Medically Necessary and Reasonable Psychotherapy Services

Medical Necessity Services

"Medically necessary care" refers to healthcare services, treatments, procedures, or supplies that are deemed essential to diagnose, treat, or manage a patient's medical condition or illness. These services are typically prescribed by a licensed healthcare provider and are considered reasonable and appropriate based on the patient's medical needs and current standards of medical practice. Medical necessity is often determined by factors such as the patient's symptoms, medical history, clinical findings, and the potential benefits and risks of the proposed treatment or intervention. Additionally, medical necessity can vary depending on individual circumstances and may be influenced by insurance coverage and healthcare policies.

A functional definition of medical necessary services is documentation in the patient’s medical record concluding that…

The reasonableness of psychotherapy services were articulated in the patient’s record using propositional logic statements which include declarative facts that can interact with each other facts leading to a clinical conclusion/opinion that is consistent with accepted professional guidelines, standards and practices.

Psychotherapy Services are Medically Necessary if …

Services were rendered or made available to a patient for treatment of a behavioral, mental health or substance use disorder diagnosis.
Services were appropriate because they were safe, effective and acceptable services for the plan-member based on generally accepted guidelines including empirical or evidence-based standards recognized by a relevant scientific or professional association.
Services were appropriate and consistent with the diagnosis identified in the behavioral and mental health assessment.
Services were provided in accordance with an individualized service plan and appropriate to achieve the specific and measurable goals identified in the service plan.
Services were not provided solely for the convenience or preference of the patient, the patient’s family, or the provider of psychotherapy service.
Services were not provided solely for recreational purposes.
Services were not provided solely for research and data collection.
Services were not provided solely for the purpose of fulfilling a legal requirement placed on the patient.
Services were not provided to maximize the psychotherapist’s reimbursements.
Services were the most cost effective of the covered services that can be safely and effectively provided to a patient.

Medically Reasonable Services

"Medically reasonable care" refers to healthcare services, treatments, procedures, or supplies that are considered appropriate and justifiable based on accepted medical standards, clinical evidence, and the specific circumstances of a patient's condition. While medical necessity focuses on whether a service or treatment is essential for the diagnosis or treatment of a medical condition, medical reasonableness assesses whether the proposed care is clinically appropriate, given the patient's condition, medical history, and available resources.

Medically Necessary and Appropriate vs Medically Necessary and Reasonable

In 2021 the Federal Government and CMS redefined the standard to qualify reimbursements under Medicare and Medicaid. Oregon has 18 Medicaid program and the major Healthplan have Medicare Advantage plan. As the largest payer system, this is arguably the standard of care. The term “Medically Necessary and Appropriate” what changed to “Medically Necessary and Reasonable.” This was in part because Healthplans lost several legal challenges for using the term “appropriate”. The word “appropriate” gives Healthplan the authority to determine what is appropriate. The word “reasonable” give broader deference to providers who must make a reasonable decision. Given services are medically necessary, the services provided must be reasonable. One could argue that treating some when that care unnecessary, is not appropriate. Appropriate and necessary are in some cases synonymous. Commercial Healthplans and OHP continue to use “appropriate” and not “reasonable.”

The terms "medically reasonable" and "medically appropriate" are often used interchangeably, but there can be nuanced differences in their meanings depending on the context. Here's a breakdown:

Medically Reasonable:
- Definition: Refers to healthcare services, treatments, procedures, or supplies that are considered justifiable and appropriate based on accepted medical standards, clinical evidence, and the specific circumstances of a patient's condition.
- Considerations: Focuses on whether the proposed care is clinically appropriate, taking into account factors such as effectiveness, risks, benefits, available alternatives, and alignment with established medical guidelines and best practices.
- Example: A treatment may be considered medically reasonable if it is supported by scientific evidence, has been shown to be effective in treating the condition, and is consistent with prevailing medical standards.
Medically Appropriate:
- Definition: Refers to healthcare services, treatments, procedures, or supplies that are deemed suitable and fitting for the individual patient's medical needs, preferences, and circumstances.
- Considerations: Takes into account not only the clinical aspects of care but also factors such as patient preferences, cultural considerations, psychosocial factors, and the patient's ability to adhere to the recommended treatment plan.
- Example: A treatment may be considered medically appropriate if it not only meets the clinical criteria for effectiveness and safety but also aligns with the patient's values, beliefs, and lifestyle, leading to better adherence and improved outcomes.

In summary, while both terms imply a level of suitability and appropriateness in healthcare decision-making, "medically reasonable" tends to focus more on clinical appropriateness and adherence to medical standards, while "medically appropriate" considers a broader range of factors, including patient preferences and individual circumstances.

State and federal regulations play a crucial role in evaluating the medical necessity of psychotherapy services, ensuring that patients receive appropriate, necessary, and quality mental health care. These regulations set the standards for what constitutes medically necessary care and outline the criteria for coverage by insurance providers. Here's a summary of the key regulations and guidelines:

Federal Regulations

1. Medicare Part B Coverage: Section 1862 (a)(1)(A) of the Social Security Act mandates that all Medicare Part B services, including mental health services, must be "reasonable and necessary for the diagnosis or treatment of an illness or injury or to improve the functioning of a malformed body member." Local medical review policies developed by Medicare carriers assess the appropriateness of claims for mental health services based on coverage and documentation guidelines[3].

2. Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA): This act requires insurers to provide the same level of benefits for mental health and substance use treatment and services as they do for medical/surgical care. It also mandates insurers to disclose their proprietary coverage guidelines, promoting transparency and fairness in the evaluation of medical necessity for mental health services.

State Regulations

1. California Mental Health Parity Act: Amended in 2020, this act requires commercial health plans and insurers in California to provide full coverage for the treatment of all mental health conditions and substance use disorders. It establishes specific standards for what constitutes medically necessary treatment and criteria for the use of services[9].

2. Medi-Cal Coverage: In California, Medi-Cal provides mental health care and substance use disorder services, covering medically necessary residential treatment and other mental health services. The coverage includes services necessary to correct or ameliorate a mental illness or condition discovered by a screening service[9].

3. Louisiana Coordinated System of Care (CSoC) Medical Necessity Criteria: These guidelines are divided into psychiatric and substance-related sets to address the patient's primary problem. They include criteria for admission, intensity and quality of service criteria, and psychological testing criteria for authorization[7].

4. California Department of Health Care Services (DHCS) Medical Necessity Criteria: DHCS proposes eligibility criteria largely driven by the level of impairment as well as diagnosis or a set of factors across the bio-psycho-social continuum. Services are considered medically necessary when they are reasonable and necessary to protect life, prevent significant illness or disability, or alleviate severe pain.

General Principles

- Medical Necessity Definition: Services must be under accepted standards of medical practice and considered to be specific and effective treatment for the patient's condition. This includes services that are reasonable and necessary for the diagnosis or treatment of an illness or injury.

- Clinical Necessity Guidelines for Psychotherapy: These guidelines support access to psychotherapy as prescribed by the clinician without arbitrary limitations on duration or frequency, emphasizing the importance of clinician judgment in determining the necessity of psychotherapy services.

In summary, state and federal regulations provide a framework for evaluating the medical necessity of psychotherapy services, emphasizing the importance of equitable coverage for mental health and substance use disorders. These regulations ensure that decisions regarding the medical necessity of psychotherapy are based on clinical needs, accepted standards of medical practice, and the individual patient's condition.

Commercial Healthplan (Private Payor) Audits

Psychotherapists may find themselves subject to third-party payer audits by commercial insurers. These audits are similar to those conducted by the Center for Medicare and Medicaid (CMS). The audit process will vary depending on the third-party payer. As is the case with most Medicare and Medicaid audits, providers likely will receive an initial notice from the payor, which may or may not be the Healthplan itself, requesting copies of certain medical records. Or there may be notification from the payer of its intention to come onsite. In many cases where an onsite audit is conducted, the auditors will hold entrance and exit interviews with provider staff. Onsite reviews may also be conducted by obtaining access to the providers electronic health record system if that is within the scope of the Healthplan’s contract with the psychotherapist.

References

DISCLAIMER and PURPOSE: This discussion document is intended for training, educational, and or research purposes only. The information contained herein is based on the data and perspectives available at the time of writing. It is subject to revision as new information and viewpoints emerge.

For more information see: https://www.mentorresearch.org/disclaimer-and-purpose

Mentor Research Institute