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Press Releases

September 29, 1998
Contact: CMS Press Office 202-690-6145

Medicare Expands Crackdown On Waste, Fraud And Abuse In Community Mental Health Centers

The Department of Health and Human Services today announced new actions to ensure that Medicare beneficiaries with acute mental illness get quality treatment in community mental health centers and that Medicare pays appropriately for those services.

As part of a comprehensive action plan, HHS' Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration) will initiate termination actions against centers that appear unable to provide Medicare's legally required core services, and will require others to come quickly into compliance. The agency also will demand repayment of money paid inappropriately for non-covered services or ineligible beneficiaries.

Termination actions will be phased in over a period of months in order to address the most egregious providers first and to assure that beneficiaries needing psychiatric services will continue to receive them in an appropriate setting. Twenty non-compliance notices will be issued this week, with an estimated 80 notices in all to be sent by early 1999.

"This is an important benefit for Medicare beneficiaries who need outpatient psychiatric services. We need to move in a deliberate, targeted manner to assure that beneficiaries' needs are met, and at the same time, that fraud and abuse in this program is eliminated," HHS Secretary Donna E. Shalala said.

"There is clear evidence of abuse of this program," Shalala added. "Working together, CMS and the HHS Inspector General have found extensive evidence of providers who are not qualified, patients who are ineligible, and services billed to Medicare that are not appropriate. CMS's 10-point plan is designed to correct these problems, and to ensure that senior citizens receive the Medicare services that they need." Under a 1990 law, community mental health centers are allowed to provide "partial hospitalization" services to beneficiaries with acute mental illness who otherwise might need to be hospitalized. These intensive psychiatric services can also be provided by outpatient psychiatric programs in hospitals.

To participate in Medicare, however, the law requires community mental health centers to provide four core services:
  1. Outpatient services to the elderly, children and the severely mentally ill;
  2. 24-hour-a-day emergency care;
  3. Day treatment or other partial hospitalization services; and
  4. Screenings to determine whether to admit patients to state mental health facilities.
Working with the HHS Inspector General in the Operation Restore Trust anti-fraud initiative, CMS last year identified patterns of fraud and abuse of the benefit at community mental health centers. Centers investigated were found to be billing Medicare for services that weren't covered, weren't provided, or weren't needed. Some beneficiaries who did not need the benefit did not even know that they were in a program intended for people with mental illness.

In response, CMS this year conducted site visits to about 700 Medicare-participating centers and applicants. Many met few, if any, of the statutory requirements for Medicare participation, raising doubts about their ability to care properly for beneficiaries. Medicare is now moving to terminate the most egregious violators.

"Partial hospitalization is intended for those who need psychiatric services," said CMS Administrator Nancy-Ann DeParle. "But in my own inspection of some of these programs, it was clear that some centers are using this program, and billing Medicare, in ways that are completely inappropriate. Centers must be competent to provide the services that are needed, and they must stop enrolling beneficiaries who do not need these benefits."

In January, President Clinton asked Congress to enact legislation that would authorize fines for physicians who falsely certify a beneficiary's eligibility for partial hospitalization services and would allow the Secretary to create additional requirements for community mental health centers to participate in Medicare. That legislation is still pending before Congress.

Today's actions build on the Administration's existing efforts to end the waste, fraud and abuse of the partial hospitalization benefit. HHS' Operation Restore Trust targeted four areas for special review -- home health, durable medical equipment, long-term care and community mental health centers.

A 10-point plan announced today includes the following leading elements:
  • Terminate the worst offenders. Medicare will end its relationship with those community mental health centers that are clearly out of compliance with the legal requirements. Other non-compliant centers must quickly correct identified problems or face similar termination actions.
  • Increase scrutiny of new applicants. CMS will require site visits nationwide to ensure community mental health centers who apply for Medicare participation meet all of the core requirements in the law. Already this year, the agency has denied more than 100 applicants because they failed to provide all the required services.
  • Eliminate improper payments. CMS will suspend payments to providers when services are not billed properly. Medicare also will seek repayment of improper claims and will refer suspected fraud to the Inspector General for investigation and possible prosecution.
  • Protect beneficiary access to covered services. CMS will consider the needs of beneficiaries before it terminates any centers. The agency will work with the Administration on Aging and other federal agencies, mental health advocates, state officials and others to ensure beneficiaries receive appropriate services from Medicare, and when appropriate, other social service agencies.
In addition, CMS plans a number of long-term reforms. These efforts include a new payment system for partial hospitalization that encourages efficiency and eliminates financial incentives for abuse; and a joint review of the partial hospitalization benefit with the Inspector General. CMS also will increase its review of partial hospitalization claims from community mental health centers and hospital outpatient departments to ensure Medicare pays only for appropriate services to qualified beneficiaries.

The number of community mental health centers has grown rapidly since Congress first allowed the centers to serve Medicare beneficiaries. There are about 1,150 community mental health centers participating in the Medicare program today. About 1,000 hospitals also provide the partial hospitalization benefit.

Between 1993 and 1996, total Medicare payments to these centers rose sharply -- from $60 million to $265 million, a 342 percent increase. The average payment per beneficiary during this period rose from $1,642 to $6,874, a 319 percent rise. Preliminary figures for 1997 show total payments climbing to $349 million and average payment per beneficiary topping $10,000.

"Today community mental health centers account for only a small fraction of Medicare's overall budget -- but it's still crucial that every dollar goes to legitimate services," DeParle said. "By acting now, we will protect beneficiaries, taxpayers and the trust fund from growing abuse."

Prior to today's announcement, CMS and the Inspector General have worked together to correct problems with these centers identified by last year's Operation Restore Trust efforts:
  • CMS suspended payments to 18 existing centers where medical review and audits uncovered large overpayments.
  • Referrals were made to appropriate law enforcement agencies to investigate those providers for fraud and abuse. CMS has terminated 15 of those centers.
  • In Florida, Medicare is reviewing all claims from many problem community mental health centers. Medicare this year increased its budget for medical reviews and audits for all services and all providers, including community mental health centers.
"It is important for CMS and the Office of the Inspector General to work together to identify problems and especially to spot trouble early," said HHS Inspector General June Gibbs Brown. "I'm pleased that CMS is moving aggressively to protect taxpayers and assure that Medicare pays only for appropriate services. We also urge Congress to approve the legislation that has been proposed to combat waste and abuse in this area."

Two separate IG reports on the partial hospitalization benefit are expected to be released soon.

The Clinton Administration has made stopping waste, fraud and abuse in the Medicare program one of its top priorities. In fiscal 1997, Medicare saved more than $7.5 billion through its anti-fraud and abuse efforts, and, with its law enforcement partners, returned another $1 billion to the Medicare Trust Fund.

Note: HHS press releases are available on the World Wide Web at: http://www.hhs.gov.
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