Definition and History

Prior to July 1, 1990, Medicare Part B paid for clinical psychologist services only if they were provided in specified settings or furnished as an integral part of a physician's service. Services provided to hospital inpatients were considered "bundled" hospital services, with Medicare's payment going to the hospital rather than directly to the psychologist. An amendment to the Social Security Act (SSA) in 1989 expanded Part B coverage and gave "clinical psychologists" the authority to independently treat Medicare beneficiaries in all settings and bill Medicare for their services.

Congress amended the SSA again in 1990 to remove any confusion over the right of "clinical psychologists" to bill Medicare directly for services provided to either inpatients or outpatients. By revising the law to specifically "unbundle" clinical psychologist services, Congress clarified that "clinical psychologists" were to receive payment under Medicare Part B for providing services to hospital inpatients. Consequently, when "clinical psychologists" are employed by a hospital, their direct, professional services are billed to Medicare Part B.

Further revisions to both the Federal law and its regulations firmly established the authority of clinical psychologists to independently treat Medicare beneficiaries. Changes to the SSA in 1994 allowed hospital patients receiving qualified psychologist services to be under the care of a clinical psychologist, rather than a physician, with respect to such services to the extent permitted under State law. In addition, the hospital conditions of participation state that a Medicare patient may be under the care of a clinical psychologist with respect to clinical psychologist services to the extent permitted by State law.

Provider-Based Clinical Psychologists

Reimbursement for Medicare services performed by hospital-employed psychologists has been a particularly confusing issue. Provider-based physician and psychologist billing, with the "provider" being the institution, has gone through major changes since 1992. Previously, specialty hospitals (such as psychiatric and rehabilitation hospitals) which have been exempt from the prospective payment system, billed Medicare Part A on a per diem basis for the professional services of their salaried employees. Although all institutions were expected to convert to billing Medicare Part B on a fee-for-service basis as of January 1, 1992, many institutions received a waiver until the end of their 1993 fiscal year. Effective January 1, 1993, professional services of "provider-based psychologists" (psychologists employed by hospitals or rehabilitation facilities) must be billed to Medicare Part B. Facilities are frequently confused by this requirement and compliance has been erratic.

Provider-based "clinical psychologists" who are salaried employees of a facility are rarely responsible for claims submissions and billing. When psychologists are employed by institutions, claims submissions and billing procedures are usually the institutions' responsibility. While it is important to understand the billing rules, it should not be necessary for salaried "clinical psychologists" to actually complete the paperwork. Paperwork usually remains the responsibility of the facility's billing offices. The majority of hospital-based services are covered under Medicare Part A, therefore hospitals typically rely on the Fiscal Intermediaries Manual for most billing and coverage instructions. However, hospitals must utilize HCFA-1500 health insurance claim forms and bill Medicare carriers for the Medicare-covered services of their employed "clinical psychologists". Therefore, hospitals must look to the Medicare Carriers Manual when billing psychologists' services to Medicare beneficiaries. Information pertaining to Part B billing is found in the "provider-based physician billing" section of the Medicare Carriers Manual. It is to the benefit of psychologists to thoroughly understand both the rules and methodology of the claims process because hospital billing staff may be unfamiliar with this aspect of coverage and reimbursement.

This issue is further complicated by the new Prospective Payment System (PPS) regulations that require certain facilities to bill for most services. However, the direct professional services of "clinical psychologists" rendered to Medicare beneficiaries are excluded from the various PPS regulations. This means that the direct professional services of "clinical psychologists" remain unbundled in these settings and continue to be billed directly to the Medicare Part B Carrier.

Reassigning Payment Benefits

In order for facilities to submit claims to Medicare carriers for the services of their salaried "clinical psychologists", the psychologists must reassign their rights to receive Medicare payments. Written contractual arrangements between facilities and "clinical psychologists" should specifically state that only the facility may bill and receive fees for the services furnished. HCFA, in the Medicare Carriers Manual Section 3060.2C suggests the following language:

"It is agreed that only (name of facility) will bill and receive any fees or charges for the services of (name of psychologist) furnished to patients at the above-named facility."

Suggestions for Handling Incorrect Billing Practices

In facilities where this is not occurring, psychologists should advise hospital administrators and billing offices that they are billing Medicare incorrectly. It is often helpful to provide specific information on how the billing office should proceed and psychologists could suggest the following:

1. Facilities should obtain a provider identification number from the Medicare carrier.
2. Facilities should prepare contracts that reassign Medicare claims from the psychologists to the facilities.
3. Claims for covered, professional services of psychologists should be submitted to the Medicare carrier, not the intermediary, on HCFA 1500 forms.
4. Facilities should contact their Medicare carrier for all information relating to claims submission.
5. In the event that a facility is told by a Medicare carrier that psychologists' services are not unbundled, facility staff should politely insist that the carrier is in error and point out that psychologists' services were unbundled under the Omnibus Budget Reconciliation Act of 1990. If necessary, ask to speak to a supervisor and continue up the Medicare hierarchy until a responsive Medicare staff person is located.