Introduction
Insurance claim denials are a common issue for psychology practices, affecting both income and daily operations. When claims are rejected, payments are delayed, staff time is spent on corrections, and patients may become confused or frustrated. In some practices, denial rates hover between 10% and 15%, putting a noticeable strain on financial health. To protect revenue and simplify operations, it’s essential to understand the most frequent denial reasons in psychological services.
Common Denial Codes in Psychology
| Denial Code | Description |
|---|---|
CO-96 | Non-covered charge(s) |
CO-119 | Benefit maximum reached |
CO-109 | Claim not covered by this payer |
CO-204 | Service not authorized |
CO-18 | Duplicate claim/service |
CO-197 | Precertification/authorization/notification absent |
CO-45 | Charge exceeds fee schedule |
CO-50 | Not medically necessary |
CO-16 | Claim lacks information |
CO-B7 | Provider not certified/eligible on date of service |
Detailed Analysis of Top 10 Denials
1. Denial Code: CO-96
Description: Non-covered Charge(s)
This denial occurs when the psychological service billed isn’t included in the patient’s insurance coverage. Mental health benefits often come with specific restrictions—like limits on session types (e.g., individual therapy vs. family therapy), exclusions for certain CPT codes (such as psychological testing), or coverage that only applies to particular diagnoses. Many patients mistakenly assume their mental health benefits cover all services, which can lead to surprise denials and frustration.
Prevention:
- Verify behavioral health benefits in detail before the first appointment including session caps, excluded services, and diagnosis limitations.
- Create a quick-reference chart for each major payer that outlines what services and codes are covered under their mental health plans.
- Keep patient records updated with the most recent insurance verification notes.
- Give patients a breakdown of what their plan does and doesn’t cover, especially for services that may require out-of-pocket payment.
- Look out for mental health carve-outs, where mental health is handled by a third-party payer.
2. Denial Code: CO-119
Description: Benefit Maximum Reached
This denial occurs when a patient has exhausted their allowed number of mental health sessions or benefits under their insurance plan. Many insurance companies limit the number of therapy sessions per year, or they may have lifetime maximums for certain services. For psychological practices, this is particularly common with therapy services where patients often need ongoing care beyond what their insurance will cover.
Prevention:
- Track remaining sessions for each patient and alert them before limits are reached
- Implement a benefits tracking system that monitors usage across all providers in the practice
- Verify remaining benefits before scheduling follow-up appointments
- Educate patients about their session limits during the initial visit
- Consider requesting additional sessions through the insurance’s medical necessity review process
3. Denial Code: CO-109
Description: Claim Not Covered by This Payer
This denial occurs when a claim is submitted to the wrong insurance carrier or when there is confusion about primary versus secondary coverage. In psychology practices, this often happens when patients change insurance, have multiple insurance policies, or don’t disclose all coverage information. This denial can also occur when patients are covered under Employee Assistance Programs (EAPs) that were not properly identified at intake.
Prevention:
- Implement a thorough insurance verification process that identifies all potential coverage
- Verify primary vs. secondary insurance status
- Capture images of all insurance cards (front and back)
- Re-verify insurance at regular intervals, especially at the beginning of the year
- Ask specific questions about EAP benefits, which are often separate from regular insurance
- Create a clear process for updating insurance information when changes occur
4. Denial Code: CO-204
Description: Service Not Authorized
This denial occurs when a psychological service requiring prior authorization was provided without obtaining the necessary approval. Many insurers require authorization for psychological testing, intensive outpatient programs, neuropsychological assessments, or extended therapy beyond initial sessions. Without proper authorization, the entire claim may be denied, even if the service was medically necessary.
Prevention:
- Create a centralized authorization tracking system
- Maintain a payer-specific database of which services require authorization
- Develop a standardized process for requesting and documenting authorizations
- Verify authorization status before delivering services
- Document authorization numbers in both clinical and billing systems
- Assign specific staff responsibility for managing authorizations
5. Denial Code: CO-18
Description: Duplicate Claim/Service
This denial occurs when a claim appears to have been submitted more than once for the same service, date, and patient. In psychology practices, this frequently happens when claims are resubmitted due to lack of payment without checking the status of the original submission, or when multiple providers in a group practice inadvertently bill for the same patient on the same day.
Prevention:
- Implement a claim tracking system that monitors submission status
- Check claim status before resubmitting
- Create clear protocols for when to correct claims versus submitting new ones
- Use unique identifiers for each claim submission
- Train billing staff on proper claim follow-up procedures
- Establish communication protocols between providers in group practices
6. Denial Code: CO-197
Description: Precertification/Authorization/Notification Absent
Similar to the CO-204 denial, this code specifically indicates that a required notification to the insurance company was not provided. This often applies to initial evaluations where notification is required within a certain timeframe after the first session, even if formal authorization isn’t needed. Many payers require notification for the first mental health visit within 24-48 hours of service.
Prevention:
- Create a clear process for same-day notification of initial visits
- Develop payer-specific notification requirements reference guide
- Train providers on notification requirements for new patients
- Implement automated reminders for staff to complete notifications
- Document all notifications with confirmation numbers
- Review denied claims with this code to identify patterns by payer
7. Denial Code: CO-45
Description: Charge Exceeds Fee Schedule
This denial occurs when the amount billed exceeds what the insurer has established as the maximum allowable charge for the service. While this typically results in a reduction to the contracted rate rather than a complete denial, it can impact expected reimbursement and create reconciliation issues. For psychology practices, this often happens when billing for extended sessions or specialized services.
Prevention:
- Maintain updated fee schedules for all contracted payers
- Regularly review and update charge masters based on payer contracts
- Monitor reimbursement patterns to identify discrepancies
- Understand the contracted rates for commonly used CPT codes
- Train providers on proper time-based coding for extended sessions
- Implement contract management software to track fee schedule changes
8. Denial Code: CO-50
Description: Not Medically Necessary
This denial occurs when the insurance company determines that the psychological service provided was not medically necessary based on the documentation provided. In mental health practice, demonstrating medical necessity can be challenging, especially for long-term therapy or certain types of psychological testing. Insurers often require clear evidence that services are treating a specific condition rather than focusing on personal growth or general well-being.
Prevention:
- Document specific symptoms and functional impairments in assessment notes
- Use evidence-based outcome measures to track progress
- Clearly link interventions to the diagnosed condition
- Regularly update treatment plans with measurable goals
- Document patient response to treatment and ongoing needs
- Use specific, detailed diagnostic codes rather than general ones
9. Denial Code: CO-16
Description: Claim Lacks Information
This denial occurs when essential information is missing from the claim submission, preventing proper processing. For psychology practices, common missing elements include appropriate modifiers, place of service codes, rendering provider information, or session duration details. This denial is particularly common with telehealth services when specific modifiers or place of service codes are required.
Prevention:
- Implement claim scrubbing software to identify missing elements before submission
- Create comprehensive intake forms that capture all required information
- Develop a claim review checklist specific to psychological services
- Train providers on proper documentation of session duration and format
- Stay updated on telehealth billing requirements
- Verify provider enrollment information is current with all payers
10. Denial Code: CO-B7
Description: Provider Not Certified/Eligible on Date of Service
This denial occurs when claims are submitted for a provider who is not properly enrolled, credentialed, or authorized to provide services under the patient’s insurance plan. In psychology practice, this commonly happens with new providers, providers working under supervision, or when a provider’s credentials expire without timely renewal. This is particularly challenging in group practices with multiple providers at different credential levels.
Prevention:
- Maintain a credentialing calendar with renewal deadlines
- Create a provider enrollment tracking system for all insurance panels
- Verify each provider’s status with insurers before scheduling patients
- Understand payer-specific rules for supervised providers or interns
- Implement a pre-scheduling verification process that matches providers to accepted insurance
- Start re-credentialing processes at least 90 days before expiration
Conclusion
For psychology practices, proactively addressing these top ten denial reasons can significantly improve revenue cycle performance and reduce administrative burden. By implementing targeted prevention strategies for each denial type, practices can increase clean claim rates, reduce the time spent on appeals, and improve financial stability. The key to success lies in creating robust verification processes, maintaining detailed clinical documentation, investing in ongoing education for both clinical and billing staff, and establishing clear communication channels between front and back office functions.