losses due to fraud, but allows the court to penalize the wrong-doer by awarding triple damages.  The health care fraud statues in Title 18 of the United States Code differ from the Federal False Claims statute in that they extend to private payers, as well as government payers. In particular, Section 1347 makes it a crime to defraud “any health care benefit program.” Violation of Title 18 may result in imprisonment up to ten years. There is also another important distinction between the civil False Claims statute and the criminal fraud statutes. The False Claims Act provides for a private cause of action. That is, a private person may initiate a false claims action on behalf of the government against a provider via a “whistle-blower” suit. Under the statute, a whistle-blower is entitled to share in fifteen to twenty-five percent of the recovery from the successful civil prosecution of a false claims action under the Act. Providers who treat two Medicare patients during the course of one hour and bill direct one-on-one codes should be wary if the resulting CMS 1500 claim forms contain more than two hands-on CPT codes each.
The Importance of Compliance Programs
The possible exposure to criminal and civil penalties should serve as a warning to private practitioners to be especially diligent with Medicare compliance. A disgruntled employee who has reasonable suspicion to suspect fraud may seek to benefit from the practice’s failure to comply but initiating a whistle-blower suit. Accordingly, a compliance program is important to uncover lapses in compliance. A compliance program functions to identify areas of risk; to increase the likelihood of the provider’s discovery of practices that could be interpreted as fraudulent or violative of Medicare’s rules and regulations; to improve the provider’s operations; to manage risk. It is not enough to just have a compliance plan. The provider must make a good faith effort to implement the plan. When diligently adhered to, a compliance program may be helpful in negating the intent, willfulness, or reckless disregard elements of the fraud statutes. The Office of Inspector General (OIG) provides guidelines for the development and implementation of such programs.
Electronic Schedulers and Billing Systems
Many billing systems provide mechanisms to monitor compliance. But, billing systems, especially when equipped with a scheduling function, can be a double-edged sword. Just as they can be useful in demonstrating compliance, they can also be used to prove fraudulent billing. Before the advent of electronic scheduling systems, pen and paper scheduling was used. Paper is not as easy to store as electronic media, and most practices did not retain their paper-based scheduling books. Computerized scheduling, on the other hand, does not take up any additional physical space. Because billing systems can use the scheduling data to provide in depth reports and analysis, there is no incentive to erase or destroy the electronic scheduling data. Destroying or erasing scheduling data for the purposes of concealing fraud is illegal.
The data contained on a CMS 1500 claim form is in a vacuum. It provides no data regarding the treatment of patient “A” relative to patient “B”. Inspection of two CMS 1500 forms for two patients treated on the same day yields no information as to whether the patients were treated at the same time or different times. For example, if patients “A” and “B” were Medicare patients and received four hands-on units each, the CMS 1500 form provides no details regarding compliance with Medicare’s rules on one-on-one care. In contrast, the electronic scheduler provides detailed information regarding treatments relative to other patients. An electronic scheduler is capable of demonstrating that both patient “A” and “B” were treated at nine o’clock by the same therapist. Furthermore, the scheduler can reveal that the therapist had patients before nine o’clock and after nine o’clock. Accordingly, under this scenario, the therapist may have a difficult time substantiating billing four hands-on units for each Medicare beneficiary “A” and “B”.
The Impossible Day Scenario and the Physical Therapy Practice
Electronic billing systems can help the government construct the “impossible day” scenario. Unlike the CPT codes for physician billing, physical therapy CPT codes are not expressed in terms of “typical” times. The hands-on codes for skilled physical therapy reflect the required direct therapist-patient contact time to substantiate the billing of each CPT code. Medicare does not permit the sharing of treatment time when billing with direct one-on-one codes. If, over the course of one hour, the physical therapist spends time with two patients, four hands on codes are the most that can be billed between those two patients. That is, this treatment pattern cannot substantiate four units billed to each patient. Analysis of the electronic scheduler will reveal how many patients were scheduled under that therapist. Cross referencing the billing data will demonstrate how many units were billed. From there, it can be determined how many hours (minutes) each patient should have been there to substantiate the number of units billed. Consider this example. A physical therapist works eight hours on a given day, and treats two patients an hour. All of the sixteen patients treated that day are Medicare beneficiaries. The therapist bills three units of hands-on procedures for each patient, equaling forty-eight units for the day. Per Medicare’s rules on billing for timed units, the physical therapist would be required to spend a total of at least thirty-eight minutes with each patient to substantiate three units per patient. Thirty-eight minutes for each patient would total six-hundred and eight minutes, which would have required the physical therapist to work a ten-hour day. The electronic scheduling data indicates that there was more than one patient scheduled under the physical therapist, which would effectively render it impossible to bill forty-eight units in an eight-hour time period.
Physician owned physical therapy practices face the same Medicare participation requirements as physical therapist-owned practices. Following Medicare’s rules has important implications for physical therapists and the clinic’s owners. It is imperative that the physicians, physical therapists, and clinic employees are aware of Medicare’s rules and billing requirements. Practice owners should ensure that their clinicians are familiar with these billing requirements, rather than assuming that every therapist who participates with Medicare is familiar or knowledgeable with the terms and conditions. The practice owner must first understand the risks involved and potential areas giving rise to liability. Second, the practice owner must develop and implement a compliance program to manage the risks faced by the practice owner in participating with Medicare and other insurance programs.
Franklin J. Rooks Jr., PT, MBA, Esq. is a physical therapist and a practicing attorney. This article is not legal advice and is not intended to serve as legal advice. This article is intended to provide only general, non-specific legal information. This article does not create any attorney client relationship between you and the author. Frank can be reached at firstname.lastname@example.org
 See 42 U.S.C. §1320a-7b(b). The anti-kickback statute prohibits the receipt of remuneration in exchange for the referral of a patient who is a beneficiary of a federal health care program.
 See 42 U.S.C. § 1395nn. Stark makes it illegal for a physician or family member of that physician to refer a beneficiary of a federal health care program for the purposes of receiving certain designated health services to an entity where that physician or family member has a financial interest, where that entity seeks reimbursement from the federal health care program.
 See 42 U.S.C. § 1395nn(b)(2)(A)(i),(ii). See also 42 C.F.R. § 1001.952
 See 18 U.S.C. § 1347. “Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice— (1) to defraud any health care benefit program; or (2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, in connection with the delivery of or payment for health care benefits, items, or services, shall be fined under this title or imprisoned not more than 10 years, or both. If the violation results in serious bodily injury (as defined in section 1365 of this title), such person shall be fined under this title or imprisoned not more than 20 years, or both; and if the violation results in death, such person shall be fined under this title, or imprisoned for any term of years or for life, or both.”
 See 18 U.S.C. § 1035. “(a) Whoever, in any matter involving a health care benefit program, knowingly and willfully— (1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact; or (2) makes any materially false, fictitious, or fraudulent statements or representations, or makes or uses any materially false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry, in connection with the delivery of or payment for health care benefits, items, or services, shall be fined under this title or imprisoned not more than 5 years, or both.”
 See United States v. Salko, 2008 WL 4773698 (M.D. Pa.)
 See http://www.cms.gov/transmittals/downloads/R1019CP.pdf “Several CPT codes used for therapy modalities, procedures, and tests and measurements specify that the direct (one on one) time spent in patient contact is 15 minutes. Providers report procedure codes for services delivered on any single calendar day using CPT codes and the appropriate number of 15 minute units of service.”
 Cf. http://www.cms.gov/transmittals/downloads/R1019CP.pdf. “Pub. 100-02, chapter 15, section 230.3B Treatment Notes indicates that the amount of time for each specific intervention/modality provided to the patient is not required to be documented in the Treatment Note. However, the total number of timed minutes must be documented.”
 See https://www.cms.gov/TherapyServices/Downloads/11_Part_B_Billing_Scenarios_for_PTs_and_OTs.pdf “When direct one-on-one patient contact is provided, the therapist bills for individual therapy, and counts the total minutes of service to each patient in order to determine how many units of service to bill each patient for the timed codes. These direct one-on-one minutes may occur continuously (15 minutes straight), or in notable episodes (for example, 10 minutes now, 5 minutes later). Each direct one-on-one episode, however, should be of a sufficient length of time to provide the appropriate skilled treatment in accordance with each patient’s plan of care. Also, the manner of practice should clearly distinguish it from care provided simultaneously to two or more patients.”
 See also http://www.apta.org/AM/Template.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=62284 (discussing American Physical Therapy Association’s position on use of the group therapy code).
 See https://www.cms.gov/cmsforms/downloads/cms855i.pdf Pursuant to the terms of participation, the provider “[a]gree[s] to abide by the Medicare laws, regulations and program instructions that apply to me or to the organization listed in Section 4A of this application. The Medicare laws, regulations, and program instructions are available through the fee-for-service contractor. I understand that payment of a claim by Medicare is conditioned upon the claim and the underlying transaction complying with such laws, regulations, and program instructions (including, but not limited to, the Federal anti-kickback statute and the Stark law), and on the supplier’s compliance with all applicable conditions of participation in Medicare.”
 See CMS 1500 claim form. ““I certify that the services shown on this form were medically indicated and necessary for the health of the patient and were personally furnished by me or were furnished incident to my professional service by my employee under my immediate personal supervision, except as otherwise expressly permitted by Medicare or CHAMPUS regulations.”
 See 31 U.S.C. §3279(b)(ii)(iii) “[T]he terms “knowing” and “knowingly”… mean that a person, with respect to information… acts in deliberate ignorance of the truth or falsity of the information; or acts in reckless disregard of the truth or falsity of the information…” See also United States v. Dearing, 504 F.3d 897, 903 (9th Cir. 2007). “The “intent to defraud” element is common to the federal fraud statutes. We have repeatedly held that the intent to defraud may be proven through reckless indifference to the truth or falsity of statements.” Id.
 See generally 31 U.S.C. § 3729.
 See 31 U.S.C. §3279(a)(1)(G)
 See 18 U.S.C. § 1347
 See 18 U.S.C. § 1347(a)
 See 31 U.S.C. § 3730(b)
 See 31 U.S.C. § 3730(d)
 See http://oig.hhs.gov/fraud/complianceguidance.asp
 See 18 U.S.C. § 1518. “Whoever willfully prevents, obstructs, misleads, delays or attempts to prevent, obstruct, mislead, or delay the communication of information or records relating to a violation of a Federal health care offense to a criminal investigator shall be fined under this title or imprisoned not more than 5 years, or both.” Id.
 See https://www.cms.gov/transmittals/downloads/R1019CP.pdf “C. Counting Minutes for Timed Codes in 15 Minute Units. When only one service is provided in a day, providers should not bill for services performed for less than 8 minutes. For any single timed CPT code in the same day measured in 15 minute units, providers bill a single 15-minute unit for treatment greater than or equal to 8 minutes through and including 22 minutes. If the duration of a single modality or procedure in a day is greater than or equal to 23 minutes through and including 37 minutes, then 2 units should be billed. Time intervals for 1 through 8 units are as follows: 1 unit >8 minutes through 22 minutes; 2 units >23 minutes through 37 minutes; 3 units > 38 minutes through 52 minutes; 4 units >53 minutes through 67 minutes.”
 38 minutes multiplied by 16 patients equals 608 minutes. 608 minutes divided by 60 minutes/hour equals 10.1 hours.
 Eight hours/day multiplied by four units/hour equals thirty-two units/day.