Adjudication & Denial Handling: Turning Data Into Dollars

(Part 3 of the RCM 101 Series for Clinician-Owned Behavioral Health Practices, catch up on part 1 and part 2)

When the claims go out but the money doesn’t come in

You’ve verified insurance. You’ve submitted the claim. You were sure it would all tie out.

Then … nothing.

Days pass. The claim sits in “pending.” You dig into explanations. You spot “denied.” Your admin team jumps in. You fix, you resubmit. You still wait. Meanwhile you hire or plan to hire, but you hesitate because the cash flow isn’t showing up as expected.

This is the moment many clinician-led practices hit a ceiling—not because the care isn’t valuable, but because the revenue cycle becomes a bottleneck. It’s not just about sending claims; it’s about ensuring they’re paid.

And when the denial rate creeps upward, the cost is financial, operational, strategic, and even emotional.

Why denials happen (and why they can hurt you badly)

Most denials don’t come from catastrophic system failures. They come from small, fixable gaps that multiply quietly over time.

Here are the biggest culprits behavioral health practices face:

1. Missing or incorrect patient or insurance information

It sounds simple, but inaccurate data at intake is one of the top reasons for claim denials.

Misspelled names, missing policy numbers, wrong payer IDs, or out-of-date coverage can all cause an instant rejection.

According to RelayHealth’s data, more than 25% of claim denials stem from registration or eligibility errors. (revcycleintelligence.com)

For clinician-owned practices, where intake and billing teams are often small, this kind of error is both common and preventable. Remember part 1 of our series? This is why we focus so much on automating high quality data capture from the very beginning. 

2. Missing prior authorization or referral requirements

Behavioral health plans are increasingly requiring prior authorization for sessions like intensive therapy, group therapy, or even telehealth. If authorization isn’t obtained, or not documented properly, the claim will be denied.
One national analysis found 10–12% of all denials are related to missing authorizations. (capminds.com)

3. Coding errors or incomplete documentation

Therapy notes that don’t justify time billed, missing modifiers on telehealth sessions (like -95 or -GT), or mismatched CPT and ICD-10 codes can all trigger denials.
Because behavioral health codes (90837 vs 90834, family therapy vs individual, etc.) are nuanced, coding errors are a top three cause of denials industry-wide.
The AMA estimates claim errors occur in 7–12% of all medical claims, and behavioral health tends to sit at the higher end of that range.

4. Late or untimely claim submission

Most payers have strict deadlines which can range from 90 to 180 days after the date of service. Miss those, and even perfect claims won’t be paid.

In busy practices, backlog or unclear ownership of the billing process often pushes claims past the filing window. One healthcare RCM survey reported over 20% of denials trace back to missed filing deadlines.

5. Provider credentialing or network mismatches

This one hits group practices especially hard. A therapist joins your team but isn’t yet credentialed under the practice’s tax ID with certain payers. Claims are submitted anyway. The payer sees the provider as “out-of-network” or “not recognized” and denies payment.

Until credentialing is aligned, those claims won’t pay, even if services were legitimate and covered.

The through-line:
Nearly all of these denials trace back to a broken connection between front-end data capture and back-end billing discipline.
And because behavioral health practices often have lean teams, a few preventable errors can quickly add up to thousands in lost revenue and countless hours of follow-up.

Where to focus: What good adjudication & denial workflows look like

Here’s what high-performing practices are doing and what you should build into your workflow.

1. Monitor claim outcomes not just submissions

Submitting claims isn’t the finish line. You need monitoring in real time. Track:

• Which claims are paid vs denied vs pending

• Days in accounts receivable (AR) – aim for < 30-45 days in behavioral health settings.

• First-pass payment rate (claims paid without intervention)

• Denial rate by payer, service type, clinician

2. Know the denial reasons and take root-cause action

Imagine your data shows “lack of prior authorization” is the top reason for denials for clinician A’s group therapy codes. That’s actionable. The steps:

• Break denials down by reason (eligibility/authorization, coding, provider-network, filing/lateness)

• Once you identify recurring patterns, adjust upstream workflows: intake, verification, documentation, claim scrubbing

• For example: many denials trace back to missing telehealth modifiers for behavioral health services. So ensure your documentation + claim creation workflows check for those every time.

3. Escalate fast

Denials aren’t “we’ll deal with later” items. The longer they sit, the more likely they’re lost. One source found that 65% of denied claims are never resubmitted. DCCS Consulting+1
Set an SLA: e.g., any claim denied or unpaid over 30 days is flagged for immediate intervention. That might mean billing staff, an appeal team, or a partner workflow.

4. Use denial data to improve the front end

You verified coverage. You submitted claims cleanly. But if you still have denial patterns, then there’s a gap early in your revenue cycle. Use denial insights to refine:

• Intake forms (capture data yawns)

• Verification workflows (capture prior auth, payer restrictions)

• Documentation & coding training (behavioral health has specific nuances)

• Submission timing (late submission = more denials)

5. Report and review regularly

Make denial trends part of your monthly business review. For clinician-owners this matters because denied claims are hidden leaks—not always obvious until you look. A regular report should answer:

• What is our denial rate this month?

• Which payer/service/clinician combinations are above threshold?

• What interventions did we put in place last month? What improved?

• Are we trending toward our target? (e.g., denial rate under 10% for behavioral health)

Why you as a clinician-owner should care deeply

Because when denials get out of hand:

• Cash flow slows, which limits hiring, growth, and marketing. 

• Staff morale drops. Billing becomes reactive and chaotic instead of strategic.

• You lose visibility. When you don’t know which claims are paid or stuck, you’re flying blind.

On the flip side: when you master adjudication & denial handling you:

• Free up time to invest in hiring and service expansion rather than chasing payers.

• Build a stronger margin on each session delivered.

• Build a business that can scale predictably rather than fight unpredictability.

A real-world story

Imagine a midsize therapist-group: they found their denial rate for family-therapy + telehealth codes was hovering at ~18%. They drilled into the data and discovered: nearly half of these denials cited “authorization missing” or “modifier not recognized”. They responded by:

• Adding an intake checklist which flagged family-therapy & telehealth combos for prior auth review.

• Updating their claim-scrubbing template to include telehealth modifiers (-95, -GT etc) and network status.

• Reviewing denials weekly by clinician and payer and feeding findings into documentation training.

Six months later: their denial rate dropped to ~8%. Cash flow became more predictable. They hired a second clinician. They opened a new location. Billing staff reported less firefighting, more strategy. The owner said “we went from chasing money to planning growth.”

Key take-aways you’ll remember

• A submitted claim isn’t truly complete until it’s paid.

• Denial rates for behavioral health practices tend to be higher than the norm—so you must track them.

• Each denied claim carries both a revenue loss and an administrative cost (often $40-$60+ per claim).

• Frequent, structured review of denials + root-cause action improves not just recovery, but prevention.

• As a clinician-owner, mastering this part of the cycle gives you time, margin, and freedom to scale.

What to do next (your checklist for this week)

1. Pull your current denial rate for the past quarter. Is it above 10%? If yes, you’re likely bleeding revenue.
2. Identify your top three denial reasons in that period (by payer, service, clinician).
3. Map one workflow change for each reason (intake, doc & coding, authorization, submission timing).
4. Set a target: e.g., reduce denial rate by 5 percentage points in the next 90 days.
5. Schedule a monthly review of denial metrics in your leadership meeting. Make it visible.

Coming up next

In Part 4 of our series you'll explore RCM Consulting: Because Billing Isn’t Just Billing—how strategic review, data-driven practices and business process discipline make the difference between a good practice and a great one.