What is Causing the Spike in Partial Hospitalization Overpayment Actions?

(June 30, 2010): Are Partial Hospitalization Programs (PHPs) and Community Mental Health Centers (CMHCs) being unfairly targeted in the Administration’s push to identify and recover allegedly improper Medicare payments?

In May 2010, the Office of the Inspector General of the HHS (HHS-OIG) published an assessment of the Program Safeguard Contractors (PSCs) overpayment collections that identified only 2 overpayment referrals for partial hospitalization claims in 2007. These referrals accounted for only $403,935 of approximately $835 million in overpayment referrals — less than 0.1% of the total.  Yet, we are aware of far more overpayment cases involving CMHCs (many of which are in the Southern region) making their way through the administrative appeals process right now.

After carefully reviewing the data, it is our belief that CMS has taken action to address HHS-OIG’s unimplemented recommendations regarding the agency’s concerns about partial hospitalization claims.   Dating as far back as 1998, HHS-OIG has pushed for stronger oversight of these programs.  For at least the last three years (2007, 2008, and 2009), HHS-OIG’s compendium of unimplemented recommendations has included dramatic findings as to the scope of supposed partial hospitalization program billings and the potential savings that could be derived from focusing on this area.  For instance, in 2007 and 2008, the agency reported:

“’Partial hospitalization’ services, which may be provided by both hospitals and community mental health centers, have been particularly troublesome…. We estimated that payment error rates for partial hospitalization in community mental health centers were as high as 92 percent.” (Emphasis added).

HHS-OIG estimated that ensuring the appropriateness of Medicare payments for mental health services would yield $725 million in savings in 2007.  This figure increased to $1.44 billion in 2008 and 2009.

Again in 2009, HHS reiterated its findings, saying,

“We believe that CMS still needs to monitor partial hospitalization services provided by community mental health centers, which we consider particularly vulnerable. We will continue to monitor CMS’s efforts to ensure that mental health services are medically necessary and reasonable and are accurately billed.” (Emphasis added).

While neither CMS nor HHS-OIG have commented on the “spike” in cases brought against CMHCs, it appears clear that partial hospitalization claims are currently being reviewed by contractors around the country for possible overpayments.

To be clear, we take exception with these findings.  After representing many CMHCs around the country, it has become apparent that many of the reviewers conducting reviews of partial hospitalization claims have little or no experience assessing these specialized services.  As a result, we are quite concerned that CMHCs are now being targeted.  We strongly recommend that CMHCs conduct periodic reviews of both applicable LCD provisions and their billing practices to ensure that partial hospitalization services are being appropriately ordered, documented and billed.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.