Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Medicare Part B Payments for 
Mental Health Services 
MAY 2001 
OEI-03-99-00130  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the health 
and welfare of beneficiaries served by them. This statutory mission is carried out through a nationwide 
program of audits, investigations, inspections, sanctions, and fraud alerts. The Inspector General 
informs the Secretary of program and management problems and recommends legislative, regulatory, 
and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of Inspector 
General. It conducts short-term management and program evaluations (called inspections) that focus 
on issues of concern to the Department, the Congress, and the public.  The inspection reports provide 
findings and recommendations on the efficiency, vulnerability, and effectiveness of departmental 
programs. 
OEI's Philadelphia Regional Office prepared this report under the direction of Robert A. Vito, Regional 
Inspector General, and Linda M. Ragone, Deputy Regional Inspector General.  Principal OEI staff 
included: 
REGION  HEADQUARTERS 
Amy Sernyak, Project Leader  Bambi Straw, Program Specialist 
Lauren McNulty, Program Analyst  Barbara Tedesco, Mathematical Statistician 
Tanaz Dutia, Program Analyst  Linda Moscoe, Technical Support Staff 
Stacey Uhl, Program Analyst 
To obtain copies of this report, please call the Philadelphia Regional Office at (800) 531-9562. 
Reports are also available on the World Wide Web at our home page address: 
http://www.hhs.gov/oig/oei  E X E C U T I V E   S U M M A  R Y  
PURPOSE 
To assess the appropriateness of Medicare Part B payments for mental health services 
provided to Medicare beneficiaries in the following outpatient settings: practitioners offices, 
community mental health centers, beneficiaries homes, and custodial care facilities. 
BACKGROUND 
Medicare and its beneficiaries paid an estimated $1.2 billion for Part B mental health services in 
1998. Payments for mental health services provided in outpatient settings accounted for about 
62 percent of this total ($718 million). 
Part B claims for mental health services are processed and paid by Medicare carriers that 
contract with the Health Care Financing Administration (HCFA). Section 1862 (a)(1)(A) of 
the Social Security Act states that all Medicare Part B services, including mental health 
services, must be reasonable and necessary for the diagnosis or treatment of an illness or injury 
or to improve the functioning of a malformed body member. To date, HCFA has not 
established a national medical review policy for all carriers to follow in assessing the 
appropriateness of claims for mental health services. Rather, carriers develop local medical 
review policies that describe the medical criteria beneficiaries must meet for particular mental 
health services to be considered medically necessary and appropriate, as well as criteria for 
satisfactory documentation of mental health services. 
For this inspection, we selected a stratified random sample of 1998 claims for outpatient mental 
health services. The sample included claims for individual psychotherapy, group 
psychotherapy, psychological testing, and pharmacologic management. We collected mental 
health records from Medicare providers in support of sampled services. An independent 
medical review contractor examined the records to make determinations about the medical 
necessity and appropriateness of mental health services. 
FINDINGS 
Medicare allowed $185 million in 1998 for inappropriate outpatient mental health 
services 
One-third of outpatient mental health services provided to Medicare beneficiaries were 
medically unnecessary, billed incorrectly, rendered by unqualified providers, and undocumented 
or poorly documented.  For 25 percent of all sample mental health services, independent 
medical reviewers determined that beneficiaries medical records 
i 
Medicare Mental Health Services  OEI-03-99-00130  did not support claims reimbursed by Medicare.  For another 6 percent of services, mental 
health service providers did not submit beneficiaries medical records after three written OIG 
requests; and for another 3 percent of services, providers submitted a response that did not 
contain any medical documentation. 
Problems were found with all types of mental health services reviewed, but 
psychotherapy and psychological testing were particularly problematic 
Fifty percent of group therapy and 34 percent of individual therapy services reviewed were 
inappropriate, along with over 40 percent of psychological testing services.  To a lesser extent, 
we also found inappropriate pharmacologic management services and services that were 
rendered by unqualified providers. 
While some beneficiaries received excessive therapy services, others did not 
receive needed medication management services 
Twenty-two percent of medical records revealed that patients received mental health services

beyond what was medically indicated and necessary. In these cases, medical records did not

justify the duration or frequency of psychotherapy services.  More than

8 percent of medical records indicated that beneficiaries may not have received needed

services. According to many of these records, patients who were receiving psychotherapy

services should have been evaluated for psychotropic medication.

RECOMMENDATIONS 
In order to address Medicare program vulnerabilities discussed in this report, we 
recommend that the Health Care Financing Administration: 
C	 Target problematic mental health services for pre-payment edits or post-payment 
medical review. 
C	 Promote provider awareness of documentation and medical necessity requirements for 
Part B mental health services. The HCFA and its carriers could enhance provider 
understanding of and compliance with Medicare requirements through seminars, education 
workshops, and newsletters. 
CC	 Work with both carriers and mental health professionals to develop a specific and 
comprehensive listing of psychological assessments that can be correctly billed under 
psychological testing code 96100. Our office made a similar recommendation in a recently 
issued report entitled Medicare Payments for Psychiatric Services in Nursing Homes: A 
Follow-up, which found similar problems with psychological testing instruments. 
ii 
Medicare Mental Health Services  OEI-03-99-00130  C	 Require Medicare carriers to initiate recovery of payments for the inappropriate 
outpatient mental health services identified in this report.  Our office will provide a listing 
of these claims to HCFA. 
AGENCY COMMENTS 
The Health Care Financing Administration concurred with these recommendations. The HCFA will ask 
Medicare carriers to conduct data analysis of mental health services provided in outpatient settings with 
particular attention to psychological testing and psychotherapy services. The HCFA stated that they 
plan to explore a number of provider educational services that will focus on issues of medical necessity, 
medical record documentation, provider qualifications, and appropriate billing and coding of outpatient 
mental health services. In addition, HCFA will have the carrier clinical workgroup on psychiatric 
services consider our report in developing a local medical review policy template for outpatient mental 
health services.  Finally, HCFA will direct Medicare carriers to recover overpayments for the 
inappropriate services identified in our report. To assist HCFA with this effort, we have provided claim 
data for the inappropriate services to them. In response to HCFAs technical comment, we revised 
Appendix A of the report to reflect the most current Medicare provider qualifications as cited in Title 
42, Part 410 of the Code of Federal Regulations. The full text of HCFAs comments is presented in 
Appendix E. 
iii 
Medicare Mental Health Services  OEI-03-99-00130  T A B L E   O F   C O N T E N T S  
PAGE

EXECUTIVE SUMMARY ...................................................... i

INTRODUCTION .............................................................1

FINDINGS

Payments for Inappropriate Services .........................................6

Problematic Mental Health Services  .........................................7

Some Patients Received Excess Services; Others Needed Services  ................. 9

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

APPENDICES

A: Medicare Provider Requirements ........................................12

B: OIG Reports on Medicare Mental Health Services ...........................14

C: Sample Procedure Codes ............................................... 16

D: Estimates and Confidence Intervals  ......................................18

E: Health Care Financing Administration Comments ...........................22

iv 
Medicare Mental Health Services  OEI-03-99-00130  I N T R O D U C T I O N  
PURPOSE 
To assess the appropriateness of Medicare Part B payments for mental health services 
provided to Medicare beneficiaries in the following outpatient settings: practitioners offices, 
community mental health centers, beneficiaries homes, and custodial care facilities. 
BACKGROUND 
Mental Illness and Medicare Populations 
As defined by the Office of the Surgeon General, mental illness is a term that refers collectively 
to all mental disorders. Mental disorders are health conditions that are characterized by 
alterations in thinking, mood, or behavior (or some combination thereof) associated with 
distress and/or impaired functioning.  People of all age groups can be affected by mental 
illness; and individuals in different stages of life may be susceptible to certain kinds of mental 
disorders. Older adults have their own special mental health problems and needs. 
The Medicare program covers people under age 65 with disabilities as well as those over age 
65. Over half of Medicare beneficiaries receiving mental health services in the outpatient 
settings we examined qualified for Medicare on the basis of disability rather than age. 
Fortunately, treatment interventions such as psychotherapy and medication can benefit 
individuals with mental illness in all age groups when tailored to meet the specific needs of each 
patient.  Mental health services reimbursed by Medicare include psychiatric diagnostic or 
evaluative interview procedures, individual psychotherapy, group psychotherapy, family 
psychotherapy, psychoanalysis, psychological testing, and pharmacologic management. 
Medicare Payments for Mental Health Services 
Medicare and its beneficiaries paid an estimated $1.2 billion for Part B mental health services in 
1998. Payments for mental health services provided in outpatient settings accounted for about 
62 percent of this total ($718 million). According to Medicare claims data, about 90 percent of 
outpatient mental health services occurred in office settings or in community mental health 
centers. The following services accounted for the majority of Medicare allowances for 
outpatient mental health services in 1998: individual psychotherapy with and without medical 
evaluation and management, pharmacologic management, group psychotherapy, diagnostic 
interview exam, and psychological testing. 
1 
Medicare Mental Health Services  OEI-03-99-00130  While Medicare pays 80 percent of the allowed amount for most Part B services, the program

pays only 50 percent of the cost for therapeutic mental health services provided in outpatient

settings.  Therefore, the beneficiary is responsible for a much larger Medicare co-payment for

therapeutic outpatient mental health services.  For diagnostic services such as psychological

testing, the beneficiary is responsible for the standard

20 percent co-payment.

Medicare Part B Coverage of Mental Health Services 
Part B claims for mental health services are processed and paid by Medicare carriers that 
contract with the Health Care Financing Administration (HCFA). Section 1862 (a)(1)(A) of 
the Social Security Act states that all Medicare Part B services, including mental health 
services, must be reasonable and necessary for the diagnosis or treatment of an illness or injury 
or to improve the functioning of a malformed body member. To date, HCFA has not 
established a national medical review policy for all carriers to follow in assessing the 
appropriateness of claims for mental health services. Rather, carriers develop local medical 
review policies based on Medicare coverage and documentation guidelines. These local 
policies describe the medical criteria beneficiaries must meet for particular mental health 
services to be considered medically necessary and appropriate. These policies also specify 
criteria for satisfactory documentation of mental health services. 
Local Medical Review Policy Coverage Criteria.  Generally, a patient must have a 
psychiatric illness and/or emotional or behavioral symptoms for psychiatric therapeutic 
procedures such as individual and group psychotherapy to be covered. Symptoms, goals of 
therapy, and the patients capacity to participate in and benefit from psychotherapy must be 
documented in the patients medical record. Psychotherapy should improve or maintain a 
patients health status and functioning. Coverage of psychotherapy does not include teaching 
grooming skills, monitoring activities of daily living, recreational therapy, or social interactions. 
Individual psychotherapy with medical evaluation and management is covered for physicians 
only, with exceptions in certain States for appropriately licensed nurse practitioners, clinical 
nurse specialists, or physician assistants. 
Psychological testing is covered when it aids in determining a patients diagnosis and therapeutic 
planning. The patients medical record must indicate the presence or symptoms of mental 
illness, and document specific psychological tests performed, number of hours of testing, 
scoring, and interpretation of test results. 
Pharmacologic management is covered for in-depth management of a patient who is taking 
psychotropic medications. Evidence of mental illness should be documented in the patients 
medical record, along with the patients response to medication, side effects, medication or 
dosage changes, and compliance with the medication regimen. Pharmacologic management is 
covered for physicians only, with exceptions in certain States for appropriately licensed nurse 
practitioners, clinical nurse specialists, or physician assistants. 
2 
Medicare Mental Health Services  OEI-03-99-00130  Mental Health Service Providers 
According to current Medicare reimbursement guidelines, physicians, clinical psychologists, 
clinical social workers, nurse practitioners, clinical nurse specialists, and physician assistants are 
permitted to submit claims for mental health services provided to beneficiaries in outpatient 
settings. However, a provider must be qualified to perform the specific mental health service 
being billed to Medicare. Medicare definitions of these provider types are presented in 
Appendix A. Typically, qualified providers bill for mental health services using the Physicians 
Current Procedural Terminology (CPT) codes published by the American Medical Association. 
Previous OIG Work 
Since 1996 the Office of Inspector General (OIG) has issued a number of reports on mental 
health services provided to Medicare beneficiaries in nursing facilities, hospital outpatient 
departments, and partial hospitalization programs. The OIG found that many mental health 
services provided to beneficiaries in nursing facilities were medically unnecessary, highly 
questionable, and/or poorly documented.  Reports identified problems including psychotherapy 
provided to patients who did not have the cognitive capacity to benefit from these services, and 
psychological testing services that were billed incorrectly. 
In addition, the OIG found that many outpatient mental health services billed by hospitals and 
partial hospitalization programs did not meet Medicare reimbursement requirements.  These 
services were not supported by adequate documentation, were not medically necessary or 
appropriate for patients conditions, and were not rendered by licensed personnel.  A listing of 
OIG reports on Medicare mental health services is provided in Appendix B. 
METHODOLOGY 
Sample Design 
The sample for this inspection consisted of outpatient individual psychotherapy services with 
and without evaluation and management; group psychotherapy services; pharmacologic 
management services; and psychological testing services. We included these services when 
provided in the following settings: practitioners offices, community mental health centers, 
beneficiaries homes, and custodial care facilities. We did not include services provided in 
partial hospitalization programs. Definitions of sample procedure codes are presented in 
Appendix C. 
We designed a sample with five strata based on type and place of service. We selected a 
stratified random sample of 650 claims from a 1 percent file of paid 1998 Part B claims.  This 1 
percent file was created from HCFAs 1998 National Claims History file, which was 98 
percent complete at the time of sample selection. After eliminating 8 claims for 
3 
Medicare Mental Health Services  OEI-03-99-00130  providers under review by the Office of Investigations, our working sample consisted of 642 
claims. A description of the sample is presented in Table 1 below. 
Table 1. Outpatient Mental Health Services Sample 
Strata  Description  Sampling  Selected  Working 
Frame  Sample  Sample 
1  Home and Custodial Care Facility Claims  5,057  175  170 
2  Psychological Testing Claims  402  100  100 
3  Group Psychotherapy Claims  7,789  70  69 
4  75-80 Minute Psychotherapy Claims  1,794  85  85 
5  All Other Claims  81,414  220  218 
TOTAL  96,456  650  642 
Data Collection and Analysis 
We collected data from Medicare providers and a medical review contractor from February 
2000 to August 2000.  We also collected local medical review policies for mental health 
services from Medicare carriers. Point estimates and confidence intervals for all statistics 
presented in the findings of this report are provided in Appendix D. 
Local Medical Review Policies. Since HCFA has not established a national medical review 
policy for mental health services, we requested local medical review policies for mental health 
services from each of the Medicare carriers.  We systematically reviewed these policies to 
determine coverage and documentation requirements among the carriers. 
Medical Records.  Using HCFAs Unique Provider Identification Number (UPIN) database, 
we identified the names and addresses for the providers of the sample outpatient mental health 
services.  We mailed providers written requests for Medicare beneficiaries medical records in 
support of sample services.  Specifically, we requested each beneficiarys initial psychiatric 
evaluation; psychological test results; all notes and documentation specific to the sample 
service; notes and documentation of services provided to the beneficiary three months prior to 
and three months after the sample date of service; and copies of providers State licenses. We 
sent a follow-up request to providers who did not respond to the initial request. A third and 
final request informed non-respondents that, for the purposes of our study, we would consider 
sample services undocumented if beneficiaries records were not submitted. 
We received responses for 547 of the 642 mental health services in our working sample.  Of 
these responses, 14 contained no supporting medical documentation and were, therefore, 
considered inappropriate.  Three responses were in Spanish and four were submitted after the 
data collection cutoff date. We did not consider these seven services to be inappropriate. The 
remaining 526 responses were forwarded to a medical review contractor. 
4 
Medicare Mental Health Services  OEI-03-99-00130  We did not receive responses for 95 mental health services. For 52 of the 95 services, 
provider addresses in the UPIN database were inaccurate, and our requests for medical 
documentation were returned as undeliverable.  We did not consider these services to be 
inappropriate. However, for the other 43 services, providers did not submit medical records 
after 3 written requests.  We deemed these services to be inappropriate. 
Medical Review. We forwarded 526 mental health records to an independent medical 
review contractor for evaluation of medical necessity and appropriateness.  For each 
beneficiary, we also included a listing of all 1998 outpatient mental health claims for sampled 
procedure codes. Mental health professionals employed by the contractor conducted the 
medical review of sample services using a data collection instrument jointly developed by OIG 
and the contractor. We developed this medical review instrument using guidelines common 
among Medicare carriers local medical review policies. The instrument included questions 
regarding symptoms, diagnosis, treatment goals and progress, medications, time spent with the 
patient, provider type, and provider qualifications. 
Three registered nurses and a masters-level psychologist used the medical review instrument to 
examine the mental health records. These first-level reviewers recorded information about the 
appropriateness of the mental health services provided and the nature of the supporting 
documentation.  When first-level reviewers identified questionable mental health services or 
documentation, the records were provided to the appropriate second-level reviewer, either a 
psychiatrist or clinical psychologist. 
Fifty-eight percent of the records (303 of 526) were referred to a second-level reviewer.  The 
second-level reviewers determined whether beneficiaries records supported the sample mental 
health services that were billed to the Medicare program; and used the medical review 
instrument to record determinations about medical necessity, appropriateness of the services 
billed, provider qualifications, and documentation.  These reviewers also examined 
beneficiaries medical records and claim histories to determine if beneficiaries received more 
services than necessary, or were in need of services that were not provided. 
Computation of Allowances for Inappropriate Services.  To compute Medicare payments 
for inappropriate services, we totaled the allowed amounts for all inappropriate services and 
weighted the estimate to reflect our stratified sample design. However, we used adjusted 
allowed amounts in our calculation for 62 outpatient mental health services. For 59 individual 
psychotherapy services, medical reviewers determined that the service billed was inappropriate, 
but a shorter individual therapy session was substantiated. In these cases, only the difference in 
allowances for these services was included in the calculation.  For three psychological testing 
services, reviewers determined that fewer hours of testing should have been billed.  Again, we 
included only the difference between the allowed amount for the number of hours actually billed 
and the amount that would have been allowed for fewer hours of psychological testing. 
This inspection was conducted in accordance with the Quality Standards for Inspections 
issued by the Presidents Council on Integrity and Efficiency. 
5 
Medicare Mental Health Services  OEI-03-99-00130  F I N D I N G S  
Medicare allowed $185 million in 1998 for inappropriate 
outpatient mental health services 
One-third of outpatient mental health services provided to Medicare beneficiaries were 
medically unnecessary, billed incorrectly, rendered by unqualified providers, and undocumented 
or poorly documented. Payments for these inappropriate services totaled an estimated $185 
million, which represents 31 percent of the $598 million reimbursed in 1998. The estimate of 
$185 million includes beneficiary co-payments of 20 percent or 50 percent, depending on the 
type of service. 
For 25 percent of all sample mental health services, independent medical reviewers determined 
that beneficiaries medical records did not support claims reimbursed by Medicare. For 6 
percent of services, mental health service providers did not submit beneficiaries medical 
records after three written OIG requests. For another 3 percent of services, providers 
submitted responses that did not contain any medical documentation. 
The following information pertains to the 25 percent of sample mental health services that were 
not supported by patients records. Medical reviewers classified these inappropriate services 
into four general categories.  As shown in Chart 1 below, 23 percent of these services were not 
medically necessary. Forty-one percent of services were billed incorrectly since providers 
billed Medicare for non-covered services, billed using the wrong code, or billed excessively. 
Eleven percent of services were rendered by providers who were not qualified to perform the 
services. Finally, 65 percent of services were insufficiently documented because medical 
records lacked critical information about patients conditions and details of the care provided. 
Many services were inappropriate for more than one of these reasons. 
Chart 1. Medical Review Determinations for Inappropriate Mental Health Services* 
11% 
23% 
41% 
65% 
0%  20%  40%  60%  80%  100% 
Percent of Services 
* Percentages sum to over 100% because many services had more than one type of problem 
6 
Medicare Mental Health Services  OEI-03-99-00130  Problems were found with all types of mental health services 
reviewed, but psychotherapy and psychological testing were 
particularly problematic 
While 16 percent of pharmacologic management services were inappropriate, between one-
third and one-half of psychotherapy and psychological testing services were inappropriate. In 
addition, one out of every nine inappropriate services was rendered by an unqualified provider. 
Half of the group psychotherapy services reviewed were inappropriate 
Fifty percent of group psychotherapy services were deemed inappropriate for one or more 
reasons. Medical records indicated that Medicare paid for group therapy that was non-
covered, medically unnecessary, and/or poorly documented. 
About 40 percent of inappropriate group therapy services were non-covered services such as 
social activity, exercise and discussion, community skills, and reality orientation groups. 
Carriers local medical review policies specify that socialization, recreational activities, 
excursions, sensory stimulation, meals, and the like do not constitute group psychotherapy. In 
one inappropriate case, a therapist ran social activity groups rather than group psychotherapy. 
Activities included games, music, picnics, and sewing. 
Over one-quarter of inappropriate group psychotherapy services were not medically necessary 
because patients lacked the cognitive or communication skills necessary to participate in and 
benefit from group therapy; or because group psychotherapy was not the appropriate treatment 
for patients. 
Over half of inappropriate group therapy services were not adequately documented. 
Beneficiaries medical records lacked one or more critical elements including treatment plans 
and goals, progress in treatment, documentation of diagnosis and ability to participate in group 
therapy, and information about the content of group sessions. Some of the group therapy 
progress notes reviewed were very brief, or used canned language to describe each group 
session. Documentation for a few inappropriate group sessions did not include any evidence of 
who rendered the group psychotherapy services. 
Thirty-four percent of individual therapy services reviewed were inappropriate 
Over one-third of individual psychotherapy services were inappropriate for two main reasons: 
extended length sessions were not justified, and documentation of individual therapy sessions 
lacked critical elements. 
For most 75 to 80 minute individual therapy services, documentation in patients records did 
not substantiate medical necessity, and practitioners did not provide justifications for treating 
patients with extended psychotherapy sessions. Carrier guidelines set forth 
7 
Medicare Mental Health Services  OEI-03-99-00130  special documentation requirements for extended length individual psychotherapy services. 
These services should not be routinely used. They are reserved for exceptional circumstances. 
The provider must document in the patients medical record the medical necessity of these 
services and define the exceptional circumstances. Reviewers indicated that shorter therapy 
sessions of 45 to 50 minutes, or 20 to 30 minutes, were documented and medically indicated in 
most of these cases. 
In addition to inappropriate extended length therapy services, documentation of individual 
therapy lacked critical elements. Some therapy notes were very brief, including a case where 
notes for several psychotherapy sessions merely stated same.  Patient records lacked 
treatment plans and goals, and evidence of patients diagnoses and progress. Progress notes 
for inappropriate services were often illegible and unsigned. As with group psychotherapy, 
documentation for a few individual therapy services also contained canned language, some of 
which appeared to be computer-generated. A number of inappropriate individual 
psychotherapy services with medical evaluation and management were not sufficiently 
documented.  Patient records reflected therapy only, with no documentation of the evaluation 
and management component; or medication management only, with no documentation of 
therapy. 
Over 40 percent of psychological testing services were billed incorrectly and 
poorly documented 
Overall, 42 percent of the psychological testing services reviewed were inappropriate. Almost 
half of these inappropriate services consisted mainly of self-administered, self-scored, or 
cognitive function screening tests like the Beck Depression Inventory, the Geriatric Depression 
Scale, the McGill Overall Pain Scale, and the Folstein Mini-Mental Status Exam.  While 
carriers policies do not contain comprehensive lists of psychological tests that are correctly 
billed under psychological testing code 96100, most state that this code should not be billed for 
self-administered or self-scored instruments, or for screening tests of cognitive function.  These 
types of assessments are considered to be part of a clinical interview or evaluation and 
management service, and are not reimbursed separately. 
Some psychological testing services were not sufficiently documented.  Patients medical 
records lacked the amount or type of information necessary to support psychological testing 
claims. Records for about one-third of inappropriate psychological testing services did not 
include a written report interpreting beneficiaries test results and making treatment 
recommendations. However, carriers guidelines, as well as the CPT definition of 
psychological testing, require providers to prepare such a report.  Medical records for a few 
inappropriate psychological testing services contained computer-generated reports, but our 
medical reviewer did not consider these reports to be adequate without additional written 
interpretation by the provider. Additionally, documentation of some inappropriate 
psychological testing services did not indicate who administered the psychological tests to 
patients. 
8 
Medicare Mental Health Services  OEI-03-99-00130  Sixteen percent of pharmacologic management services were inappropriate 
Pharmacologic management services were deemed inappropriate because providers failed to 
record important elements in beneficiaries charts, such as diagnosis, target symptoms, 
treatment goals, response to medication, side effects, and the like. In addition, reviewers were 
unable to determine who rendered some of these pharmacologic management services because 
progress notes were not initialed or signed. 
Some inappropriate pharmacologic management services were provided by registered nurses 
who were not qualified to render these services to Medicare beneficiaries. In two of these 
cases nurses dispensed methadone to patients, without any documentation that physicians 
provided face-to-face drug management services.  Carriers guidelines explicitly state that the 
pharmacologic management CPT code is not to be used for the actual administration of 
medication or the observation of a patient taking oral medication. 
Eleven percent of inappropriate mental health services were rendered by 
unqualified providers 
Patients records for these inappropriate services indicated that registered nurses, mental health 
and substance abuse counselors, masters-level, and bachelors-level practitioners rendered 
mental health services that they were not qualified to provide. In addition, billing providers 
failed to supply rendering practitioners licenses to perform mental health services in many of 
these cases. Almost half of services rendered by unqualified providers were group 
psychotherapy services.  For two inappropriate group therapy services, providers actually 
acknowledged that group therapy was rendered by unlicensed practitioners. In another case, a 
social worker rendered individual therapy with medical evaluation and management, a service 
clearly outside the social workers scope of practice. 
While some beneficiaries received excessive therapy 
services, others did not receive needed medication 
management services 
For the 303 cases referred for more extensive review, 22 percent of medical records indicated 
that patients had received more mental health services than they needed. Another 8 percent of 
records indicated that patients were in need of mental health services that may not have been 
provided. 
9 
Medicare Mental Health Services  OEI-03-99-00130  Twenty-two percent of medical records revealed that patients received mental 
health services beyond what was medically indicated and necessary 
In many of these cases, medical records did not justify the duration or frequency of 
psychotherapy services. A number of chronic but stable patients received the same type of 
psychotherapy service on a weekly or even daily basis without justification. Some patients 
received individual and group psychotherapy services weekly; yet documentation did not 
demonstrate the need for this amount of therapy, or for both individual and group treatment. 
For example, a patient attended two to three individual therapy sessions per week in addition to 
once-per-week group therapy. In an extreme case, a provider billed for 67 extended individual 
psychotherapy services in 1998 without documentation of need for the 75 to 80 minute 
sessions, or the frequency of treatment. 
Both place and type of mental health service affected whether beneficiaries received more 
mental health services than necessary. Excessive services were more likely to occur when 
provided in patients homes and community mental health centers. Excessive services were 
also more likely to occur when the service reviewed was group psychotherapy. 
More than 8 percent of medical records indicated that beneficiaries may not have 
received needed services 
Reviewers found that a number of patients who were receiving psychotherapy services should 
have been evaluated for psychotropic medication.  Patients medical records did not contain 
evidence that providers had considered medication as treatment for their mental disorders, nor 
were pharmacologic management services billed to Medicare for any of these patients in 1998. 
In addition, longer or more frequent individual psychotherapy services were indicated for a few 
patients due to their severe symptoms, but were not provided. Finally, for two psychological 
testing cases additional testing should have been performed to determine patients diagnoses. 
10 
Medicare Mental Health Services  OEI-03-99-00130  R E C O M M E N D  A T I O N S  
In order to address Medicare program vulnerabilities discussed in this report, we 
recommend that the Health Care Financing Administration: 
C	 Target problematic mental health services for pre-payment edits or post-payment 
medical review. 
C	 Promote provider awareness of documentation and medical necessity requirements for 
Part B mental health services. The HCFA and its carriers could enhance provider 
understanding of and compliance with Medicare requirements through seminars, education 
workshops, and newsletters. 
CC	 Work with both carriers and mental health professionals to develop a specific and 
comprehensive listing of psychological assessments that can be correctly billed under 
psychological testing code 96100. Our office made a similar recommendation in a recently 
issued report entitled Medicare Payments for Psychiatric Services in Nursing Homes: A 
Follow-up, which found similar problems with psychological testing instruments. 
C	 Require Medicare carriers to initiate recovery of payments for the inappropriate 
outpatient mental health services identified in this report.  Our office will provide a listing 
of these claims to HCFA. 
AGENCY COMMENTS 
The Health Care Financing Administration concurred with these recommendations. The HCFA will ask 
Medicare carriers to conduct data analysis of mental health services provided in outpatient settings with 
particular attention to psychological testing and psychotherapy services. The HCFA stated that they 
plan to explore a number of provider educational services that will focus on issues of medical necessity, 
medical record documentation, provider qualifications, and appropriate billing and coding of outpatient 
mental health services. In addition, HCFA will have the carrier clinical workgroup on psychiatric 
services consider our report in developing a local medical review policy template for outpatient mental 
health services.  Finally, HCFA will direct Medicare carriers to recover overpayments for the 
inappropriate services identified in our report. To assist HCFA with this effort, we have provided claim 
data for the inappropriate services to them. In response to HCFAs technical comment, we revised 
Appendix A of the report to reflect the most current Medicare provider qualifications as cited in Title 
42, Part 410 of the Code of Federal Regulations. The full text of HCFAs comments is presented in 
Appendix E. 
11 
Medicare Mental Health Services  OEI-03-99-00130  A P P E N D I X   A 
Medicare Provider Requirements

Physicians 
A qualified physician must be a doctor of medicine or osteopathy, a doctor of dental surgery or dental 
medicine, a chiropractor, a doctor of podiatric medicine, or a doctor of optometry who is licensed by 
the State in which services are performed.  Services are covered only if the particular type of medical 
practitioner is operating within the scope of his or her license. [Code of Federal Regulations, Title 42, 
Part 410, Section 20(b)] 
Clinical Psychologists 
To qualify as a clinical psychologist, a practitioner must hold a doctoral degree in psychology; and be 
licensed or certified at the independent practice level, by the State in which he or she practices, to 
furnish diagnostic, assessment, preventive, and therapeutic services directly to individuals.  [Code of 
Federal Regulations, Title 42, Part 410, Section 71(d)] 
Clinical Social Workers 
A qualified clinical social worker must possess a master's or doctoral degree in social work; have 
performed at least two years of supervised clinical social work; and be licensed or certified as a clinical 
social worker by the State in which services are performed.  In a State that does not provide for 
licensing or certification as a clinical social worker, an individual must be licensed or certified at the 
highest level of practice provided by law in the State where services are performed; and have 
completed at least two years or 3,000 hours of post-masters degree supervised clinical social work 
under the supervision of a masters-level social worker in an appropriate setting such as a hospital, 
skilled nursing facility, or clinic.  [Code of Federal Regulations, Title 42, Part 410, Section 73(a)] 
Nurse Practitioners 
A qualified nurse practitioner must be a registered professional nurse authorized to practice as a nurse 
practitioner by the laws of the State where services are performed, and certified by a recognized 
national certifying body that has established standards for nurse practitioners; or a registered 
professional nurse authorized to practice as a nurse practitioner by the laws of the State where services 
are performed who has received a Medicare billing number as a nurse practitioner by December 31, 
2000; or a nurse practitioner who meets the standards described above and applies for a Medicare 
billing number for the first time on or after January 1, 2001; or a nurse practitioner who meets the 
standards described above, has a masters degree in nursing, and applies for a Medicare billing number 
for the first time on or after January 1, 2003.  [Code of Federal Regulations, Title 42, Part 410, Section 
75(b)] 
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Medicare Mental Health Services  OEI-03-99-00130  A P P E N D I X   A 
Clinical Nurse Specialists 
To qualify as a clinical nurse specialist, a practitioner must be a registered nurse currently licensed by 
the State where services are performed and authorized to perform clinical nurse specialist services in 
accordance with State law; have a masters degree in a defined clinical area of nursing from an 
accredited educational institution; and be certified by the American Nurses Credentialing Center as a 
clinical nurse specialist.  [Code of Federal Regulations, Title 42, Part 410, Section 76(b)] 
Physician Assistants 
A qualified physician assistant must be licensed by the State to practice as a physician assistant, as well 
as have graduated from a physician assistant educational program accredited by the Commission on 
Accreditation of Allied Health Education Programs, or have passed the national certification exam 
administered by the National Commission on Certification of Physician Assistants. [Code of Federal 
Regulations, Title 42, Part 410, Section 74(c)] 
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Medicare Mental Health Services  OEI-03-99-00130  A P P E N D I  X B   
OIG Reports on Medicare Mental Health Services

Nursing Facilities 
Medicare Payments for Psychiatric Services in Nursing Homes: A Follow-up, OEI-02-99-00140 
Mental Health Services in Nursing Facilities, OEI-02-91-00860 
Acute Care and Psychiatric Specialty Hospitals 
Review of Outpatient Psychiatric Services Provided by Provena St. Joseph Hospital for the Period 
September 1, 1996 through November 30, 1997, A-05-00-00034 
Review of Outpatient Psychiatric Services Provided by Tomball Regional Hospital for Fiscal Year 
Ended June 30, 1998, A-06-99-00014 
Review of Outpatient Psychiatric Services Provided by the Waterbury Hospital for Fiscal Year Ending 
September 30, 1997, A-01-99-00501 
Review of Outpatient Psychiatric Services Provided by the Elliot Hospital for the Fiscal Year Ending 
June 30, 1998, A-01-99-00502 
Ten-State Review of Outpatient Psychiatric Services at Acute Care Hospitals, A-01-99-00507 
Review of Outpatient Psychiatric Services Provided by the Danbury Hospital for Fiscal Year Ending 
September 30, 1997, A-01-99-00518 
Review of Outpatient Psychiatric Services at Psychiatric Hospitals for Calender Year 1998, 
A-01-99-00530 
Review of Outpatient Psychiatric Services Provided by St. Vincents Hospital for Calendar Year 
Ended December 31, 1997, A-02-99-01010 
Review of Outpatient Psychiatric Services Provided by St. Lukes-Roosevelt Hospital for Calendar 
Year Ended December 31, 1997, A-02-99-01016 
Review of Outpatient Psychiatric Services Provided by the Franklin Medical Center for the Fiscal Year 
Ending September 30, 1996, A-01-98-00503 
Psychiatric Outpatient Services: The Newton-Wellesley Hospital, A-01-98-00506 
Psychiatric Outpatient Services: The Arbour-HRI Hospital, A-01-97-00526 
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Partial Hospitalization Programs 
Review of Partial Hospitalization Services and Fiscal Year 1997 Cost Report - New Center 
Community Mental Health Services, Detroit, Michigan, A-05-00-00004 
Results of Review of Americas Behavioral Health Center, A-04-98-01192 
Audit of the Medicare Partial Hospitalization Program at Mental Health Corporation of Denver, A-07-
98-01263 
Five-State Review of Partial Hospitalization Programs at Community Mental Health Centers, 
A-04-98-02145 
Reviews of Partial Hospitalization Services Provided Through Community Mental Health Centers, A-
04-98-02146 
Review of St. Francis Behavioral Health Centers Partial Hospitalization Program, 
A-04-97-02141 
Review of St. Jude Behavioral Health Centers Partial Hospitalization Program, A-04-97-02142 
Review of Partial Hospitalization Services and Audit of Medicare Cost Report for Community 
Behavioral Services, a Florida Community Mental Health Center, A-04-96-02118 and 
A-04-96-02124 
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Sample Procedure Codes

Individual Psychotherapy 
Procedures 90804 through 90809 are defined as the treatment of mental illness and behavior 
disturbances in which the physician establishes a professional contract with the patient and, through 
definitive therapeutic communication, attempts to alleviate the emotional disturbances, reverse or 
change maladaptive patterns of behavior, and encourage personality growth and development. 
90804	 Individual psychotherapy, insight oriented, behavior modifying, and/or supportive, in an 
office or outpatient facility, approximately 20 to 30 minutes face-to-face with patient. 
90805  Same as procedure 90804, but with medical evaluation and management services. 
90806	 Individual psychotherapy, insight oriented, behavior modifying, and/or supportive, in an 
office or outpatient facility, approximately 45 to 50 minutes face-to-face with patient. 
90807  Same as procedure 90806, but with medical evaluation and management services. 
90808	 Individual psychotherapy, insight oriented, behavior modifying, and/or supportive, in an 
office or outpatient facility, approximately 75 to 80 minutes face-to-face with patient. 
90809  Same as procedure 90808, but with medical evaluation and management services. 
Group Psychotherapy 
90853	 Psychotherapy administered in a group setting (other than of a multiple-family group) 
with a trained group leader in charge of several patients. Personal and group dynamics 
are discussed and explored in a therapeutic setting allowing emotional catharsis, 
instruction, insight and support. 
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Medicare Mental Health Services  OEI-03-99-00130  A P P E N D I X  C 
Psychological Testing 
96100	 Psychological testing (includes psychodiagnostic assessment of personality, 
psychopathology, emotionality, intellectual abilities, e.g., WAIS-R, Rorschach, MMPI) 
with interpretation and report, per hour. Code 96100 includes the administration, 
interpretation and scoring of tests mentioned in the CPT description and other medically 
accepted tests for evaluation of intellectual strengths, psychopathology, 
psychodynamics, mental health risks, insight, motivation and other factors influencing 
treatment and prognosis. 
Pharmacologic Management 
90862	 Code 90862 is intended for use by the physician who is prescribing pharmacologic 
therapy for a patient with an organic brain syndrome or whose diagnosis is in the ICD-9 
range of 290.0-319, and is being managed primarily by psychotropic drugs. It may 
also be used for the patient whose psychotherapy is being managed by another health 
professional and the billing physician is managing the psychotropic medication.  The 
service includes prescribing, monitoring the effect of medication, and adjusting the 
dosage.  Any psychotherapy provided is minimal and is usually supportive only. 
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Estimates and Confidence Intervals

PAGE 
TABLE 1.  Inappropriate Outpatient Mental Health Services  .........................19

TABLE 2.  Medical Review Determinations for Inappropriate Services ................. 19

TABLE 3.  Frequency of Inappropriate Services by Type of Mental Health Service  ....... 20

TABLE 4.	 Frequency of Inappropriate Individual Psychotherapy Services by

Length of Session .................................................. 20

TABLE 5.  Beneficiaries Received More Services Than Necessary  .................... 20

TABLE 6.  More Services Than Necessary by Place of Service  .......................21

TABLE 7.  More Services Than Necessary by Type of Mental Health Service ............ 21

TABLE 8.  Beneficiaries May Not Have Received Needed Services  ...................21

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Medicare Mental Health Services  OEI-03-99-00130  A P P E N D I X   D 
Estimates and Confidence Intervals

The tables below contain statistical estimates presented in the Findings section of this report. 
We used the Survey Data Analysis (SUDAAN) software package to compute percentages, 
totals, and confidence intervals.  These estimates are weighted based on the stratified random 
sample design and are reported at the 95 percent confidence level. 
Table 1. 
Inappropriate Outpatient Mental Health Services 
Point Estimate  95% Confidence Interval 
Total Medicare Allowances in 1998 for  $185,287,513  $151,251,639 - $219,323,387 
Inappropriate Outpatient Mental Health Services 
Percent of Inappropriate Outpatient Mental  33.58%  28.27% - 38.89% 
Health Services 
Percent of Sample Services Not Supported by  25.22%  20.36% - 30.08% 
Beneficiaries Medical Records 
Percent of Sample Services where No Response  5.61%  3.06% - 8.16% 
was Submitted 
Percent of Sample Services where Response  2.74%  0.86% - 4.62% 
Contained No Documentation 
Table 2. 
Medical Review Determinations for Inappropriate Services 
Percent of Services  95% Confidence Interval 
Provider Not Qualified  11.03%  4.29% - 17.77% 
Medically Unnecessary  22.64%  13.74% - 31.54% 
Billed Incorrectly  40.80%  29.61% - 51.99% 
Insufficient Documentation  64.87%  54.07% - 75.67% 
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Medicare Mental Health Services  OEI-03-99-00130  A P P E N D I X   D 
Table 3. 
Frequency of Inappropriate Services 
by Type of Mental Health Service 
Percent of Services  95% Confidence Interval 
Group Psychotherapy  50.03%  37.33% - 62.73% 
Individual Psychotherapy  34.09%  26.45% - 41.73% 
Psychological Testing  41.98%  31.18% - 52.78% 
Pharmacologic Management  15.65%  6.87% - 24.43% 
Difference between percentages is significant at above the 95% confidence level. (Chi-square statistic=22.98, df=3, p<0.0001) 
Table 4. 
Frequency of Inappropriate Individual 
Psychotherapy Services by Length of Session 
Length of Individual Psychotherapy  Percent of Services  95% Confidence 
Session  Interval 
20-30 Minutes  29.67%  14.73% - 44.61% 
45-50 Minutes  33.40%  24.09% - 42.71% 
75-80 Minutes  82.09%  73.51% - 90.67% 
Difference between percentages is significant at above the 95% confidence level. (Chi-square statistic=56.97, df=2, p<0.0001) 
Table 5. 
Beneficiaries Received More Services Than Necessary 
Percent of  95% Confidence Interval 
Cases 
Referred Cases where Beneficiaries Received  22.49%  15.65% - 29.33% 
More Services than Necessary 
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Medicare Mental Health Services  OEI-03-99-00130  A P P E N D I X   D 
Table 6. 
More Services Than Necessary 
by Place of Service 
Percent of Cases  95% Confidence 
Interval 
Home  41.67%  25.52% - 57.82% 
Community Mental Health Center  40.87%  22.45% - 59.29% 
Custodial Care Facility  25.00%  7.63% - 42.37% 
Office  17.24%  9.77% - 24.71% 
Difference between percentages is significant at above the 95% confidence level. (Chi-square statistic=10.27, df=3, p=0.017) 
Table 7. 
More Services Than Necessary 
by Type of Mental Health Service 
Percent of Cases  95% Confidence 
Interval 
Group Psychotherapy  38.34%  24.87% - 51.81% 
Individual Psychotherapy without  20.27%  9.98% - 30.56% 
Evaluation and Management 
Pharmacologic Management  20.10%  0.68% - 39.52% 
Individual Psychotherapy with  19.75%  6.15% - 33.35% 
Evaluation and Management 
Psychological Testing  4.17%  0 - 9.85% 
Difference between percentages is significant at above the 95% confidence level. (Chi-square statistic=22.52, df=4, p=0.0002) 
Table 8. 
Beneficiaries May Not Have Received Needed Services 
Percent of  95% Confidence Interval 
Cases 
Referred Cases where Beneficiaries May Not  8.45%  3.82% - 13.08% 
Have Received Needed Services 
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Health Care Financing Administration Comments

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