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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Payment Edits for Outpatient Psychiatric Services at the Massachusetts Medicare Part B Carrier" (A-01-98-00500)

August 1998

Complete Text of Report is available in PDF format (82 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The objective of our review was to determine whether the Massachusetts Blue Shield correctly applied the outpatient psychiatric payment limitation of 62.5 percent to psychiatric physician services performed in an outpatient setting. Our review covered services performed in Calendar Year (CY) 1996.

Our review of claims processed for beneficiaries residing in the four state area of Maine, Massachusetts, New Hampshire and Vermont in CY 1996, identified approximately $2.7 million in payments to professional psychiatric providers for Current Procedural Terminology (CPT) evaluation and management (E&M) services for the treatment of mental, psychoneurotic, and personality disorders in an outpatient setting. However, contrary to Medicare regulations, these services were reimbursed at 80 percent of the Medicare allowed amount without first applying the outpatient mental health payment limitation of 62.5 percent. As a result of not applying the payment limitation, we estimate that Medicare overpaid its share by approximately $1 million in CY 1996 for outpatient mental health services.

To prevent additional overpayments from occurring we met with the National Heritage Insurance Company (NHIC) and recommended that it adjust the outpatient psychiatric payment edit to include E&M procedure codes used by psychiatric providers for services rendered to beneficiaries with a psychiatric diagnosis code. The NHIC generally concurred with our recommendation and as of April 1, 1998 began using the new edit to correct the payment errors. We are further recommending that the NHIC:

The NHIC generally concurs with our recommendations in response to our draft report. The NHIC, however, will further study the provider usage of certain procedure codes to determine if they should be subject to the new edit.