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OIG report on PHPs: The tip of the iceberg

September 7, 2012
by By Alison Knopf, Contributing Writer
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CMS now implementing higher level of scrutiny for mental health providers

Mental health care providers billing Medicare or Medicaid take heed: the federal government is watching you. The most recent report issued last month by the Department of Health and Human Services (HHS) Office of Inspector General (OIG), which focused on partial hospitalization program (PHP) services billing Medicare, found that almost half of the community mental health centers (CMHCs) involved were engaging in questionable billing practices, and that 90 percent of the cases occurred in three states that don’t regulate CMHCs: Florida, Louisiana, and Texas.

While this report, “Questionable Billing by Community Mental Health Centers,” focused on PHPs, all CMHCs are under scrutiny under a new system of “program integrity” at HHS.



The OIG conducted the PHP investigation in the wake of last year’s conviction of four CMHS owners and managers in Florida for fraudulently billing Medicare $200 million for unnecessary PHP services from 2002 to 2010.

An estimated $218.6 million went to CMHCs during 2010 for PHP services to about 25,000 Medicare beneficiaries. Because past OIG investigations have found “vulnerabilities” in such payments, the OIG wanted to take a closer look at billing practices.  About half of them were engaging in at least one of the questionable billing practices, resulting in unusually high billing.


The OIG recommended that CMS:

·       increase fraud monitoring of CMHCs

·       enforce the rule that physicians who certify the need for treatment be listed on PHP claims

·       implement proposed conditions of participation in the Medicare program for CMHCs, and,

·       “take appropriate action against CMHCs with questionable billing practices.” (More on the conditions of participation below.)

CMS agreed with all four recommendations.


Questionable billing

OIG developed nine questionable billing practices for CMHCs and determined the rates at which each occurred at 206 CMHCs for 2010. The analysis excluded 11 CMHCs that did not have at least five beneficiaries and were not paid $10,000 or more for PHP services.


The questionable billing practices were:

  • Beneficiaries who received only group psychotherapy during their PHP participation.
  • Beneficiaries who were not referred to PHPs by health care facilities.
  • Beneficiaries who were not evaluated by physicians during their PHP participation.
  • Beneficiaries with no mental health diagnoses a year prior to participating in PHPs.
  • Beneficiaries who participated in PHPs at CMHCs outside their communities.
  • Beneficiaries who participated in PHPs at more than one CMHC.
  • Beneficiaries with cognitive disorders who participated in PHPs.
  • Beneficiaries who were readmitted to inpatient treatment.
  • Beneficiaries with long durations of PHP participation.

Of the 195 CMHCs reviewed, 102 – 52 percent –had unusually high billings based on at least one of the nine questionable billing practices. Ninety percent were in the three states with no licensure or certification requirements – Florida, Texas, and Louisiana. CMHCs in those states be now scrutinized under a pilot project.



The National Council for Community Behavioral Healthcare distanced itself from the CMHCs reviewed in the OIG report. “They are not our members,” Linda Rosenberg told Behavioral Healthcare. “They are for-profits. What the for-profits do is they round up people who are homeless or in boarding homes, some don’t even have a psychiatric diagnosis, and they bill Medicare because they are getting people who are on disability,” she said.

Rosenberg pointed out that Texas, Louisiana, and Florida are states that “don’t invest a lot of money in mental health services, including oversight.” The atmosphere is one in which “people who are less than honest can operate,” she said.

Rates are good for PHPs, and that’s why for-profit CMHCs operate them. “It’s a business they went into many years ago,” she said.



In 1998, OIG found 91 percent of the PHP services it reviewed – 14 CMHCs in 5 states –should not have been paid because “1) the beneficiaries were ineligible for services, 2) services were not medically reasonable or necessary for the beneficiaries’ condition, 3) services were not properly authorized by or furnished under the supervision of physicians, or 4) services were not adequately documented.” The total amount was $229 million for 5,431 services, of which 4,959 were deemed ineligible for payment.

The next year, OIG investigated 303 medical records for mental health services provided in CMHCs, practitioner’s offices, beneficiaries’ homes, and custodial care facilities, and found that in 22 percent of them, the services were “beyond what was medically reasonable and necessary.” Typically, the excessive services were provided either by CMHCs or in beneficiaries’ homes.


Conditions of participation

Currently, the Medicare program does not have “conditions of participation” for CMHCs. Without these conditions, which are standards to help ensure the quality of patient care, and without any requirement that CMHCs be accredited, licensed, or certified by a state, CMS has limited ability to shut them down. That, however, may change. Last year, CMS proposed a rule to establish conditions of participation for CHMCs – something that last month’s OIG report recommends.  Many CMHCs are visited only once by CMS – when they first open.