Claim denials can be incredibly frustrating and costly for providers, especially those who work tirelessly to support individuals with mental health and substance use disorders. Unfortunately, behavioral health billing is one of the most complex areas of healthcare revenue cycle management (RCM), and claim denials are all too common. In 2020, approximately 20% of the 765,000 behavioral health claims deemed medically necessary were denied by insurers.

While denials are common, knowledge is power. The more you understand why claim denials happen, the better you can prevent them. Below are the top reasons why claims are denied in mental health and substance use treatment.

Missing or Incomplete Documentation

Insurance companies require detailed, accurate documentation to justify medical necessity. This is important for a number of reasons, including proof that the services received were appropriate. Detailed records also help prevent overbilling, duplicate claims, and services that aren’t actually performed.

Ultimately, insurance companies only pay for services that are provided and justified, making documentation crucial. Any missing or incomplete documentation can lead to fast denials. To avoid this from happening, make documentation a priority from the start. Ensure clinicians are trained to clearly record all symptoms, treatment goals, and session frequency.

Lack of Medical Necessity

Even if an individual clearly needs treatment, insurers can deny claims if the documentation doesn’t show why the care was clinically necessary. Claims can even be denied if there’s no documented improvement or modification to the treatment plan. To insurers, this looks like the treatment isn’t working. Ensure all assessments and progress notes paint a clear picture of the client’s needs, the severity of their symptoms, and how services are helping.

Authorization Issues

Services rendered without pre-authorization are frequently denied, especially when it comes to detox or residential treatment. Insurance companies request prior authorization to manage costs, ensure appropriate care, and reduce unnecessary medical services.

Pre-authorization also acts as a safeguard against providers that bill for unnecessary, duplicate, or overly frequent services. It even helps ensure patients receive the actual care they need, not just what’s reimbursable. To prevent authorization issues, always verify benefits and authorization before treatment begins.

Coding Errors or Mismatched Codes

Incorrect CPT or ICD-10 codes or mismatches between diagnosis and procedure codes are major triggers for denials. This is especially true in dual diagnosis care where both mental health and substance use are treated simultaneously.

Even minor errors, such as using an outdated code, can lead to automatic rejections. Incorrect coding can also raise red flags with payers, prompting additional scrutiny. The best way to avoid this mistake is by working with certified medical coders who understand behavioral health nuances. Regular audits can also help catch common mistakes.

Non-Covered Services

Some insurers have specific exclusions for certain services, such as family therapy or holistic treatments, even with a documented diagnosis. Generally speaking, insurers cover services on a step-down basis, meaning less intensive services must be tried before more intensive care is covered. They also tend to approve evidence-based therapies over experimental care.

Always review each payer's coverage policies before submitting a claim. Clearly document medical necessity and link each service to a covered diagnosis code. Remember, behavioral health services are heavily scrutinized compared to general medical services.

Timely Filing Limits

Every insurance plan has its own deadline for claim submissions. If you miss this deadline, you’ll likely be out of luck, even if the claim is perfect. Fortunately, you can dodge this mistake by filing claims in a timely manner. If any claims are pending or denied, follow up on them immediately. Medicare typically has a filing limit of 12 months from the date of service, while Medicaid and commercial insurance (Aetna, Blue Cross, UnitedHealthcare) are around 90-180 days.

Coordination of Benefits

Claims can be denied if the insurance company believes another plan should pay first, such as Medicaid. At intake, always verify the primary and secondary coverage and keep this information updated. Keep in mind that each insurance plan may have different filing limits and preauthorization protocol. One may require you to file a claim within 90 days, while the other plan may give you up to one year.

Lower Your Claim Denials with Our RCM Company

At Integrity Billing, we believe that mental health and substance use treatment providers deserve to be paid for the lifesaving work they do. Minimizing denials is important for our team, and we do this by educating our staff, maintaining accurate and up-to-date documentation, and using strong systems for verification, coding, and follow-up.

If you need help improving your approval rates and getting paid faster, give us a call today at 800-683-5640 or fill out our online contact form. Our team specializes in billing and revenue cycle management for behavioral healthcare providers. Let’s take the headache out of claims so that you can stay focused on helping your clients heal.