Partial Hospitalization Programs: How to Avoid Denied Insurance Claims

Insurance denials in Partial Hospitalization Recovery Programs are rarely a matter of bad luck; they are usually a matter of documentation gaps or procedural errors. In addition, insurers are increasingly using automated tools to flag claims that don’t meet strict “Medical Necessity” or “Timed Service” criteria, making these documentation gaps more deadly.

Here are the five most effective ways to ensure your PHP claims are approved the first time.

1. Check Authorization Numbers

One of the most common reasons for a PHP denial is a failure to obtain or maintain valid authorization. Never begin PHP services without a confirmed authorization number for each patient. Even if a patient is transitioning directly from your own inpatient program, a new authorization is required for the change in “Level of Care.” In addition, authorizations often expire after 7 to 14 days. You may also want to set a calendar alert for 48 hours before the current authorization number ends to submit the clinical update for re-authorization. If there is a single-day gap in the dates of service, the carrier may deny the entire subsequent week of claims.

2. Prove “Medical Necessity” with Data

Unfortunately, some insurance carriers won’t pay for PHP simply because a patient is struggling; they pay because the patient is at risk of inpatient hospitalization. Your clinical notes must prove this every single day. To help push them to pay, document exactly why a lower level of care, such as Intensive Outpatient (IOP) or once-a-week therapy, is insufficient. You may even want incorporate quantifiable data, such as scales based on objective scores, such as standardized assessment tools like the PHQ-9 (Depression), GAD-7 (Anxiety), or ASAM Criteria (Substance Use). Quantifiable data (e.g., “Patient’s PHQ-9 score remains at a 19, indicating severe depression”) is much harder for an insurance adjuster to argue against than subjective descriptions.

3. Make Sure Each Patient Gets 20 Hours

Most commercial payers and Medicare require a minimum of 20 hours of therapeutic services per week for a program to qualify as a PHP. If your schedule shows 19.5 hours due to a holiday or a patient leaving early, the insurer may deny the entire week as not meeting the PHP definition. Do not let this happen! Make sure that, no matter what, every patient who requires a minimum of 20 hours gets them every single week. Also, be careful to exclude lunch, transit, and social “breaks” from your clinical hour count. Your daily logs must clearly distinguish between “Group Psychotherapy” (billable) and “Supportive Socialization” (non-billable).

4. Verify Eligibility Every Monday

Insurance status can change overnight. A patient may lose coverage due to a job change, a missed premium, or “aging out” of a parent’s plan. It doesn’t have to be every Monday, but your program should check that each patient is covered every week. For some PHP programs, implementing a “Monday Morning Verification” protocol can really help. Before the first session of the week, have your billing team verify active coverage for every patient currently in the program.

• The Benefit: Discovering an eligibility issue on Monday allows you to address it immediately, rather than providing five days of intensive care that you will never be reimbursed for.

5. Match the Codes to the Setting

PHP billing uses a specific set of Revenue Codes and HCPCS/CPT codes that are different from standard outpatient care.

• Revenue Code 0912/0913: These are the standard “per diem” codes for PHP. Using an outpatient code (like 90834 for a 45-minute session) while billing under a PHP facility NPI can trigger an automatic “Mismatched Level of Care” denial.

• Most PHPs require a physician or psychiatrist to sign off on the treatment plan within the first 24 to 72 hours. If a claim is submitted without an active Physician’s Certification on file, a lot of carriers will automatically deny it.

If you receive a denial, don’t just resubmit the claim. Review the Explanation of Benefits (EOB) for the specific “Reason Code.”

• If the denial is for “Medical Necessity,” you need a Peer-to-Peer review between your psychiatrist and the insurer’s medical director.

• If the denial is for “Missing Information,” it’s usually a clerical fix like a missing modifier or a typo in the NPI.