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February,
2001
Department of Health and Human
Services
Office of Inspector General
 Medicare Payments for
Psychiatric Services in Nursing Homes: A Follow-Up
This inspection, a follow-up to an Office of Inspector General
report issued in May 1996 entitled "Mental Health Services in
Nursing Facilities" (OEI-02-91-00860), was conducted to
determine what changes, if any, have occurred with Medicare
reimbursement for psychiatric services in nursing homes. In the
earlier report, the Inspector General found
that nearly half of all Medicare psychiatric services in nursing
facilities were either medically unnecessary (32 percent) or
questionable (16 percent). The report also identified inadequate
utilization guidelines and a lack of carrier policies and screens
specific to nursing facilities.
The Nursing Home Reform Act of 1987 mandates that each nursing
home resident have a comprehensive initial and periodic assessment
using a standard form called the Minimum Data Set, which includes
a mental health evaluation and establishes the need for
psychiatric services. These services include initial testing and
evaluation, individual psychotherapy, pharmacological management,
and group therapy. Claims for psychiatric services are processed
and paid for by Medicare carriers that contract with the Health
Care Financing Administration. Medicare payments for psychiatric
services in nursing homes totaled approximately $211 million in
1998 and $194 million in 1999.
Using a stratified random sample of 450 nursing home
psychiatric services provided in the first 6 months of 1999, we
combined 3 methods for this inspection: a medical record review, a
beneficiary billing history review, and an analysis of carrier
policies.
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