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Psychiatric and Psychology Services

Psychiatric Evaluations

The psychiatric diagnostic evaluation is an integrated psychosocial assessment, including history, mental status and recommendations. The evaluation may include communication with family or other sources as well as review and ordering of diagnostic tests. The psychiatric diagnostic procedure requires:

  • the elicitation of a complete medical (including past, family, social) and psychiatric history;
  • a mental status examination;
  • establishment of an initial diagnosis;
  • an evaluation of the beneficiary’s ability and capacity to respond to treatment and
  • an initial plan of treatment.

Information may be obtained from not only the beneficiary, but other physicians, healthcare providers and/or family if the beneficiary is unable to provide a complete history.


Individual Psychotherapy

According to the Local Coverage Determination (LCD) L33632: Psychiatry and Psychology Services, psychotherapy is defined as:

“The treatment for mental illness and behavioral disturbances in which the physician or other qualified health care professional through definitive therapeutic communication attempts to alleviate the emotional disturbances, reverse or change maladaptive patterns of behavior and encourage personality growth and development.”

Per L33632:

  • Duration of psychotherapy must be individualized.
  • Services must be performed by persons authorized in their state to render psychotherapy services.
  • Psychotherapy codes should not be used to bill for activities of daily living training and/or teaching social interaction skills.

Group Psychotherapy

L33632 indicates that group psychotherapy:

  • Is administered in a group setting, involving no more than 12 participants.
  • Must be led by a person who is licensed or otherwise authorized by the state in which he or she practices to perform this service.
  • Involves the discussion and exploration of personal and group dynamics.

Psychotherapy Documentation Requirements

The medical record must:

  • Indicate the time spent in the psychotherapy encounter and the therapeutic maneuvers.
  • Include a periodic summary of goals, progress toward goals, and an updated treatment plan.

The medical record should:

  • Document the beneficiary’s capacity to participate in and benefit from psychotherapy, especially if there is cognitive impairment.
  • Document target symptoms, goals of therapy, and methods of monitoring outcomes.
  • Show how the treatment is expected to improve the health status or function of the beneficiary.
  • Support prolonged periods of psychotherapy.

*Please note that the following information is excluded from the protected information in 45 CFR Section 164.501, and must be included in all psychiatric medical record documentation and made available upon request:

  • Name of beneficiary and date of service
  • Type of service (individual, group, family, interactive, etc.)
  • Time element, where duration of the face-to-face contact is the determining factor for coding the service rendered
  • Modalities and frequency of treatment furnished
  • A clinical note for each encounter, where in the aggregate, summarizes the following items:
  • Diagnosis
  • Symptoms
  • Functional status
  • Focused mental status examination
  • Treatment plan
  • Prognosis
  • Progress to date
  • Identity and professional credentials of the person performing service

Elements such as treatment plans, functional status and prognostic assessment are expected to be documented, updated and available for review, but do not need to be delineated for each individual date of service.

General Coverage Requirements

LCD L33632 outlines the following coverage criteria that must be met for coverage of psychiatry and psychology services:

  • Individualized Treatment Plan

    The individualized treatment plan must:
    • State type, amount, frequency and duration of the services to be furnished
    • Indicate the diagnoses and anticipated goals.
    • Include date plan was established.
    • Be signed by the approved provider with credentials.
  • Reasonable Expectation of Improvement
    • Services must be for purpose of diagnostic study or reasonably be expected to improve the beneficiary’s condition.
    • Services must, at minimum, be designed to reduce or control the beneficiary’s psychiatric symptoms to prevent relapse or hospitalization, and improve or maintain the beneficiary’s level of functioning.
    • When stability can be maintained without further treatment or with less intensive treatment, the psychological services are no longer medically necessary.
  • Frequency and Duration of Services
    • There is no specific limit on the length of time that services may be covered.
    • Evidence should show that the beneficiary continues to show improvement in accordance with his or her individualized treatment plan.
    • Frequency of services should be within accepted normal of medical practice.
    • When further improvement does not appear to be indicated and there is no reasonable expectation of improvement, the services are no longer considered reasonable or medically necessary.

It’s important to note that severe and profound intellectual disabilities are never covered for psychotherapy services. For beneficiaries with dementia, the dementia must be mild in order for the beneficiary to benefit from psychotherapy services. Therefore, the capacity for these beneficiaries to meaningfully benefit from psychotherapy must be documented in the medical record. Additional coverage limitations are outlined in LCD L33632.

For specific guidance pertaining to coverage under the Incident To provision, see Local Coverage Article (LCA) A52825: Psychological Services Coverage under the Incident to Provision for Physicians and Non-physicians.

For coding guidance, see LCA A56937: Billing and Coding: Psychiatry and Psychology Services.

Common Findings

Listed below are common findings that may result in denial of psychiatry and psychology services.

  • Documentation submitted was insufficient or incomplete. Information frequently missing includes:
    • Initial evaluations
    • Individualized treatment plans
    • Updated treatment plans
    • Time (length of session)
    • Signature (of the rendering provider)
  • Medical necessity was not supported.
  • Documentation did not meet coverage guidelines.
  • There was a failure to respond to the request for documentation.


In order to ensure proper payment for psychiatry and psychology services:

  • Become familiar with the regulatory guidelines outlined below.
  • Submit all requested documentation within the specified timeframe upon request.
  • Ensure the documentation is complete, accurate and signed
  • Ensure correct billing and coding is used.

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Posted 8/9/2022