Clinical and Administrative Tools/Guidelines

Principles for Defining Medical Necessity in Mental Health Treatment

The American Association of Community Psychiatrists (AACP) recognizes that the definition and determination of medical necessity is unique in community mental health settings. Two stages are required in addressing medical necessity. The first is defining principles by which to gauge exiting medical necessity criteria. This step is undertaken in this document. The second is to form an operational definition of medically necessary interventions. This operational level needs to be addressed in a separate document. Operational definition will not only guide reimbursement, but more importantly, it will enable systems of care to utilize available resources in the most efficient manner.

Several principles relevant to the definition of a medically necessary intervention are the following:

  1. There is an identifiable or suspected DSM-IV psychiatric diagnosis
  2. An intervention should be consistent with community standard of care
  3. The intervention is likely to achieve at least one of the following:
    1. Prevent deterioration.
    2. Alleviate symptoms.
    3. Improve level of functioning.
    4. Assist in restoring normal development in a child.
  4. An intervention is determined by clinical need, not by convenience
  5. An intervention should incorporate patient and family choice
  6. Care should be directed by a licensed health care professional
  7. Psychiatric health promotion/prevention interventions and psychiatric social support services are other components of psychiatric care. These components require their own criteria for implementation, which are not addressed in this document

It should be understood that these medical necessity principles are general. Different systems of care must create more specific standards to apply to their particular circumstances and service populations. Some instruments have been developed for implementing medical necessity criteria in the context of assessing acuity and severity of patients with psychiatric and substance use disorders. These allow clinicians to make clinically relevant level of care decisions based on patients’ presentation and needs. One example is the level of care instruments developed in part by the AACP, the Level Of Care Utilization System (LOCUS) (1) and Child and Adolescent Level of Care Utilization System (CALOCUS) (2). Additional systems of care aspects of addressing medical necessity, with respect to persons with psychiatric disorders, has been delineated by the Bazelon Center for Mental Health Law in their publication on defining medically necessary services (3), and by the National Mental Health Association (4). Future documents should focus on an operational definition alluded to earlier.


1. Level Of Care Utilization System for Psychiatric and Addiction Services, American Association of Community Psychiatrists, Dallas TX, 1996

2. Child and Adolescent Level of Care Utilization System, American Association of Community Psychiatrists, Dallas TX, 1998

3. Defining "medically necessary" services to protect plan members. In Protecting Consumer Rights in Public Systems’ Managed Mental Health Care Policy. Bazelon Center for Mental Health Law: 1-21, March 1997

4. Standards for consumer-centric managed mental health and substance abuse programs: 8-9, September 1998