Most treatment centers leave money on the table—not because they provide bad care, but because their billing operations are a mess. High denial rates, slow reimbursements, and missed authorizations are a well-documented challenge across behavioral health, where mental health and substance use claims are denied more often than many other medical claims.coresolutionsinc+1
If you're opening or running an IOP or PHP program, getting insurance billing for drug rehabs dialed in isn’t optional—it’s the difference between a sustainable practice and one that bleeds cash while you chase carriers.
Here are three things that separate programs with clean revenue cycles from those drowning in AR.
Secret #1: Authorization Is Where Most Billing Errors Begin
In behavioral health, authorization problems and incomplete data consistently show up among the top reasons for claim denials across payers. It’s not just about documentation quality or coding accuracy—if you miss an auth, let it lapse, or request the wrong level of care, you’re setting yourself up for preventable denials.[experian]
The Auth Workflow That Helps Prevent Denials
Every admission should have a pre-authorization (when required by the payer) before the patient walks in the door. That usually means calling the insurance carrier, verifying active benefits, confirming medical necessity criteria (many payers use tools such as InterQual or MCG/ Milliman-guideline–based criteria), and getting a reference number in writing.[experian]
Authorizations also come with limits. Commercial plans commonly approve a defined number of days or units initially—for example, a short span of PHP days or a block of IOP sessions—before requiring concurrent review; exact numbers and rules vary by payer and state, but the pattern is the same. If your clinical team doesn’t flag that review need to the billing team before the auth window closes, you risk billing services the plan considers unauthorized, which are highly likely to be denied.ncdhhs+1
A simple but powerful fix is a shared tracker that shows every active authorization, the number of days/sessions approved, and the concurrent review due date. Even a basic spreadsheet works as long as one person “owns” it and clinical and billing teams review it together regularly.
Know the Criteria Before You Document
Most clinicians naturally document what happened in session. Payers, however, look for specific elements tied to medical necessity—symptom severity, functional impairment, risk factors (like suicidality or relapse risk), and response to treatment. If it’s not in the note, it effectively doesn’t exist to the reviewer.[experian]
Major commercial payers publish medical policies and criteria for behavioral health levels of care, including PHP and IOP, which often reference standardized necessity frameworks. It’s worth training your clinical team on payer-specific language and making those criteria part of onboarding, supervision, and documentation templates so notes clearly support the level of care being billed.[experian]
Secret #2: Insurance Billing for Drug Rehabs Lives or Dies on Clean Claim Submission
A “clean claim” is a claim that is complete, accurate, and meets all payer requirements so it can be processed without delay, rework, or requests for additional information. CMS and state regulators define clean claims similarly: no defects, no missing required data, and nothing that would delay timely payment once received by the payer.horizonblue+3
Healthcare revenue cycle benchmarks emphasize that organizations should aim for a high clean-claim or first-pass acceptance rate, because even modest increases in denials can significantly impact cash flow and administrative burden. In behavioral health, where denial rates are often higher than in other specialties, tightening up claim submission is one of the fastest ways to improve financial performance.simitreehc+2
The Four Most Common Coding Pitfalls in IOP/PHP Billing
Using the wrong H-codes. Many commercial behavioral health contracts use HCPCS H-codes such as H0035 or H2012/H2014 for certain partial hospitalization or intensive services, and H0015 for intensive outpatient treatment; exact mapping varies by payer policy and contract. If you bill a code that doesn’t match the documented service or the plan’s benefit design, automated edits will often deny the claim before a person ever looks at it.[experian]
Missing or incorrect place of service (POS) codes. CMS defines standard POS codes—for example, POS 11 for office/outpatient and POS 22 for hospital outpatient. Payers routinely match POS against your contract and benefit rules; if they don’t line up, claims can be rejected at the clearinghouse or plan level.[horizonblue]
Improperly unbundling services. Many commercial contracts treat IOP program codes as inclusive of associated group/individual therapy on that day, and explicitly prohibit billing certain psychotherapy codes separately in combination with H0015 or similar program codes. Whether you can bill group therapy (e.g., 90853) on top of a program code is contract-specific, so you need to confirm rules with each payer before submitting claims.[experian]
Insufficient or inaccurate diagnosis coding. ICD-10-CM requires specific codes for substance use disorders (for example, alcohol use disorder codes in the F10.x family distinguish uncomplicated, with intoxication, with withdrawal, etc.). Claims that use unspecified or mismatched diagnoses are more likely to hit payer edits or fail medical policy checks, driving avoidable denials.[experian]
Build a Pre-Submission Claim Scrubber Workflow
Most clearinghouses and practice management systems include claim scrubber tools that check for errors, missing data, and payer-specific edits before a claim goes out the door. Running every claim through a scrubber can significantly reduce avoidable denials tied to basic data problems.medcaremso+3
At minimum, your pre-submission workflow should confirm:
Active eligibility on the date(s) of service
Valid NPI for the rendering and billing providers (per NPPES and payer enrollment)
Required authorization number included when applicable
Diagnosis codes that match clinical documentation and payer policy
Correct place of service and procedure code combinations per contract and payer rules
This step adds a small amount of time per claim, but it’s one of the most reliable ways to cut down on preventable denials and rework.medcaremso+2
Secret #3: Maximize Reimbursement Rates Through Active Contract Management
Many treatment centers sign their initial contracts, file them away, and don’t look at them again until there’s a problem. In an environment where behavioral health demand has grown and reimbursement pressures are high, ignoring your contracts can quietly erode margins over time.coresolutionsinc+1
Commercial reimbursement for PHP and IOP varies widely by market, payer, and provider type, and is negotiated rather than fixed, which means programs with strong volume and outcomes often have room to revisit rates over time. Exact dollar figures are highly local, so it’s more useful to think in terms of knowing your own averages and where you sit relative to peers and your costs.[experian]
Know Your Contract Rates and Your Leverage
Before you try to renegotiate anything, pull your payer mix and see what share of your revenue comes from each plan. Payers that represent a meaningful portion of your volume have more incentive to keep you in-network, which can give you more leverage in discussing rates or terms.[experian]
Regulators and industry analyses frequently note that behavioral health networks are often narrower than medical networks, and that access to addiction treatment remains a policy priority. In practical terms, if you are a key access point for a plan’s members in a given region, you may have more negotiating power than you realize.ncdhhs+1
Appeal Everything That’s Reasonably Appealable
Across healthcare, a substantial portion of claim denials are technically recoverable but never appealed, which leads to lost revenue and distorted denial statistics. For behavioral health programs, creating a structured appeal process for high-impact denial categories can materially change net reimbursement.[experian]
Focus on building standard playbooks for:
Medical necessity denials. These often warrant a peer-to-peer review when your documentation supports the level of care. Industry experience and payer reports suggest that a meaningful share of medical necessity denials are overturned when robust clinical information is presented in review.[experian]
Timely filing denials. CMS requires states to pay high percentages of clean Medicaid claims within 30–90 days, and many commercial prompt-pay laws require payment or denial within 30–45 days of receipt. Still, payers may deny if you miss their filing windows, so it’s critical to understand contract-specific timelines and submit quickly.namas+1
Authorization retrodenials. When a payer initially authorizes care and later attempts to deny payment for reasons that conflict with that authorization or applicable benefit rules, providers can often escalate through internal appeals and, when appropriate, through state insurance departments or external review processes defined in state law.coapharmacy+1
Tracking denial reasons (by payer, code, and reason code) over 60–90 days will usually reveal patterns—missing auths, particular codes, certain plans—that point directly to where your process needs to change.[experian]
Frequently Asked Questions
What billing codes does an IOP use for insurance reimbursement?
Many commercial plans use HCPCS code H0015 for intensive outpatient treatment services, typically defined as structured services of several hours per day, several days per week. Some contracts also recognize other H-codes or allow separate group psychotherapy codes such as 90853, but whether those can be billed in addition to a program code depends entirely on each payer’s policy and your contracts.[experian]
How do I reduce claim denials for my treatment center?
The most effective steps are building a reliable prior authorization tracking system, training clinicians to document using clear medical necessity language, and running every claim through a scrubber to catch eligibility, coding, and authorization issues before submission. Since missing or inaccurate data and authorization problems are consistently among the top denial drivers, tightening those workflows can have an outsized impact.simitreehc+2
How long does insurance reimbursement take for drug rehab programs?
Most states have prompt payment laws that require commercial insurers to pay or deny clean claims within roughly 30–45 days, with specific timelines defined in state statute. For Medicaid, federal rules require states to pay high percentages of clean claims within 30 and 90 days, though exact processing times can vary. If you’re routinely waiting longer than these benchmarks on clean claims, it often signals unresolved errors, missing information requests, or payer-level processing issues.namas+3
What reimbursement rates should I expect for PHP and IOP?
PHP and IOP reimbursement rates are highly variable and depend on state, payer, contract terms, and whether you are in- or out-of-network. Rather than relying on generic benchmarks, it’s more accurate to analyze your own contracted rates, compare them to your costs, and periodically review whether they still make sense given current demand and market conditions.[experian]
Do I need a billing company or can I handle billing in-house?
Both in-house billing and outsourced billing can work; the key is whether your team understands behavioral health coding, authorization rules, and payer policies for services like PHP and IOP. In-house teams offer tighter feedback loops with clinicians, while specialized third-party billers can bring established processes and technology—what matters most is that whoever owns billing is deeply fluent in behavioral health revenue cycle requirements.[experian]
What's the difference between a billing error and a documentation error?
A billing error is a problem in how the claim was submitted—wrong code, wrong NPI, missing auth—while a documentation error is a gap or inconsistency in the clinical record that doesn’t support the billed service or level of care. Both can lead to denials, but billing errors are usually fixed with process and technology, whereas documentation errors require clinician training and better templates or supervision.[experian]
Want to Skip Building This Infrastructure From Scratch?
You can absolutely build all of this yourself: hire a practice manager, train a billing specialist or two, build a denial management dashboard, negotiate your own payer contracts, and stand up your own compliance and utilization management processes over 12–24 months.
Or you can shortcut that.
ForwardCare is a behavioral health MSO (Management Services Organization) that partners with clinicians, sober living operators, healthcare entrepreneurs, and investors to launch and scale behavioral health treatment centers. We handle the business side — licensing support, insurance credentialing, billing, compliance, and operational infrastructure — so our partners can focus on growth and clinical quality.
If you’re serious about opening or expanding a behavioral health treatment center but don’t want to navigate the business side alone, ForwardCare may be worth a conversation.