Noridian Healthcare Solutions, LLC (Noridian), as the Supplemental Medical Review Contractor (SMRC) for the Centers for Medicare and Medicaid Services (CMS), is conducting post-payment review of claims for Medicare Part A Inpatient Psychiatric Services billed on dates of service from January 1, 2024, through December 31, 2024. This notification includes the reasons for the review, documentation that will be requested in the Additional Documentation Request (ADR) letter, and resources providers/suppliers may wish to consult when submitting claims.

Background

Medicare covers medically necessary inpatient psychiatric services furnished in an approved Inpatient Psychiatric Facility (IPF), which may include a freestanding psychiatric hospital, a psychiatric unit within a general acute care hospital, or a psychiatric unit within a psychiatric institution. Inpatient Psychiatric Facilities (IPFs) provide 24 hours of daily care in a structured, intensive, and secure setting for beneficiaries who cannot be safely or adequately managed at a lower level of care. Inpatient psychiatric hospitalization is intended for beneficiaries experiencing an acute mental health condition that requires a level of care that cannot be safely or effectively provided in an outpatient, partial hospitalization, residential, or other less restrictive setting.

Services in an IPF include daily physician supervision, continuous nursing assessment and monitoring, multidisciplinary treatment team involvement, psychiatric evaluations, diagnostic testing, medication management, psychotherapy, behavioral interventions, discharge planning, and other medically necessary therapeutic services designed to stabilize and improve the beneficiary’s psychiatric condition.

The beneficiary admitted for inpatient psychiatric hospitalization must be under the care of a physician who is knowledgeable about the beneficiary’s condition. The physician must certify that inpatient psychiatric hospitalization is medically necessary either because the beneficiary requires treatment that can reasonably be expected to improve the beneficiary’s condition or because the admission is necessary for diagnostic study. The physician must also provide ongoing recertifications demonstrating that inpatient psychiatric services remain medically necessary and that the beneficiary continues to require active treatment on a daily basis furnished directly by, or under the supervision of, inpatient psychiatric facility personnel.

The 2025 Medicare Fee-For-Service Supplemental Improper Payment Data report identified the psychoses Diagnosis Related Groups (DRGs) as a top five service type with the highest improper payments, projecting an improper payment rate of 10%.

Centers for Medicare and Medicaid Services (CMS) directed Noridian Healthcare Solutions, LLC (Noridian), as the Supplemental Medical Review Contractor (SMRC) to perform data analysis and medical record review July 6, 2026. The SMRC will perform data analysis and medical record reviews on supporting documentation to determine if the IPF services billed with the Diagnosis Related Group (DRG) code 885, Psychoses, were reasonable, necessary, and billed appropriately.

Reason for Review

The SMRC is tasked to perform data analysis and conduct medical record reviews on inpatient psychiatric services claims billed with DRG code 885 Psychoses billed with dates of service January 1, 2024, through December 31, 2024.

The SMRC will conduct medical record reviews in accordance with applicable waivers/flexibilities/statutory, regulatory, and sub-regulatory guidance.

Claim Sample Detail

Access related project details below.

• Documentation Requirements
• References

Documentation Requirements

Below is a list of specific documentation necessary to perform medical record review and is included in each ADR letter to assist the provider in collecting and submitting, thereby diminishing the burden. The specific requirements will aid in clarity on scope of review, allowing the MAC redeterminations teams to process the request appropriately.

1. Initial psychiatric, psychological evaluation, or mental status exam findings
2. Medical and psychiatric history
3. Psychiatric evaluation and all behavioral/psychological/psychiatric tests that have been performed
4. All progress notes or summaries demonstrating active therapeutic interventions and ongoing medication management for the services under review
5. Individual and group psychotherapy and beneficiary education and training for the services under review
6. Documentation of multidisciplinary treatment involvement for the services under review
7. Admitting diagnosis along with any diagnosis of comorbid disease and the psychiatric diagnosis if applicable
8. Any re-evaluations for the services under review
9. Individualized treatment plan for psychiatric services for the services under review with updates
10. Patient goals and progress towards goals for the services under review
11. Physician/Non Physician (NPP) order or evidence of intent to order for the services under review
12. All behavioral/psychological/psychiatric tests that have been performed
13. Discharge summary
14. Signed consent form (This applies to Jurisdictions J6, JK, J15, JJ, JM, and JN)
15. Physician certification/recertification that the inpatient psychiatric facility admission was medically necessary for either: (1) treatment which could reasonably be expected to improve the beneficiary’s condition, or (2) diagnostic study
16. Any other supporting/pertinent documentation for the services under review
17. Medical record documentation to support national and local requirements
18. Evidence that services required the intensity of an inpatient level of care and could not be safely provided in a lower level of care
19. Providers and/or suppliers are encouraged to review the documentation prior to submission, to ensure that signature information is available. Please include a signature log or signature attestation for any missing or illegible signature within the medical record
20. If an electronic health record is utilized, include your facility’s process of how the electronic signature is created. Include an example of how the electronic signature displays once signed by the physician
21. Advance Beneficiary Notice of Non-Coverage (ABN)/Notice of Medicare Non-Coverage (NOMNC)
22. If medical record documentation is submitted via esMD: Beneficiary identification, date of service, and provider of the service should be clearly identified on each page of the submitted documentation

References

Social Security Act (SSA), Title XI

• §1135 Authority to Waive Requirements During National Emergencies

SSA, Title XVIII

• §1812 Scope of Benefits
• §1814(a) Conditions of and limitations on payment of services
• §1815(a) Payment to Providers of Services
• §1833(e) Payment of Benefits
• §1861(c) Inpatient Psychiatric Hospital Services
• §1862(a)(1)(A) Exclusions from Coverage and Medicare as Secondary Payer
• §1879 (a)(1) Limitation on Liability of Beneficiary Where Medicare Claims are Disallowed
• §1886 Payment to Hospitals for Inpatient Hospital Services
• §1887 Payment of Provider Based Physicians and Payment Under Certain Percentage Arrangements
• §1893(b) Medicare Integrity Program

Title 42 Code of Federal Regulations (CFR)

• §409.62 Lifetime Maximum on Inpatient Psychiatric Care
• §409.63 Reduction of Inpatient Psychiatric Benefit Days Available in the Initial Benefit Period
• §411.15(g) Custodial Care
• §411.15(k)(1) Particular Services Excluded from Coverage
• §412 Prospective Payment Systems for Inpatient Hospital Services
• §424.14 Requirements for Inpatient Services of Inpatient Psychiatric Facilities
• §424.5 Basic Conditions
• §482 Conditions of Participation for Hospitals

45 CFR

• §164.501 Definitions

Internet-Only Manual (IOM), Pub. 100-03, Medicare National Coverage Determination Manual (NCD)

• Chapter (Ch.) 1, §130 Mental Health

IOM, Publication (Pub.) 100-01, Medicare General Information, Eligibility, and Entitlement Manual (MGIEEM)

• Ch. 4, §10.9 Inpatient Psychiatric Facility Services Certification and Recertification

IOM, Publication (Pub.) 100-02, Medicare Benefit Policy Manual (MBPM)

• Ch. 1, Inpatient Hospital Services Covered Under Part A
• Ch. 2, Inpatient Psychiatric Hospital Services
• Ch. 3, §30 Inpatient Days Counting Toward Benefit Maximums
• Ch. 4, Inpatient Psychiatric Benefit Days Reduction and Lifetime Limitation
• Ch. 5, §10.3 Availability of Reserve Days Where Psychiatric Limitations are Involved

IOM, Pub.100-04, Medicare Claims Processing Manual (MCPM)

• Ch. 3, §190 Inpatient Psychiatric Facility Prospective Payment System (IPF PPS)
• Ch. 23, §10.2 Inpatient Claim Diagnosis Reporting

IOM, Pub. 100-08, Medicare Program Integrity Manual (MPIM)

• Ch. 3, §3.2.3.2 Time Frames for Submission
• Ch. 3, §3.2.3.8 No Response or Insufficient Response to Additional Documentation Requests
• Ch. 3, §3.3.2.4 Signature Requirements
• Ch. 3, §3.3.2.6 Psychotherapy Notes
• Ch. 3, §3.6.2.4 Coding Determinations
• Ch. 3, §3.6.2.5 Denial Types
• Ch. 6, §6.5 Medical Review of Inpatient Hospital Claims for Part A Payment

Local Coverage Determination (LCD)

• L33624 Psychiatric Inpatient Hospitalization
• L34183 Psychiatric Inpatient Hospitalization
• L34570 Psychiatric Inpatient Hospitalization
• L33975 Psychiatric Inpatient Hospitalization

Local Coverage Article (LCA)

• A56865 Billing and Coding: Psychiatric Inpatient Hospitalization
• A57052 Billing and Coding: Psychiatric Inpatient Hospitalization
• A56614 Billing and Coding: Psychiatric Inpatient Hospitalization
• A57726 Billing and Coding: Psychiatric Inpatient Hospitalization

Other

• Medicare Learning Network (MLN) Booklet: Medicare & Mental Health Coverage MLN198652

Last Updated Aug 19, 2026