The requirement for high levels of documentation is largely an attempt by payers (insurers) to prevent fraud, waste, and abuse. In the US most healthcare providers are still paid on a fee for service basis so the more patients they treat in a day the more money they make. There have been many incidents of providers submitting claims for patients who didn't need treatment, or with the wrong billing codes. (Obviously the vast majority of doctors don't do anything unethical or illegal, but still fraud is fairly common.) So payers want to see the notes in order to verify that treatment actually occurred, was medically necessary, and consistent with the terms of the patient's insurance policy.

The new Accountable Care Organization (ACO) model has the potential to reduce the documentation requirement. Under that model the insurer shifts the risk to a provider organization which is receives a flat fee per year to care for the patient. So the providers no longer need to submit detailed insurance claims.

The secondary reason for requiring detailed clinical documentation is coordinating between all members of a patient's care team. Obviously your primary care physician would like to know what your psychiatrist did and why.