Causes, impact, and how to prevent them  

Handling claims denials can feel like an uphill battle—it’s frustrating, time-consuming, and often leaves mental health providers in a financial crunch. Beyond the financial headache, denied claims can also harm patient trust and disrupt your practice’s efficiency. But here’s the good news: understanding why claims get denied and how to address these challenges can make a world of difference.  

This guide will break down the impact of claims denials, uncover the most common causes, and give you actionable tips to keep denials to a minimum. (Want more details and other invaluable information about reducing claim denials? Check out this Denial Prevention 101 webinar!)

 

Why denied claims matter  

Financial stress  

Denied claims derail cash flow and place a strain on finances. Things like delayed payroll, late supply orders, and increased labor costs are common consequences.  

Did you know that on average, resolving a denied claim costs about $25 in labor costs? And that’s before considering the time spent by staff. This can eat into as much as 25% of the original claim’s value! Worse yet, this administrative burden diverts valuable time your team could spend improving patient care and operations.  

Impact on patient relationships  

Claims denials don’t just hit your bottom line—they also impact your client relationships. A denied claim could be a sign that you made a billing mistake, such as overcharging or undercharging, and these errors can frustrate or financially burden your patients.  

Missed claims can interrupt clients’ treatment plans, causing tension and potentially weakening trust in your practice. Long-term engagement hinges on consistency, and billing issues can erode that stability.  

 

What causes claims to be denied?  

Claims can fall apart at different stages of the billing process. Below, we’ll explore common reasons claims get denied and how to tackle them.  

Before treatment  

Eligibility problems: Out-of-date insurance details, incomplete demographic info, or other inaccuracies can lead to eligibility issues. These prevent claims from even being processed. Double-check insurance eligibility before appointments and update details regularly.  

Missing authorizations: Many payors require prior authorization for specific treatments or services. Without it, your claim will likely get rejected. Be proactive about tracking authorizations by payor and service type! Set up reminders or an organized system to avoid mistakes.  

During treatment  

Coding errors: Using incorrect diagnostic codes or forgetting procedural modifiers are common issues. These errors disrupt claims processing and delay reimbursement. Train staff on up-to-date coding requirements and review claims before submission for accuracy.  

Exceeded benefits or sessions: Client insurance may limit the number of sessions or benefits covered within a given timeframe. If you unknowingly exceed those limits, claims can be denied. Keep track of each client’s remaining coverage to stay within their policy limits.  

After treatment  

Missed filing deadlines: Each insurance provider has specific timeframes for claims submissions. Filing after the deadline will lead to automatic denials. Establish a routine for submitting claims quickly—ideally, within a week of service.  

Duplicate charges: Submitting the same service twice, often due to human error or system glitches, will trigger a denial. Always review charges carefully before submitting claims to avoid duplication.  

 

How to reduce claims denials  

Step 1: Strengthen front-end processes  

• Verify patient information: Ensure that everything—from insurance IDs to demographic data—is up-to-date and accurate before your client’s appointment. 
• Keep track of authorizations: Certain services require authorization in advance. Create a simple system to manage and track these approvals. Regularly check for updates in payor requirements to avoid unexpected complications.

Step 2: Submit “clean” claims  

• Invest in claim-scrubbing tools: Tools like claim scrubbing software catch missing details, invalid codes, or incomplete information before submission.
• Send claims promptly: Don’t delay! Submitting claims weekly ensures you meet filing deadlines and speeds up payment.
• Review for any “unbilled” items: Missed a service charge? Go back and verify that all services are accounted for in your claims.  

Step 3: Stay on top of denials  

• Track problem patterns: Does it feel like the same mistakes keep cropping up? Track denials by reason to spot trends, then address the root causes (e.g., coding errors could call for staff training!).
• Revisit denied claims: A denied claim isn’t necessarily the end of the road. Set up workflows to review and resubmit claims for resolution quickly.
• Engage your team: Work collaboratively with all teams—front desk staff, billing, and clinical providers. Strengthening communication can tighten your entire claims process.  

 

Final thoughts  

Denial prevention isn’t just about protecting your cash flow — they’re about strengthening your practice as a whole. Properly addressing denials ensures smoother operations, fosters trust with clients, and lets you focus on what truly matters: delivering exceptional care.  

Improved cash flow means more resources for maintaining essential supplies, higher-quality treatment tools, and better support for your team. It’s a win-win for everyone.  

Dealing with claims denials may not be the most exciting part of running a mental health practice, but it’s essential for long-term success. By improving your processes from start to finish, submitting accurate claims, and tackling denials with a clear plan, you’ll minimize frustrations and create stability for your practice.  

Remember, no one builds a thriving practice alone. Keep empowering your team, learning from challenges, and refining your efforts every step of the way. With the right strategies in place, you’ll spend less time worrying about paperwork and more time focusing on exceptional client care. 

Want to get your practice the operational support it needs? Learn about our revenue cycle management (RCM) services! Schedule a free billing consultation with our team. Not only can you ask questions and learn more about the service, but we’ll also provide a complimentary analysis of your current billing processes and KPIs.