Department of Health and Human Services


OFFICE OF 

INSPECTOR GENERAL 

MEDICARE PAYMENTS 


FOR 2003 PART B MENTAL HEALTH 


SERVICES:


MEDICAL NECESSITY, DOCUMENTATION, 


AND CODING


Daniel R. Levinson


Inspector General 


April 2007


OEI-09-04-00220

Office of Inspector General 
 http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of 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 are intended to provide independent 

assessments of HHS programs and operations. These assessments help reduce waste, 

abuse, and mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on 

significant issues. Specifically, these evaluations focus on preventing fraud, waste, or 

abuse and promoting economy, efficiency, and effectiveness in departmental programs. 

To promote impact, the reports also present practical recommendations for improving 

program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 

and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 

convictions, administrative sanctions, or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. OCIG imposes program exclusions and civil 

monetary penalties on health care providers and litigates those actions within HHS. 

OCIG also represents OIG in the global settlement of cases arising under the Civil False 

Claims Act, develops and monitors corporate integrity agreements, develops compliance 

program guidances, renders advisory opinions on OIG sanctions to the health care 

community, and issues fraud alerts and other industry guidance. 
Δ EXECUTIVE SUMMAR Y 

OBJECTIVE 

To determine the extent to which Medicare Part B mental health 

services met Medicare’s coverage criteria and were coded correctly 

in 2003. 

BACKGROUND 

Medicare Coverage of and Reimbursement for Mental Health Services 

Medicare’s Supplementary Medical Insurance (Part B) covers 

physicians’ services, outpatient care which also includes mental health 

services, and other services not covered by Medicare’s Hospital 

Insurance (Part A). General provisions of the Social Security Act (the 

Act) govern Medicare reimbursement of all services, including mental 

health services. In general, beneficiaries are responsible for 

coinsurance of 20 percent of the approved amount for most Part B 

services; however, section 1833(c) of the Act limits payments to 

62.5 percent of the expenses (Medicare-approved amount) for mental 

health services. Section 1862(a)(1)(A) of the Act states that “no 

payment may be made under Part A or Part B for any expenses 

incurred for items or services which are not reasonable and necessary 

for the diagnosis or treatment of illness or injury or to improve the 

functioning of a malformed body member. . . .” Section 1833(e) requires 

that providers furnish “such information as may be necessary in order 

to determine the amounts due” to receive Medicare payment. 

Mental health services covered by Medicare include psychotherapy, 

psychiatric pharmacologic management, and evaluation and 

management. Mental disorders that occur most frequently for 

Medicare beneficiaries include affective psychoses, senile psychotic 

conditions, schizophrenic disorders, and neurotic disorders. 

Psychiatrists, clinical psychologists, licensed clinical social workers, 

nurse practitioners, clinical nurse specialists, and physician 

assistants typically render mental health services. In addition, 

licensed and unlicensed staff can furnish mental health services 

“incident to” the billing practitioner’s professional services. In these 

cases, the services must be furnished to noninstitutionalized patients 

under the direct supervision of the billing practitioner (or another 

physician). 

In 2003, the Centers for Medicare & Medicaid Services (CMS) issued 

a Program Memorandum (Transmittal AB-03-037) that focused on 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES i 
EXE CUTIVE S U MMAR Y 

Part B mental health services. The memorandum explained 

Medicare’s guidelines for payment for Part B mental health services. 

CMS instructed its contractors to disseminate the information to 

Medicare providers. 

The Office of Inspector General (OIG) has issued several reports that 

identified vulnerabilities in Medicare payments for mental health 

services. In 2001, OIG issued “Medicare Part B Payments for Mental 

Health Services” (OEI-03-99-00130), which found that Medicare allowed 

$185 million for inappropriate outpatient mental health services. In 

response, CMS issued the aforementioned Program Memorandum. 

Methodology 

In 2005, we conducted a medical record review of a random sample of 

452 Part B mental health services rendered by 422 billing 

practitioners in 2003, the most recent year for which we had Medicare 

claims data. Licensed psychiatrists reviewed the practitioners’ 

medical records we received to determine the medical necessity of the 

sampled services. Certified professional coders reviewed the medical 

records to determine proper coding. In addition, we interviewed 372 

of the 422 billing practitioners for the sampled services. 

FINDING 

Forty-seven percent of the mental health services allowed by 

Medicare in 2003 did not meet program requirements, resulting in 

approximately $718 million in improper payments. Medicare allowed 

approximately $2.14 billion in 2003 for Part B mental health services; 

47 percent of these services did not meet Medicare requirements. 

Miscoded and undocumented services accounted for 26 and 

19 percent of all mental health services in 2003, respectively. Medically 

unnecessary services and services that violated the “incident to” rule each 

accounted for 4 percent of all mental health services in 2003. Some 

services had more than one error, resulting in overlapping errors in our 

error rate calculation. 

RECOMMENDATION 

We recommend that CMS revise, expand, and reissue its 2003 Program 

Memorandum on Part B mental health services with an increased 

emphasis on proper documentation and coding. In addition, the 

memorandum should emphasize the requirements for mental health 

services billed “incident to.” 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES ii 
In addition to this recommendation, we have forwarded information 

on the miscoded, undocumented, and medically unnecessary services 

identified in our sample to CMS for appropriate action. 

 AGENCY COMMENTS 

In its comments on the draft report, CMS concurred with our 

recommendation. CMS noted that significant information on medical 

documentation requirements and “incident to” requirements is available 

on the CMS Web site and from its contractors. Nevertheless, CMS will 

consolidate this information for providers of mental health services. 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES iii 
Δ T ABLE OF CONTENTS 

EXECUTI VE SUMMARY ........................................ i

INTRODUCTI ON ................................................ 1 

FINDI NG ......................................................... 8 

Improperly paid services...................................... 8 

RECOM M E NDATI O N ........................................... 13 

APPENDI XES .................................................. 15 

A: CPT codes............................................... 15 

B: Previous OIG reports..................................... 19 

C: Methodology ............................................ 20 

D: Sampling plan........................................... 24 

E: Confidence intervals ..................................... 25 

F: Agency comments ........................................ 26 

ACKN O W LEDGMENTS ......................................... 28 
ΔINTROD UCT ION

 INTRODU C TION 

OBJECTIVE 

To determine the extent to which Medicare Part B mental health 

services met Medicare’s coverage criteria and were coded correctly 

in 2003. 

BACKGROUND 

Medicare Part B Mental Health Services: Profile of 2003 Claims 

Medicare and its beneficiaries paid approximately $2.14 billion for 

Medicare’s Supplementary Medical Insurance (Part B) mental health 

services in 2003.1 Allowed amounts2 for mental health services have 

increased steadily since 1998; the median annual increase was 

4.6 percent. Approximately 4 million Medicare beneficiaries received 

Part B mental health services in 2003. The number of beneficiaries who 

received mental health services increased modestly from 1998 to 2003; 

the median annual increase was 1 percent. In 2003, beneficiaries were 

allowed an average of $538 for mental health services.3 

In 2003, approximately 38 percent of the mental health services 

consisted of individual psychotherapy. Another 38 percent of the 

services consisted of psychiatric diagnostic interview examinations, 

central nervous system testing, and evaluation and management (E&M) 

services; and 17 percent of the services consisted of medication 

management.

4 The remaining services, approximately 7 percent, 

consisted of other mental health services, including group and 

electroconvulsive therapy. 

1 This total includes all claims with psychiatric codes (Current Procedural Terminology 

(CPT) codes 90801–90899) in addition to claims for E&M and central nervous system tests 

that are supported by a mental disorder diagnosis. All estimates are based on Office of 

Inspector General (OIG) analysis of a 1-percent sample of Medicare National Claims 

History. 

2 “Allowed amount” is the total Medicare-approved amount for a service, which includes 

the amount reimbursed to the provider and the beneficiary copayment. 

3 At the time of our review, 2003 was the most recent full year of Medicare claims data 

available. 

4 Medication management may be billed under one of two CPT codes: 90862 (psychiatric 

pharmacologic management) or M0064 (brief office visit for the sole purpose of 

monitoring or changing drug prescriptions used in the treatment of mental, 

psychoneurotic, and personality disorders). 

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INTROD UCT ION 

Overall, psychiatrists billed for 50 percent of the services, clinical 

psychologists billed for 17 percent, and licensed clinical social workers 

billed for 11 percent. Nurses, multispecialty group practices, and 

various physician specialties billed for the remaining 22 percent. 

Psychiatrists typically billed for procedures involving E&M services, 

while psychologists and clinical social workers were more likely to bill 

for individual and group psychotherapy. 

Medicare Coverage for Part B Mental Health Services 

General provisions of the Social Security Act (the Act) govern Medicare 

reimbursement of all services, including mental health services. Section 

1862(a)(1)(A) of the Act states that no payment may be made for 

services that “are not reasonable and necessary for the diagnosis or 

treatment of illness or injury or to improve the functioning of a 

malformed body member.” Section 1833(e) requires that providers 

furnish “such information as may be necessary to determine the 

amounts due” to receive Medicare payment. Related regulations at 

42 CFR §§ 411.15(k)(1) and 424.5(a)(6) implement these provisions of 

the Medicare law. 

Medicare Part B covers physicians’ services, outpatient care, and other 

services not covered by Medicare’s Hospital Insurance (Part A). In 

general, beneficiaries are responsible for coinsurance of 20 percent of 

the approved amount for most Part B services; however, the Act limits 

payments to 62.5 percent of the expenses (Medicare-approved amount) 

for mental health services.5 Specifically, the law limits payments for 

services in connection with the treatment of “mental, psychoneurotic, 

and personality disorders.” 

Section 1848(a)(1) of the Act established the physician fee schedule as 

the basis for Medicare reimbursement for all physician services 

beginning in January 1992. Section 1848(c)(5) of the Act required the 

Secretary of the Department of Health and Human Services to develop a 

uniform coding system for all physician services. The American Medical 

Association’s (AMA) “Current Procedural Terminology” (CPT) maintains 

a numeric coding system for physicians’ services, including mental 

health services. In 1983, the Centers for Medicare & Medicaid Services 

5 Section 1833(c) of the Act. This is the Outpatient Mental Health Treatment Limitation, 

which typically results in a beneficiary copayment of 50 percent of the Medicare-approved 

amount. See the companion report, “Carrier Determination of Copayments for Medicare 

Mental Health Services” (OEI-09-04-00221). 

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INTROD UCT ION

(CMS) adopted CPT as part of Medicare’s Healthcare Common 

Procedure Coding System (HCPCS) and mandated that providers use 

HCPCS to report physicians’ services to Medicare. 

CMS issues binding guidance to its carriers6 in the form of 

claims-processing manuals and memoranda. In 2003, CMS issued a 

Program Memorandum7 to its carriers concerning Part B mental health 

services. The memorandum includes: 

Medicare’s guidelines for payment of Part B mental health 

services including qualification requirements for mental health 

providers; incident to services; reasonable and necessary services; 

reasonable expectation of improvement; general principles of 

medical record documentation; documentation guidelines for 

evaluation and management (E/M) services involving a general 

psychiatric examination or the single system psychiatric 

examination; and documentation guidelines for psychiatric 

diagnostic or evaluative interview procedures, psychiatric 

therapeutic procedures, central nervous system assessment, and 

health and behavior assessment.8 

CMS instructed carriers to include the memorandum in their next 

bulletin to providers and to post it on their Web sites or bulletin boards. 

To bill Medicare for mental health services, practitioners must be 

qualified to perform the services in the States in which they render 

services. Medicare permits the following practitioners to bill Medicare 

independently for mental health services, as long as the services are 

included in their States’ scopes of practice: 

o physicians (including psychiatrists),9 

o psychologists,10 

o licensed clinical social workers,11 

6 Section 1842 of the Act authorizes CMS to contract with private companies, called 

carriers, to process and pay physician and nonphysician practitioner Part B claims within 

a given service area, which usually follows State lines. 

7 CMS, Transmittal AB-03-037, Change Request 2520, Provider Education Article: 

“Medicare Payments for Part B Mental Health Services,” March 28, 2003. 

8 Ibid. 

9 42 CFR § 410.20. 

10 42 CFR § 410.71. 

11 42 CFR § 410.73. 

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INTROD UCT ION

o nurse practitioners,

12 

o clinical nurse specialists,13 and 

o physician assistants.14 

“Incident to” Rule 

Medicare allows physicians to bill for mental health services performed 

by their staffs and furnished to patients if the services are rendered 

“incident to” the physicians’ professional services.15 These services may 

be performed by auxiliary personnel if the services are: 

o furnished in a noninstitutional setting to noninstitiutional patients; 

o an integral, though incidental, part of the service of a physician (or 

other practitioner) in the course of diagnosis or treatment of an 

injury or illness; 

o commonly furnished without charge or included in the bill of a 

physician (or other practitioner); 

o of a type that are commonly furnished in the office or clinic of a 

physician (or other practitioner); and 

o furnished under the direct supervision of the physician (or other 

practitioner). The physician (or other practitioner) directly 

supervising the auxiliary personnel need not be the same physician 

(or other practitioner) upon whose professional service the “incident 

to” service is based. 

Outpatient Mental Health Services and Psychiatric Disorders 

Outpatient mental health services commonly rendered16 to Medicare 

beneficiaries include: 

o psychotherapy: treatment for mental illness and behavioral 

disturbances in which the clinician establishes a professional 

contract with the patient and, through definitive therapeutic 

communication, attempts to alleviate emotional disturbances, 

12 42 CFR § 410.75. 

13 42 CFR § 410.76. 

14 42 CFR § 410.74. 

15 Section 1861(s)(2)(A) of the Act; 42 CFR § 410.26. 

16 Based on OIG analysis of a 1-percent sample of Medicare claims for 2003. 

OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 4 
INTROD UCT ION

reverse or change maladaptive patterns of behavior, and encourage 

personality growth and development;17 

o psychiatric pharmacologic management: including prescription, 

use, and review of medication with no more than minimal medical 

psychotherapy;18 and 

o E&M services: office visits, hospital visits, and consultations that 

typically involve at least one of three key components—history, 

physical examination, and medical decisionmaking. E&M services 

can vary based on these three key components, and reimbursement 

is based on one of five levels.19 (See Appendix A for median 

reimbursements for the various E&M services and all other services 

that we reviewed.) 

Psychiatric disorders that occur most frequently for Medicare 

beneficiaries20 include: 

o affective psychoses (e.g., major depressive disorder and bipolar 

affective disorder), 

o senile psychotic conditions, 

o schizophrenic disorders, and 

o neurotic disorders (e.g., neurotic depression and adjustment 

reaction). 

These disorders are described in more detail in AMA’s “International 

Classification of Diseases, 9th Revision” (ICD-9) and the American 

Psychiatric Association’s “Diagnostic Statistical Manual, Third 

Edition – Revised” (DSM-III-R). 

Previous Office of Inspector General Work 

Since 1996, the Office of Inspector General (OIG) has issued several 

audits and evaluation reports concerning Medicare mental health 

services. Most recently, in 2001, OIG issued “Medicare Part B 

Payments for Mental Health Services” (OEI-03-99-00130). Based on a 

medical review of mental health services rendered in 1998, OIG 

reported that approximately 31 percent of the claims were paid 

17 AMA, “Current Procedural Terminology, Professional Edition,” 2003, p. 353. 

18 Ibid, p. 355. 

19 Ibid, p. 5. 

20 Based on OIG analysis of a 1-percent sample of Medicare claims for 2003. 

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INTROD UCT ION

inappropriately, including 23 percent that were not medically necessary. 

Medicare allowed $185 million for these inappropriate outpatient 

mental health services. OIG recommended that CMS target certain 

mental health services for prepayment and postpayment review, 

promote provider awareness of requirements for Part B mental health 

services, and work with carriers and mental health professionals to 

develop a list of psychological assessments that can be billed correctly 

under CPT code 96100. 

In response to the 2001 report, CMS issued a Program Memorandum 

(mentioned previously on page 3 of this report) in 2003 to assist carriers 

in “informing the provider community about requirements for payment 

of Part B mental health services.”21 

Other reports have focused on mental health services rendered in 

institutions. (See Appendix B for a listing and summary of other OIG 

reports.) 

Companion Report 

This is the second of two reports on Medicare Part B mental health 

services rendered in 2003. The first report, issued in October 2006, 

determined the extent to which Medicare carriers consistently calculate 

beneficiary copayments for mental health services and correctly 

calculate copayments for services rendered to beneficiaries diagnosed 

with Alzheimer’s disease or related disorders (“Carrier Determination of 

Copayments for Medicare Mental Health Services” (OEI-09-04-00221)). 

METHODOLOGY 

Our methodology consisted of a medical necessity and coding review 

of a random sample of Part B mental health services rendered in 

2003 and structured interviews of the billing practitioners for the 

sampled services. 

We conducted a medical review of a stratified random sample of 

452 mental health services for 422 billing practitioners rendered 

during calendar year 2003, the most recent full year of Medicare 

claims data available at the time of our review. We requested by mail 

complete medical records from each billing practitioner of the sampled 

21 CMS, Transmittal AB-03-037, Change Request 2520, “Provider Education Article: 

Medicare Payments for Part B Mental Health Services,” March 28, 2003, p. 1. 

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INTROD UCT ION 

mental health services. We contacted each billing practitioner in our 

sample either by mail or by telephone. The response rate was 

99 percent. 

We contracted with three licensed psychiatrists and two certified 

professional coders to conduct a medical record review using a 

protocol OIG developed in collaboration with the reviewers. The 

psychiatrists reviewed the medical records to determine whether the 

services were medically necessary. Certified professional coders 

determined the appropriate CPT codes for the sampled services based 

on the medical record documentation. 

We attempted to interview by telephone each of the 422 billing 

practitioners in our sample. We used a standardized interview 

instrument to determine whether the billing practitioners (1) rendered 

the sampled services personally or (2) billed for the services “incident to” 

their professional services. We interviewed 372 of the 422 billing 

practitioners for an 88-percent response rate. 

See Appendix C for a more detailed explanation of the methodology and 

Appendix D for details on the sampling plan. 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and Efficiency 

and the Executive Council on Integrity and Efficiency. 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 7 
Δ FINDING 

Forty-seven percent of the mental health services 

allowed by Medicare in 2003 did not meet 

program requirements, resulting in 

approximately $718 million in improper payments 

Medicare allowed approximately 

$2.14 billion in 2003 for Part B mental 

health services. Forty-seven percent of 

these services did not meet Medicare 

requirements. (Confidence intervals 

for all statistics are in Appendix E.) 

As a result, Medicare allowed approximately $718 million in improper 

payments in 2003 for mental health services. Table 1 groups the 

improperly paid services in our sample by type of error and gives 

statistical projections of these errors to the population. 

Table 1: Improperly Paid Medicare Part B Mental Health Services—2003 

Type of Error 

Sample 

Services Allowed 

Amount 

Projected 

Services Allowed 

Amount 

Miscoded 

Undocumented 

Medically Unnecessary 

“Incident to” Violations

(Overlapping Errors) 

140 

83 

24 

16 

(29) 

$4,998.38 

$5,813.00 

$2,037.24 

$1,350.23 

($1,175.68) 

26% 

19% 

4% 

4% 

(5%) 

$245 million 

$356 million 

$106 million 

$72 million* 

($62 million*) 

Total 234 $13,023.17 47%** $718 million** 

* The confidence intervals for these estimates have at least 50-percent relative precision. 

**Numbers do not add due to rounding. 

Source: OIG analysis of medical review results, 2006.

Miscoded. In 2003, Medicare allowed approximately $701 million for 

Part B mental health services that were billed with codes that did not 

accurately reflect the services provided. If these services had been 

coded properly, Medicare would have allowed only $456 million, yielding 

an overpayment of $245 million for miscoded services. 

Of the 140 miscoded services within our sample, 133 were “upcoded,” 

6 were “downcoded,” and 1 was miscoded with no effect on payment. 

(See Table 2 on the next page.) Upcoded services are billed at a level 

higher than the actual level of the service performed. For example, a 

20- to 30-minute individual psychotherapy service billed as a 

45- to 50-minute service is an upcoded service. Conversely, a 

downcoded service is billed at a lower level than the actual level of the 

service performed. 

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F I NDING

Table 2: Miscoded Services in the Sample 

Service Type (as billed) Upcoded Downcoded Miscoded 

(No effect on payment) Total 

Individual Psychotherapy 

E&M Services 

Psychiatric Diagnostic Interview 

Examinations 

Medication Management 

73 

58 

2 

0 

2 

1 

0 

3 

0 

0 

1 

0 

75 

59 

3 

3 

 Total 133 6 1 140 

Source: OIG medical review results, 2006. 

Almost all miscoded individual psychotherapy claims lacked 

documentation to justify the time billed. Individual psychotherapy can 

be billed as one of three time periods: 20 to 30 minutes, 45 to 50 

minutes, or 75 to 80 minutes. Because reimbursement of psychotherapy 

services is based on face-to-face time spent with the patient, 

practitioners are required to document in the medical record the time 

spent with the patient.22 However, in the majority of the records for 

miscoded services, no time was documented. As a result, our reviewers 

determined that the services should have been billed at the lowest 

possible time period. For some practitioners who claimed to have 

furnished E&M services in conjunction with psychotherapy, our 

reviewers found no evidence for those E&M services on the same dates 

of service. Therefore, the practitioners should have used codes for 

services consisting solely of psychotherapy. For other miscoded 

psychotherapy services, reviewers found that the actual services were 

not psychotherapy but totally different services, such as E&M services, 

medication management,

23 psychological evaluation, and group 

psychotherapy. 

22 Section 1833(e) requires that providers furnish “such information as may be necessary to 

determine the amounts due” to receive Medicare payment. 

23 Medication management may be billed under one of two codes: 90862 (psychiatric 

pharmacologic management) or M0064 (brief office visit for the sole purpose of 

monitoring or changing drug prescriptions used in the treatment of mental, 

psychoneurotic, and personality disorders). 

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F I NDING

Table 3: Miscoded E&M Services in the Sample 

Type of Error 

Number of Miscoded 

Services Billed as 

E&M in Sample 

Percentage 

of Miscoded 

Services Billed 

as E&M Services 

Downcoded 

Not an E&M Service 

Upcoded 

By 1 level 

By 2 levels 

By 3 levels 

Established patient, not new patient 

or 

 Subsequent visit, not initial visit 

Not an E&M Service 

Wrong place of service 

1 

1 

58 

26 

19 

1 

5 

5 

2 

2% 

2% 

98% 

44% 

32% 

2% 

8% 

8% 

3% 

 Total miscoded E&M services 59 100% 

Source: OIG medical review results, 2006. 

Most of the miscoded E&M services in our sample were billed at a 

higher level than the medical record documentation supported.24 (See 

Table 3.) For example, a practitioner billed for an E&M service that 

indicated that the decisionmaking was of moderate complexity; 

however, reviewers found the documentation supported decisionmaking 

that was straightforward or of low complexity.25 Reviewers found that 

some services were billed incorrectly because the services were rendered 

during a subsequent visit rather than an initial visit. Reimbursement 

rates for subsequent E&M visits are less than those for initial visits. 

Other miscoded E&M services should have been billed as psychiatric 

diagnostic interview examinations, consultations, or psychotherapy, 

24 E&M services levels vary based on (1) the extent of the patient history obtained, 

(2) the extent of the examination performed, and (3) the complexity of the medical 

decisionmaking. (AMA, “Current Procedural Terminology, Professional Edition,” 2003, 

pp. 5–7.) 

25 The complexity of medical decisionmaking for E&Ms can be billed at one of four levels: 

straightforward, low, moderate, or high. (AMA, “Current Procedural Terminology, 

Professional Edition,” 2003, p. 7.) 

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F I NDING

which are reimbursed at a lower rate. In addition, some E&M services 

were miscoded because the place of service (e.g., inpatient) did not 

match the place of service indicated in the medical record (e.g., 

outpatient). 

Three psychiatric diagnostic interview examinations in our sample were 

miscoded. These examinations are “history, mental status, and a 

disposition, and may include communication with family or other 

sources, ordering and medical interpretation of laboratory or other 

medical diagnostic studies.”26 Documentation for these miscoded 

services supported a brief medication management visit, indicated that 

the practitioner rendered psychotherapy in the home, or did not show 

evidence that the provider used “interactive” psychiatric diagnostic 

interview techniques (although the practitioner coded the interview as 

interactive). Two of these services should have been reimbursed at a 

lower rate, and the rate for the third would not have changed. 

Three medication management services in our sample were downcoded. 

Documentation for two of these services supported an E&M code, and 

documentation for the third indicated that the practitioner furnished 

more than minimal psychotherapy during the visit and should have 

billed under a psychotherapy code. These services should have been 

reimbursed at a higher rate. 

Undocumented. Medicare allowed approximately $356 million for 

undocumented services. For more than half of these services, we 

received no documentation for the sampled dates of service. This 

includes services for which we received no medical records whatsoever 

from the billing practitioner. For the other undocumented services, we 

received inadequate documentation to determine the medical necessity 

of the services, or the medical records indicated that a practitioner saw 

the patient on the date of service billed; however, the documentation 

was insufficient to determine a billable code. 

Although some cases of missing documentation may be attributable to 

billing errors (e.g., putting the wrong date on the claim form), others 

may represent services not rendered. Claims for services that lack 

sufficient documentation to show that care was provided do not meet 

the requirements of section 1833(e) of the Act. 

26 AMA, “Current Procedural Terminology, Professional Edition,” 2003, p. 353. 

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F I NDING 

Medically unnecessary. Medical reviewers determined that these 

services, which represent $106 million allowed by Medicare, were not 

medically necessary because: 

o The psychotherapy session was too long. 

o The patient could not benefit from the psychotherapy. 

o The sessions, such as number of sessions per week, were too 

frequent. 

o No clinical problem was documented in the record. 

o The patient cancelled the session. 

“Incident to” violations. Ten of the sixteen “incident to” services that were 

billed in error were furnished in a skilled nursing facility or a hospital 

and therefore violated Federal regulations.27 The remaining six services 

were furnished without the level of supervision required by 

regulations,28 which require that “incident to” services be furnished 

under direct supervision.

29 The billing practitioners reported to us that 

these services were furnished under general supervision.30 The 

personnel who rendered these services included: 

o physician assistant, 

o nurse practitioner, 

o licensed clinical social worker, 

o licensed professional counselor, 

o licensed psychiatric assistant, or 

o psychology intern. 

27 Pursuant to 42 CFR § 410.26(b)(1), “incident to” services “must be furnished in a 

noninstitutional setting to noninstitutional patients.” Pursuant to 42 CFR § 410.26(a)(5), 

noninstitutional settings include “all settings other than a hospital or skilled nursing 

facility.” 

28 42 CFR § 410.26(b)(5). 

29 Pursuant to 42 CFR § 410.26(a)(2), “direct supervision” means the level of supervision 

defined in 42 CFR § 410.32(b)(3)(ii), which provides that “[d]irect supervision in the office 

setting means the physician must be present in the office suite and immediately available 

to furnish assistance and direction throughout the performance of the procedure. It does 

not mean that the physician must be present in the room when the procedure is 

performed.” 

30 “General supervision means the procedure is furnished under the physician’s overall 

direction and control, but the physician’s presence is not required during the performance 

of the procedure” (42 CFR § 410.32(b)(3)(i)). 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 12 
 O E I - 0 9 - 0 4 - 0 0 2 2 0 MEDICARE PAYMENTS FOR 2003 PART B MENTAL HEALTH S ERVICES 13 

Almost half of the Medicare Part B mental health services allowed in 

2003 did not meet program requirements, resulting in an estimated 

$718 million in improper payments. Incorrect coding and poor 

documentation make Medicare and its beneficiaries vulnerable to 

overpayments for Part B mental health services, accounting for more 

than $600 million of the $718 million paid improperly in 2003. The 

remainder of improper payments was for services that were not 

medically necessary or violated the “incident to” rule. 

The 2003 CMS Program Memorandum31 on Part B mental health 

services referenced other CMS guidance documents on requirements for 

medical record documentation and “incident to” services. However, it 

did not provide specific guidelines for documentation of face-to-face time 

with patients or the requirement that “incident to” services be provided 

under direct supervision of a physician and only billed for patients in 

noninstitutional settings.32 Therefore, we recommend that CMS revise, 

expand, and reissue its 2003 Program Memorandum on mental health 

services to include: 

1. an increased emphasis that “CPT and ICD-9-CM codes reported 

on health insurance claim forms should be supported by 

documentation in the medical record,”33 including the requirement 

that documentation must be adequate to determine the Medicare 

amounts due (e.g., documentation for psychotherapy services 

should include the amount of face-to-face time spent with the 

patient); 

2. an emphasis that adequate documentation in the medical record 

must be present when billing for psychotherapy services furnished 

with E&M services; 

3. an increased emphasis that medical record documentation must 

support the level of E&M code billed; and 

4. an increased emphasis on the requirements for “incident to” 

services, especially the (1) supervision requirements and 

31 CMS, Transmittal AB-03-037, Change Request 2520, “Provider Education Article: 

Medicare Payments for Part B Mental Health Services,” March 28, 2003. 

32 Section 1861(s)(2)(A) of the Act. 

33 CMS, Transmittal AB-03-037, Change Request 2520, “Provider Education Article: 

Medicare Payments for Part B Mental Health Services,” March 28, 2003. 

ΔΔ RECOMMENDATIONS RECOMMENDATIONS RECOMMENDATION 
R E C O MMENDA T I ON 

(2) the requirement that “incident to” can be billed only for 

patients in noninstitutional settings.34 

In addition to this recommendation, we have forwarded information 

on the miscoded, undocumented, and medically unnecessary services 

identified in our sample to CMS for appropriate action. 

AGENCY COMMENTS 

In its comments on the draft report, CMS concurred with our 

recommendation. CMS noted that significant information on medical 

documentation requirements and “incident to” requirements is available 

on the CMS Web site and from its contractors. Nevertheless, CMS will 

consolidate this information for providers of mental health services. 

For the full text of CMS’s comments, see Appendix F. 

34 Section 1861(s)(2)(A) of the Act. 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 14 
Δ APPENDIX~A 

CPT Codes Included in the Medical Review 

Includes Codes for the Sampled Claims and Codes Used to Correct the Miscoded Claims 

CPT Code Procedure 

2003 Median 

Medicare 

Allowed 

Amount 

Psychiatry 

90801 Psychiatric diagnostic interview exam $140.13 

90802 

Interactive psychiatric diagnostic exam, using play equipment/play 

devices/language interpreter/other $88.36 

90804 Individual psychotherapy; office, 20–30 minutes $54.86 

90805 

Individual psychotherapy; office, 20–30 minutes with Evaluation & 

Management (E&M) $68.25 

90806 Individual psychotherapy; office, 45–50 minutes $89.69 

90807 Individual psychotherapy; office, 45–50 minutes with E&M $105.04 

90808 Individual psychotherapy; office, 75–80 minutes $120.00 

90809 Individual psychotherapy; office, 75–80 minutes with E&M $141.79 

90816 Individual psychotherapy; hospital, 20–30 minutes $62.93 

90817 Individual psychotherapy; hospital, 20–30 minutes with E&M $70.00 

90818 Individual psychotherapy; hospital, 45–50 minutes $95.17 

90819 Individual psychotherapy; hospital, 45–50 minutes with E&M $103.65 

90847 

Family psychotherapy (conjoint psychotherapy) (with patient 

present) $108.48 

90853 Group psychotherapy (other than multiple-family group) $29.14 

90862 Psychiatric medication management with minimal psychotherapy $48.38 

90870 Electroconvulsive therapy (with monitoring); single seizure $97.86 

90899 Unlisted psychiatric service/procedure $67.10 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 15 
APP E N D I X ~ A 

Central Nervous System Assessments/Tests 

96100 Psychological testing, with interpretation and report, per hour $81.52 

96115 

Neurobehavioral status exam, with interpretation and report, 

per hour $74.04 

Evaluation and Management Services 

99203 

Office/outpatient visit, new patient, three key components: 

detailed history, detailed exam, medical decisionmaking of low 

complexity $88.97 

99205 

Office/outpatient visit, new patient, three key components: 

comprehensive history, comprehensive exam, medical 

decisionmaking of high complexity $163.64 

99211 

Office/outpatient visit, established patient, not requiring physician 

presence, typically 5 minutes $19.72 

99212 

Office/outpatient visit, established patient, which requires at least 

two of these three key components: problem-focused history, 

problem-focused exam, straightforward medical decisionmaking $34.60 

99213 

Office/outpatient visit, established patient, which requires at least 

two of these three key components: expanded problem history, 

expanded problem exam, medical decisionmaking of low complexity $48.81 

99214 

Office/outpatient visit, established patient, which requires at least 

two of these three key components: detailed history, detailed

exam, medical decisionmaking of moderate complexity $77.16 

99215 

Office/outpatient visit, established patient, which requires at least 

two of these three key components: comprehensive history, 

comprehensive exam, medical decisionmaking of high complexity $113.37 

99221 

Initial hospital care, which requires these three key components: 

detailed or comprehensive history, detailed or comprehensive 

exam, medical decisionmaking that is straightforward or of low 

complexity $63.12 

99222 

Initial hospital care, which requires these three key components: 

comprehensive history, comprehensive exam, medical 

decisionmaking of moderate complexity $105.62 

99223 

Initial hospital care, which requires these three key components: 

comprehensive history, comprehensive exam, medical 

decisionmaking of high complexity $148.08 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 16 
APP E N D I X ~ A 

99231 

Subsequent hospital care, which requires at least two of these 

three key components: problem-focused interval history,

problem-focused exam, medical decisionmaking that is 

straightforward or of low complexity $31.95 

99232 

Subsequent hospital care, which requires at least two of these 

three key components: expanded problem-focused interval history, 

expanded problem exam, medical decisionmaking of moderate 

complexity $53.21 

99233 

Subsequent hospital care, which requires at least two of these 

three key components: detailed interval history, detailed exam, 

medical decisionmaking of high complexity $77.47 

99238 Hospital discharge day management; up to 30 minutes $66.71 

99239 Hospital discharge day management; longer than 30 minutes $91.19 

99243 

Office consultation, which requires these three key components: 

detailed history, detailed exam, medical decisionmaking of low 

complexity $112.59 

99244 

Office consultation, which requires these three key components: 

comprehensive history, comprehensive exam, medical 

decisionmaking of moderate complexity $160.85 

99245 

Office consultation, which requires these three key components: 

comprehensive history, comprehensive exam, medical 

decisionmaking of high complexity $209.11 

99252 

Initial inpatient consultation, which requires these three key 

components: expanded problem-focused history, expanded 

problem-focused exam, straightforward medical decisionmaking $ 68.29 

99253 

Initial inpatient consultation, which requires these three key 

components: detailed history, detailed exam, medical 

decisionmaking of low complexity $ 93.65 

99254 

Initial inpatient consultation, which requires these three key 

components: comprehensive history, comprehensive exam, medical 

decisionmaking of moderate complexity $134.74 

99255 

Initial inpatient consultation, which requires these three key 

components: comprehensive history, comprehensive exam, medical 

decisionmaking of high complexity $188.52 

99261 

Follow-up inpatient consultation, which requires at least two of 

these three key components: problem-focused interval history, 

problem-focused exam, medical decisionmaking that is 

straightforward or of low complexity $21.49 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 17 
APP E N D I X ~ A 

99262 

Follow-up inpatient consultation, which requires at least two of 

these three key components: expanded problem-focused interval 

history, expanded problem-focused exam, medical decisionmaking 

of moderate complexity $44.10 

99263 

Follow-up inpatient consultation, which requires at least two of 

these three key components: detailed interval history, detailed 

exam, medical decisionmaking of high complexity $66.29 

99283 

Emergency department visit, which requires these three key 

components: expanded problem-focused history, expanded 

problem-focused exam, medical decisionmaking of moderate 

complexity $57.84 

99284 

Emergency department visit, which requires these three key 

components: detailed history, detailed exam, medical 

decisionmaking of moderate complexity $91.10 

99285 

Emergency department visit, which requires these three key 

components: comprehensive history, comprehensive exam, medical 

decisionmaking of high complexity $143.60 

99302 

Nursing facility care, which requires these three key components: 

detailed interval history, comprehensive exam, medical 

decisionmaking of moderate to high complexity $83.97 

99303 

Nursing facility care, which requires these three key components: 

comprehensive history, comprehensive exam, medical 

decisionmaking of moderate to high complexity $103.80 

99311 

Subsequent nursing facility care, which requires at least two of 

these three key components: problem-focused interval history, 

problem-focused exam, medical decisionmaking that is 

straightforward or of low complexity $32.67 

99312 

Subsequent nursing facility care, which requires at least two of 

these three key components: expanded problem-focused interval 

history, expanded problem-focused exam, medical decisionmaking 

of moderate complexity $52.22 

99313 

Subsequent nursing facility care, which requires two of these three 

key components: detailed interval history, detailed exam, medical 

decisionmaking of moderate to high complexity $73.77 

99332 

Rest home visit, established patient, which requires at least two of 

these three key components: expanded problem-focused interval 

history; expanded problem-focused exam; medical decisionmaking 

of moderate complexity $50.27 

Brief Medication Management 

M0064 Visit for drug monitoring $23.12 

Source: OIG analysis of 2003 Medicare claims, 2006. 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 18 
Δ APPENDIX~B 

Office of Inspector General Reports 

on Mental Health Services 

o In 1996, the Office of Inspector General (OIG) issued “Mental 

Health Services in Nursing Facilities” (OEI-02-91-00860), which 

reviewed Part B mental health services in nursing homes. OIG 

found that approximately 32 percent of services were unnecessary, 

and another 16 percent were questionable. 

o As a followup to the 1996 report, OIG issued “Medicare Payments 

for Psychiatric Services in Nursing Homes: A Follow-up” 

(OEI-02-99-00140) in January 2001. As stated in the follow-up 

report, approximately 27 percent of the services were not medically 

necessary, 9 percent were not documented, and 3 percent were 

medically questionable. 

o In 1998, OIG issued “Five-State Review of Partial Hospitalization 

Programs at Community Mental Health Centers” (A-04-98-02145). 

Based on this audit, approximately 92 percent of reviewed claims 

were not allowable or were questionable. Furthermore, many 

beneficiaries who received services had no history of mental illness. 

Other beneficiaries suffered from mental conditions, such as 

dementia, that would have prevented them from benefiting from 

the intensive program. Additionally, some of the treatment 

sessions involved only recreational activities. 

o In 2000, OIG issued “Ten-State Review of Outpatient Psychiatric 

Services at Acute Care Hospitals” (A-01-99-00507). Based on this 

audit, approximately 58 percent of the Medicare payments for 

psychiatric services rendered in acute care hospitals in the 

10 States were not allowable or were unsupported. The hospitals’ 

claims were documented inadequately, and services were not 

reasonable or necessary. In addition, unlicensed personnel 

rendered some services. 

o Also in 2000, OIG issued “Review of Outpatient Psychiatric Services 

at Psychiatric Hospitals for Calendar Year 1998” (A-01-99-00530). 

This audit identified that approximately 42 percent of the 

outpatient and partial hospitalization services in specialty 

psychiatric hospitals in 10 States were paid inappropriately. 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 19 
Δ APPENDIX~C 

Methodology 

Sample Selection 

We conducted a medical review of a stratified random sample of mental 

health services rendered during calendar year 2003, the most recent full 

year of Medicare claims data available to us at the time of our review. 

We selected our sample from the Part B Medicare National Claims 

History. (See Appendix D for details.) To compile this sample, we 

selected individual line item services that appeared in the National 

Claims History. We limited our universe to mental health services, 

which we defined as: 

o psychiatric procedures (according to the American Medical 

Association’s (AMA) “Current Procedural Terminology,” 2003); 

o central nervous system test procedures supported by a psychiatric 

disorder diagnosis; or 

o evaluation and management (E&M) services supported by a 

psychiatric disorder diagnosis. 

For sampling purposes, we defined “service” as the unique combination 

of: 

o Medicare beneficiary health identification claim number, 

o unique provider identification number, 

o date of service, and 

o procedure code. 

Some of these services contained multiple units. In these cases, we 

reviewed each individual unit. Therefore, our unit of analysis for this 

medical review is “service-unit,” which we defined as the individual unit 

associated with a single line-item claim. For example, a single line-item 

claim for psychotherapy may consist of two units. For purposes of our 

medical review, this line-item claim would result in two service-units in 

our sampling frame. 

The sampling frame consisted of approximately 29.2 million 

service-units rendered in 2003, representing approximately $2.1 billion 

allowed by Medicare. To improve our estimations of improper 

payments, we stratified the population by allowed amount and then 

selected 425 services. These services represented 455 service-units. 

In our sample, 3 of the 425 providers were under investigation and were 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 20 
APP E N D I X ~C 

excluded from this review. Therefore, our final sample consisted of 

422 services, 422 practitioners, and 452 service-units. To simplify the 

presentation of our findings, we refer to service-units as services. The 

table below defines the strata and corresponding data for the sample 

design. 

Basic Sample Design* 

Stratum Medicare Allowed Amount Population 

(Line-Item Services) 

Sample 

(Line-Item Services) 

1 

2 

3 

Less than or equal to $65.00 

$65.01–$125.00 

More than $125.00 

14,265,228 

12,768,731 

2,202,167 

125 

225 

75 

 Total 29,236,126 425 

Source: Office of Inspector General, 2006. 

*See Appendix D for more details. 

Medical Record Request 

We requested by mail complete medical records from each billing 

practitioner of the sampled mental health services. To ensure that we 

obtained adequate records to determine the medical necessity of the 

services, we requested records that included services rendered 

6 months prior to the sampled date of service through the date of the 

request.35 We allowed the billing practitioners 2 weeks from the date of 

the initial request to send us the records. We made as many as two 

additional written attempts followed by two telephone calls to obtain 

the records. For some billing practitioners, we requested the records 

three times by mail and twice by telephone. 

Despite our repeated attempts to obtain medical records, 6 of the 422 

billing practitioners did not produce the requested documents. We 

categorized the sample units associated with these six billing 

practitioners as undocumented because we were able to contact the 

billing practitioner, but the practitioner did not supply the medical 

records. 

35 The record request occurred from December 2004 through May 2005. 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 21 
APP E N D I X ~C 

Medical Review 

We contracted with three licensed psychiatrists and two certified 

professional coders to conduct a medical record review using a protocol 

developed in collaboration with the reviewers. The psychiatrists 

reviewed the medical records to determine whether the service-units 

were medically necessary. The psychiatrists’ criteria included, but were 

not limited to, Medicare’s coverage criteria (e.g., section 1862(a)(1)(A) of 

the Act), the American Psychiatric Association’s “Practice Guidelines,” 

and their own professional judgment. Certified professional coders 

determined the appropriate Common Procedural Terminology (CPT) 

codes for the sampled services based on the medical record 

documentation provided. The professional coders’ criteria included the 

definitions in AMA’s CPT for 2003. The reviewers recorded their 

determinations on standardized medical review instruments. 

Test sample review. To ensure uniformity among the reviewers and to 

test our medical review instrument, we conducted a preliminary review 

of 117 service-units, which we randomly selected using the same criteria 

we used for the final sample. (See “Sample Selection” on page 20.) We 

received records for 48 service-units. Both coders and psychiatrists 

reviewed all 48 service-units. We analyzed the results of the test review 

and presented them to the reviewers. Reviewers discussed and resolved 

any inconsistencies in the results and offered suggestions for revisions 

of the medical review instrument. The 117 test sample units were not 

included in the review results and are not included in this report. 

Final sample review. Reviewers used a standardized medical review 

instrument to analyze the medical records. One psychiatrist and one 

coder reviewed each medical record. The medical records for the final 

sample were assigned randomly to the reviewers, and we analyzed the 

completed medical review instruments to determine uniformity among 

the reviewers. 

Structured Interviews 

We attempted to interview by telephone each of the 422 billing 

practitioners in our sample. We used a standardized interview 

instrument to determine whether the billing practitioners (1) rendered 

the sampled services personally or (2) billed for the services “incident to” 

their professional services. We asked practitioners who personally 

furnished the services they billed “incident to” and what level of 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 22 
APP E N D I X ~C 

supervision they provided to the ancillary staff (e.g., general, direct, 

or personal).36 

We interviewed by telephone 372 of the 422 practitioners in our 

sample, resulting in an 88-percent response rate. Two practitioners 

refused to be interviewed, 1 was deceased at the time we requested an 

interview, and the remaining 47 could not be reached for interviews 

after a minimum of three attempts. For purposes of reporting an 

error rate related to “incident to” services, we assumed that the 

practitioners we did not interview rendered the sampled services 

personally or complied with the “incident to” rules regarding the 

direct supervision requirement. 

36 See 42 CFR § 410.32(b)(3) for definitions of the three levels of supervision. 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 23 
Δ APPENDIX~D 

Medical Review Sample Flowchart 

The sampling plan OIG used to select a stratified random sample of Medicare Part B mental h

All 2003 Part B Services* = 1.25 billion Allowed = $81.8 billion 

Source: OIG analysis of 2003 Medicare claims data, 2006. OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 24 

Sample frame 

Services = 29.2 million 

Allowed = $2.1 billion 

Psychiatric procedures 

CPT codes = 90801-90899 

& M0064 

Services = 19.2 million 

Allowed = $1.4 billion 

66.7% of services 

Central nervous system 

tests & assessments 

with psychiatric diagnosis 

CPT codes = 96100-96117 

ICD-9 = 290.xx-319.xx 

Services = 198,765 

0.7% of services 

E&M services 

with psychiatric diagnosis 

CPT codes = 99201-99499 & 

ICD-9 = 290.xx-319.xx 

Services = 9.8 million 

Allowed = $642 million 

33.6% of services 

Stratified random sample: 

425 total services 

Allowed Amt. Sampled 

<=$65.00 ................125 

$65.01-$125.00.........225 

>$125.00..................75 

*For sampling purposes, we defined a “service” as the uniqcombination of: 

• patient identification 

number, 

• physician identification 

number, 

• date of service, and 

• procedure code. 
Δ APPENDIX~E 

Statistical Confidence Intervals 

Statistic Sample 

Size 

Sample Units 

Found Not To 

Meet Medicare 

Requirements 

Estimate of 

Projection to 

Universe 

95% Confidence 

Interval 

Percentage of services that were 

medically unnecessary 

452 24 4% 2% to 6% 

Amount allowed for medically 

unnecessary services 452 24 $106 million $61.7 to $150 million 

Percentage of services that were 

miscoded (net) 452 140 26% 22% to 30% 

Allowed amount for miscoded 

services 452 140 $245 million $205 to $287 million 

Percentage of services that were 

undocumented 452 83 19% 15% to 23% 

Allowed amount for 

undocumented services 452 83 $356 million $281 to $431 million 

Percentage of services that were 

paid improperly 

452 234 47% 42% to 53% 

Allowed amount for all 

improperly paid services 452 234 $718 million $635 to $801 million 

Source: OIG medical review results, 2006. 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 25 
Δ APPENDIX~F 

Agency Comments 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 26 
APP E N D I X ~ F 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 27 
Δ ACKNOWLEDGMENTS 

This report was prepared under the direction of Paul A. Gottlober, 

Regional Inspector General for Evaluation and Inspections in the San 

Francisco regional office, and Deborah W. Harvey, Assistant Regional 

Inspector General. 

Steven Zerebecki served as the team leader for this study. Other 

principal Office of Evaluation and Inspections staff from the San 

Francisco office who contributed include Silvia Chin, Robert Gibbons, 

Scott Hutchison, Thomas Purvis, and China Tantameng; and central 

office staff who contributed include Doris Jackson and Tricia Davis. 

We would like to thank our medical review contractor and the 

individual psychiatrists and coders who performed the review, as well 

as the carrier staff who assisted us in obtaining contact information for 

the physicians whose claims were selected for review. 

 OE I-09-04-00 220 MEDI C ARE PAYM E N T S FO R 2003 PA R T B MENTA L HEALT H S E R VIC ES 28