National Alliance on Mental Illness
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The Medicare Partial Hospitalization Benefit

Why Medicare Partial Hospitalization Is Important?

Five million Medicare beneficiaries have mental disorders other than mental retardation and 1.3 million of them are under the age of 65 and receiving Social Security Disability Insurance (SSDI). In 1990, Medicare spent $1 billion for 240,000 psychiatric hospital admissions. In 1992 Medicare spent $661.3 million for 831,240 persons under the Medicare Part B outpatient mental health services. Between 1993 and 1997 Medicare spending for partial hospitalization services for mental health jumped from $60 million to $369 million.

Medicare contains one of the most discriminatory benefits for mental illness in the nation. There is no coverage for medication. Outpatient mental health services carry a 50-percent copay, while all other outpatient benefits carry a 20-percent copay. There is a 190-day lifetime limit on inpatient psychiatric hospital treatment. A number of important services for persons with severe mental illnesses are not covered under Medicare, such as psychiatric rehabilitation, case management, and programs for assertive community treatment. Partial hospitalization is frequently used because of the inadequacy of the Medicare mental health benefit, which creates pressure to approve services outside allowable parameters.

In the late 1980s Congress authorized a hospital-based partial hospitalization benefit as an alternative to hospitalization. In 1990 Congress expanded the partial hospitalization benefit to allow community mental health centers (CMHCs) to deliver this benefit. The law required such CMHCs to "meet applicable licensing or certification requirements for CMHCs." Unfortunately, over half of our states do not have such licensing or certification requirements. Many storefront operations calling themselves CMHCs were given Medicare-provider status and began billing for partial hospitalization services. These are not the traditional CMHCs recognized by the state mental health authorities and the federal Community Mental Health Services Block Grant.

Medicare rules require that partial hospitalization services are services "reasonably expected to improve or maintain the individual’s condition and functional level and to prevent relapse or hospitalization." Partial hospitalization services are intended to be an alternative to inpatient psychiatric care; a physician must certify that in the absence of partial hospitalization services the patient would require inpatient care.

Medicare rules require "active treatment," generally meaning that patients have an acute psychiatric disorder or are experiencing an exacerbation of a severe and persistent mental illness and that services must be targeted to meet the goals of alleviating impairments and maintaining or improving functioning to prevent relapse or hospitalization.

In late 1997 Medicare’s Carrier Medical Director Working Group on Partial Hospitalization issued a model reimbursement policy that fiscal intermediaries have the option of following. The model emphasized active treatment of an acute psychiatric condition in place of inpatient hospitalization. The model required a physical examination by a physician within 24 hours of admission and also required the intensity of services to equal at least three hours a day, four days a week. When the need for inpatient admission ceases, use of the partial program should cease.

In early October a subcommittee of the House Commerce Committee conducted a hearing on "fraud and abuse" in the partial hospital program. HCFA auditors had the week before terminated 80 so-called CMHCs in nine states from the program because they failed to provide active treatment—what the HCFA administrator and the press termed "warehousing, playing bingo, watching TV."

In general there are four kinds of providers participating in the Medicare partial hospitalization program:

1. Hospital-based programs, represented by the National Association of Psychiatric Health Systems (NAPHS), formerly the National Association of Private Psychiatric Hospitals.

2. Community Mental Health Centers, represented by the National Council of Community Behavioral Healthcare (NCCBH), formerly the National Council of Community Mental Health Centers.

3. Free-standing partial hospitalization programs, represented by the Association for Ambulatory Behavioral Healthcare (AABH)B, formerly the American Association for Partial Hospitalization.

4. Storefront operations, frequently family owned, that call themselves CMHCs for purposes of Medicare billing.

NAMI works with both NAPHS and NCCBH and occasionally attends meetings with AABH. Each of these provider groups has its own recommended solution to the problems of the partial programs.

1. NAPHS advocates more detailed HCFA conditions of participation for partial hospitalization, consistently applied by the fiscal intermediaries.

2. NCCBH advocates a proactive role by the state mental health authorities, which finance the traditional CMHCs, and also advocates a revised Medicare statutory definition of a CMHC.

3. AABH advocates more detailed HCFA conditions of participation for partial hospitalization, consistently applied by the fiscal intermediaries.

In many ways, none of the three groups want to alter its current operations. Each wants to maximize its Medicare revenue while serving persons with mental illness in the program model currently offers. Defense of their current program models is a predominant goal of these groups. All want to immediately terminate the storefront operations calling themselves CMHCs. Some states and providers have supported expansion of these programs, preferring 100-percent Medicare reimbursement at higher rates than either a Medicaid or state general revenue rate.

1. NAMI supports a revised Medicare statutory definition of CMHC that retains in law two existing CMHC Medicare statutory requirements: that CMHCs must provide 24-hour-a-day emergency care services and that CMHCs must screen and assess persons for possible hospital admissions. NAMI supports a pro-active role by the state mental health authorities.
2. NAMI wants providers to be licensed by the state and meet national standards of clinical care. Reports of their compliance with national standards should be publicly available.

3. All persons served should have a documented diagnosis of illness.

4. All persons served should have an individualized treatment plan with stated clinical goals and progress notes.

5. The existing peer review organizations (PROs)(Part 462 of the Code of Federal Regulations) should increase their psychiatric treatment expertise and be directly involved in verifying a sample of clinical cases as medically necessary and appropriate. PRO reports should be publicly available.
6. NAMI supports the expectation to improve or maintain functional levels to prevent relapse or hospitalization. NAMI also strongly advocates for the expansion of the Medicare benefit to cover medications, psychiatric rehabilitation, case management, and programs of assertive community treatment. Program integrity of partial hospitalization services must be restored to retain this important Medicare benefit, but the entire benefit must be expanded to meet the needs of persons with severe and persistent mental illness.

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