Outpatient Psychiatric Care

Affected Providers

Physicians and non-physician practitioners who bill for outpatient psychiatry services.

HCPCS & CPT Codes

Article: Billing and Coding: Psychiatric/Psychiatry/Psychology Services has the current HCPCS and CPT codes. Select your Medicare Administrative Contractor’s (MAC’s) outpatient article from the search results.

Background

According to the 2024 Medicare Fee-for-Service Supplemental Improper Payment Data, the improper payment rate for outpatient psychiatry services is 16.1%, with a projected improper payment amount of $254.5 million.

We outline other policy requirements in Local Coverage Determination (LCD): Psychiatric/Psychiatry/Psychology Services. Select your MAC’s outpatient LCD from the search results and review the article or policy to see if the coverage information applies to you.

Denial Reasons

Insufficient documentation accounted for 78.3% of improper payments for psychiatry services during the 2024 reporting period, while no documentation (17%), incorrect coding (2.6%), and other errors (2%) also caused improper payments. “Other” errors include duplicate payment, non-covered or unallowable service, or ineligible Medicare patient errors.

Preventing Denials

Outpatient Psychiatry

A facility may provide a wide range of services and programs to its outpatients who need psychiatric care, ranging from a few individual services to comprehensive, full-day programs and from intensive treatment programs to those that provide primary support.

We cover services that must be “incident to” a physician’s service and reasonable and necessary for diagnosing or treating the patient’s condition.

Part B covers outpatient mental health services, including services that are usually provided outside a hospital, in these types of settings:

• Doctor’s or other health care provider’s office
• Hospital outpatient department
• Community mental health center

Coverage criteria include:

• Individualized Treatment Plan
  • A physician must prescribe and provide services under an individualized written plan of treatment set up by a physician after any needed consultation with proper staff members.
  • For the patient to get services, the plan must state the type, amount, frequency, and duration of the services and must show the diagnoses and expected goals. We don’t require a plan if the provider only provides a few brief services.
• Physician Supervision and Evaluation
  • A physician must supervise and periodically evaluate services to decide if they meet the treatment goals. The physician must base the evaluation on periodic consultation and conferences with therapists and staff, medical records review, and patient interviews. Physician entries in medical records must support this involvement.
  • A physician must also supervise and direct any therapist involved in the patient’s treatment, see the patient periodically to evaluate the course of treatment, and decide if the patient is realizing treatment goals or if they need changes in direction or emphasis.
• Reasonable Expectation of Improvement
  • Services must be for diagnostic study or reasonably be expected to improve the patient’s condition.
  • The treatment must at least reduce or control the patient’s psychiatric symptoms to prevent relapse or hospitalization and improve or maintain their level of functioning.

Covered Services

• Individual and group therapy with physicians, psychologists, or other mental health providers (including substance use disorder (SUD) professionals) authorized by the state.
• Occupational therapy services if they require the skills of a qualified occupational therapist and are provided by, or under supervision of, a qualified occupational therapist or an occupational therapy assistant.
• Services of social workers, trained psychiatric nurses, and other staff trained to work with psychiatric patients (including patients with SUD). These include principal illness navigation services provided by auxiliary staff, including peer support specialists.
• Drugs and biologicals provided to outpatients for therapeutic purposes, but only if they’re of a type that can’t be self-administered.
• Activity therapies, but only those that are individualized and essential for treating the patient’s condition. The treatment plan must clearly justify the need for each therapy and explain how it fits into the patient’s treatment.
• Family counseling services. These include counseling services for caregivers.
• Patient education programs, but only when the educational activities are closely related to the patient’s care and treatment. These services include caregiver training services provided for the patient’s benefit.
• Diagnostic services for patients who need extended or direct observation to determine functioning and interactions, identify problem areas, and formulate a treatment plan.

Non-Covered Services

• Meals and transportation
• Activity therapies, group activities, or other services and programs that are primarily recreational or diversional in nature
• Outpatient psychiatric day treatment programs that are entirely activity therapies
• Psychosocial programs
• Vocational training

Service Frequency & Duration

There are no specific limits on the length of time that services may be covered. Many factors affect the outcome of treatment, such as:

• Nature of the illness
• Prior history
• Treatment goals
• Patient’s response 

If the evidence shows that the patient continues to improve according to their individualized treatment plan and the frequency of services is within accepted norms of medical practice, we may continue coverage.

If a patient reaches a point in their treatment where further improvement doesn’t appear possible, evaluate the case in terms of the criteria to decide if continued treatment creates a reasonable expectation of improvement.

Medicare Benefit Policy Manual, Chapter 6, sections 70.1 and 70.2 have more coverage criteria information.

Office or Outpatient Evaluation & Management Visits Provided on Same Day for Unrelated Problems

If physicians from the same group perform an evaluation and management (E/M) visit and outpatient psychiatric visit on the same day, the visits can be separately billable. We may not pay 2 E/M office visits billed by a physician (or physician of the same specialty from the same group practice) for the same patient on the same day unless the physician documents that the visits were for unrelated problems in the office, off-campus outpatient hospital, or on-campus outpatient hospital setting that couldn’t be provided during the same encounter (for example, office visit for blood pressure medication evaluation, followed 5 hours later by a visit for evaluation of leg pain following an accident).