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Psychiatric Hospitals

This page provides basic information about being certified as a Medicare and/or Medicaid psychiatric hospital provider and includes links to applicable laws, regulations, and compliance information.

The term psychiatric hospital means an institution which: 

  • Is primarily engaged in providing, by or under the supervision of a Doctor of Medicine or Osteopathy, psychiatric services for the diagnosis and treatment of mentally ill persons;
  • Satisfies the requirements of §§1861(e)(3) through (e)(9) of the Social Security Act (general hospital requirements);
  • Maintains clinical and other records on all patients as the Secretary finds necessary to determine the degree and intensity of the treatment provided to individuals entitled to hospital insurance benefits under Part A; and
  • Meets such staffing requirements as the Secretary finds necessary for the institution to carry out an active program of treatment for individuals receiving services in the institution.

In the case of an institution that satisfies the first two criteria and contains a distinct part that also satisfies the last two criteria, the distinct part is considered to be a “psychiatric hospital.”

There are some psychiatric hospitals that are designated as “forensic hospitals.”  These hospitals focus on serving individuals who are in the custody of penal authorities.  As a general rule, institutions that house only prisoners are excluded from Medicare payment.  However, in accordance with 42 CFR 411.4(b) payment may be made for services furnished to individuals who are in the custody of penal authorities if (1) State or local law requires such individuals to repay the cost of the medical services they receive while in custody and (2) the State or local government entity enforces the requirement by billing all individuals who are prisoners whether or not they are insured by Medicare on any other insurance program.  The pursuit of repayment from the prisoners for Medical services must be done with the same vigor as would be done for the collection of any other debts owed the state.  The determination of payment eligibility in these cases is made by the FI and CMS financial personnel.

Regardless of whether a state meets the payment requirements for prisoners housed in these hospitals, the hospital must apply the CoP, including the restraint and seclusion rules, to all patients including the prisoners.  If a hospital wants to apply different health and safety rules to prisoners, it may want to consider establishing a distinct part.

Medicaid rules for institutionalized individuals are found at 42 CFR 435.1008 – 435.1009.  If there is an issue concerning a Medicaid prisoner, contact the RO account representative for the particular state for resolution.

Psychiatric hospitals participating in Medicare and accredited by AoA or JCAHO under their hospital accreditation programs or under JCAHO’s consolidated standards for adult psychiatric facilities are deemed to meet the Medicare requirements for hospitals, with the exception of the special medical record and staffing requirements.  Consequently, for a newly applying accredited psychiatric hospital, the effective date can be no sooner than the date established by CMS under 42 CFR 489.13(c)(2).  Facilities accredited exclusively under the JCAHO community mental health standards, or under the consolidated standards for child and adolescent psychiatric facilities, or alcoholism and drug abuse facilities are not deemed to meet any of the CoPs.

Some surveys of these facilities are surveyed by contracting surveyors hired by CMS while others are surveyed by the State Survey Agency.

A psychiatric hospital may elect to participate in its entirety, or it may designate a distinct part and apply for Medicare participation of that portion.

The distinct part provisions of the law are designed to permit the participation of those identifiable sections of psychiatric hospitals that are adequately staffed, supervised, and equipped to provide active treatment on a continuing basis. The participating distinct part must meet the hospital CoPs and the two special CoPs and have appropriate treatment services available.  Patients in the distinct part must be provided treatment that may reasonably be expected to improve their condition.

The provisions for certification of distinct parts of psychiatric hospitals apply only where the entire institution is primarily for the treatment of mental illness. Thus, a psychiatric wing or building of a general hospital or of a large medical center or complex may not be certified as a “distinct part psychiatric hospital.”  Such facilities are included in the certification of the institution of which they are an integral part.