Claim denials are one of the most frustrating realities of running a therapy practice. You provide excellent care, document thoroughly, and submit claims on time, only to receive a denial notice weeks later. The good news? Most denials are preventable, and even when they occur, a well-crafted appeal can overturn the decision. This guide walks you through the most common denial reasons, prevention strategies, and step-by-step instructions for writing appeals that get results.
Understanding Claim Denials
A claim denial occurs when an insurance company refuses to pay for a submitted service. Unlike a rejection (which means the claim never entered the system due to formatting errors), a denial means the payer reviewed your claim and decided not to reimburse for specific reasons. Understanding this distinction matters because denials require formal appeals, while rejections simply need correction and resubmission.
Denials fall into two broad categories: hard denials and soft denials. Hard denials result in lost revenue unless successfully appealed. These include issues like non-covered services, exceeded benefit limits, or authorization failures. Soft denials are temporary and can often be resolved with additional information, such as missing documentation or incomplete claim data.
For therapy practices, denial rates typically range from 5% to 15% depending on payer mix, documentation quality, and billing practices. Even a modest denial rate translates to significant revenue impact. A solo practitioner seeing 25 clients weekly at an average reimbursement of $120 per session could lose $15,000 to $45,000 annually to denials if they go unworked.
Most Common Denial Reasons and Their Codes
Insurance companies use standardized reason codes to explain why claims were denied. Learning these codes helps you quickly identify the issue and determine your response strategy. Here are the denials therapy practices encounter most frequently:
Authorization and Eligibility Denials
Medical Necessity Denials
Billing and Coding Denials
Preventable vs. Non-Preventable Denials
Not all denials are created equal. Understanding which denials you can prevent helps you focus your efforts where they will have the greatest impact on your revenue cycle.
Preventable Denials (85% of All Denials)
- ✓ Eligibility verification failures
- ✓ Missing or expired prior authorizations
- ✓ Incorrect patient demographic information
- ✓ Wrong CPT or diagnosis codes
- ✓ Missing modifiers for telehealth or group
- ✓ Timely filing deadline missed
- ✓ Duplicate claim submissions
Non-Preventable Denials (15% of All Denials)
- ✕ Coordination of benefits issues
- ✕ Retroactive eligibility termination
- ✕ Benefit limits exhausted
- ✕ Out-of-network service limitations
- ✕ Medical necessity disputes requiring appeal
- ✕ Payer system errors
- ✕ Policy exclusions for specific conditions
Denial Prevention Strategies
The most effective denial management strategy is prevention. Implementing systematic checks at key points in your revenue cycle can eliminate the majority of denials before they occur.
Before the Appointment
Run eligibility verification for every patient before every session. Insurance coverage can change without notice, and catching a lapse before the appointment prevents denied claims. Verify that mental health benefits are active, check remaining visit limits, and confirm any authorization requirements.
For new patients, collect complete demographic and insurance information during intake. A single transposed digit in a subscriber ID or an outdated address can trigger denials. Build verification into your intake workflow so nothing slips through.
During Documentation
Write progress notes that support medical necessity. Every note should clearly connect the presenting problem, the intervention used, and the clinical rationale for continued treatment. Vague documentation like "patient reports improvement" provides no justification for ongoing services.
Use diagnosis codes that accurately reflect the condition being treated and support the CPT codes billed. A mismatch between diagnosis and procedure is one of the fastest paths to denial. Review your documentation before signing to ensure consistency.
At Claim Submission
Submit claims within 48 hours of the service date. Faster submission means faster payment and more time to address any issues that arise. Run claims through a scrubbing process that checks for common errors before submission. Verify that all required fields are populated and modifiers are correctly applied.
Set up automated reminders to track authorization expiration dates. Most authorizations cover a specific number of sessions or a date range. Submitting claims for sessions outside the authorized period results in automatic denial. Build a 2-week buffer before expiration to request renewals.
When to Appeal vs. When to Resubmit
Not every denial requires a formal appeal. Understanding when to resubmit a corrected claim versus when to file an appeal saves time and increases your success rate.
Resubmit When:
- Claim was rejected (not denied) for formatting
- Information was missing or incorrect
- Wrong code was submitted in error
- Modifier was missing or wrong
- Patient demographics need correction
- Payer ID or address was incorrect
Appeal When:
- Medical necessity was questioned
- Authorization denial despite compliance
- Service deemed not covered incorrectly
- Payer misapplied policy or contract terms
- Claim denied due to payer error
- You disagree with the clinical decision
For resubmissions, correct the error and submit the claim as a corrected claim (not a new claim, which could trigger duplicate denial). Use the appropriate claim frequency code to indicate this is a replacement. For appeals, you will need to follow the payer-specific appeal process, which typically involves a written request with supporting documentation.
The Appeal Process: Step by Step
Filing a successful appeal requires organization, documentation, and persistence. Most payers allow multiple levels of appeal, and many denials are overturned at the first or second level when properly documented.
Step 1: Review the Denial Thoroughly
Read the Explanation of Benefits (EOB) or denial letter carefully. Identify the specific reason code and any additional notes. Determine whether the denial is based on a clinical decision, a billing error, or a coverage limitation. This assessment shapes your entire appeal strategy.
Step 2: Gather Supporting Documentation
Collect all relevant records including progress notes, treatment plans, prior authorizations, and any correspondence with the payer. For medical necessity appeals, you may need letters of support from other treating providers or peer-reviewed literature supporting your treatment approach.
Step 3: Write Your Appeal Letter
Draft a clear, professional appeal letter that addresses the specific denial reason. State your case factually, reference relevant policy language, and include all supporting documentation. Keep the letter focused and free of emotional language.
Step 4: Submit Within the Deadline
Most payers have strict appeal deadlines, typically 60 to 180 days from the denial date. Missing this window means losing your right to appeal entirely. Submit via the method specified by the payer (often fax or mail for formal appeals) and keep proof of submission.
Step 5: Follow Up and Escalate
If you do not receive a response within the stated timeframe (usually 30 to 45 days), follow up. If your first-level appeal is denied, evaluate whether to proceed to the second level. Many practices see higher success rates at the second level, where clinical reviewers often make the decisions.
Writing Effective Appeal Letters
A well-structured appeal letter makes the reviewer's job easier and increases your chances of success. Include these essential components in every appeal:
Appeal Letter Checklist
Appeal Letter Templates
Template 1: Medical Necessity Appeal
[Practice Letterhead]
[Date]
[Insurance Company Name]
Appeals Department
[Address]
RE: Appeal for Claim Denial - Medical Necessity
Patient: [Patient Name]
Member ID: [ID Number]
Claim Number: [Claim Number]
Date of Service: [DOS]
Dear Appeals Review Committee:
I am writing to appeal the denial of the above-referenced claim for [CPT code and description]. The claim was denied on [denial date] with reason code [code]: [reason description].
I respectfully request reconsideration of this decision based on the following clinical justification:
[Patient Name] presented with [diagnosis] characterized by [specific symptoms]. These symptoms have resulted in [functional impairments]. Based on my clinical assessment and consistent with evidence-based practice guidelines, [treatment type] is the appropriate and medically necessary intervention.
The enclosed documentation demonstrates:
1. Clinical assessment supporting the diagnosis
2. Treatment plan with measurable goals
3. Progress notes showing patient engagement and response
4. Medical necessity for continued treatment
Per the member's plan benefits and [payer name] medical policy [policy number], mental health services are covered when medically necessary. The clinical evidence clearly supports the necessity of this treatment.
Please reverse this denial and process the claim for payment. I am available to discuss this case with your clinical review team if additional information is needed.
Sincerely,
[Provider Name], [Credentials]
[NPI Number]
[Contact Information]
Template 2: Authorization Denial Appeal
[Practice Letterhead]
[Date]
RE: Appeal for Authorization Denial
Patient: [Patient Name]
Member ID: [ID Number]
Authorization Request: [Auth Number if applicable]
Date of Service: [DOS]
Dear Appeals Review Committee:
I am appealing the denial of authorization for [service description] for [Patient Name]. The authorization was denied on [date] stating [denial reason].
This denial should be reconsidered because [choose applicable reason]:
Option A: Authorization was obtained prior to service. The authorization number [number] was approved on [date] for [number] sessions through [expiration date]. The service in question falls within this authorized period.
Option B: Authorization was not required under the plan terms. Per the member's benefit documentation, [specific benefit language showing auth not required].
Option C: Retroactive authorization should be granted due to [urgent clinical circumstances, emergency situation, or other qualifying reason].
Enclosed please find supporting documentation including [list attachments].
Please reverse this denial. Contact me at [phone/email] with any questions.
Sincerely,
[Provider Name], [Credentials]
Appeal Deadline Requirements by Payer
Missing an appeal deadline means losing your right to contest the denial. Here are the standard timeframes for major payers, though you should always verify current requirements as they can change:
| Payer | First Level Appeal | Second Level Appeal | External Review |
|---|---|---|---|
| Aetna | 180 days from denial | 60 days from first denial | 4 months from final denial |
| Anthem/BCBS | 180 days from denial | 60 days from first denial | Varies by state |
| Cigna | 180 days from denial | 60 days from first denial | 4 months from final denial |
| UnitedHealthcare | 180 days from denial | 60 days from first denial | 4 months from final denial |
| Medicare | 120 days from denial | 180 days from redetermination | 60 days from reconsideration |
| Medicaid | Varies by state (30-90 days typical) | Varies by state | State fair hearing available |
Appeal deadlines are calculated from the date on the denial notice, not the date you received it. If mail delivery is delayed, you lose those days. Always file appeals as soon as possible, ideally within the first two weeks of receiving a denial. Never wait until close to the deadline.
Escalation Strategies When Appeals Fail
If your internal appeals are exhausted and you believe the denial was improper, several escalation options remain available.
External Review
Under the Affordable Care Act, most health plans must offer external review by an independent third party. This is particularly useful for medical necessity disputes where an independent clinician will review your case. External reviewers are not employed by the insurance company and often overturn denials that internal reviewers upheld.
State Insurance Commissioner
If you believe the insurance company is not following state regulations or its own stated policies, file a complaint with your state insurance commissioner. This does not directly overturn denials but can prompt investigation and corrective action. Some states have consumer assistance programs that can advocate on behalf of patients.
Peer-to-Peer Review
Many payers offer the option to discuss a denial directly with the medical director or clinical reviewer who made the decision. These peer-to-peer calls allow you to present your clinical rationale verbally and ask questions about the denial reasoning. Request this option before proceeding to a formal appeal when available.
Patient Advocacy
Encourage patients to file their own appeals in addition to yours. Appeals from members carry weight because the insurance company has a contractual relationship with the patient. Provide patients with documentation to support their appeal and explain their rights under their plan.
Tracking Denial Patterns
Systematic tracking of your denials reveals patterns that can prevent future issues. Build a denial tracking system that captures key data points for analysis.
What to Track
For every denial, record the payer, denial reason code, CPT code, diagnosis code, date of service, amount, appeal status, and outcome. Over time, this data shows you which payers have the highest denial rates, which services are most frequently denied, and which denial reasons appear most often.
Review your denial data monthly. Look for trends such as a sudden increase in authorization denials from a specific payer (which might indicate a policy change) or repeated coding denials for particular services (which might indicate a documentation or coding issue in your practice).
Key Metrics to Monitor
Compare denial rates across insurance companies. A significantly higher rate with one payer may indicate credentialing issues, contract problems, or billing errors specific to that payer.
Track how often your appeals succeed. A low success rate may mean your appeal letters need improvement or you are appealing claims that should be corrected and resubmitted.
Monitor how quickly you file appeals after denial. Delays reduce your available follow-up time and may indicate workflow bottlenecks.
Calculate the dollar amount recovered through appeals versus the amount denied. This justifies the time invested in appeal work.
Key Takeaways: Mastering Claim Denials and Appeals
- ✓ 85% of denials are preventable through eligibility verification, authorization tracking, and accurate documentation
- ✓ Know when to resubmit a corrected claim versus when to file a formal appeal to save time and increase success
- ✓ File appeals within two weeks of denial to maximize your available follow-up time
- ✓ Structure appeal letters with clear identification, point-by-point rebuttal, policy references, and supporting documentation
- ✓ Track denial patterns monthly to identify systemic issues and prevent recurring problems
- ✓ Use external review when internal appeals are exhausted for medical necessity disputes
Frequently Asked Questions
How long do I have to appeal a denied claim?
Most commercial payers allow 180 days from the denial date for the first-level appeal. Medicare allows 120 days. Medicaid varies by state, typically 30 to 90 days. Always check the specific deadline on your denial notice and file as early as possible.
What is the success rate for insurance appeals?
Studies show that 50% to 65% of properly documented appeals are successful. The success rate is higher for appeals that include strong clinical documentation and directly address the stated denial reason. Medical necessity appeals with supporting literature tend to have the highest overturn rates.
Can I appeal a denial for lack of prior authorization?
Yes, but these appeals are challenging. Your best arguments include demonstrating that authorization was not required under the plan terms, that you obtained authorization but it was not correctly recorded, or that clinical urgency justified proceeding without authorization. Some payers will grant retroactive authorization in limited circumstances.
Should I appeal every denial?
Not necessarily. Evaluate each denial for its appeal potential. Denials based on clear policy exclusions or accurate application of benefit limits are unlikely to be overturned. Focus your appeal efforts on denials where you have documentation supporting your position or where the payer appears to have made an error.
What is external review and when should I use it?
External review is an independent review of your case by a third party not employed by the insurance company. It is available for most commercial plans after you have exhausted internal appeals. Use external review for medical necessity disputes where you believe the payer's clinical decision was wrong.
How do I request a peer-to-peer review?
Contact the payer's provider services line and request to speak with the medical director or clinical reviewer who made the denial decision. Some payers require this request in writing. Peer-to-peer reviews are typically available for medical necessity denials and can be an effective way to resolve issues before formal appeal.
What should I do if my appeal is denied?
Review the denial explanation for the second-level appeal. If the denial reason has changed or additional issues were cited, address these in your next appeal. Consider requesting external review if available. You may also file a complaint with your state insurance commissioner if you believe the denial violates regulations or the plan's stated policies.
Reduce Denials with TheraFocus
TheraFocus helps therapy practices prevent denials through automated eligibility verification, authorization tracking, and claim scrubbing. Spend less time on appeals and more time with clients.
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The TheraFocus team is dedicated to empowering therapy practices with cutting-edge technology, expert guidance, and actionable insights on practice management, compliance, and clinical excellence.