Denial Management for Behavioral Health: Strategies That Work

Even though insurance coverage enables access to care for millions of Americans, the systems behind it remain incredibly complex. Like providers in other specialties, behavioral health professionals face the ongoing challenge of navigating strict and ever-changing rules for claim approvals from both federal and commercial payers.

In fact, an American Psychological Association (APA) survey found that 82% of psychologists experience incorrect reimbursement rates, 62% encounter preauthorization issues, and 52% are concerned about insurance-related payment delays. 

To prevent delayed payment, administrative burden, and increased client costs, clinics must strengthen claim denial management for behavioral health. Doing so can mean the difference between financial instability and long-term success.

Common Causes of Claim Denials

Behavioral health is multifaceted, collaborative, and coordinated, which means behavioral health claims are likewise complicated, which often contributes to higher denial rates. In 2023, for example, 30% of mental health claims were denied, while only 19% of all other claims were rejected.  

Denials are often the result of one or more of the following common issues: 

Non-Covered Services 

According to the APA, 34% of mental health care providers don’t take insurance at all. And of those who do, 52% have never been in-network with commercial payers. This makes it difficult for organizations to verify coverage and for clients to find providers who take their insurance, which can lead to claim denials and payment delays. 

Difficulty Proving Medical Necessity 

Insurers frequently require providers to demonstrate medical necessity before approving claims. In behavioral health care, that necessity can be harder to clearly define or quantify. This ambiguity can contribute to frequent claim denials and then time-consuming back-and-forth with payers to resolve them. 

Lack of Eligibility 

KFF reports that Medicaid covers 29% of the 52 million adults living with a mental illness, and 35% of Medicaid enrollees have a mental health condition. But Medicaid rules and federal legislation are constantly shifting, meaning eligibility for coverage often changes as well. Submitting a claim for a non-eligible client leads to resource-intensive and costly denials. 

Coding Errors

Coding for behavioral health claims is elaborate, with organizations needing to juggle ICD-10 medical codes, Current Procedural Terminology (CPT) codes, and Healthcare Common Procedure Coding System (HCPCS) codes — all of which connect to specific diagnoses, treatment locations, approaches, and more. With so much to manage, it’s easy for documentation and billing codes to inaccurately reflect the services delivered, which is a surefire path to denials. 

Preauthorization Challenges

KFF also notes that 26% of people seeking mental health treatment faced preauthorization barriers. In 2023 alone, KFF reports, Medicaid Advantage processed 50 million preauthorization determinations, while commercial insurers denied 3.2 million preauthorization requests. With preauthorization decisions becoming increasingly stricter, clients and organizations alike are encountering more denials of behavioral health claims. 

Automated Denials

Some claims aren’t even getting to human agents for decisions. One study found that preauthorization denial rates rose up to 108% when insurers used artificial intelligence (AI) tools to review claims. 

Strategies for Handling Denials of Behavioral Health Claims 

Effective denial management for behavioral health should be an always-on and comprehensive process. Fortunately, an advanced electronic health record (EHR) with embedded revenue cycle management (RCM) capabilities can relieve much of the manual work at every stage, from preventing claim denials to quickly addressing them when they do occur. 

Denial Prevention

Quickly responding to claim denials is important, but prevention is even better. The right EHR can support denial prevention by: 

• Ensuring accurate documentation. Top EHRs automate documentation using custom rules and compliance checklists, helping teams minimize human error and stay aligned with insurance requirements.
• Fast eligibility verification. With tailored rules, the EHR can verify insurance coverage and preauthorization details in real time, preventing costly delays or service disruptions.
• Confirming accurate client information. EHRs with self-service options empower clients to confirm the accuracy of their personal details and health history, which can improve the precision of claim submissions. Clients can access, update, and verify their information via an intuitive portal, and if anything is amiss, they can use built-in communication tools to contact their providers. 

Efficient Denial Management for Behavioral Health 

While improving clean claim rates and reducing denials is critical, some denials — justified or not — are inevitable. Organizations must have strong denial management for behavioral health systems in place to avoid payment delays. Advanced EHRs offer capabilities to behavioral health organizations for quickly handing denied claims, such as: 

• Notifications and alerts. Instant notifications flag issues related to insurance claims, eligibility, or client data. The system routes the claim to the appropriate staff member, enabling them to correct any issues quickly before delays occur.
• Coding support. EHRs with integrated RCM capabilities help ensure accurate billing by automating the coding process and alerting teams to coding errors. This reduces the risk of denials caused by incorrect or missing codes. 

The Right Solution for Long-Term Claim Monitoring

Effective denial management for behavioral health requires more than resolving individual issues. It demands a big-picture view. Top EHRs use AI tools to review large datasets in mere minutes, flagging trends in claim denials and patterns by service type, location, and provider. These insights allow organizations to pinpoint root causes, implement targeted improvements, and strengthen both billing workflows and reimbursement outcomes. 

Core Solutions’ Cx360 Enterprise platform offers these advanced capabilities and more, including an intelligent exception log, claim scrubbing, and authorization management, in a centralized solution that strengthens denial management for behavioral health and improves RCM. 

Learn how the right behavioral health EHR can help you with denial management and other critical challenges.