New Local Coverage Determinations Create Major Compliance Issues for Hospital Outpatient Psychiatric Departments

Novitas Solutions, Inc. (Novitas) recently issued two local coverage determinations (LCDs) that created significant compliance issues for hospital outpatient psychiatric departments. LCD L32705: Partial Hospitalization Programs (PHPs) – Psychiatric incorrectly requires “direct personal supervision” by a physician for any service, including group therapy, to be covered in an off-campus PHP. LCD L32766: Psychiatric Codes contains an incomplete list of approved providers of mental health services provided in an Intensive Outpatient Psychiatric (IOP) program or PHP. The significant errors in the LCDs, which became effective August 13, 2012, create serious compliance issues, particularly for off-campus PHPs, which could render virtually every service provided in the PHP as non-covered and non-billable and carries with it False Claims Act implications.

While we have written and contacted Novitas regarding the matter, to date, Novitas’ position is that the LCDs are in effect and that services not meeting the LCD requirements are not covered services under the Medicare program. While Novitas considers our request to suspend the effective date of the LCDs or rescind the LCDs completely, hospitals offering outpatient psych services through an IOP or off-campus PHP need to be aware of the LCDs and the compliance risks posed thereby.

Executive Summary

• Novitas is requiring off-campus PHPs to have “direct personal supervision” of a physician who is required to physically be in the PHP department anytime group therapy is provided. CMS Payment rules only require general supervision.
• Novitas failed to include LPCs and LMSWs in its listing of approved mental health providers. CMS Payment rules allow LPCs and LMSWs to provide mental health services subject to state licensure.
• Novitas’ position is that even if a service meet CMS payment rules, not meeting the new coverage rule renders the service “not covered” and therefore, ineligible for payment. Services not meeting the LCD requirements may implicate the False Claims Act and/or be subject to recoupment through audits.
• The LCDs become effective according to the following schedule: August 13, 2012 (Louisiana, Arkansas), October 22, 2012 (Mississippi), November 19, 2012 (Colorado, New Mexico, Oklahoma, Texas)

I. LCD L32705: Partial Hospitalization Programs

The physician supervision required by Novitas LCD L32705 for off-campus Partial Hospitalization Programs (“PHPs”) directly contradicts the supervision standards required by CMS. Under the heading “Sites of Service,” LCD L32705 states:

“If a hospital outpatient department or CMHC operates a PHP offsite, the services must be rendered under the direct personal supervision of a physician (MD/DO). Direct personal supervision means that the physician must be physically present in the same office suite and immediately available to provide assistance and direction throughout the time the employee is performing services. Availability on another floor or somewhere else in the institution does not meet this requirement.” [emphasis added] CMS has never required hospital outpatient group therapy in a PHP to be provided “under the direct personal supervision of a physician”. Indeed, there is no such thing as “direct personal supervision.” The three levels of supervision in a hospital are Personal, Direct, and General. See 42 C.F.R. §410.27 and § 410.32. While off-campus PHP group therapy originally required “direct” physician supervision, CMS explained in the 2000 Outpatient Prospective Payment System (OPPS) Final Rule that direct supervision in a hospital setting has never required the supervising practitioner to be “in-suite”.

In the CY 2010 OPPS Final Rule, CMS increased hospitals’ flexibility to allow nonphysician practitioners (NPPs) to supervise hospital outpatient therapeutic services within their scope of practice under state law and their hospital-granted privileges. 74 Fed. Reg. 60679- 60680 (November 20, 2009). Thereafter, in the CY 2011 OPPS Final Rule, CMS again increased hospitals’ flexibility by removing the “on-premises” physical boundary requirements for direct supervision of hospital outpatient therapeutic services. 75 Fed. Reg. 71998-72001 (November 24, 2010). Consequently, for both on and off-campus, the supervisory physician or NPP was required to be “immediately available to furnish assistance and direction throughout the performance of the procedure.” 42 C.F.R. § 410.27(a)(1)(iv).

As CMS explained, “the physician [or NPP] is not required to be present in the room where the procedure is performed or within any other physical boundary as long as he or she is immediately available.” CMS Pub. 100-02, Medicare Benefit Policy Manual, Chapter 6, Section 20.5.2. “For services furnished in CY 2011 and following, a supervisory practitioner may furnish direct supervision from a physician office or other nonhospital space that is not officially part of the hospital or CAH campus where the services are furnished as long as he or she remains immediately available.” CMS Pub. 100-02, Medicare Benefit Policy Manual, Chapter 6, Section 20.5.2.

Finally, on May 22, 2012, CMS issued a notice in which it changed the supervision requirements for hospital outpatient group therapy and other listed services from direct to general. Pursuant to this notice, starting July 1, 2012 outpatient psychotherapy services “may be conducted under general supervision”. This notice specifically listed HCPCS codes G0410 and G0411 (PHP group therapy) in the list of services that now only require General Supervision. The physician supervision standard included in LCD L32705 is clearly erroneous as it directly and unequivocally contradicts CMS regulations and payment rules.

II. LCD L32766: Psychiatric Codes

LCD L32766 contains a list of approved providers of mental health services which specifically includes: (1) Psychiatrists who are physicians (MDs and DOs) trained in mental health disorders; (2) Clinical Psychologists (CPs); (3) Clinical Social Workers (CSWs); (4) Psychiatric Nurse Practitioners (PNPs); (5) Clinical Nurse Specialists (CNSs); and (6) Physician Assistants (PAs). At the end of the list, the LCD states that “[c]overage for all non-physician practitioners is limited to services that they are authorized to perform by the states in which the services are furnished.”

The LCD creates the impression that only mental services provided by those providers specifically listed in the LCD will be covered to the extent the service is within their scope of practice. Novitas confirmed this reading when it was specifically asked if Licensed Professional Counselors (“LPCs”) and Licensed Master Social Workers (“LMSWs”) were approved. Novitas’ position is that since LPCs and LMSWs are not on the approved list, services provided by LPCs and LMSWs would not be covered.

Novitas’ reading of the LCD contradicts CMS Pub. 100-02, Medicare Benefit Policy Manual, Chapter 6, Section 70.1.C.1. The CMS manual clearly states that individual and group therapy services are covered for the treatment of psychiatric patients when conducted by “physicians, psychologists, or other mental health professionals authorized by the State.” [emphasis added] CMS specifically delegated to the state the authority to determine which mental health professionals are authorized to provide therapy services. In practice, as long as the state licensing board for each provider type includes individual and group mental health therapy services in the provider’s scope of practice, such services are covered by Medicare.

Louisiana Revised Statutes 37:1103 and 37:2707 provide that psychotherapy services are within the scope of practice of Licensed Professional Counselors (LPCs) and Licensed Master’s Social Workers (LMSWs), respectively, provided that supervision and other requirements are met. Therefore, LCD L32766 directly contradicts both Medicare guidelines and Louisiana scope of practice laws by failing to include LPCs and LMSWs from the approved provider list in the LCD. If Novitas does not change its position on the LCD, it may attempt to deny coverage for any mental health services provided in a hospital outpatient department by LPCs or LMSWs.

III. Current Status: Addressing Compliance Concerns

The Novitas LCDs addressed above have created a great deal of confusion and anxiety by providers. The real issue boils down to whether or not the LCD is enforceable even if it contradicts Medicare payment rules and regulations. Despite the statement at the beginning of the LCD that the LCD does not supersede Medicare payment policies and regulations, Novitas has taken the position that the LCD is a coverage rule, not a payment rule. In other words, while services may comply with Medicare payment rules, Novitas would still not consider it a “covered” service and would, therefore, deny payment. CMS has confirmed that coverage requirements are different than payment rules and that Novitas generally has the authority to develop the coverage requirements under the “reasonable and necessary” standard provided under Section 1862(a)(1)(a) of the Social Security Act.

Novitas’ position has False Claims Act implications since the government could take the position that providers willfully submitted claims for services they knew were not covered because the services did not meet the LCD’s requirements. We believe this would be a difficult argument for the government to win since numerous Federal courts have held that the False Claims Act should not be used to prosecute disputes over policy determinations or questionable interpretations of regulations. While Novitas is considering the request to rescind or suspend the LCDs, the coverage of the services remains unclear. Another complication posed by the erroneous LCDs is the possibility that Novitas with audit outpatient psych providers and deny any claim that failed to comply with the LCDs.

Until the LCDs are rescinded or suspended, Novitas’ LCDs present serious compliance problems for outpatient hospital psychiatric providers, especially off-campus PHPs since very few, if any, PHPs staff a physician on-site in the PHP department for every group therapy session. To discuss the LCDs and any compliance concerns, please feel free to contact Michael R. Schulze at 337.233.6210.

“New Local Coverage Determinations Create Major Compliance Issues for Hospital Outpatient Psychiatric Departments.”

Louisiana Hospital Association Impact Law brief, Vol 26 (No. 7). June 01, 2012

Michael R. Schulze