Billing errors are quietly draining treatment centers of tens of thousands of dollars every year, especially in higher-volume levels of care like IOP and PHP where even a modest denial rate quickly adds up. It’s usually not because operators are careless — substance use disorder coding is genuinely complicated, payer rules change constantly, and most clinicians never got a single hour of billing training in graduate school. If you're running an IOP or PHP and your denial rate is above 10%, there’s a good chance you’re making at least one of the mistakes below. Here’s what they are, why they happen, and how to fix them.[blog.coresolutionsinc]
Coding Error #1: Billing the Wrong Level of Care for the Service Delivered
This is one of the most common and expensive mistakes in addiction treatment billing: programs bill for PHP (Partial Hospitalization Program) when the documentation only supports IOP — or bill for IOP when the patient is actually receiving standard outpatient services. The ASAM criteria and state guidance generally define IOP (Level 2.1) as at least 9 hours per week of structured programming and PHP (Level 2.5) as 20 or more hours per week, while standard outpatient treatment is under 9 hours per week. If your progress notes don’t clearly reflect that level of clinical engagement and intensity, your claims are exposed.pa+1
Payers audit this constantly, and if the medical record doesn’t clearly support the level of care billed, you’re at risk for denials or post-payment recoupments. Medicaid managed care plans and commercial payers increasingly tie authorization and payment to documented adherence to ASAM levels of care and to the number of hours actually delivered per week.[pa]
The fix: Audit your clinical documentation against your billing weekly, not quarterly. Your group therapy notes, individual session records, and treatment plans should explicitly justify why this patient needs this level of care (e.g., ASAM dimensions, risk factors, failed lower levels of care) — not just describe what happened in session. A simple weekly internal check of “hours documented vs. hours billed vs. authorized level of care” will catch most of these issues before claims go out.[pa]
Coding Error #2: Misusing H-Codes vs. CPT Codes
There’s persistent confusion in the industry about when to use H-codes (HCPCS Level II) versus CPT codes for substance use disorder services. H0015 is a HCPCS code defined as “alcohol and/or drug services; intensive outpatient (treatment program that operates at least 3 hours/day and at least 3 days/week and is based on an individualized treatment plan), including assessment, counseling, crisis intervention, and activity therapies or education.” Many Medicaid programs use H0015 for SUD IOP as a bundled per‑diem, while commercial payers more often want CPT codes like 90837, 90832, 90853, or 90791 billed separately.[aapc]
Billing H0015 to a payer that expects CPT codes will often get your claim denied outright, and the reverse is also true in Medicaid programs that explicitly require H-codes for SUD services and will not reimburse comparable CPT codes. On top of that, each payer can set its own rules in contracts and policies, so what works for one plan may be rejected by another.[aapc]
The fix: Know your payer mix cold and build a payer-specific billing matrix that documents which code set (HCPCS vs. CPT) and which exact codes each insurer requires for each level of care. This needs to be a living operational document that includes whether the payer wants H0015, time-based CPT psychotherapy codes, or both (e.g., H0015 plus separate med management), and should be updated whenever a contract or policy changes. Train both your front-office and billing staff on this matrix so they don’t rely on “what we usually do” when claims are submitted.
Coding Error #3: Not Capturing the Correct Diagnosis Code (or Using the Wrong Specificity)
ICD-10 coding for substance use disorders is highly specific, and billing with a vague or incorrect diagnosis code is one of the fastest ways to trigger a denial or a medical necessity review. The ICD-10-CM codes for SUDs distinguish between “use,” “abuse,” and “dependence,” as well as remission status and severity (mild, moderate, severe). For example, F11.20 (Opioid use disorder, severe, uncomplicated) and F11.21 (Opioid use disorder, severe, in early or sustained remission) describe very different clinical situations, and coding a patient as uncomplicated when they are clearly in remission is inconsistent with the clinical picture.[pa]
Payers increasingly look for alignment between diagnosis codes and procedure codes — for instance, intensive outpatient services are usually considered medically necessary for moderate to severe SUD, not for a single mild use diagnosis without significant functional impairment. When diagnosis severity suggests a lower level of care but the code billed is for IOP or PHP, payer algorithms are more likely to flag the claim for review.[pa]
The fix: Every diagnosis code on a claim should come directly from a completed clinical assessment or diagnostic interview — not from memory or copy‑forward. Build required fields into your intake documentation for severity specifiers, remission status, and polysubstance use so that clinicians must select the appropriate ICD-10 details before a chart can be closed. Periodically audit charts to make sure the diagnosis in the note, the ASAM assessment, and the code on the claim all match.
Coding Error #4: Missing or Incomplete ASAM Criteria Documentation
If you’re treating substance use disorders and your payers are scrutinizing medical necessity, they are almost certainly looking for ASAM (American Society of Addiction Medicine) criteria documentation. The ASAM Criteria provide a six‑dimension framework that justifies placement at a given level of care (e.g., 2.1 IOP vs. 2.5 PHP), and many commercial payers and Medicaid programs explicitly reference ASAM in their utilization management policies. When ASAM is completed at intake but never shows up again in treatment plans or utilization review notes, payers often conclude that the documentation doesn’t support the ongoing intensity of care.[pa]
The most common issue isn’t that programs ignore ASAM; it’s that they treat it as a one‑time form instead of a thread that runs through the entire chart. During concurrent reviews, utilization reviewers are looking for explicit references to ASAM dimensions (e.g., Dimension 1: acute intoxication/withdrawal potential, Dimension 3: emotional/behavioral conditions) that explain why the patient still needs IOP/PHP level support rather than standard outpatient.[pa]
The fix: Build ASAM into your EHR workflow so it isn’t a separate step that lives in a static PDF. Intake, treatment planning, and progress note templates should prompt clinicians to reference the ASAM dimensions driving placement, and continuing stay or discharge notes should explicitly state which ASAM criteria are still met. A simple rule of thumb: if a utilization reviewer can’t tell from the chart which ASAM level of care you’re treating at — and why — your documentation isn’t strong enough.
Coding Error #5: Billing for Services Without a Corresponding Progress Note
This one seems obvious until you look at how many treatment centers actually operate under day‑to‑day pressure. The claim goes out. The service happened. But when the payer requests records for a pre‑ or post‑payment review, the progress note for that specific group session or individual therapy hour doesn’t exist — or it’s so thin that it functionally doesn’t exist. Under federal and state regulations, documenting services is a core requirement, and billing for services that lack supporting documentation can be treated as a false or unsupported claim.[blog.coresolutionsinc]
For IOP programs running multiple group sessions per day across dozens of patients, the documentation burden is real. Clinicians get behind, notes don’t get finalized before billing runs, and then audits happen — suddenly you’re refunding months of payments for services that were actually delivered but never properly documented. Behavioral health claims already have higher-than-average denial and audit risk compared with many other specialties, which makes this gap especially expensive.[blog.coresolutionsinc]
The fix: Put a hard rule in place: claims don’t get submitted for a date of service until all clinical notes for that date are finalized in your EHR. That may create some short-term cash flow tension, but it dramatically reduces audit risk and takebacks. If your billing cycle is weekly, set your documentation deadline at least 48 hours before billing runs so that supervisors can spot‑check charts and ensure that billed services match what’s actually documented.
How These Errors Add Up
Let’s make the math real. Imagine a 200‑patient IOP program billing an average of $150 per group session, running three groups per day, five days per week. That’s roughly $90,000 per week in gross charges (200 patients × 3 groups/week × $150). A denial rate of 15% — which is not unusual for behavioral health programs with weak billing infrastructure and documentation — means about $13,500 per week in revenue at risk. Over a full year of operations, that’s more than $700,000 in denied or delayed reimbursement.[blog.coresolutionsinc]
These aren’t abstract numbers. They represent real claims that got denied because documentation didn’t match the billed level of care, the wrong code set was used, ASAM wasn’t clearly documented, or progress notes weren’t completed in time. Tightening up these five areas won’t solve every billing problem, but it can be the difference between a sustainable program and constant financial stress.
FAQ
What is the denial rate for IOP and PHP billing?
Behavioral health denial rates are often higher than in other specialties, and it’s not unusual for programs without strong billing processes to see total denial rates in the 10–20% range. Well‑run programs that invest in documentation, coding expertise, and proactive denial management can often push that number below 5–10% for clean claims.[blog.coresolutionsinc]
What CPT codes are used for IOP billing?
Common CPT codes used within an IOP include 90853 (group psychotherapy), 90837 (60‑minute individual psychotherapy), 90832 (30‑minute individual psychotherapy), and 90791 (psychiatric diagnostic evaluation), depending on what services are actually delivered. Some payers also accept H0015 for IOP as a bundled code, particularly in Medicaid, so it’s essential to confirm code requirements with each payer before billing.pa+1
What is the difference between H0015 and CPT codes for substance use disorder treatment?
H0015 is a HCPCS Level II code that describes intensive outpatient alcohol and/or drug services delivered at least 3 hours per day, at least 3 days per week, under an individualized treatment plan. CPT codes, by contrast, typically describe specific encounters (like a single psychotherapy session), and many commercial payers prefer these time‑based CPT codes for SUD services. Using the wrong code set for a particular payer and contract can lead to automatic denials, even if the clinical care was appropriate.[aapc]
How do I know if my documentation supports medical necessity for IOP or PHP?
Your chart should clearly show: (1) an ASAM assessment that supports the chosen level of care (2.1 IOP or 2.5 PHP), (2) a treatment plan that references the ASAM dimensions and functional impairments justifying that level, and (3) progress notes that reflect the required intensity of services (hours per week, type of services) and ongoing clinical need. If a utilization reviewer can’t understand from the record why this patient needs IOP or PHP instead of standard outpatient, you can assume your documentation isn’t strong enough.[pa]
What happens during a payer audit of an addiction treatment center?
Payers conduct both pre‑payment and post‑payment audits, often focusing on high‑cost levels of care like IOP and PHP. Pre‑payment audits usually involve requests for records before processing a claim, while post‑payment audits can result in recoupments if documentation doesn’t support the level of care, codes billed, or medical necessity. Programs with incomplete ASAM documentation, mismatched diagnoses, or missing progress notes are at especially high risk of significant financial exposure.[blog.coresolutionsinc]
How can I reduce claim denials at my addiction treatment center?
The most effective steps are: (1) bake documentation requirements into your clinical workflow before billing runs, (2) train clinicians on what payers look for in ASAM, diagnoses, and progress notes, (3) build and maintain a payer-specific billing matrix for CPT vs. HCPCS codes and authorization rules, (4) track denial reasons by payer and code so you can spot patterns and fix root causes, and (5) conduct monthly internal audits of a random sample of charts and claims. Treat denial management as an ongoing quality-improvement process, not a one‑time clean‑up project.[blog.coresolutionsinc]
About ForwardCare
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.