Top Denial Reasons In Behavioral Health Billing And How To Prevent Them

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Top Denial Reasons in Behavioral Health Billing and How to Prevent Them
With complex payer regulations, changing rules, and varying insurance coverage, even small errors can result in denied claims and lost revenue. Indeed, medical billing denials cost $262 billion each year for U.S. healthcare providers, with as much as 40% of claims initially denied due to errors such as improper coding, lack of proper documentation, or eligibility mismatches.
These denials not only hurt the bottom line of behavioral health clinics and addiction treatment facilities but also disrupt care continuity and impose unnecessary administrative burdens. As demand for behavioral health services continues to increase in 2025, it is now more critical than ever to get billing correctly.
Have you ever felt frustrated by denied claims that make no sense? Have you spent hours trying to decode CPT or ICD-10 codes? Or have you found yourself dealing with documentation and reimbursement issues?
If so, then you are not alone.
The good news?
You don’t need to become a billing expert to solve the problem. With the right systems, ...
... knowledge of denial codes, and smart support, such as outsourcing medical billing and coding services providers in India, you can avoid common pitfalls and ensure timely, accurate payments.
In this blog, we break down the most frequent denial reasons in behavioral health billing and offer practical strategies to prevent them.
Top Denial Reasons
Behavioral health claim denials arise from a variety of challenges. The following are the most frequently encountered reasons that hinder reimbursement and lead to revenue leakage:
● Not a MCO Covered Benefit
This denial occurs when providers mistakenly bill Managed Care Organizations (MCOs) for services that should be submitted to the Fee-for-Service (FFS) system. For example, billing Medicare Advantage Organizations (MCOs) for services rendered to Health Options Benefit Design (HOBD) clients at Critical Path Emergency (CPE) hospitals often leads to rejections. Providers must consult the HCA ‘Provider Identify Payer Table’ before submitting claims.
● Service Not Covered
If a service or procedure is not listed under the patient’s health plan benefits or the HCA fee schedule, it will be denied. Even when exceptions exist, providers must verify coverage eligibility and ensure the billed code aligns with the payer’s fee schedule. A claim review may be needed for resolution.
● Wrong Provider Specialty
Claims can be rejected if the provider’s specialty, as defined by their taxonomy code, does not match the billed procedure. This often results from outdated or incorrect credentialing records. In fact, it is vital to ensure taxonomy accuracy, especially when new services are introduced or provider specialties have changed since the last update.
● Exceeded Limits
Claims are denied when the number of billed units exceeds contractual or regulatory limits for a given procedure. Behavioral health services often have strict limits on the number of units per week or month. Providers must consult billing guides, like SERI and HCA manuals, to avoid surpassing these thresholds and triggering denials.
● Code & Location Mismatch
Claims can be rejected if the CPT code billed is not approved for the place of service indicated. For instance, CPT code H0019 billed with POS 21 instead of POS 55 is not payable. Providers should use the latest billing guidelines to verify that CPT and POS codes align correctly before billing.
● Wrong Payer
Claims for behavioral health services rendered before system integration can be the responsibility of the Behavioral Health Organization (BHO) rather than the provider’s current payer. In fact, failure to identify the correct responsible party leads to claim denials. Providers must verify claim responsibility based on the date of service and region.
● Not BHSO Covered
BHSO members often have limited benefits that only cover specific behavioral health services. Billing for services outside the covered scope leads to automatic denials. Providers must check eligibility in ProviderOne to determine what services are covered under a member’s limited plan before proceeding with treatment and billing.
Ways to Prevent Denials
Prevention of claim denials is necessary through proper documentation, correct billing, and proactive communication with payers. The best practices to minimize denials and improve the reimbursement process are as follows:
● Verify Eligibility and Coverage Before Treatment
Always confirm patient eligibility and service coverage prior to providing treatment. Using tools like ProviderOne and the HCA Identify Payer Table ensures the right payer is billed. This step helps avoid errors related to non-covered services or sending claims to the incorrect entity, both common causes of denials.
● Review Fee Schedules and Contracts
It is critical to know which services are reimbursed under particular payer contracts and fee schedules. Providers need to review payer-specific reimbursement policies on a regular basis and verify CPT code coverage. They should call the payer if they are not certain to avoid denials due to uncovered or non-reimbursable services or procedures.
● Maintain Accurate Provider Credentialing
Outdated credentialing or incorrect taxonomy codes can cause mismatch errors during claim submission. Providers must ensure that all credentialing, rosters, and taxonomy updates are submitted regularly and accurately reflect the services offered. Keeping these records current aligns provider details with billing requirements and reduces denial rates significantly.
● Ensure Code and Location Compatibility
Before submitting claims, cross-reference CPT codes with the allowable places of service (POS). Mismatch of procedure codes and locations is a typical billing error. It is advisable to verify that the billed code is approved for the specified location, as it maintains compliance as well as avoids unnecessary claim rejections.
● Confirm Responsibility for Claim Submission
Before submitting claims, confirm whether the payer is the BHO, MCO, or FFS entity based on the service date and patient eligibility. Misrouting claims to the wrong payer delays reimbursement and increases the administrative burden. Accurate payer identification at the start reduces claim denials related to submission errors.
● Use ProviderOne for BHSO
When treating BHSO patients, check ProviderOne to see which services are actually covered. It is important to note that attempting to bill for uncovered services results in denials. Pre-checking this information allows providers to tailor treatments and documentation to align with covered services and ensures smoother reimbursement workflows.
Outsourcing to ICS
Outsourcing offshore medical billing and coding services in India to Info Hub Consultancy Services (ICS) significantly reduces denial rates by ensuring expert handling of behavioral health claims. ICS professionals maintain up-to-date knowledge of payer policies, credentialing requirements, and billing rules to help providers avoid common pitfalls. They also handle the complete revenue cycle, beginning with eligibility verification, documentation, coding, resubmissions, and appeals to facilitate timely, accurate payments.