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Overview and Description

The high-cost U.S. healthcare system is growing and becoming increasingly more complex. At the same time, stakeholders are striving for more efficiency and better utilization of resources. In this setting, there is a mandate for healthcare providers to develop further understanding of key players and systems to effectively care for their patients.

Systems-based practice (SBP) is defined as “the demonstration of an awareness of and responsiveness to the larger context and system of health care and the ability to effectively call on system resources to provide care that is of optimal value.”1 Our system is composed of multiple payers, including federal (i.e., Medicare), state (i.e., Medicaid), and private financers. Various governmental and non-governmental organizations dictate standards and norms of care, rules and regulations, legislation, certifications and licensure, and financial regulations, among other things. Knowledge of this complex system from a policy, provider, and payer point of view is critical for effective patient care. The literature demonstrates that knowledge and competency in SBP are interrelated and contribute to improving quality and safety of patient care.2 It is within this context that the Accreditation Council for Graduate Medical Education (ACGME) and the American Board of Medical Specialties (ABMS) identified SBP as one of the six core competencies in which physicians must be proficient to deliver patient care that is safe and high in quality.

Settings of Practice in PM&R

PM&R has four service models for post-acute care (PAC) in rehabilitation, as defined by the CMS: inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs) (subacute), home health services, and day hospital rehabilitation/outpatient facilities.

The distribution of physiatrists across different service models can vary depending on several factors, including the size and location of the healthcare organization, the needs of the patient population, and the availability of other rehabilitation providers. However, there are several common service models that are commonly used in the field of physical medicine and rehabilitation (PM&R), each with its own distribution of physiatrists. These include: 

  • Inpatient rehabilitation hospitals: Inpatient rehabilitation hospitals provide intensive rehabilitation services to patients who require a higher level of care and supervision than can be provided in an outpatient setting. According to a study published in the American Journal of Physical Medicine & Rehabilitation in 2019, approximately 45% of physiatrists practice in inpatient rehabilitation hospitals.18
  • Outpatient rehabilitation clinics: Outpatient rehabilitation clinics provide a range of rehabilitation services to patients who are able to return home after their therapy sessions. According to the same study, approximately 28% of physiatrists practice in outpatient rehabilitation clinics. 
  • Academic medical centers: Academic medical centers are large healthcare organizations that combine clinical care with research and education. According to the same study, approximately 16% of physiatrists practice in academic medical centers.18
  • Private practice: Physiatrists may also work in private practice, either as solo practitioners or as part of a group practice. According to the same study, approximately 11% of physiatrists practice in private practice settings. 

It’s worth noting that these figures may not reflect the most current distribution of physiatrists across service models, as they are based on data from 2016-2017. Additionally, there may be regional variations in the distribution of physiatrists across service models, depending on factors such as population density, healthcare infrastructure, and local healthcare policies.


The Medicare IRF benefit provides rehabilitation for patients in a resource-intensive environment. An IRF is able to receive payment from Medicare under the Center for Medicare and Medicaid Services (CMS) payment system if a series of requirements are met. Patients should (1) have a medical need and sufficient complexity requiring physician supervision and nursing needs, (2) generally should be able to tolerate three hours of therapy per day (physical therapy, occupational therapy, speech therapy; one of which must be PT or OT), (3) make progress in a reasonable period of time (CMG length of stay for diagnosis), and (4) be medically stable.

Regarding the 3-hour rule, patients must be able to engage in 3 hours of multidisciplinary therapy for 5 out 7 consecutive days. If a patient is unable to work with therapy 5 out 7 consecutive days, due to a medical hold, the patient must still satisfy 900 minutes of therapy in seven days. Additionally, an IRF must provide each patient with nursing staff specialized in rehabilitation care, a case manager, a social worker along and a physician specialized in rehabilitation to evaluate patients 3 times weekly. The physician must also lead an interdisciplinary meeting with nursing and therapy staff to dynamically evaluate and modify patient care.10 Beyond this, local insurers, agencies, and regulatory bodies may have admitting decision tools or criteria that are distinct from CMS criteria (e.g., local coverage determinations of Medicare, selecting certain elements of the Medicare 75% rule, and private organizations’ products) that make admission to an IRF particularly challenging. 

IRFs are reimbursed through the prospective payment system (PPS), where discharge payments are based on case-mix groups (CMGs). For classification as an IRF, sixty percent (commonly called the 75% rule) of the IRF’s total patient population during the cost reporting period must match one or more of thirteen CMS designated medical conditions. These conditions are: stroke, spinal cord injury, congenital deformity, amputation, major multiple trauma, fracture of the hip, brain injury, burns, active polyarthritis, systemic vasculitis with joint involvement, specified neurologic conditions, severe or advanced osteoarthritis (involving 2 or more joints), knee or hip replacement (bilateral, or unilateral with body mass index >50, or age 85).10,29 Payments under a PPS are made on a per discharge basis, and payment rates are based on CMGs reflecting the clinical characteristics of the patient resources needed for treatment. As of October 1, 2019, the FIM has been removed from the IRF patient assessment instrument and updated relative weights and LOS have been established.  Unfortunately, the new indicators do not assess cognitive function as well as the FIM score did.

In October 2018, the CMS developed GG codes as a part of the Patient-Driven Payment Model (PDPM) to assess a patient’s function and assign a payment rate. GG codes describe specific functional abilities or tasks related to activities of daily living (ADLs). These can include eating, bathing, dressing, toileting, mobility and communication. There are several advantages to the use of GG codes in the rehabilitation setting such as standardized documentation, improved care coordination, accurate payment and patient-centered care. Overall, GG codes can be a valuable tool for improving documentation, coordination of care, and patient outcomes.30

GG codes:
06. Independent 05. Setup or clean-up assistance
04. Supervision or touching assistance
03. Partial/moderate assistance02. Substantial/maximal assistance
01. Dependent. Patients may use assistive devices for any codes.

If activity was not attempted, code reason:
07. Patient/resident refused
09. Not applicable – Not attempted
10. Not attempted due to environmental limitations (e.g., lack of equipment, weather constraints)
88. Not attempted due to medical condition or safety concerns

Day Hospital Rehabilitation or Outpatient Facilities
Day hospital rehabilitation, which is rather rare, is a system where a patient receives rehabilitation during the day and returns home in the afternoon. Patients attend therapy five days per week for an average of three hours per day, based on clinical need and insurance guidelines. In order to qualify for outpatient benefits, patients should not require home health agency (HHA) services because most insurers will not cover both home and outpatient services simultaneously.

The medical requirements to qualify for outpatient physical rehabilitation vary depending on the specific condition or injury being treated, as well as the policies and guidelines of the healthcare facility providing the rehabilitation services. In general, outpatient physical rehabilitation is intended for individuals who have experienced a decline in physical function, mobility, or strength due to a medical condition or injury, and who require specialized therapy to improve their physical abilities. 

To be eligible for outpatient physical rehabilitation, patients typically need a referral from a healthcare provider, such as a primary care physician or specialist, who will assess the patient’s medical history, physical examination findings, and other relevant factors to determine the appropriate course of treatment. 

Common medical conditions or injuries that may qualify for outpatient physical rehabilitation include: 

  • Stroke or other neurological disorders 
  • Spinal cord injuries 
  • Traumatic brain injuries 
  • Orthopedic injuries, such as fractures or joint replacements 
  • Arthritis or other joint disorders 
  • Chronic pain conditions 
  • Cardiopulmonary conditions, such as chronic obstructive pulmonary disease (COPD) or heart failure 

Patients may also need to meet certain insurance or financial requirements to receive outpatient physical rehabilitation, as coverage and payment policies may vary by insurance provider and healthcare facility. It is important to check with the healthcare provider and insurance provider to determine eligibility and coverage for outpatient physical rehabilitation. 

The average cost of outpatient physical rehabilitation can vary depending on several factors, including the type of rehabilitation services required, the length of treatment, the geographical location, and the healthcare facility providing the services. In the United States, the cost of outpatient physical rehabilitation is typically covered by health insurance plans, although out-of-pocket costs may still apply depending on the individual’s insurance coverage and policy.

According to a 2019 report by Blue Cross Blue Shield Association, the average cost of outpatient physical therapy was $1,077 per episode of care. This report also found that the average number of visits per episode of care was 8.8, and the average cost per visit was $124.15 However, these figures are just averages, and the actual cost of outpatient physical rehabilitation can vary widely depending on the individual circumstances

Skilled nursing rehabilitation facilities, also known as skilled nursing facilities or SNFs, play an important role in providing rehabilitation services to patients who require ongoing medical care and support following an injury, illness, or surgery. These facilities offer a range of specialized services, including physical therapy, occupational therapy, and speech therapy, as well as 24-hour nursing care and medical supervision.

The primary role of SNFs is to help patients recover from acute medical events, such as a stroke or hip fracture, and to provide rehabilitation services to help them regain their independence and functional abilities. Skilled nursing facilities typically provide a more intensive level of care than other types of rehabilitation settings, such as outpatient clinics or home health agencies, and are staffed by a multidisciplinary team of healthcare professionals, including physicians, nurses, and rehabilitation therapists. 

In addition to providing rehabilitation services, SNFs also offer a range of other medical and support services to help patients achieve their recovery goals. These services may include wound care, medication management, nutrition support, and social services to help patients and their families navigate the healthcare system and access resources in the community. SNFs can also play a critical role in helping to prevent hospital readmissions and reducing healthcare costs by providing ongoing care and support to patients following a hospitalization. By providing comprehensive rehabilitation services in a supportive and medically supervised environment, these facilities can help patients achieve better outcomes and a faster return to their normal activities. 

Overall, skilled nursing rehabilitation facilities play an important role in the continuum of care for patients who require ongoing medical and rehabilitation services and can provide a valuable resource for patients and their families during the recovery process. 

The average length of stay in a skilled nursing facility can vary depending on a number of factors, including the patient’s medical condition, the level of care required, and the individual facility’s policies and guidelines. In general, however, the average length of stay in a skilled nursing facility is approximately 28 days, according to the Centers for Medicare & Medicaid Services (CMS).16

The cost of skilled nursing facility care can also vary depending on a number of factors, including the geographic location, the level of care required, and the individual facility’s pricing policies. According to the 2020 Genworth Cost of Care Survey, the average daily cost of a semi-private room in a skilled nursing facility in the United States is $7,756 per month, or approximately $255 per day. The average daily cost of a private room in a skilled nursing facility is $8,821 per month, or approximately $290 per day.17

SNFs currently receive per diem payments for each admission using a methodology that considers geographic factors and is adjusted for case mix by using a system called RUG-IV (Resource Utilization Groups Version IV) wherein each RUG has associated nursing and therapy weights that are applied to base payment rates.3

Since October 1, 2019, the Patient-Driven Payment Model (PDPM) has become the official Medicare payment rule for skilled nursing facilities. Under PDPM, therapy minutes were removed. Instead, each patient’s ICD-10 case-mix classifications and anticipated resource needs would be calculated into the daily reimbursement rate.25 Payments are based on five components of primary needs (physical therapy, occupational therapy, speech-language pathology, nursing, and non-therapy ancillary services) in an effort to incentivize the individualization of care instead of the volume of therapy rendered. The intent of PDPM is to improve patient outcomes, while mitigating over- or under-delivery of therapy services.26

One of the key effects of PDPM on rehabilitation is that it has shifted the focus from the quantity of services provided to the quality and effectiveness of those services. The new payment model incentivizes skilled nursing facilities to provide high-quality, evidence-based rehabilitation services that are tailored to each patient’s individual needs and goals, rather than providing a set number of therapy sessions regardless of the patient’s progress. 

Another effect of PDPM on rehabilitation is that it has led to changes in the way rehabilitation services are delivered in skilled nursing facilities. To maximize Medicare reimbursements under the new payment model, many skilled nursing facilities have begun to adopt new strategies for delivering rehabilitation services, such as using group therapy sessions, incorporating technology and innovative treatment approaches, and focusing on interdisciplinary collaboration to provide more coordinated and comprehensive care.

Overall, the PDPM has had a significant impact on rehabilitation in skilled nursing facilities and has led to changes in the way rehabilitation services are delivered and reimbursed. While it is still too early to fully assess the long-term effects of this new payment model, it is clear that new opportunities and challenges are posed for rehabilitation providers and skilled nursing facilities as they work to deliver high-quality, patient-centered care in an increasingly complex healthcare environment. 

Medicare home health visits require a patient to be under the care of a physician, have an intermittent need for skilled nursing care, or need physical/occupational/speech therapy. The beneficiary must be homebound and receive home health services from a Medicare-approved HHA. Health assessment information is captured by HHAs in the Outcome and Assessment Information Set. Under the home health PPS, Medicare pays higher rates to home health agencies to care for beneficiaries with greater needs.5 As of January 1, 2020, reimbursement will be done with the Patient-Driven Groupings Model “with the intent to place patients into payment categories and eliminate the use of therapy service thresholds.”6


Hospital- based billing (HB) refers to medical services that are billed under the hospital’s official tax identification number (TIN). In contrast, provider-based billing (PBB) refers to medical services that are billed under the TIN of the healthcare provider that rendered the services. HB will bill for equipment and services provided by the hospital system during a patient encounter. PBB bill for services performed by the healthcare provider such as physician office visits and consultations.

Reimbursements can be a challenge in the multidisciplinary setting, in which patients receive care across different medical specialties. This is largely due to the stark differences between billing charges and reimbursement rates across specialties, insurers, and institutions. If patients are seen separately by different specialists, separate billing codes may be used for individual visits. If seen together in the same room, collaborative CPT codes can be used for such a visit to indicate multispecialty involvement and increase reimbursement rate for a single charge.

Billing for evaluation and management (E+M) services and same-day procedures also post a reimbursement challenge. Some insurance companies, including Medicare, have specific guidelines for E+M services, particularly in the case of billing in addition to a procedure, and, as expected, providers must document the medical necessity for each service provided. Accurate and complete documentation, as well as following any specific billing guidelines from insurance companies, is essential to appropriate and complete reimbursement.

Relevance to Clinical Practice

Expected/Unexpected Outcomes of Application at Various Levels Including the Individual, the Social Support System, the Environment and Larger Social Policy/Legislation

The aforementioned clinical settings are appropriate as long as patient selection is appropriate, considering the level of dependence, disability, and available social supports in the community. Medical necessity is an important issue in qualifying patients for acute IRF versus SNF level of rehabilitation as problems can arise if a patient is categorized into a level of rehabilitation without considering the individual’s needs and evidence of documented progress.

Rehabilitation providers and institutions may encounter random onsite audits as rehabilitation services are under the scrutiny of the Office of Inspector General since 2003. An OIG report in 2018 estimated that nearly $6 billion in services may not have been “reasonable and necessary” citing “inappropriate admissions” as one potential cause.7

There is growing evidence supporting various levels of rehabilitation which would be useful for clinicians and administrators to be familiar with. For instance, a 2017 systematic review concluded that inpatient rehabilitation for older adults improved functional status and reduced length of stay.8 There have been numerous outcome measures to objectively measure the effectiveness of an acute inpatient rehabilitation stay. The functional independence measure (FIM) was an instrument designed to gauge disability for a variety of patient populations regardless of comorbidities and diagnoses. It includes measures of self-care, sphincter control, ability to complete transfers, mobility and social cognition. Zhang et al. completed a retrospective cohort study evaluating 270 medically complex adult patients including those with cardiac, pulmonary, and orthopedic conditions. They found that these medically complex patients had total FIM gains, FIM efficiency (rate of change with time), and decreased rehospitalization rates when compared to their equivalent national benchmarks.20 This further supports the vital role physiatrists play in the acute inpatient setting to further care for a medically complex patient population.  

Economic factors and external pressures to contain health care costs can influence the setting in which patients receive PAC. A patient’s condition may change over time and therefore the most appropriate setting of care often changes and may require different types of delivery settings at a given point of recovery.

PAC in rehabilitation is a key component of the health care delivery system. An executive summary of the 2007 conference on the state-of-the-science of post acute rehabilitation sponsored by the Rehabilitation Research and Training Center on Measuring Rehabilitation Outcomes and Effectiveness discussed many aspects of PAC.6,7 With health care reform, the PM&R community is uniquely positioned to provide cost-effective care for patients with an emphasis on quality and safety at both inpatient and outpatient levels with clear measures of quality and programs for quality improvement. The Health Information Technology legislation initially provides bonus payments for meeting quality standards, but eventually will penalize practices that fail to meet these standards. At present, PM&R still has few specific standards, and therefore there is some flexibility in the metrics used, but eventually quality standards will be established, and regulators will mandate their use.

Current challenges still exist for patients with coverage under Medicare Advantage Organizations (MAOs). Although MAOs approve most requests, there are millions of denials yearly raising concerns for Medicare beneficiary access to medically necessary care, especially inpatient rehabilitation placement. MAOs typically denied care by using MAO clinical criteria not contained in Medicare clinical guidelines, requiring unnecessary documentation and by manual review errors. Proposals to improve these system discrepancies include issuing guidance on appropriate use of MAO clinical criteria in medical necessity reviews, update its audit protocols and direct MAO to identify and address vulnerabilities that lead to manual review errors.28

Pediatric placement into an acute rehab facility follows similar guidelines to adult acute inpatient rehabilitation admission but has criteria that varies with facility. Briefly, pediatric patients should be medically stable and common diagnoses for admission include but are not limited to brain injury, spinal cord injury (all levels, complete and incomplete spinal cord injuries and all etiologies), stroke, orthopedic, neurological conditions and general deconditioning. Pediatric patients must also be able to participate in multidisciplinary therapy for at least 3 hours daily for 5 days in a 7 day period. Facilities typically accept all types of commercial insurance, Managed Medicaid Programs, Medicaid, BCMH and self-pay.31

Educational Issues That Are Relevant

SBP for Medical Students, Residents and the Board-Certified Physicians:

SBP is one of the six core competencies defined by the ACGME and the ABMS that is required of residents and physicians to deliver high-quality medical care. SBP incorporates less concrete areas of medicine such as advocacy, healthcare economics, safety and quality, and transitions and settings of care and is therefore one of the more abstract and difficult aspects to define. The goal of SBP and its sub-competencies is to train physicians to observe, understand, and improve the healthcare system within which they practice. Appreciating the different requirements and regulations in deciding between appropriate rehabilitation settings, collaborating with team members and administrators regarding disposition, providing optimal transitions of care, and advocating for patients are integral factors in becoming good physiatrists. Understanding the role of a physiatrist within the healthcare team and system is integral to mastering a systems-based approach which leads to improved collaboration, patient care, and health system efficiency. The essential and universal value of SBP competency is supported by the Interprofessional Education Collaborative, a multi- healthcare professions accreditation collective. One of the four primary interprofessional competencies includes “Use the knowledge of one’s own role and those of other professions to appropriately assess and address the health care needs of patients and to promote and advance the health of populations.”19

SBP is also an important component of Maintenance of Certification, which was established in 2000 by the ABMS to promote recertification, which assesses the continuing competencies of physicians2 It includes the following 4 components:

  • Professional standing, for example, unrestricted license, hospital privileges, and peer and patient ratings.
  • Commitment to lifelong learning, for example, self-assessment, continuing medical education, and simulations.
  • Cognitive expertise.

Evaluation of performance and improvement in practice, for example, an ability to demonstrate that care is safe, effective, patient-centered, timely, efficient, and equitable, and that one has incorporated quality improvement as a habit of practice.

Cutting Edge/ Unique Concepts/ Emerging Issues

Over the past few years, physiatry has progressively become more prominent in post-acute and long-term care (PALTC) realm, specifically at the Skilled Nursing Facilities (SNF) and Long-Term Care Facilities (LTCF). Cost has been the main factor driving the gradual shifting of inpatient rehabilitative care to the sub-acute setting, through the various Affordable Care Act (ACA) provisions, CMS-13 criteria restrictions, and insurance authorization. Early studies of this trend have already demonstrated the potential values of physiatry at the SNF, with shorter length of stay in addition to improved reimbursement for the facilities via added complexities.27 

Most physiatrists practicing at the PALTC setting function as consultants. Especially for the physiatrists-in-training who are interested in inpatient rehabilitation without the burden of medical management responsibilities, this paradigm of care delivery provides opportunities to flourish as true inpatient physical medicine and rehabilitation (PM&R) specialists (i.e., specialty branding, professional identity).

Physiatrists are in an excellent position as liaison officers in a leadership or clinical role, nestled between the parallel but separate domains of SNFists and therapists. In the clinical role, longitudinal co-management by the physiatrist alongside the SNFist – an innovative concept at PALTC – can pose a potential challenge with concerns for the clear delineation of clinical responsibilities. In the leadership role, perceptive vulnerability can emerge between a hospital trained physician medical rehabilitation director and an experienced SNF-based therapist rehabilitation director, especially in matters concerning policies, rules, and regulations.

Gaps in Knowledge/ Evidence Base

Although it is logical to assume that physical medicine and rehabilitation (PM&R) will add value to the post-acute care (PAC) environment, it is quite difficult to measure the true impact of the specialty on a PALTC setting such as SNF. The physiatrist consultants are providing indirect care, filtered through the primary team, in an environment where there are great variations across the spectrum of care delivery in quality, staffing, and practice conventions 

In 2014, the Improving Medicare Post-Acute Care Transformation Act required PAC providers to submit standardized patient assessment data with respect to five quality domains, one of which involved functional status and cognitive function.22 In 2017 the World Health Organization (WHO) launched the global Rehabilitation 2030 initiative, calling for health system leadership and governance to expand financing incentive for the development of quality multidisciplinary rehabilitative programs and work force, and to improve data collection and research on rehabilitation.23 Under CMS SNF Quality Reporting Program (QRP), the definitions of functional limitations come directly from the WHO’s International Classification of Functioning, Disability and Health.24

The World Health Organization (WHO) Global Rehabilitation 2030 Initiative aims to improve rehabilitation systems and services globally, with the goal of meeting the needs of people who require rehabilitation due to health conditions or disabilities.11 This initiative is expected to have several benefits for physiatrists, who specialize in physical medicine and rehabilitation. 

Firstly, the initiative will promote the importance of rehabilitation services as a crucial component of healthcare, thereby increasing the demand for physiatrists and their specialized skills.12 This increased focus on rehabilitation will lead to better outcomes for patients, as rehabilitation has been shown to improve functional outcomes and quality of life for people with disabilities.13 Secondly, the initiative aims to improve access to rehabilitation services, especially in low- and middle-income countries where access is currently limited.1 This will create new opportunities for physiatrists to work in these areas and help to address the significant unmet need for rehabilitation services in many parts of the world. Finally, the initiative will encourage the integration of rehabilitation services into primary healthcare systems, which will increase the visibility and recognition of the specialty of physical medicine and rehabilitation.14 This integration will also improve collaboration between physiatrists and other healthcare professionals, leading to more effective and coordinated care for patients.  

During the Covid-19 pandemic in 2020, many physiatrists were labeled as “non-essential,” and were not allowed to enter SNFs.21 The WHO global Rehabilitation 2030 initiative is expected to have significant benefits for physiatrists, including increased demand for their specialized skills, new opportunities for work in low- and middle-income countries, and improved integration of rehabilitation services into primary healthcare systems. Thus, the WHO global Rehabilitation 2030 initiative may serve as a post-pandemic opportunity for physiatrists to forge new collaborations with other PAC practitioners on clinical guidelines development and new research opportunities. Although there are knowledge gaps in the correct mechanism to capture true PM&R values at the PALTC environment, establishing an evidence-based platform upon which to create metrics is the correct beginning. 

There is strong evidence supporting rehabilitation in post-acute care, such as after stroke, though further research is needed to help define assessment of patient recovery and outcomes. Current examples of valid and uniform measures of progress and patient outcomes include the International Classification of Functioning, Disability and Health.

The further development of disease and injury models and assessment of rehabilitation settings may be facilitated by participation in demonstration projects offered by the CMS. Rehabilitation Medicine has been critical in helping patients transition from the acute care setting to home via IRFs and SNFs for decades. Helping prevent recurrent disease and disease complications are two areas where rehabilitation providers can continue to provide excellent patient care and coordination of care. The IDT model embraced by the field can help assure a proper transition from acute care to PAC.


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Original Version of the Topic

K. Rao Poduri, MD. Administrative Rehabilitation Medicine: Systems-based Practice. 12/27/2012

Previous Revision(s) of the Topic

Arpit Arora, MD. Administrative Rehabilitation Medicine: Systems-based Practice. 1/21/2020

Author Disclosure

Tracy Friedlander, MD
Nothing to Disclose

Arvind Senthil Kumar, MD
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Dominique Vinh, MD
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Harman Chopra, MD
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