Department of Health and Human Services 

OFFICE OF


INSPECTOR GENERAL 

MENTAL HEALTH SERVICES IN


NURSING FACILITIES 

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— 

OFFICE OF INSPECTOR GENERAL 

The mission of the OffIce of ~pector &ner~ (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Dep~ent of Health and Human Services’ (HHS) 

programs as well as the health and welfare of benefici~im served by those programs. This 

statutory mission is carried out through a nationwidenetwork of audits, investigations, and 

inspections conducted by three OIG operating components: the OffIce of Audit Services, the 

Office of Investigations, and the Oftlce of Evaluation and Inspections. The OIG also informs the 

Secretary of HHS of program and Wgement problem and recommends courses to correct them. 

OFFICE OF AUDIT SERVICES 

The OIG’SOffIceof Audit Services(OAS)provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. Audits 

examine the performance of HHS programs and/or its grantees and contractors in carrying out 

their respective responsibilities and Me intendedto provide independent assessmentsof HHS 

programs and operations in order to reduce w~te, abuse, and mismanagementand to promote 

economy and efficiency throughout the Department. 

OFFICE OF INVESTIGATIONS 

The OIG’SOffice of Investigations(01) conducts criminal, civil, and administrative investigations 

of allegations of wrongdoing in HHS progr~ or to HHS beneficiaries and of unjust enrichment 

by providers. The investigative efforts of 01 lead to criminal convictions, administrative 

sanctions, or civil money penalties. The 01 alSO oversees State Medicaid fraud control units which 

investigate and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECTIONS 

The OIG’SOffIce of Evaluation and Inspections (OEI) conducts short-term management and


program evaluations(called inspections)that focus on issues of concern to the Department, the


Congress, and the public. The findings and recommendationscontied in these inspection reports


generate rapid, accurate, and up-todate information on the efilciency, vulnerability, and


effectivenessof departmental programs.


This report was prepared in the New York Regional OffIce under the direction of Regional


Inspector General Alan S, Meyer, Ph.D. Project staff included:


New York Headquarters


Renee C. Dunn, P.T. (Project Leader) Jennifer Antico


Lucille M, Cop, R.N. (Lead Analyst) Barbara R. Tedesco


Nancy Harrison Brian Ritchie


Steven B. Harris (Intern)


Sheila Weigert (Intern) Mti i~ Review Ccmtractor


FMAS, Inc., Rockville, MD 

To obtain a copy of this report contact the New York Regional Office at (212) 264-1998 
Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MENTAL HEALTH SERVICES IN 

NURSING FACILITIES 

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J+ q+ $ 

# JUNE GIBBS BROWN $

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EXECUTIVE SUMMARY 

PURPOSE 

To identifi possible vulnerabilities to the Medicare program in the provision of mental 

health services to nursing facility residents. 

BACKGROUND 

Events in the past few years have focused attention on mental health care for nursing 

facility residents. The number of nursing facility residents with mental disorders has 

increased; the Nursing Home Reform Act, which provided new protections for residents 

and sweeping reforms of many aspects of life in nursing homes was implemented; and 

Medicare payments tripled in the wake of an expansion of Part B coverage of these 

services. Many nursing home residents have benefitted from services not previously 

available to them. However, some problems remain. On the one hand, some may not be 

getting the care they need. On the other hand, the Office of Inspector General has 

received allegations of abusive practices relating to these services, primarily about 

Medicare being billed for unnecessary or inappropriate services. 

Our study is meant to draw an overall picture of the kinds of mental health services being 

provided in nursing facilities and to identify any potential vulnerabilities for the Medicare 

program. 

We based our results on a review of medical records maintained by nursing homes for the 

five Medicare codes that were most commonly reimbursed to psychiatrists, clinical 

psychologists, and clinical social workers in 1993. We also interviewed knowledgeable 

persomel and reviewed pertinent policies and documents. We selected nursing facility 

records as the basis of our sampling because these records are generally used by HCFA 

and its contractors to assess the appropriateness and quality of care provided to Medicare 

beneficiaries, and they are the primary source of information for records reflecting care 

actually delivered to a patient during a stay in a nursing facility. These records also 

provide a full accounting of all services delivered. We contracted with FMAS, Inc., a 

medical review contractor, which employed psychiatrists, psychologists, and social 

workers to review the records and the services provided by their peers. 

FINDINGS 

In 32 percent of the records received, Medicare paid for medically unnecessary services; 

this projects to $17 million, or 24 percent of all 1993 Medicare payments for mental 

health services for nursing home residents. 

Of the 397 medical records received for review, 126 contained medically unnecessary 

services. In forty-one records, all services were unnecessary; and in 85 some were 

umecessary. Medically unnecessary services are those which our medical reviewers 

i 
concluded were inappropriate based on information in the medical record concerning the 

patient’s condition, need for treatment, and ability to benefit from the treatment. 

In 16 percent of the records received, Medicare paid for highly questionable services; 

this projects to $10 million in Medicare payments 

In sixty-three records, all services were highly questionable. Highly questionable services 

are those where the medical record led the reviewers to raise serious questions about the 

medical necessity of the services, but where the evidence in the medical record was 

insufficient for the reviewers to make a deftitive determination. 

In another forty the documentation was so poor they could not be reviewed. These forty 

records did not contain enough information for the screeners to even refer the records to 

the, clinical reviewers, 

In 30 percent of the records, the wrong code appears to have been billed 

According to the medical reviewers, in thirty percent of the 225 cases where they had 

enough information to determine what the correct procedure code should be, the code 

billed appeared to have been incorrect. In over half of these cases the service appeared to 

be medication management without any documentation of psychotherapy, but 

psychotherapy was billed. 

At the same time, difficulties remain in delivering needed mental health services to 

beneficiaries 

We found that some beneficiaries are not getting the care they need. For example, some 

received psychotherapy without being evaluated for medication which might have been 

helpful. Others received erratic, inconsistent services when they needed consistent 

psychotherapy. We also found that the skill levels of some providers may not have been 

adequate. 

Certm”ntypes of procedures, providers, residents, and re~”ons are more likely than others 

to be associated with unnecessary and questionable services 

Psychological testing and group therapy are more likely (79 percent) to be medically 

unnecessary or questionable than evaluation and individual therapy (47 percent). Among 

the provider types, clinical psychologists and clinical social workers had the highest 

percentage (61 percent) of unnecessary and questionable services billed to Medicare. 

Among age groups, the “old, old” (over 85) were most likely to have unnecessary or 

questionable services. Sixty-two percent of these residents had such services compared to 

47 percent of those under 85. Those residents with a mental health diagnosis of dementia 

including Alzheimer’s disease, were more likely (58 percent) to receive questiomble or 

umecessary services than those with other diagnoses (45 percent). Records from nursing 

facilities in the South were slightly more likely to have unnecessary or questionable 

services than other parts of the country. 

ii 
Many Factors Make Mental Health Service Billings Vulnerable To Abuse 

We found the following conditions which might jeopardize Medicare payment integrity: 

. Lack of physician involvement,


. Impediments of social service staff involvement,


. Missing treatment plans,


. Lack of utilization guidelines,


� Lack of carrier policies and screens specific to nursing facilities, and


. Difficulty identifying patients’ nursing facilities.


RECOMMENDATION 

HCFA needs to take steps to prevent inappropriate payments for mental health services in


nursing facilities. The challenge lies in ensuring the integrity of Medicare payments while


promoting the delivery of needed care. There probably is no one simple solution.


Instead, a battery of carefully applied remedies is needed.


Based on the mture of the problems we identified, we suggest the following approaches


that HCFA, in concert with the carriers, might take:


� Develop guidelines for carriers with delineation of exactly what the psychiatric 

procedure codes mean, what can be billed for, who can bill, and how often; 

� Develop screens to implement these guidelines; 

� Conduct focused medical reviews; 

� Provide educational activities to providers of mental health services; 

� Clarify who can provide services incident to physician or clinical psychologist 

services; 

� Assure that the nursing facility provider number and name is on all claims for 

patients in nursing facilities; 

� Clari@ the requirements needed to become an independent mental health provider; 

� Identi~ and disseminate information about effective ways to help residents adjust 

quickly to the nursing facility to prevent the need for later clinical intervention; 

and 

� Convene a group of medical professionals to develop best practices in documenting 

the nursing facility medical record and provide guidance to nursing facility 

professionals. 

OPERATION RESTORE TRUST STRATEGIES 

This inspection is a part of a Department of Health and Human Services anti-fraud 

initiative called Operation Restore Trust designed to target fraud, waste, and abuse related 

to home health agencies, nursing homes, and durable medical equipment suppliers. This 

initiative targets California, Florida, 

the highest number of Medicare and 

Illinois, New York, and Texas, the five States with 

Medicaid beneficiaries. 

... 

111 
We will work with HCFA and the Administration on Aging (AoA) to follow up on issues 

raised in this report in a variety of ways as they relate to Operation Restore Trust. For 

example, we will refer possible cases of fraud and abuse found in this inspection for 

additional review by HCFA and our own audit and investigations units, as appropriate. 

HCFA’S protocol for survey and certification staff to look at mental health services in 

nursing facilities when on-site will be beneficial not only in preventing inappropriate 

payments, but also in improving the quality of services. We will also communicate with 

the Administration on Aging to make the State Ombudsmen aware of possible 

inappropriate or inadequate mental health services. We intend to issue a follow-up report 

providing information specific to the five project ORT States. 

COMMENTS 

The HCFA and the Assistant Secretary for Planning and Evaluation (ASPE) concurred 

with our recommendation. The HCFA details the actions they are taking in response to 

carry it out. The HCFA and ASPE also made suggestions for changes in wording, 

clarifications of the text and technical changes which we have for the most part 

incorporated into the final report. The actual comments received are in Appendix D. 

iv 
TABLE OF CONTENTS 

PAGE 

EXECUTIVE SUMMARY 

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


FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8


� unnecessaryServices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8


. Questionable Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8


. Wrong Procedure Codes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9


. Needed Se~ices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10�

� characteristics of Questio~ble Services . . . . . . . . . . . . . . . . . . . . . . . . . . 12


� vu~erabfiities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14


RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

A: 

. 17 

. . . 

A-1 

B-1 

c-1 

Description ofProcedureCodes. . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 

Sampling and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Non-Respondent Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

B: 

c: 

D: Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..D-l 
INTRODUCTION 

PURPOSE: 

To identify possible vulnerabilities to the Medicare program in the provision of mental 

health services to nursing facility residents. 

BACKGROUND: 

Events in the past few years have focused attention on mental health care for nursing 

facility residents. ~enumber ofnurshg facili& residents witimen~l disorders has 

increased; the Nursing Home Reform Act, which provided new protections for residents 

and sweeping reforms of many aspects of life in nursing homes was implemented; and 

Medicare payments tripled in the wake of an expansion of Part B coverage of these 

services. Many nursing home residents have benefitted from services not previously 

available to them. However, some problems remain. On the one hand, some may not 

getting the care they need. On the other hand, the Office of Inspector General has 

received allegations of abusive practices relating to these services, primarily about 

Medicare being billed for unnecessary or inappropriate services. 

The number of individuals with psychiatric disorders residing in nursing facilities 

surpasses the number in psychiatric hospitals, according to the American Psychiatric 

Association (APA). Recent studies have also shown that psychiatric disorders and 

be 

emotional, behavioral, and cognitive problems are present in a majority of nursing facility 

residents. However, it is difficult to precisely quantify the extent and types of problems 

because these conditions are not always the primary reason for institutionalization, and are 

not always accurately reported in patients’ medical records. 

Reconciliation Act (OBRA) 

The Nursing Home Reform Act 

As a pmt of the Omnibus Budget of 1987, Congress passed 

This expanded requirements 

It focused on each resident’s 

the comprehensive Nursing Home Reform Act (PL 100-203). 

that nursing facilities had to meet for Medicare certification. 

highest potential for physical, mental, and psychosocial well-being with reasonable 

accommodation for individual needs and preferences. The Act mandated that all 

applicants to Medicaid certified nursing facilities and all nursing facility residents must be 

screened to determine whether they have a mental illness or mental retardation, whether 

they need active treatment, and whether they need the level of nursing care provided by a 

nursing facility. This Preadmission Screening and Annual Resident Review (PASARR), 

implemented in 1988, is the screening process used to determine those nursing facility 

residents who need both specialized mental health services and nursing facility care and 

can stay in a nursing facility and those residents that need specialized services, but not 

nursing facility care, and must be transferred to a more appropriate setting unless they 

have lived in a nursing facility more than 30 months and choose to stay. The State is 

responsible for making sure that the residents get the specialized services they need. 
The Nursing Home Reform Act also requires that residents appropriately placed in nursing 

facilities receive a full range of services to address their psychosocial needs and 

behavioral problems. This range of services is not precisely defined, but nursing facilities 

must “conduct standardized, reproducible assessments of each resident’s functional 

capacity... ” within 14 days of admission, if the patient’s condition changes, and at least 

every 12 months to determine the appropriate services. This assessment uses the Resident 

Assessment Instrument which is a multidimensional, clinically focused evaluation tool. It 

provides a basis for identifying problems and developing a resident’s plan of care. The 

instrument has two parts: the Minimum Data Set which is the basis of the resident 

assessment process and the Resident Assessment Protocols (RAPS) which identify the 

residents’ unique problems. This information is used by the interdisciplimry team and the 

resident when developing the resident’s individualized, comprehensive care plan. Seven 

of the 18 RAPs specifically address mental health problems commonly found in nursing 

facilities such as delirium, cognitive loss/dementia, psychosocial well-being, sad and 

anxious moods, behavior problems, psychotropic drug use, and use of physical restraints. 

The Nursing Home Reform Act also mandated the development of regulations constraining 

the use of psychotropic drugs. The Health Care Financing Administration (HCFA) 

regulations state that residents must be free from unnecessary drugs, not be given 

antipsychotic drugs except to treat a specific condition, and be given gradual dose 

reductions. 

Medicare Coverage of Mental Health Services 

As with all Part B Medicare services, covered 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. ” Payment is prohibited for medical services 

that are for prevention, palliation, research or experimentation. In the absence of mtional 

policy, local carriers determine their own policies. 

Services may be provided by different professionals. Medicare defines each of these 

specialties for the purposes of coverage. While psychotropic drugs may be prescribed 

only by a physician, behavioral and psychotherapeutic approaches may be carried out by a 

psychiatrist, a clinical psychologist and/or a clinical social worker. 

While clinical psychologists’ and social workers’ services are covered the same as services 

by a physician, they may only provide those services they are legally authorized to 

perform in their State, Additionally, independent clinical social workers may not bill 

Medicare Part B for services finmished to an inpatient of a skilled nursing facility that the 

facility is required to provide as a Medicare condition of participation. 

Medicare Expanswn of Mental Health Bene@s 

From 1966 until 1988, Section 1833 of the Social Security Act placed a cap on each 

Medicare beneficiary’s psychiatric outpatient costs incurred during a calendar year. Prior 

to 1988, Medicare paid no more than $250 annually for covered outpatient treatment of 

2 
mental, psychoneurotic, or persomlity disorders. This was based on 62.5 percent of a 

maximum of $500 in reasomble charges and subject to a fhrther reduction of 20 percent 

for co-insurance. Charges for initial diagnostic services, i.e., psychiatric testing and 

evaluation to diagnose the patient’s illness, were never subject to this limitation. 

The 1987 OBRA liberalized Medicare Part B coverage of outpatient psychiatric services. 

Beginning in 1988, reimbursement for outpatient psychiatric services increased to $450 

annually, based on 62.5 percent of $900 in reasomble charges and a further reduction of 

20 percent for co-insurance. In January 1989, this was increased to $1100 annually, 

based on 62.5 percent of $2,200 with a 20 percent co-insurance, This legislation also 

expanded Medicare coverage to include therapeutic services directly finmished by clinical 

psychologists, effective July 1988, but covered services were restricted to those furnished 

in certain settings such as community mental health centers. 

The 1989 OBRA further expanded the Part B Medicare psychiatric benefit. It eliminated 

the dollar cap on outpatient psychiatric reimbursement, effective January 1, 1990, 

although the reasonable charges are still reduced by a 62.5 percent limitation and the 20 

percent co-insurance remains in effect. Brief office visits for the sole purpose of 

monitoring or changing drug prescriptions and any partial hospitalization services not 

furnished by a physician were excluded from the 62.5 percent limitation, effective January 

1989. In addition, effective July 1990, direct payment to clinical psychologists can be 

made in all settings and to clinical social workers in most settings. 

fiends in Medicare Reimbursement 

Medicare reimbursement for the five most commonly reimbursed mental health HCPCS 

codes for psychiatrists, clinical psychologists and clinical social workers for all Part B 

services show a 57 percent increase, from $353 million in 1991 to $555.6 million in 1993. 

However, these same codes for the same three provider types for services provided in 

nursing facilities showed a 244 percent increase, from $20.8 million in 1991 to $71.7 

million in 1993. Deftitions of the procedure codes are in Appendix A. 

Concerns About Possible Fraud and Abuse 

During the years prior to liberalization of the outpatient psychiatric benefit in 1988, 

postpayment claims monitoring by HCFA and Medicare carrier staff identified a variety of 

abusive and fraudulent physician practices. Among the most common were those 

involving nursing home and old age home patients, many often incapable of 

communication, whose Medicare accounts were billed for lengthy psychotherapy sessions, 

individual and group. In some cases no service was rendered; in many others a brief visit 

to check and/or adjust drug prescriptions was the actual service. However, outpatient 

psychiatric services were not usually given intense scrutiny by HCFA, presumably 

because of the cap on outpatient reimbursement. 

After three and one-half years of uncapped Part B psychiatric benefits and three years of 

covered clinical psychologist and clinical social worker services, only limited HCFA 

3

review of the mture and extent of these services and the practices of their providers takes 

place. One kind of review that carriers have available is called focused medical review 

which targets more in-depth medical review efforts at claims for items, services or 

providers that present the greatest risk of inappropriate payments. In 1992 and 1993, 

there was minimal Medicare carrier focused medical review of @ese services. However, 

in one identified instance of carrier focused review of psychological testing, the review 

established that the psychological testing conducted in nursing homes by certain clinical 

psychologists was excessive and unnecessary. 

A HCFA-funded Medicare carrier study in Arkansas has been looking at ancillary services 

in nursing facilities. While reviewing beneficiary records, this carrier discovered 

problems involving consultation and psychotherapy services provided by non-physicians in 

nursing facilities. One problem involved clinical psychologists in group practice billing 

for therapy provided by unsupervised non-clinical social workers. After readjudicating 

claims from the group which billed for these services from 1988 to early 1992, the carrier 

has recovered nearly a quarter million dollars and may assess additional overpayments. 

Cases of suspected fraudulent practices involving outpatient psychiatric services have been 

recently identified by carriers and referred to the OIG. An August 1992 OIG fraud alert 

addresses concerns about excessive and fraudulent billing for psychotherapy services 

provided by a clinical psychologist. It reports a pattern of aggressive marketing of 

psychological services to Medicare beneficiaries in certified retirement and nursing 

facilities. 

AARP Public Policy Institute Study 

A 1994 report “Barriers to Mental Health Services for Nursing Home Residents” was 

published by the AARP Public Policy Institute. The goal of the project was to develop 

data about the need of nursing home residents for mental health services, the availability 

of such services, and the barriers to obtaining needed care. 

Policy makers and researchers who contributed to the report agreed that many mentally ill 

nursing home residents would benefit from increased attention from mental health 

professionals. These residents often respond well to short-term interventions. They go on 

to say that mental health services are scarce in nursing facilities because of low Medicare 

and Medicaid reimbursement rates; lirnhs to mental health coverage under these programs; 

and difficulties that facilities face in recruiting mental health professiomls to work in 

nursing homes, 

They concluded that the presence of mental health professionals such as psychiatrists, 

psychologists, psychiatric and geriatric nurses, and clinical social workers in nursing 

facilities is the key to helping residents with mental disorders. They felt that timely 

treatment can forestall further decline and that attracting the necessary mental health 

professiomls to nursing facilities would require improved reimbursement rates and fewer 

restrictions on services, 

4

We based our results on a review of medical records maintained by nursing homes for the


five Medicare codes that were most commonly reimbursed to psychiatrists, clinical


psychologists, and clinical social workers in 1993. We also interviewed knowledgeable


personnel and reviewed pertinent policies and documents.


First, we selected a simple random sample of 540 beneficiary claims from the 1993


HCFA Common Working File which meet certain conditions. The sample consists of


beneficiaries who received any one of five of the six top HCFA common procedure


coding system (HCPCS) services: psychiatric diagnostic interview (90801); psychological


testing with written report (90830); individual psychotherapy, 20 to 30 minutes (90843);


individual psychotherapy, 45 to 50 minutes (90844); and group psychotherapy (90853)


provided in a nursing facility. A more detailed description of these procedure codes is


given in Appendix A. Pharmacologic management and review of medication with no


more than minimal medical psychotherapy (90862) was eliminated from the universe prior


to sampling because that procedure code can only be billed by a medical doctor and not a


psychologist or social worker. All claims by a psychiatrist for an evaluation only were


also omitted. The place of service for all sample beneficiaries was either skilled nursing


facility (SNF) or nursing facility (NF). Although in the course of this study we reviewed


only services billed to Medicare, the beneficiaries may have been Medicaid eligible as


well.


Beneficiary claims in this sample were handled by 33 Medicare carriers who we contacted


to obtain copies of claims in order to identify the nursing facility where services were


provided. Next, we asked the nursing facilities to send us copies of the sample patients’


medical records. We requested: the initial admission evaluation; all mental health


documentation during the patient’s entire stay; and for 1993, all nurse’s notes, medication


orders, physicians’ notes, including consultations; and any patient assessments that were


done.


We selected nursing facility records as the basis of our sampling for several reasons.


First, these records are frequently used by HCFA and its contractors to assess the


appropriateness and quality of care provided to Medicare beneficiaries. In conversations


with HCFA contractors, we were told that they generally rely on records maintained at the


site of service for these purposes. ‘1’hus,they are the primary source of information for


records reflecting care actually delivered to a patient during a stay in a nursing facility.


Second, these records contain a full accounting of all services delivered and thus provide


better documentation from which to assess medical necessity than fragmented provider


based records. Third, nursing facilities, like hospitals, are required to maintain patient


records reflecting the care provided to their patients.


We received 397 (74 percent) of the 540 records requested. We contracted with FMAS,


Inc., a medical review contractor to review the medical records which did not pass the


screens. The screening was done by either the inspection team or FMAS, Inc. screeners.


The instrument used for screening the records was developed by the contractor using


5 
clinical screens generally accepted among mental health care peer review organizations. 

These screens are used for reviewing records for all patients requiring mental health care. 

In developing the screening instrument, the medical review contractor did a literature 

search and talked to people who had leadership roles in their professioml organizations. 

The screening instrument included variables such as the patient’s diagnosis and treatment, 

both medical and psychological, how the mental health treatment was initiated, its goals, 

indications for testing, how the tests are used, the existence of a treatment plan, and any 

changes in the patient’s status after treatment. 

The first listed service in 1993 which was one of the five sampled procedure codes was 

screened against the clinical guidelines in the case screening instrument (397 medical 

records). We will call this the sample service. In forty records documentation was so 

poor they could not be reviewed. Cases failing the clinical screens for this fwst service 

were referred to the contractor’s clinical reviewer of the same provider type as that on the 

claim for fhrther review of all 1993 mental health services (248 medical records). Those 

passing the screens were not reviewed any further (109 medical records). In those 

referred, the medical reviewers determined which services were medically necessary, 

which services were medically unnecessa~ or which were highly questiomble. 

We also selected a random subsarnple, from the sample of 540 claims, of 120 nursing 

facilities in which the sample beneficiaries resided to interview the administrator by 

telephone. We were able to contact 102 nursing facility administrators or their designees 

who were directors of nursing and/or social workers on their staffs to get their views on 

the increased utilization of the mental health benefit, any problems associated with it, its 

impact on nursing facility residents, barriers to services and effects of adding clinical 

psychologists and clinical social workers as Pafi B providers. 

We obtained from the carriers beneficiary histories for each case to determine how many 

and what types of mental health professionals were involved in the beneficizuy’s care and 

how often mental health services other than those sample procedure codes were provided 

in each case. 

We asked all 42 Medicare carriers for their policies, procedures and guidelines for mental 

health services, as well as any related bulletins or provider education materials. We also 

asked about any cases they are developing related to fraud and abuse in mental health 

services in nursing facilities, whether they conduct focused medical review in this area, 

and what their thoughts are on the inspection issues. 

Lastly, we purposively selected 16 carriers from the universe of 42 to include: at least one 

carrier from each of the five Operation Restore Trust States (a total of 6 carriers); and 

another 10 carriers based on their activities in the mental health area and having a 

substantial number of claims in our sample. One or more officials from each of the 

carriers were asked about documentation of claims, complaints, monitoring, barriers to 

services and effects of adding clinical psychologists and clinical social workers as Part B 

providers. 

6

The Chi-square statistic was used to test the statistical significance of differences in 

medical necessity by types of procedures, providers, residents and regions. All 

differences reported are statistically significant at the 95 percent cotildence level. Details 

of this are in Appendix B. The precision for questions in the medical review screening 

instrument and the nursing home administrator questionnaire is reported in Appendix B. 

The cofildence intervals for the estimates in the sample are also given in Appendix B. 

The results of the respondent, non-respondent amlysis are in Appendix C. 

Strengths and Limitti”ons of Methodology 

As discussed earlier, the strengths of this kind of review include: 

�	 the nursing facility record presents a total picture of the patient, with a whole 

range of relevant information regarding the patient’s condition, not just information 

for the particular services under review, and 

�	 the study reflects the level of quality control and payment suppofi available in the 

nursing facility, which is required by HCFA to retain all documentation about the 

patient in the nursing facility record. 

The limitations of relying on the nursing facility medical records include: 

. documentation may not reflect the actual services, 

� documentation may be incomplete or in other ways inadequate, and 

� other relevant documentation available elsewhere is not considered. 

We conducted our review in accordance with the Standards for Inspections issued by the 

President’s Council on Integrity and Efficiency. 

7

FINDINGS 

In 32 Percent of the Records Received, Medicare Paid for Medically Unnecessary 

Services; This Projects to $17 Million, or 24 Percent of All 1993 Medicare Payments 

for Mental Health Services for Nursing Home Residents 

Of the 397 medical records received, 126 contained medically unnecessary services.


Forty-one had all 1993 services unnecessary and 85 had some of the 1993 services


unnecessary.


Medically unnecessary services are those which our medical reviewers concluded were


inappropriate based on information in the medical record concerning the patient’s


condition, need for treatment, and ability to benefit from the treatment. For example, an


85 year old woman with a mental health diagnosis of dementia had weekly billings for


group therapy. The medical reviewer says the notes clearly reflect the patient had no


complaints, no anxiety or depression, and no need for group therapy. Another 85 year


old woman in a different facility with dementia and Parkinson’s syndrome had periodic


billings for longer psychotherapy sessions. The record showed she was unable to


converse and had no understanding due to dementia. One psychologist who saw her stated


that one to one psychotherapy was inappropriate for this patient.


Based on our sample we project that this represents $17 million in 1993 Medicare


payments. This is 24 percent of $71.7 million for all Medicare payments for mental


health services provided to residents of nursing facilities for that year.


In 16 Percent of the Records Received, Medicare Paid for Highly Questionable 

Services; This Projects To $10 Million in Medicare Payments 

In sixty-three records, all services were highly questiomble. Highly questiomble services 

are those where the medical record led the reviewers to raise serious questions about the 

medical necessity of the services, but where the evidence in the medical record was 

insufficient for the reviewers to make a definitive determination. 

For example an 87 year old woman who is confused, cannot hear, and is severely 

demented had weekly billings for group therapy with occasioml longer sessions of 

individual psychotherapy. The medical reviewer felt the patient was in need of 

socialization such as art or movement therapy; but the documentation did not assess how 

she was benefiting from group therapy. Thus he questioned the need for the group 

therapy. An 88 year old man with no mental health diagnosis, but a medical diagnosis of 

seizure disorder and stasis ulcers was billed for weekly short, individual psychotherapy. 

The reviewer questioned this treatment because he could not fmd any reasons for the 

referral to the psychologist and the medical record shows the patient doing very well and 

not in need of psychotherapy. 

8

In another forty records the documentation was so poor they could not be reviewed. 

These forty did not contain enough information for t.he screeners toeven refer the records 

to the clinical reviewers. 

In 30 Percent of the Records, the Wrong Code Appears To Have Been Billed 

Improper Coding 

According to the medical reviewers, in thirty percent of the 225 cases where they had 

enough inforrnationto determine what the correct procedure code should be, the code 

billed appeared tohave been incorrect. Inoverhalf of these cases theservice appeared to 

bemedication maagement witiout anydocumentition ofpsychotierapy, but 

psychotherapy was billed. 

In16percent ofthose with the questionable code, alonger psychotherapy session was 

billed either with no documentation to support the longer time or with the record showing 

a profile of a patient who could not benefit from a longer session. The clinical reviewers 

found it difficult to determine whether brief psychotherapy or longer psychotherapy was 

the appropriate code, since the length of the psychotherapy session was rarely 

documented. 

Often, the clinical psychologist or clinical social worker may evaluate a resident and make 

treatment recommendations to the primary care physician and the nursing facility staff. 

The clinical reviewers say there is no procedure code for a follow-up visit to see how the 

resident is responding to the treatment. They probably use a psychotherapy code even 

though no psychotherapy is performed. Another problem the reviewers mentioned was 

when a clinical psychologist evaluates the resident and refers her/him to a social worker. 

The social worker often does another evaluation and bills for it. The clinical reviewers 

feel this is inappropriate. 

Routine Billing of Additional Codes 

The majority of the beneficiary histories that contained adequate information and could be 

reviewed indicated that no other psychiatric codes or evaluation and management codes 

were billed to the program in addition to the five sample codes. 

However, questionable billing practices were found in some carriers. We found billing 

for a variety of psychiatric codes in addition to the codes in our sample. Depending on 

the carrier, some codes are more popular than others. One carrier in the Northeast had 

psychiatrists billing for initial and follow up consultation codes as well as the evaluation 

and mamgement codes on a frequent basis on each of their patients. Social workers in 

this carrier bill for environmental intervention on the patient’s behalf repeatedly for the 

same beneficiary. All of this is in addition to procedure codes in our sample. 

9

Another carrier had psychiatrists billing the code for medication management more 

frequently than had other carriers. Thk was in addition to billing for psychotherapy 

which includes medication management. 

In other carriers, atypical billing patterns are limited to individuals or groups of providers. 

One such group in the South has the psychiatrist, psychologist, and social workers treat 

patients; and a frequently billed code is evaluation of hospital records as well as the 

medication management code. Another popular code used by a psychologist is the 

interactive diagnostic interview which is designed to utilize physical aids and non-verbal 

communication with patients who have difficulty in communicating. Another Southern 

carrier had a group alternating billing between nursing facility and office for group 

therapy sessions. In some instances, when the bill was denied in one location it was billed 

to the other location and paid. 

The billing practices in some Midwest carriers indicate that psychiatrists are also billing 

for the evaluation and mamgement codes on their patients as well as for the sample codes. 

They also bill for interactive individual psychotherapy more frequently than providers in 

other carriers. 

At the Same Time, Difficulties Remain in Delivering Needed Mental Health Services 

To Beneficiaries 

Some Beneficiaries Are Not Geti”ng Needed Care 

The medical reviewers found some of the patients had billings and were receiving certain 

kinds of services without any benefit when they really would have benefitted from 

different services. One 89 year old woman who had a major depressive disorder and 

would have really benefitted from intensive psychotherapy had irregular and inconsistent 

social work sessions which did not document any benefit. Another 84 year old woman 

with severe dementia who could not converse and was not really capable of making 

changes had billings for psychotherapy when she really required medication management. 

The reviewers also questioned the case of an 85 year old woman who had billings for 

longer psychotherapy sessions once or twice a month with no change when she could have 

benefitted from psychotropic medication which she did not get. 

Seventy-eight percent of the nursing facility respondents cite barriers nursing facility 

residents face in getting needed mental health services. They say there are still areas in 

the country where providers are not available and providers who do not want to go into 

nursing facilities since they are not interested in this type of patient. Some say there is a 

stigma associated with mental health services and patients, or their families refuse needed 

services. At times, the attending physician reportedly feels this way and refines to order 

what nursing facility staff see as needed services. Also noted is a lack of awareness of 

mental health illness on the part of some of the nursing facility staff working with these 

patients. Some nursing facility respondents mention that depression is under diagnosed 

and therefore not treated or sometimes leads to a misdiagnosis of dementia. 

10

Lesser Skilled People Provtiing Services 

In 24 percent of the records it was impossible to determine who provided the services. 

Either there was not enough documentation to tell or the person who signed the record 

could not be identified. In these services where we could not identify the provider, the 

person who submitted the claim was usually a psychiatrist (41 percent) or clinical 

psychologist (34 percent) and a lesser skilled person could well have provided the service 

because there were often no credentials after the name. Although Medicare permits this 

through “incident to billing, ” it is not clear that the professioml who bills the service is 

actually in the nursing facility supervising while the service is being delivered as required. 

Thirty-eight percent of the carriers cited problems around services given “incident to. ” 

The clinical reviewers also expressed concern about the effectiveness of a lesser skilled 

person performing psychotherapy. They reported that in many cases when the provider 

type submitting the bill was a psychiatrist or clinical psychologist, the record was clearly 

documented that the service was performed by another provider type. This included but 

was not limited to a person with a Bachelor of Arts (BA), a social worker (with or 

without licensing credentials), and a nurse (with or without nurse practitioner credentials). 

The reviewers consider this practice inappropriate. Typical of this was an 84 year old 

woman with a diagnosis of depression who had billings for four hours of psychological 

testing. The reviewers found that person with a BA degree administered the tests and feel 

that a psychologist would not be allowed by the State licensing board to delegate 

responsibilities in this way. 

In some cases the name of the clinical psychologist who submitted the bill was 

documented in the medical record as an M.A. or Ed.D. rather than a Ph.D. Some 

carriers have questioned the carrier process of giving out provider numbers and whether 

people without proper qualifications are billing Medicare. 

Clinical Psycholo@”stsand Clinical Social Workers Seen as Beneficial 

Perhaps due, in part, to the lack of qualifications and the shortage of social service staff, 

seventy percent of nursing home respondents see a beneficial effect and sixty-four percent 

view patients as better off since clinical psychologists and certified social workers can bill 

Medicare independently. A psychologist in our sample treated a 94 year old resident for a 

major depressive disorder with suicidal ideation. The reviewer indicated that the 

psychotherapy was necessary and the notes were comprehensive and helpful. 

Most of the nursing home respondents (70 percent) say that allowing clinical psychologists 

and certified social workers to bill Medicare Part B independently has had a beneficial 

effect on providing mental health services in nursing facilities. These respondents feel it 

has provided better access to mental health services, and that clinical psychologists and 

social workers are more available than psychiatrists and are now more willing to come 

into nursing facilities now that they can get paid. They say that this, in the end, provides 

better patient care. Almost two-thirds (64 percent) say that patients are better off now, 

since they are getting necessary treatment. 

11 
The carriers generally agree. Sixty-three percent see some positive results from adding 

clinical psychologists as Medicare providers and 44 percent see some benefit from adding 

social workers. 

Certain Types of Procedures, Providers, Residents, and Regions Are More Likely 

Than Others To Be Associated with Unnecessary and Questionable Services 

Psycholo~”cal Testing and Group l%erapy 

Seventy-nine percent of psychological testing and group therapy were found to be 

medically unnecessary or questionable as compared to 47 percent of evaluation and 

individual therapy. If we separate all the procedures, eighty percent of the psychological 

testing and three quarters of group therapy were found to be umecessary or questionable. 

However, the longer individual psychotherapy (59 percent,) evaluations (46 percent,) and 

brief individual psychotherapy (39 percent) still had excessive rates of questionable and 

unnecessary services. These rates for testing, group therapy, and the longer individual 

psychotherapy are all higher than the average rate of 53 percent for all types of services. 

An example of unnecessary testing is the case of a 91 year old man admitted to a nursing 

home with terminal cancer who died within a month of admission. A psychologist billed 

for many hours of testing. The clinical reviewer questioned the need for testing this 

resident who had been admitted to the nursing facility to spend his last weeks. 

Psychological testing was poorly documented with often no evidence of the actual tests in 

the record. Testing was often billed when rating scales were administered as opposed to 

those tests referred to in the CPT manual as psychological testing. The clinical reviewers 

feel that clarification should be provided concerning the appropriate procedure code to use 

for these rating scales, such as the Beck Depression Inventory or the Geriatric Depression 

Inventory. These rating scales may not require the same highly specialized administration 

and scoring as intellectual, persomlity, memory or neuropsychological tests. The 

questions on rating scales are generally self-explanatory and they are usually scored by 

totaling relevant response options. 

Half of the carriers feel that group therapy is a problem; they point to services billed for 

recreatioml and socialization activities. Some carriers also mention each of the other 

services as problematic. 

The reviewers noted that some of the group therapy sessions claimed were groups like the 

“tea time group” or the “wake up” group which appeared to be more appropriately social 

groups rather than psychotherapy. 

Clinical Psycholo~”sts and Clinical Sociul Workers 

Among the various provider types, clinical psychologists and clinical social workers had 

the highest percentage (61 percent) of unnecessary and questiomble services billed to 

12

Medicare. Incomparison, 46percent ofpsychiatiisfi' billkgs were eitier questionable or 

unnecessary. 

Forexarnple, apsychologist billed for 10units oftestingofa78 year oldman witha 

diagnosis of dementia and there was no indication in the record as to why the patient was 

tested, and no test report or even a brief report of the findings in the record. The 

reviewer questioned the need for the testing and said a mental status exam or 

psychological evaluation would have been appropriate. 

About two-fifths of the carriers reported “excessive entrepreneurialism, ” particularly 

among psychologists. They were generally less likely to see these problems with social 

workers. Also, half of the nursing facility respondents mention the marketing practices by 

groups of mental health workers to their facilities. 

Residents Over 85 

The “old, old” were most likely to have unnecessary or questionable services. Sixty-two 

percent of the residents 85 and older had such services compared to 47 percent of those 

under 85. Only 29 percent of those under 65 had unnecessary or questionable services. 

A sample case was that of a 100 year old with senile dementia who was seen by a 

psychiatrist in group therapy for 6 months. For service on the sample date, the resident 

did not attend because of medical reasons, but the bill was submitted. The reviewer was 

umble to determine a clear indication of any mental illness and because the resident had 

severe dementia, the reviewer questioned the benefit of therapy. 

Dementia 

Those residents with a mental health diagnosis of some sort of dementia, including 

Alzheirner’s disease, were more likely (58 percent) to receive questiomble or unnecessary 

services than those with other diagnoses (45 percent). An example is a 97 year old with 

Alzheimer’s disease who was seen for individual psychotherapy weekly, for 12 months. 

The reviewer indicated that this patient did not need weekly therapy sessions. He felt 

social activities at the facility would have been helpfil with occasioml therapy sessions 

once or twice a month. 

The South 

Nursing facilities in the South (61 percent) were somewhat more likely than the rest of the 

country (49 percent) to have umecessary or questiomble services. However, the 

Midwest and the West each had more than half (56 percent) of their services umecessary 

or questionable. Only the Northeast had less than the natioml average with 41 percent of 

unnecessary and questiomble services. Some States within each region had a majority of 

their services either unnecessary or questiomble. 

A number of providers treated multiple patients in the sample. Half of these providers 

were from the South. Eighty-one percent of these providers had unnecessary or 

13 
questionable services. They were often members of groups that had different disciplines 

treating patients in a number of different nursing facilities or treating a number of patients 

in the same facility. 

Many Factors Make Mental Health Service Billings Vulnerable To Abuse 

Luck of Physician Involvement 

The clinical reviewers noted that a common practice in the records was to see physician 

orders for psychiatric, psychological, or mental health services on an “as needed” or 

“pm” basis. An example is a 78 year old man with dementia who had 10 units of 

psychological testing. The reviewer saw no reason for the testing and could not fmd who 

referred the patient. However, there was a standing order in the record for “psych 

services as needed. ” They also question the appropriateness of these services. The 

reviewers recommend that physician orders for these services be based on each patient’s 

individual needs, and that routine standing orders for these services be discouraged or not 

allowed. 

Seventy-eight percent of the nursing facility respondents said that a physician’s order was 

required before any mental health services could be performed. They said that if someone 

else in the facility or a family member requested mental health services, the attending 

physician had to be consulted ‘and write the request. We found that 58 percent of the 

sample services had referrals by the primary care physician. Even in many of those cases 

there were standing orders which did not necessarily address the specific needs of the 

individual patient. However, in over a third of the records the reviewers could not 

determine who referred the patient 

Impediments To Social Service Staff Involvement 

Most of the nursing facilities contacted (85 percent) have a social service staff which 

varies in size. The educational background of staffs also varies fkom that of a high school 

graduate with no mental health educational background to a Doctorate in Social Work with 

many Bachelor and Masters level social workers in between. They usually provide 

supportive services or counseling (75 percent), take part in the psychosocial assessment 

(47 percent) and provide other services as needed to help the residents and families adjust 

to the nursing facility. 

The nursing facility respondents say that the social service staff are burdened by 

paperwork. They say that even when their social service staff is qualified to provide 

psychotherapy, they do not have the time. One nursing facility administrator said, 

“Mental Health services could be provided in house by most facilities if the social worker 

were not so burdened by paperwork. The social worker doesn’t have time and 

psychological services are not in the Medicaid rate. ” 

14

Missing Treatment Plans 

Twenty-eight percent of the records for patients receiving psychotherapy had no treatment 

plan, while another 22 percent of records of those receiving therapy or testing did not 

show whether the plan was carried out, In 43 percent of the records we could not 

determine if any goals were met. Only 15 percent of the records included the PASARR. 

The lack of treatment plan and goals make it difficult to measure a patient’s progress 

and make appropriate adjustments during a course of treatment. It also makes it more 

likely for a provider to provide services without need. 

tick of Utilization Guidelines 

Carriers have difficulty denying services when they have no clear guidelines or utilization 

parameters. It is not cost effective to review services on a case by case basis. A quarter 

of the carriers pointed to lack of either clear HCFA guidelines or clear definitions of 

medically necessary mental health services and who may provide them. One carrier 

mentioned that the same provider is dealt with differently by different carriers. This is 

supported by the documents we received from the carriers as well. This is also supported 

by the medical review, where the variation in coverage of services is reflected in billings 

and inappropriate payments. 

Luck of Carrier Policies and Screens Specific To Nursing Facilities 

Almost all carriers have policies and procedures about outpatient mental health services; 

however, we found that only three have any policy specific to nursing homes. 

Three-quarters of the carriers have screens or edits relating to mental health services in 

general, but few have any that relate specifically to mental health services in a nursing 

facility. Of those carriers that have screens, 61 percent have a screen which prevents 

evaluation and management services and psychotherapy on the same day and/or 

medication management on the same day as psychotherapy. Two carriers have a screen 

for certain diagnoses such as dementia or Alzheimer’s Disease. The provider must 

document the medical necessity of the service. 

The majority of carrier respondents report using screens and edits, requiring additioml 

documentation, periodic reviews such as focused medical reviews, monetary settlements, 

referrals to investigative agencies, special reviews, and education and interagency 

coordination to ensure appropriate payment. They are beginning to give attention to these 

services in nursing facilities. 

The clinical reviewers often questioned the need for the high frequency of the services 

provided in the records reviewed. They wondered whether there should be screens for 

more than one evaluation in a period of time without a documented change in the patient’s 

status and they questioned the large number of individual and group psychotherapy 

sessions provided per week, sometimes more than one a day. 

15 
All but three carriers sent us educational material, but generally not specific to nursing 

facilities. Eigh&-sk percent send bulletti ornewsletiers toclfical psychologisG~d 

certified social workers which include information about payment. One carrier has a 

manual specific to mental health services. Forty-three percent of the carriers have 

seminars or workshops which include information about mental health services. one 

carrier mentioned that they meet with the psychological association quarterly to discuss 

concerns and issues. 

difficulty Identifying P~”ents’ Nursing Facilities 

In 30 cases we were unable to identify the nursing facility to request the records. In 

many other cases we used a comprehensive nursing home computer file to find the name 

of the facility when only an address was available. The mailing address of the beneficiary 

on the top of the hard copy claim form often does not include the name of the nursing 

facility, nor is it listed on the bottom of the form as the facility where services are 

rendered. On electronic claims it is even more difficult to identify the nursing facility 

where the beneficiary resides. Not being able to determine the facility where the 

beneficiary resides, it is then impossible to retrieve the records to review to determine 

unnecessary or questionable services in a nursing facility. 

16

RECOMMENDATION 

HCFA needs to take steps to prevent inappropriate payments for mental health services in 

nursing facilities. The challenge lies in ensuring the integrity of Medicare payments while 

promoting the delivery of needed care. There probably is no one simple solution. 

Instead, a battery of carefi,llly applied remedies is needed. 

Based on the nature of the problems that we identified, we suggest the following 

approaches that HCFA, in concert with the carriers, might take: 

� Develop guidelines for carriers with delineation of exactly what the psychiatric 

procedure codes mean, what can be billed for, who can bill, and how often; 

� Develop screens to implement these guidelines; 

� Conduct focused medical reviews; 

� Provide educational activities to providers of mental health services; 

� Clari@ who can provide services incident to physician or clinical psychologist 

services; 

� Assure that the nursing facility provider number and name is on all claims for 

patients in nursing facilities; 

� Clarify the requirements needed to become an independent mental health provider; 

� Identify and disseminate information about effective ways to help residents adjust 

quickly to the nursing facility to prevent the need for later clinical intervention; 

and 

�	 Convene a group of medical professionals to develop best practices in documenting 

the nursing facility medical record and provide guid-mce to nursing facility -

professionals. 

OPERATION RESTORE TRUST STRATEGIES 

This inspection is a part of a Department of Health and Human Services anti-fraud 

initiative called Operation Restore Trust designed to target fraud, waste, and abuse related 

to home health agencies, nursing homes, and durable medical equipment suppliers. This 

initiative targets California, Florida, Illinois, New York, and Texas, the five States with 

the highest number of Medicare and Medicaid beneficiaries. 

We will work with HCFA and the Administration on Aging (AoA) to follow up on issues 

raised in this report in a variety of ways as they relate to Operation Restore Trust. For 

example, we will refer possible cases of fraud and abuse found in this inspection for 

additional review by HCFA and our own audit and investigations units, as appropriate. 

HCFA’S protocol for survey and certification staff to look at mental health services in 

nursing facilities when on-site will be beneficial not only in preventing inappropriate 

payments, but also in improving the quality of services. We will also communicate with 

the Administration on Aging to make the State Ombudsmen aware of possible 

inappropriate or inadequate mental health services. We intend to issue a follow-up report 

providing information specific to the five project ORT States. 

17 
We received comments on the draft report from HCFA and the Assistant Secretary for 

Planning and Evaluation (ASPE). They concur with our recommendation. They also 

provided suggestions for changes in wording, clarifications of the text and technical 

changes which we have for the most part incorporated into the fiml report. The actual 

comments received are in Appendix D. 

The HCFA agreed with our suggestion to clarify who can provide services incident to 

physician or clinical psychologist services. However, they believe that they should ensure 

that only those individuals who bill meet the required qualifications, fulfill all the 

requirements under the “incident to” benefit, and assume responsibility for the services 

furnished by their auxiliary personnel. WMe we agree with that, we also believe that 

clarification of this requirement should be expanded to require that the direct provider of 

the service, not only the biller, meets certain qualifications. The performance of mental 

health services, such as psychotherapy and psychological testing, requires a certain skill 

level to be safe and effective. 

The HCFA did not agree with the need to assure that the nursing facility provider number 

and name are on all claims for patients in nursing facilities. They do not see how 

requiring this can help Medicare contractors make determinations about appropriateness of 

the services. They also say that Medicare already requires that providers record the 

address if the place of service is other than “home” or “office.” They feel it would be a 

needless additioml burden on the provider to obtain and record provider numbers of the 

facility. We understand that contractors do not need this information to make medical 

necessity determinations on a case by case basis. We believe, however, that the site of 

service, that is the nursing facility name, address and provider number, is important for 

contractors and others using Medicare data to know. During the course of this inspection 

we found that providers did not record this information on Medicare claims in a 

systematic way. However, it is necessary information for any kind of proactive trend 

analysis; to detect whether services are part of the nursing facility inclusive rate; and/or to 

do any site of service comparisons. In this study it was necessary to collect the nursing 

facility medical record. This was difficult since the nursing home name was ofien 

missing. 

The HCFA also offered several technical comments. They are concerned about an over 

reliance on medical doctors making decisions about the delivery of mental health services 

since they say that medical doctors may have no expertise in the diagnosis and treatment 

of mental health problems. The HCFA also says that many geriatric nurses and social 

workers may have extensive training and experience in providing mental health services 

for this population; and that as long as individuals are practicing within the scope of their 

State licensing laws, claims should not be denied on the basis of credentials alone. We 

agree with this in principle, but this did not always appear to be the case in the records 

we reviewed. We did not, however, question any claims on the basis of credentials alone. 

The peer review determinations were done on the basis of necessity of the services 

rendered. 

18

The HCFA was also concerned that we did not address the possible over utilization of 

psychoactive medications in the nursing home population. Although we do have data 

about the psychoactive medications the residents in our sample were taking, decisions 

about the appropriateness of these medications was not within the scope of this inspection. 

Finally, the HCFA believes that our recommendations should be strengthened in regard to 

enforcement since some of the practices described are clearly fraudulent. We agree with 

this need for strong enforcement. We will be referring all of the unnecessary and 

questiomble cases and those without enough information to the appropriate agency for 

further development and to our Office of Investigations when appropriate. 

19

APPENDIX A


DESCRIPTION OF PROCEDURE CODES 

90801� Psychiatric diagnostic interview, examination including history, mental 

status, or disposition (may include family or other sources, ordering and 

medical interpretation of laboratory, or other medical diagnostic studies in 

lieu of the patient). 

90830 Psychological testing by physician, with written report, per hour. 

90843� Individual medical psychotherapy by a physician with continuing medical 

diagnostic evaluation, and drug management when indicated, including 

insight oriented behavior modifying or supportive psychotherapy, 

approximately 20 to 30 minutes. 

90844 Individual psychotherapy approximately 45 to 50 minutes. 

90853	 Group medical psychotherapy (other than of multiple family group) by a 

physician, with continuing medical diagnostic evaluation and drug 

mamgement when indicated. 

A-1

APPENDIX B 

SAMPLING, PROJECTIONS, CHI-SQUARE VALUES AND PRECISION 

Sampling 

A simple random sample was drawn for this inspection. The sample frame was the 

population of Medicare beneficiaries who in 1993 had one of five mental health codes in 

the HCFA Common Procedure Coding System (90801, 90830, 90843, 90844, and 90853) 

with the place of service being a nursing facility or skilled nursing facility . We excluded 

any beneficiary who had claims only for HCPCS 90801 billed by a psychiatrist. This left 

a total of 1,332 beneficiaries. We then randomly sampled 540 of the 1,332 beneficiaries. 

We requested the nursing facilities to send us the medical records for these beneficiaries. 

We received 397 records, a response rate of about 75 percent. Based on our analyses, 

these 397 fell into the following three groups: 

1)� 109- Passed the initial screening of the first service in 1993 by screeners 

from FMAS, Inc. (the contractor) or by the inspection team and 

were not referred for fiu-ther review; 

2)� 248- Were referred to contractor reviewers to review all 1993 services; 

and 

3) 40- Did not have enough documentation to review. 

For the 248 records reviewed by the contractor for all 1993 services, the four outcomes 

were as follows: 

1) 59- All services were medically necessary; 

2) 41- All services were medically unnecessary; 

3)� 85- Some of the services were medically necessary and some medically 

unnecessary; and 

4)� 63- AU services were highly questiomble with respect to medical 

necessity. 

Projections 

Two projections of cost savings to the universe of 1,332 beneficiaries from which the 

sample was drawn were calculated based on the 189 records identified by the contractor as 

containing unnecessary or questiomble services among the 248 records reviewed. The 

frost projection in Table B1 below was based on categories 2 and 3 above (including the 

all or some medically unnecessary services) and on a sample size of 248. The second 

projection was based on the highly questionable, and using the same sample size. 

B-1

The table below presents two projections. 

Table B1 

Projections of Cost Savings For Five HCPC Codes 

Basedon Unnecessary or Highly Questionable Services 

Service Outcomes 

1) All or some services medically 

unnecessary (n= 126) 

2) All services highly 

questionable (n=63) 

Sample 

Size 

248 

248 

Weighted 

Projections 

$16,674,667 

$10,304,993 

Boundaries for 95 

% Coni3dence 

Interval 

+/- $4,447,227 

+/- $3,631,827 

The dollar amount is a conservative estimate because there were cases where we could not 

determine the exact dollar amount; in which case we did not include any amount. 

B-2

Chi-Square Values 

We computed chi-square values for differences in unnecessary and/or questionable 

services for each of the five variables on which such differences are reported in our 

findings. Chi-square values show that differences on all five variables were significant at 

the 95 percent confidence level. 

Table B2 

CHI-SQUARE Values for Testing Significance of Differences 

in Unnecessary and/or Questionable Services for Procedure, 

Provider, Age, Didgnosis, and Re@”on 

VARIABLE 

Procedure 

Provider 

Age 

Diagnoses 

Region 

*Degrees of Freedom 

Precision 

DF* I CHI-SQUARE II 

1 I 21.712 II 

1 3.958 

Response rates on individual items in the medical record screening document varied from 

item to item. Except where otherwise specified, the number of items are equal to the 357 

records reviewed. We can conservatively estimate that the measured precision of the 

results for categorical questions is no more than 4.8 percent at the 95 percent conlldence 

level. 

Some items only applied to a portion of the sample. In those cases the precision ranged 

from 5.2 percent to 8.7 percent. only one case was out of the range at 11.8 percent. 

The number of responses to individual questions in the nursing home administrator’s 

questionnaire varied from a low of 89 to a high of 102. Taking the low value of 89 as the 

sample size, we can conservatively estimate the measured precision of the survey results 

for the categorical questions as 10 percent, at the 95 percent confidence level. 

B-3

APPENDIX C 

ANALYSIS OF RESPONDENTS AND NON-RESPONDENTS 

An important consideration in surveys of t.his type is the bias that may be introduced into the 

results if non-respondents differ from respondents to the survey instrument. For this 

inspection, a beneficiary whose medical record was not obtained or was incomplete is a nonrespondent. To test for the presence of any bias, we f~st obtained information from the 

Common Working File (CWF) for all 540 beneficiaries whose medical records were 

requested, including both respondents and non-respondents. There were 183 nonrespondents, including 143 beneficiaries for whom we received no records and another 40 

with incomplete records. The remaining 357 beneficiaries for whom complete records were 

received are our respondents. 

We found the following four variables related to unnecessary or questionable services among 

respondents: type of service (psychological testing and group therapy vs, evaluation and 

individual therapy), type of provider (psychiatrist vs. psychologist and social worker), age 

group (under 85 vs. 85 and older), and region ( the South vs all other regions.) Differences 

between respondents and nonrespondents for each of these four variables were tested for 

significance using Chi-square with the appropriate degrees of freedom. 

The results of this analysis are presented in tables C 1-4. The Chi-square values given in the 

tables provide a test of significance for the differences in the distribution of respondents and 

non-respondents for each variable of interest. Also provided in the tables are the response 

rates for the different values of the variables. 

These tables show a statistically significant difference between respondents and nonrespondents with respect to age and region. We therefore estimated the effect of these 

differences on our original findings. Assuming the non-respondents 85 and older would have 

had the same rate of unnecessary and questiomble services as respondents 85 and older, the 

percent of such services for the study universe of beneficiaries from whom the sample was 

selected would have decreased only slightly from 52.94 percent to 52.41 percent. This 

change is very minor and well within the bounds of our conildence interval. 

We also estimated the effect of the difference between the percent of respondents and 

nonrespondents by region. Assuming that the non-respondents from each region would have 

had the same rate of unnecessary or questionable services as respondents from the same 

regions, the percent of such services for the study universe would have increased very 

slightly from 52.94 percent to 53.73 percent, This change is also minor and well within the 

bounds of our contldence interval, therefore not differing significantly from-the percent 

found among our respondents. In summary, our analysis of key characteristics of nonrespondents indicates that our original results are not biased due to their non-response. 

c-1 
Table C (1 - 4)


CHI-SQUARE Values for Testing Significance of Differences


Between Respondents and Non-Respondents For


(1) ~pe of Service, (2) ~pe of Provider,


(3) Age and (4) Region 

(1) TYPE OF SERVICE 

Respondents Non-respondents Total Percent 

66 (18%) 37 (20%) 103 64% 

291 (82%) 146 (80%) 437 67% 

357 183 540 66% 

Psych Testing & Group 

Therapy 

Evaluation & Individual 

Therapy 

All Services 

CHI-SQ=.235


Degrees of Freedom = 1


Psychiatrist


Clinical Psychologist


Clinical Social Worker


Nurse Practitioner


All Providers *


CHI-SQ= .684


Degrees of Freedom = 3


(2) TYPE OF PROVIDER


Respondents


160 (48%)


133 (40%)


34 (lo%)


8 (2%)


335


Non-respondents 

74 (45%) 

71 (43%) 

16 (10%) 

3 (2%) 

164 

Total Percent 

234 68% 

204 65% 

50 68% 

11 73% 

499 67% 

* The above totals are less than the previous totals due to the elimination of some categories 

that were very small (such as nurse specialist) and some that could not be determined. 

c-2 
Table C (Continued) 

Respondents 

85 or older 138 (39%) 

< 85 219 (61%) 

All Ages 357 

CHI-SQ=5,56*


Degrees of Freedom = 1


*Significant at the .982 level


, 

Respondents 

Northeast 107 (30%) 

Midwest 95 (27%) 

south 112 (31%) 

West 43 (12%) 

(3) AGE 

Non-respondents 

52 (28%) 

131 (72%) 

183 

(4) REGION 

Non-respondents 

26 (15%) 

52 (29%) 

63 (35%) 

38 (21%) 

Total Percent 

190 73% 

350 63% 

540 66% 

Total Percent 

133 80% 

147 65% 

175 64% 

81 53% 

I


All Regions 357 I 179 I 536 I 66% 

CHI-SQ=18.911*


Degrees of Freedom = 3


*Significant at the .999 level


c-3 
APPENDIX D 

COMMENTS ON THE DRAFI’ REPORT 

In this appendix, we present in full the comments from the Health Care Financing 

Administration and the Assistant Secretary for Planning and Evaluation. 

D-1

�

*S* wcl,,o +F 

*4 G 

:* . DEPARTMENTOF HEALTH& HUMAN SERVICES Health Care Financing Administration 

; 

8 

“+ -g 

‘+~8,,w > The Administrator 

Washington, D.C. 20201 

DATE: lt4R2219$J5 

TO: June Gibbs Brown 

Inspector General 

FROM: Bruce C. Wade . W 

Administrator %“ \ 

SUBJECT:	 Office of Inspector General Draft Report: “Mental Health Services In 

Nursing Facilities,” (OEI-02-91-O0860) 

We reviewed the subject draft report which discusses possible vulnerabilities to the


Medicare program in the provision of mental health services to nursing facility residents.


Our detailed comments are attached for your consideration. Thank you for the


opportunity to review and comment on this report. Please contact us if you would like to


discuss our comments tier.


Attachment / 

.. . - ....- ~._.---. .-
Health Care Financing Administration (HCFA) Comments 

On Office of Inspector General Drafl Report: 

“Mental Health Services in Nursi.ruzFacilities.” 

0EI-02-91-O0860 

OIG Recommendation 

HCFA needs to take steps to prevent inappropriate payments for mental health services in 

nursing facilities. There probably is no one simple solution. Instea~ a battery of 

carefidly applied remedies are offered. 

HCFA Response 

We basically agree with this premise and offer the following comments on each 

approach. 

Apuroach 1 

Develop guidelines for camiers with delineation of exactly what the psychiatric procedure 

codes meq what can be billed for, who can b~ and how often. 

HCFA Res~onse 

We agree that there is a need for a clear delineation of the psychiatric procedure codes, 

and in fac$ such a system exists under the Physician’s Current Procedural Terminology 

coding system. Accordingly, HCFA does not believe there is any need for fhrther 

definition of these procedure codes or duplication of the American Medical Association’s 

efforts. We also agree that clear distinctions are needed when it comes to the what who, 

and intend to discuss these issues in detail in the final rule, Medicare Coverage and 

Payment of Clinical Psychologists, other Psychologis~ and Clinical Social Worker 

Services. Regarding the frequency of coverage we understand that the 

Psychiatry/Psychology Carrier Medical Directors’ workgroup is developing model 

medical review policies that would establish medical review guidelines to help determine 

whether the frequency of services rendered to patients is reasonable and necessary based 

on their diagnosis and/or treatment plan. 
Page 2 

Amxoach 2 

Develop screens to implement these guidelines. 

HCFA Response 

We will develop the proper screens for Medicare contractors to implement the final 

guidelines. 

Approach 3 

Conduct focused medical reviews. 

HCFA Response 

We agree that focused medical reviews will limit payments for inappropriate services, 

and Medicare contractors are now conducting these on mental health services. 

Amxoach 4 

Provide educational activities to providers of mental health services. 

HCFA Res~onse 

We concur. Once model policy becomes available to all contractors (or HCFA revises its 

own policyhstructions), contractors will no@ providers of the new policy and its 

requirements. 

Approach 5 

Clari& who can provide services incident to physician or clinical psychologist services. 

HCFA Response 

We concur. Since the statutory benefit allOWSonly certain qualified individuals to bill for 

the services of their employees as if they had fbrnished the services themselves, HCFA 

believes that it should ensure that these individuals who bill meet the required 

qtications, fu.Mll all the requirements under the “incident to” benefig and assume 

responsibility for the services fhrnished by their auxilky personnel. 
Page 3 

Approach 6 

Assure that the nursing facility certification number and name is on all claims for patients 

in nursing facilities. 

HCFA ResDonse 

We disagree. We do not see how requiring a provider to record on the claims form the 

certification number of the nursing facihty in which the beneficiary resides can help 

Medicare contractors make determinations about the appropriateness of the services. 

Medicare already requires that providers record the address if the place of service is other 

than “home” or “office.” It would be a needless additional burden on the provider to 

obtain and record certification numbers. 

Approach 7 

Clari@ the requirements needed to become an independent mental health provider. 

HCFA Response 

We agree that there is some confbsion about who can quali& as a clinical psychologist 

(Cp) while the statute is quite clear about the requirements for clinical social workers 

(CSW). A final rule which is currently under development will refine the CP 

qualifications that are in place under manual instructions and those proposed in the notice 

of proposed rulemaking on the CP benefit. The qualifications in the final rule will take 

into account the extensive public comments as well as numerous inquiries that HCFA has 

received about the CP definition and establish a precise definition. 

AuProach 8 

Identi& and disseminate information about effective ways to help residents adjust quickly 

to the nursing facility to prevent the need for later clinical intervention. 

HCFA Response 

We agree. 
Page 4 

Amxoach 9 

Convene a group of medical professionals to develop best practices in documenting the 

nursing facility medical record and provide guidance to nursing facility professionals. 

HCFA Response 

Components of HCFA have recently worked with various medical societies to develop 

documentation guidelines for evaluation and management codes. We will continue our 

work in this effort. 

Technical/General Comments 

1. There is an inaccurate statement contained in the second fidl paragraph on page 3 

of this report. The statement reads, “In additio~ effective July 1990, direct 

payment to clinical psychologists and clinical social workers can be made in all 

settings.” While direct payment may be made to CPS in all settings, the law 

excludes the provision of direct payment to CSWS for services fhrnished to 

inpatients of a hospital or those services fhrn.ished to inpatients of a skilled nursing 

facility that the facility is required to furnish in order to participate in Medicare. 

Accordingly, the correct wording is that direct payment to CPS can be made in all 

settings and to CSWS inmost settings. 

2.� We are concerned about what maybe an over reliance on medical doctors in 

making decisions about the delivery of mental health services (e.g., “Lesser Skilled 

Persons Providing Services”, pg. 11 and “Lack of Physician Involvement?’, 

pg. 14.) Medical doctors may or may not have expertise in the diagnosis and 

treatment of mental health problems, particularly relating to the geriatric 

population. Many geriatric nurses and social workers, for example, may have 

extensive training and experience in providing mental health services for this 

population. As long as individuals are practicing within the scope of their state 

licensing laws, claims should not be denied on the basis of credentials alone. 

3. While we concur that depression is probably under diagnosed in the nursing home 

population an~ therefore, under treate~ we are concerned that the report makes 

no mention of over utilization of psychoactive medications. (See “Some 

Beneficiaries Are Not Getting Needed Care”, pg. 10.) It is our experience that 

these medications are often used inappropriately for residents who are bothersome 
. 

Page 5 

to staff or other residents, rather than attempting less intrusive treatments which 

have proven effective for many individuals. Ag@ this relates to approach 2 

above, since general practitioners may not have the expertise dealing with mental 

health problems in tl& population an-~ therefore, reso~ to psychoactive 

medications as the first response to people with behavioral difficulties. 

4.� Finally, while we agree with the educational approach taken in the 

recommendations, we believe the recommendations could be strengthened in 

regard to enforcement. Some of the practices described in the report are clearly 

fraudulent. We, therefore, would like to see some specific recommendations as to 

how those cases might be more aggressively pursued. 

— 
�

,.., 

---

,*%S**l-* 1,,, 

A+ 

,* DEPARTMENTOF HEALTH& HUMAN SERVICES office of the Secretary 

2 

;

% 

*+

Jg

%ztiam Washington, D.C. 20201 > 

. . s .:,- J.# 

:j,, s .+~


>
 (3’ ~ ;.-l
 rllc TO: June Gibbs Brown ~ -.(; - 9

,,? 

Inspector General� 1: z:. u .: /“. ­ ;..:,- q-j ;-j 

FROM: Assistant Secretary for 1-,

./

,: @ 

Planning and Evaluation :

~� a ., m

SUBJECT: OIG Draft Report, “Mental Health Services in Nursing Facilities” 

L&oz+” @UO 

This office has reviewed and concurs with the OIG draft report entitled “Mental Health Services 

in Nursing Facilities.” Staff had the following minor comments and recommendations which 

were shared with OIG staff on March 4, 1996. 

1).� Clari@ that the scope of the report applies to both Medicare and Medicaid, skilled 

nursing facilities and nursing facilities. 

2).� Include in the Background Section of the report information on payment methodologies 

for mental health professionals. 

3).� Clarify (perhaps through a footnote) the rationale for the 62.5% limit on Medicare 

payments for mental health services. 

4).� Ensure that appropriate staff at the Substance Abuse Mental Health Services 

Administration were consulted for input into this report. 

/q(+.; ,f/J$J_up_ 

Peter B.&delma.n d