OIG Finds $74M in Inappropriate Mental Health Claims

A government-led medical record review reveals that 39 percent of Medicare Part B claims allowed for mental health services during non-Part A nursing home stays in 2006 did not meet the program requirements for coverage, according to a July 8 Office of Inspector General (OIG) report. Specifically, the OIG says, services were found to be medically unnecessary, undocumented or inadequately documented or miscoded. These errors resulted in an estimated $74 million in inappropriate Part B payments.

Based on this medical review, the OIG found that psychotherapy services were associated with the most number of errors related to medical necessity, documentation, and miscoding.

Medical Necessity

Based on psychiatrists’ medical review, the OIG estimates that 10 percent (37 of the 376 sampled claims) of the Part B mental health claims allowed during non-Part A nursing home stays in 2006 were medically unnecessary.

The OIG gives the following example of a medically unnecessary service:

A patient is given full sessions of psychotherapy twice a week. Given the patient’s memory problems and dementia, the psychiatrist reviewer determines that the intensity and level of treatment were unnecessary and inappropriate.


The OIG estimates that Part B mental health claims during non-Part A nursing home stays in 2006 were undocumented or lacked adequate documentation 25 percent of the time. For the majority of these claims, there were no records for the correct service date.

In addition to following the documentation guidance for psychiatric diagnostic or evaluative interview procedures and psychiatric therapeutic procedures as described in the CPT® code book, providers should confer with their carrier to determine if a local medical review policy has been written regarding documentation requirements.


The OIG estimates that 8 percent of mental health claims allowed by Medicare Part B were miscoded. Of the 376 sampled claims, reviewers identified 29 claims that contained billing codes that did not accurately reflect the services provided—17 of which were found to be upcoded.

An example of upcoding:

A provider bills for 45-50 minutes of psychotherapy treatment (90818 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 45 to 50 minutes face-to-face with the patient) when medical records indicate only a 20-30-minute (90816 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 20 to 30 minutes face-to-face with the patient) session was actually provided.

An example of miscoding:

A provider bills for psychotherapy treatment lasting 20-30 minutes (90816) when, according to medical review, the provider actually furnished medication management (90862 Pharmacologic management, including prescription, use, and review of medication with no more than minimal medical psychotherapy).


The OIG also found 268 of the 376 (71 percent) sampled mental health claims contained inaccurate diagnosis codes or lacked adequate documentation to support the diagnosis code.

For example, one patient had been diagnosed with 290.21 Senile dementia with depressive features, but medical reviewers determined that the patient should have been diagnosed with 331.0 Alzheimer’s disease.

Although diagnosis codes did not directly affect reimbursement, “including an inaccurate or undocumented diagnosis is inconsistent with the 2003 memorandum [Change Request (CR) 2520] and possibly could affect quality of care if it prevented a patient from receiving the proper treatment to address his or her illness,” the OIG states in the report.

Payment Policy

During non-Part A nursing home stays, Medicare generally pays providers 80 percent of the allowed amount for Part B services. For mental health services provided in outpatient settings, however, Medicare first limits its incurred expenses to 62.5 percent of the allowed amount, and then pays 80 percent of the reduced amount. As a result, Medicare may pay only 50 percent for mental health services. This payment policy is called the “outpatient mental health treatment limitation.”


For more details, read the full OIG memorandum report.

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