Revenue Cycle Insider

Find out how to stay compliant and keep the payments coming.

More Medicare beneficiaries (and patients with other payers) are seeking psychiatric care. Medicare and other payers are also issuing denials for psychiatric care services.

Address the denial reasons associated with the Centers for Medicare & Medicaid Services’ (CMS’) improper payment rate and improve claim and payment accuracy with this information.

A May 2025 MLNConnects article, “Psychiatric Care: Prevent Claim Denials,” identified the most common outpatient psychiatric denial reasons and an improper payment rate of 13.5 percent, or $186.1 million.

Find Out Why CMS Is Concerned About Improper Payments

Background: The program considers any claim that was paid when it should have been denied or paid at another amount as an improper payment. CMS findings are categorized into one of five error categories with percentages: insufficient documentation (79.5 percent), medical necessity (0.1 percent), incorrect coding (7.1 percent), no documentation (7.6 percent), and other reasons (5.8 percent), which includes duplicate payments, noncovered or unallowable services, or ineligible Medicare patients.

Some facilities and sectors — like skilled nursing facilities (SNFs), hospitals, inpatient rehabilitation facilities (IRFs), and hospices — are driving improper payments. Improper payment drivers are service or provider types that make up the largest proportion of improper payments in the Comprehensive Error Rate Testing (CERT) program. Due to these bad actors, entities can expect ongoing and even expanded scrutiny.

Key Part B Issues Exposed

Even though facilities are certain improper payment drivers, other providers who foster Part B services have also contributed via coding errors and insufficient documentation. Specifically, the incorrect coding errors involved documentation supporting a higher or lower level of evaluation and management (E/M) service than billed, and the insufficient documentation centered around documentation for the date of service and attestations for unsigned documentation.

There were also issues found with other, non-Medicare Physician Fee Schedule payments, like for lab tests. In these situations, there was insufficient documentation, with the following root causes, where documentation was missing:

• Provider’s intent to order (certain services)
• Documentation to support medical necessity
• Order inadequate or missing
• Risk assessment for urine drug screen
• Documentation to support frequency of billing
• Result of the diagnostic or laboratory test
• Level of risk for urine drug screen
• Local coverage determination (LCD)/Local coverage article (LCA) requirements, other documentation required for payment
• National Coverage Determination (NCD) requirement(s), other documentation required for payment

There were also insufficient documentation issues, including inadequate or missing information, found with minor procedures included in the Medicare Physician Fee Schedule, affecting the following:

• Physical therapy (PT)/occupational therapy (OT)/speech therapy (ST) certification/recertification, plan of care, required progress report, and/or reason for the delayed physician certification/recertification
• LCD/LCA requirements, other documentation required for payment
• Documentation to support medical necessity
• Attestation for unsigned documentation

Medical necessity was sometimes an issue, where documentation didn’t support the service or item billed; in other situations, units of service were incorrectly reported via upcoding.

Attack Financial and Operational Impact of Denials

Beyond evaluating claims and establishing checks for the above errors, reinvest in compliance by focusing on the basics:

1. Ensure documentation is accurate, complete, and compliant. If not already in place, consider investing in tools like electronic health record (EHR) systems to streamline and facilitate organized and thorough patient records.
2. Review and strengthen standard workflows as needed to verify patient eligibility, benefits, and coverage including pre-authorization requirements before services are rendered to avoid improper billing. Implement benefit verification tools where possible.
3. If not already performed, initiate regular claims and billing audits to ensure that the right codes are being used for services.
4. Educate staff routinely on procedures and accurate use of billing codes, including audit findings and payer updates.
5. Monitor and frequently review CMS’ and other payer’s documentation guidelines and implement changes promptly to ensure ongoing compliance.

Resource: Learn more about compliance issues and avoid common billing errors here.

Patricia Zubritzky, BS, CRCE-I, Contributing Writer, Pittsburgh