Mental Health Scrutiny under Medicare Heats Up

By Paula E. Hartman-Stein


1. What is new regarding Medicare’s scrutiny of mental health billing practices?


A veritable torrent of activity has occurred in 1998 as Medicare expanded its crackdowns on fraud, abuse, and questionable billing procedures in all aspects of mental health services. As a result, federal officials are expelling 80 mental health centers, and the Principal Deputy Inspector General has recommended that all Medicare claims from partial hospitalization programs be reviewed. More mental health providers in nursing home settings have been subject to pre-payment reviews, and individual providers in some regions have received profiles of their billing practices.

Under Operation Restore Trust, an anti-fraud initiative carried out by the Office of Inspector General in conjunction with HCFA (the Health Care Finance Administration), five states were targeted for investigation of Medicare’s partial hospitalization programs.

The following five states that accounted for 77% of Medicare payments to community mental health centers were: Florida, Texas, Colorado, Pennsylvania, and Alabama. Ninety percent of the Medicare payments made for partial hospitalization services were deemed highly questionable or unallowable.

This year inspectors conducted on site reviews in 700 mental health centers in nine states (Florida, Texas, Georgia, Mississippi, Arkansas, Alabama, South Carolina, Tennessee, and Louisiana). As of September twenty mental health centers in Florida, Texas, and Louisiana were expelled immediately, with sixty more to be ineligible for Medicare payment in the next few months. According to several media sources, inspectors found evidence of providers who are not qualified, patients who are ineligible for services, and activities such as bingo and arts and crafts being billed as mental health services. Between 1993 and 1996 total Medicare payments to community mental health centers rose from $60 million to $265 million, a 319% rise.


Several Medicare carriers are sending performance reports to clinicians that compare their frequency of performing psychological services to that of other practitioners with the same specialty in the same locality. Bar graphs are included that demonstrate how a clinician’s practice varies from their peers. The data are informational and serve to warn the practitioner to change their practice patterns before an audit is warranted. Clinicians may respond to the warning letters if they believe their case mix or site of service make the comparative data invalid.

Undisclosed sources suggest they would be relieved to receive a profile of their practice pattern compared to their Medicare carrier’s procedure of issuing pre-payment reviews of mental health services. This means that the provider must submit hard copies of individual progress notes along with the Medicare claim. Such a procedure slows down provider payment considerably, and a high percentage of claims are rejected outright. In 1998 Medicare carriers in both northern and southern California have begun extensive pre-payment reviews of mental health services to nursing home patients.


2. Why are mental health practices under the magnifier at this time?

The Health Care Finance Administration has developed maximum performance standards that estimate the expected volume of claims for various procedure codes. When performance standards are exceeded, it triggers the need for additional scrutiny. According to Dr. Jim Georgoulakis, APA’s representative to the American Medical Association Resource-Based Value Update Committee, mental health utilization has exceeded HCFA’s estimated performance for 1997.

A second reason offered by Dr. Georgoulakis has to do with so-called erroneous billing practices. Audits conducted by the Inspector General’s office show psychologists and psychiatrists to be the second greatest offenders regarding erroneous billing. Only podiatrists exceed the mental health profession in questionable billing practices.


3. Are psychologists and psychiatrists the only professionals targeted for comparative reviews with their peers?

Absolutely not. According to Dr. Jim Georgoulakis, the Health Care Finance Administration has endorsed profiling of individual healthcare providers for at least five years. Physicians such as those in primary care have been profiled, and professionals such as audiologists are also being scrutinized.


4. Are all services provided by individual psychologists/psychiatrists triggers for performance reviews?

Mental health services provided to long-term care facilities, including those provided to patients living in independent apartments attached to nursing homes appear to be under the most scrutiny.


5. Are all Medicare carriers conducting the same methods of scrutiny of individual mental health professionals’ billing practices?

From my informal survey of regional practices, it appears that different carriers can do different things. The government website on fraud and abuse in Medicare implies that each carrier has the responsibility to have a plan to combat questionable billing practices, but there appears to be room for creativity.


6. What can individual mental health providers do to ensure their ability to provide services to Medicare beneficiaries and get paid appropriately?

Clinicians must provide services that are clinically necessary, but criteria for medical necessity are not always clear cut. I recommend the termination of formal therapy when you determine that treatment is no longer required for specific behavioral problems or symptoms. This can pose an ethical dilemma because many patients in nursing homes are lonely and isolated, and the mental health clinician can become the main source of emotional support for such patients. When you are no longer providing necessary clinical services, arrange for a friendly visitor to take your place, try and get the activities’ staff to become more involved with the patient, and limit your contacts with the client to brief social calls when you are in the facility.

Careful documentation of all therapy and assessment procedures is crucial when working with Medicare patients. In fact, individual progress notes for Medicare patients covered under traditional Medicare are much more likely to be reviewed than are those of patients covered under private sector managed care plans. Carriers typically do not provide exact guidelines for progress notes. In discussing this issue with psychologists across the country, one theme predominates: the need to demonstrate in writing exactly what the psychologist does during the therapy session, highlighting the differences from what other professional staff do for the patient. This is especially true for frail elderly patients who are receiving services from numerous specialists.


7. Have there been any outstanding lawsuits against individual or corporations in the news this year regarding Medicare fraud?

Yes, several noteworthy ones. The Department of Justice announced that Charter Behavioral Health Systems, a psychiatric hospital chain, settled for $4.75 million on allegations that it illegally admitted and extended the length of psychiatric stays of hundreds of Medicare beneficiaries.

According to the San Antonio Medical Gazette, two individuals have been charged with obtaining reimbursement for $55,000 on 67 claims for psychological tests of nursing home residents who were unresponsive or otherwise untestable. These individuals allegedly claimed 16 hours per assessment. The indictment charges both mail fraud and false claims.

Four psychiatric patient brokers were indicted as part of the ongoing antifraud effort of the Psychiatric Hospital Project, according to the August 19, 1998 edition of the Compliance Monitor. The investigation identified union employees, therapists, a municipal judge, employee assistance counselors, and others as patient referral sources. Medicare, Champus, and private insurance programs were affected by the patient brokering violations.


8. Will the "heat" be off mental health practices under Medicare in 1999?

Unlikely. Under the Incentive Program for Fraud and Abuse Information, created in the Health Insurance Portability and Accountability Act, starting in 1999, rewards will be paid to Medicare beneficiaries and others who report fraud and abuse in any aspect of the Medicare program if their information leads to recovery of money for fraudulent activity. For more information on Medicare fraud and abuse scrutiny, visit the website


An edited version of this article appears in the National Psychologist, November-December
1998,Volume 7.