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The rules say that plans must pay for a medical service or item if regular Medicare would pay for it in this case.
You can find this rule at 42 Code of Federal Regulations (CFR) Section 422.101.
The rules say that payment for inpatient psychiatric hospital services is to be made only for active treatment.
For services to be designated as active treatment they must:
1. be provided under an individualized treatment or diagnostic plan;
2. reasonably be expected to improve the patient's condition, or for the purpose of diagnosis; and
3. be supervised and evaluated by a physician.
You can find these rules in the Centers for Medicare and Medicaid Services, Internet Only Manual, Publication
100-02, Medicare Benefit Policy Manual, Chapter 2, Sections 30.2.2 and 30.2.2.1.
The rules say that Medicare will not pay any expenses for items or services which are not medically necessary
and reasonable for the diagnosis or treatment of illness or injury. This exclusion extends to claims for services
which are provided in inappropriate settings. You can find this rule in the Social Security Act, Section
1862(a)(1).
The rules say Covered Indications
Admission Criteria (Intensity of Service):
The patient must require intensive, comprehensive, multifaceted treatment including 24 hours per day of
medical supervision and coordination because of a mental disorder. The need for 24 hours of supervision may
be due to the need for patient safety, psychiatric diagnostic evaluation, potential severe side effects of
psychotropic medication associated with medical or psychiatric comorbidities, or evaluation of behaviors
consistent with an acute psychiatric disorder for which a medical cause has not been ruled out.
The acute psychiatric condition being evaluated or treated by inpatient psychiatric hospitalization must require
active treatment, including a combination of services such as intensive nursing and medical intervention,
psychotherapy, occupational and activity therapy. Patients must require inpatient psychiatric hospitalization
services at levels of intensity and frequency exceeding what may be rendered in an outpatient setting, including
psychiatric partial hospitalization. There must be evidence of failure at, inability to benefit from, or
unacceptable risk in an outpatient treatment setting.
For all symptom sets or diagnoses, the severity and acuity of symptoms and the likelihood of response to
treatment, combined with the requirement for an intensive, 24-hour level of care, are the significant factors in
determining the necessity of inpatient psychiatric treatment.
The following parameters are intended to describe the severity of illness and intensity of service that
characterize a patient appropriate for inpatient psychiatric hospitalization. These criteria do not represent an allinclusive
list and are intended as guidelines.
Admission Criteria (Severity of Illness):
Examples of inpatient admission criteria include (but are not limited to):
Threat to self, requiring 24-hour professional observation (i.e., suicidal ideation or gesture within 72 hours
prior to admission, self-mutilation (actual or threatened) within 72 hours prior to admission, chronic and
continuing self-destructive behavior (e.g., bulimic behaviors, substance abuse) that poses a significant and/or
immediate threat to life, limb, or bodily function).
Threat to others requiring 24-hour professional observation (i.e., assaultive behavior threatening others
within 72 hours prior to admission, significant verbal threat to the safety of others within 72 hours prior to
admission).
Command hallucinations directing harm to self or others where there is the risk of the patient taking action
on them.
Acute disorder/bizarre behavior or psychomotor agitation or retardation that interferes with the activities of
daily living (ADLs) so that the patient cannot function at a less intensive level of care during evaluation and
treatment.
Cognitive impairment (disorientation or memory loss) due to an acute Axis I disorder that endangers the
welfare of the patient or others.
A patient with a dementia disorder for evaluation or treatment of a psychiatric comorbidity (e.g., risk of
suicide, violence, severe depression) warranting inpatient admission.
A mental disorder causing major disability in social, interpersonal, occupational, and/or educational
functioning that is leading to dangerous or life-threatening functioning, and that can only be addressed in an
acute inpatient setting.
A mental disorder that causes an inability to maintain adequate nutrition or self-care, and family/community
support cannot provide reliable, essential care, so that the patient cannot function at a less intensive level of
care during evaluation and treatment.
Failure of outpatient psychiatric treatment so that the beneficiary requires 24-hour professional observation
and care. Reasons for the failure of outpatient treatment may include increasing severity of psychiatric
condition or symptom, noncompliance with medication regimen due to the severity of psychiatric symptoms,
inadequate clinical response to psychotropic medications or severity of psychiatric symptoms that an outpatient
psychiatric treatment program is not appropriate. You can find this information in Medicare's Local Coverage
Determination (LCD): Psychiatric Inpatient Hospitalization (L33975).
If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.