Behavioral Health Billing


Mental health care is a large industry, and according to Johns Hopkins Medicine, about 26% of people in the United States ages 18 and older have behavioral health issues. Funding for behavioral health care often involves many sources, including payments from individuals, grants, nonprofits, and insurance companies. 

People often carry insurance with private organizations, but that insurance may not cover some or all behavioral health fees. Medicaid and Medicare are often payers of last resort that can cover some claims denied by private insurance. Medicaid and Medicare get their funding from the federal government and states. 

Considering all of these factors can make behavioral health billing a complex task. Researching mental health billing models can help your organization run smoothly and receive more funding. Learn more about standard behavioral health billing models, the organizations involved in billing, billing authorizations, mechanisms, integrations, and the information needed for billing.


Table of Contents

Behavioral Health Billing Models

Various behavioral health billing models, also called payment models, are available for insurers, mental health professionals, and billing services. Some of the most common mental health billing models include:

Daily Per Diem

Daily per diem rates pay providers daily for the mental health care people receive. This rate is a flat fee. However, the daily per diem rate can vary depending on the professionals a person sees and their diagnoses. The intensity of services or treatments, location, local regulations, costs of supplies and equipment, and many other factors can also impact per diem rates. Organizations often use per diem rates when reimbursing inpatient mental health clinics and similar facilities where people sometimes spend one or more full days.

Fee for Service

The fee-for-service billing model is one of the most common types of billing. Organizations submit reimbursements for each service, like counseling, individual therapy, or group therapy. Different insurance companies offer different reimbursement rates. For accurate fee-for-service billing, behavioral health providers have to keep track of fee information for each individual’s insurance company. They must also maintain good records of the services each person receives.

Members of a network of organizations negotiate different costs with insurance companies. In exchange for being part of an extensive network, an insurance provider like Medicaid can offer mental health care providers lower costs than these providers usually charge to people who pay without using an insurer.

If a mental health provider’s fee for a service is higher than an insurer’s reimbursement, the provider must accept the amount offered in most cases. Fee-for-service behavioral health billing rewards the quantity of services over the quality. Since it doesn’t consider treatment outcomes, providers have incentives to see as many people as possible. This characteristic distinguishes fee-for-service billing models from those with value-based reimbursements.

Value-Based Reimbursements

A billing model based on value-based reimbursements focuses more on quality and treatment outcomes than the volume of services provided. Better quality mental health care and outcomes can reduce costs for governments and nonprofit organizations over time. When people receive successful treatment and their behavioral health improves, their mental health care costs decrease. Eliminating unnecessary treatments helps reduce costs as well.

Value-based reimbursements reward professionals who provide quality care while helping reduce the resources needed to help each person. Value-based reimbursement billing adjusts fee-for-service rates based on the outcome for each individual. It can also modify a PMPM or capitation billing model based on the average outcome for a group of people. Better outcomes increase the PMPM reimbursement from Medicare, Medicaid, and other organizations. Several other value-based reimbursement billing models are available as well.

Per Member Per Month

With a per member per month (PMPM) billing model, an MCO, or managed care organization, receives a certain monthly amount for each member from organizations like Medicare and Medicaid. This model is called capitation. PMPM can also refer to the average treatment cost per person for an MCO or the average monthly premium people pay for behavioral health coverage. When reviewing calculations or reports that use PMPM as a descriptor, consider the context to ensure you understand which billing component they describe.

Physical Integration

One approach to this model is to physically integrate behavioral health and primary care. This approach can be found in primary care settings, specialty settings ( such as pediatrics and neurology), and other settings, such as long-term care facilities, community-based health centers, and social services sites. Behavioral healthcare teams often work onsite in these scenarios. There are advantages to housing behavioral health and medical services in the same place. Doing so can increase the chances that clients follow through on a referral. It also gives health providers the opportunity to grow their skills and network in house.

The Stakeholders in Behavioral Health Billing

Many organizations are involved in behavioral health billing, including:

The Federal Government

The federal government, especially the Centers for Medicare & Medicaid Services (CMS), is a significant funding source for mental health services. It administers Medicare and Medicaid and is part of the Department of Health and Human Services. The Department of Veterans Affairs and the Children’s Health Insurance Program (CHIP) contribute to Medicaid. The federal government also provides mental health block grants (MHBGs) that help states build their community mental health infrastructures.

State Governments

State governments administer Medicaid, the largest funding source for mental health services in the United States. These state governments often have to provide matching funds to receive Medicaid dollars. The federal government makes sure that states comply with federal Medicaid rules. In 2010, the Affordable Care Act (ACA) expanded Medicaid in many states. About 29% of the people who benefited from Medicaid expansion had mental health or substance abuse disorders, or both. 

Even outside these locations, Medicaid rules can differ slightly from state to state. For example, Nebraska approved expanded Medicaid coverage in 2018 but didn’t offer full coverage to those who qualified until 2021. Maine implemented its Medicare expansion in 2019 and provided retroactive coverage until July 2018.

Each state also has a separate behavioral health organization or a department within its health and human services organization. For example, Alabama’s Department of Mental Health has a Division of Mental Health and Substance Abuse Services. It contains several offices, including the Office of Certification, a reviewer of community providers, and the Office of Prevention Services. This office helps prevent many substance use disorders, including tobacco use.

Local Governments

Cities and other local governments often fund nonprofit organizations and treatment centers to help improve the behavioral health of residents within their communities. The number of organizations and providers, their specialties, and the requirements to receive funding differ depending on the local government’s decisions. Cities and towns also collaborate with state and federal governments to help optimize behavioral health outcomes. Like states, larger cities may have organizations or departments that focus on mental health for residents.


Managed care organizations (MCOs) started to become popular during the 1980s. Employers providing mental health coverage often choose MCOs to help cut costs by preventing unnecessary tests and treatments. An MCO decides which providers a person can see for treatment, which treatments are authorized, and how much to pay. Managed care plans often employ doctors, statisticians, and other professionals to assess research and computer-generated data. They use this information to make decisions about which treatments are most effective. This data can help individuals coordinate behavioral health treatments from different professionals and prevent unnecessary or ineffective treatments, lowering premiums for MCO members.

With a more traditional insurance provider, doctors and other professionals make all the decisions without any initial input from an insurer. If an insurer doesn’t approve of treatment or pay the expected amount, individuals may discover they’ve been denied when they receive a significant bill for services. Several structures for insurance plans and ways for states to manage Medicaid dollars exist:

  • ACOs: Accountable care organizations (ACOs) are groups of doctors, clinics, hospitals, and other behavioral health care providers. They collaborate voluntarily to coordinate care and improve outcomes.
  • ASOs: An administrative services organization (ASO), also called a behavioral health administrative services organization or BH-ASO, contracts with Medicaid or a local organization to provide mental health services to people who need them, regardless of their insurance status or ability to pay. ASOs can also manage locally approved government grants and run community programs to help people prevent mental health issues.
  • EPOs: An exclusive provider organization (EPO) only uses providers and hospitals within its network. An EPO doesn’t cover treatments from providers outside the network.
  • HMOs: A health maintenance organization (HMO) focuses on keeping people healthy rather than providing treatment. It usually requires people to see a primary care provider (PCP) and get approval, often called a referral, before seeing a specialist like a psychiatrist. Annual checkups by PCPs are required as well.
  • POS plans: With point-of-service (POS) plans, people make higher copayments for out-of-network treatment but still receive some coverage.
  • PPOs: With a preferred provider organization (PPO), an employer or plan administrator makes some decisions instead of the insurer.

Clearinghouse Services

A behavioral health billing clearinghouse acts as an intermediary to help mental health care providers and insurance companies communicate with each other and assist providers with billing more effectively. The clearinghouse can help assess medical claims, process them, and check for errors. This process is called claim scrubbing, and when a claim is clean, the clearinghouse submits it to the insurance company for reimbursement. 

Behavioral Health Billing Authorizations

Many insurance plans require an authorization before people can get behavioral health treatment. People sometimes call this type of authorization a pre-authorization or prior approval. Before a provider starts treatment for someone new, it’s a good idea to check with the insurer and get pre-authorization if required. Even when it’s optional, pre-authorization can help speed up billing and payment processes and help organizations get payments faster. With most insurers, pre-authorization takes between five and 30 days.

It’s also a good idea to regularly update clients’ personal information, like addresses and phone numbers. That way, you can ensure that claims are accurate and pre-authorizations are approved.

If you get authorization after giving someone treatment, submit the claim on time. Many insurers have submission deadlines and will deny payment authorizations if you wait too long. Working with a clearinghouse to get approvals from multiple insurers can help you avoid delays from errors or inaccuracies. If authorization gets denied, most insurers provide a reason for the denial and let the provider resubmit the claims within a limited time frame.

Insurance companies usually provide an authorization number when they approve a test or treatment. However, pre-authorization only sometimes guarantees payment. Insurers can still deny claims if they decide treatment wasn’t necessary or the treatment cost exceeded payment limits for the insurance plan.


Information Required for Behavioral Health Billing

For successful behavioral health billing, you’ll need many types of information, including:

  • The individual’s mental health and medical history.
  • The person’s name and contact information, including address and phone number.
  • The person’s Medicare ID, Medicaid ID, or other insurance ID number.
  • The name and location of the treatment professional and the individual’s contact information.
  • The reason for treatment.
  • Diagnoses and test results.
  • Testing and treatment dates.
  • A behavioral health treatment plan for the person.
  • A list of any factors that could increase health risks for the individual.

Different insurances and states may require additional information. Having a system to handle the variance is essential, particularly if billing in multiple locations and states.

A National Provider Identifier (NPI) number is required as well. According to the Health Insurance Portability and Accountability Act (HIPAA), insurers, treatment providers, and clearinghouses must use 10-digit numbers as identifiers and share their NPIs with other organizations that might need them for successful billing. Keeping extensive notes can make providing all of this information more straightforward and help reduce payment delays. 

Behavioral Health Billing Mechanisms

The mental health billing process uses many different mechanisms. HIPAA requires many other electronic data interchange (EDI) codes and NPI numbers. You could encounter the following behavioral health billing codes and abbreviations:

  • EDI 835: An EDI 835 file contains electronic remittance advice (ERA). When organizations receive payment from insurers, these files help them automatically post the information on their clearinghouses and software systems.
  • EDI 837: EDI 837 health care claim files contain the information needed for claims. Providers can use software to create EDI 837 files individually or in batches. Organizations sometimes create each claim manually through data entry. However, using software is becoming more practical, even for small providers.
  • HCFA 1500: HCFA stands for Health Care Financing Administration. The Centers for Medicare & Medicaid Services (CMS) created the HCFA 1500 form to make Medicare and Medicaid reimbursements easier, and people sometimes identify form HCFA 1500 as form CMS-1500. Today, many doctors and other professionals use the HCFA 1500 form to file claims.
  • UB-04: UB stands for uniform billing, and the UB-04 form is the electronic version of the paper CMS-1450 form. It’s similar to CMS-1500, but institutions like hospitals and inpatient treatment centers use UB-04, not individual doctors. The Centers for Medicare & Medicaid Services also created it.
  • CPT Billing Codes: Current Procedural Terminology (CPT) billing codes for mental health identify the items and services people receive. When providers submit the forms and files above for Medicare and Medicaid, they use these codes to help speed up the billing process. CMS updates these codes annually, and people sometimes call them Healthcare Common Procedure Coding System (HCPCS) codes.
  • Copayments or Copays: A copayment or copay is a flat fee that people pay every time they see a provider. Contact the individual’s insurer to find out the copay amount for a new client.

Billing clients directly can help providers avoid using these mechanisms and reduce their billing costs. Some behavioral health professionals don’t join insurance networks or accept payments from insurers. That way, they don’t need to communicate with insurers or comply with their rules. However, direct billing can increase costs for individuals. Organizations can use an income-based sliding scale for their fees to compensate, reducing expenses for people with lower incomes.

Billing Integrations

Billing integrates with accounting to provide details about how organizations generate revenue. It integrates with the clinical side of behavioral health care by incorporating service data. Billing can also integrate with front-desk operations to provide information for clients, including invoices. 

Integrating billing and payments with a general ledger (GL) helps save time and effort for individuals and providers. With the right mental health billing software, you can access information from many insurers, providers, and individuals and communicate with other organizations quickly and easily. Using one system can also reduce errors. Billing integration encourages communication among providers and insurers, improving treatment quality and preventing billing inaccuracies.

Behavioral Health Billing FAQs

Behavioral health billing can often be complex. Explore the most frequently asked questions and their answers.

How Often Should I Bill?

Most insurers give providers 90 days after service to file a claim. When people receive regular mental health treatment, generating a new bill monthly or every 30 days is a good idea. Daily or weekly billing can improve cash flow for providers, and the advanced, integrated electronic health record (EHR) systems available today help make frequent billing work seamless.

What Is a Good Billing Process?

A good billing process involves several steps, starting with collecting information. For successful billing, you’ll need the individual’s name, address, gender, and date of birth. Verify the insurance ID, group number, authorization number, and claims address. Your provider tax ID number, employment identification number (EIN) or Social Security number (SSN), and National Provider Identifier or NPI are also required. The NPI number makes finding information about different providers easier. You’ll also need your provider license and the address on file with the insurer.

Behavioral health billing software can help you verify eligibility and additional information without making phone calls. It often uses electronic transactions called Eligibility and Benefit Inquiry or 270 and Eligibility and Benefit Response or 271. People sometimes call this the 270/271 format. A clearinghouse can also speed up this process. In many cases, organizations can get an authorization in real time.

Recording CPT billing codes for mental health treatment accurately is essential for prompt reimbursement. Providers can submit claims on their own or get help from a clearinghouse. If a clearinghouse notices any errors, it will alert you and help you correct them before submission. You can check the approval status for a claim by calling the payer, visiting the organization’s website, or asking your clearinghouse. If a claim gets denied, you or your clearinghouse can appeal the decision and resubmit the claim with corrected information.

How Can I Reconcile My Billing to Services?

Reconciling billing to services involves finding the fee for each service you can expect from the insurer. This reconciliation can include copays and coinsurance. After receiving payment, you should ensure it’s the correct amount. If you don’t receive the amount owed, you can resubmit the claim and ask for the difference. Under some circumstances, you can bill the individual for any amount that insurance won’t cover.

How Should I Handle Denials?

Many insurance providers use software to approve or deny claims automatically. A misspelled word, an inaccurate date, or the wrong CPT billing code could be enough for the program to generate a denial.

If the insurer didn’t give you a reason for the claim denial, ask for it in writing. Correcting a minor error and resubmitting your claim could be quick and easy. You could write a letter appealing the decision if the denial wasn’t because of a claim error. It should contain the name of the person who received treatment, the date that treatment started, and a summary of the treatments the person received. You can conclude the letter with examples of potential impacts on people’s health if they can’t continue treatment and research showing the effectiveness of the treatment.

What Is Batch Billing?

Batch billing lets providers receive payments from multiple sources in batches instead of processing individual payments. You can use software to allocate the payments in a batch correctly and resubmit claims if the total amount from the payments in a batch is low.

To learn more about how software can make behavioral health billing easier, contact us at Foothold Technology. We can help your organization focus on improving people’s lives.


Kids are losing Medicaid coverage at high rates in these 10 states. Here’s how to fix it.

Written by: Dom DiFurio

Half of U.S. children depend on government programs for health care, and in some states, they’re beginning to lose that coverage at rates that have concerned the federal government.

Foothold Technology analyzed data from the Centers for Medicare and Medicaid Services and state health departments collected by the Georgetown University Center for Children and Families to illustrate which states have allowed children to lose health care at an alarmingly fast pace.


Passed in March 2020, the Families First Coronavirus Response Act provided additional Medicaid funds for states in exchange for meeting a requirement to provide continuous coverage for all Medicaid and Children’s Health Insurance Program, or CHIP, recipients throughout the public health emergency. The policy pushed the nation’s uninsured rate to a historic low of 8%, according to the Department of Health and Human Services. During the same period, between 2020 and 2023, the number of children enrolled in Medicaid and CHIP grew by 32%.

As of May 1, 2024, the Georgetown University CCF estimates nearly 5 million children have lost health care. Its researchers have dubbed the lifting of COVID-19 pandemic-era policies “the unwinding.”

American children impacted by that loss of coverage are more likely to be Black, Hispanic, and Native American, populations already historically underserved by a number of essential services like health care, banking, and food availability. Experts have already pointed out that some of the states where children are experiencing the most coverage losses, such as Montana and Idaho, have large Native American populations.

Data has also shown the unwinding of public health care coverage for children has been more dramatic in some states than others.

The 10 states that saw enrollment decline the most account for nearly half (46%) of all child disenrollments since the COVID-era Medicaid and CHIP policies ended in early 2023. When kids lose health care coverage, they can see worse outcomes for conditions like asthma, infections, and other illnesses that families are then forced to pay out of pocket for or forgo altogether.

10 states account for nearly half of all kids who lost health care since last year

Data on the change in children’s Medicaid enrollment since states began terminating recipients from Medicaid rolls paints a fractured picture of states’ approaches to public health care.

According to the authors of a May 2024 CCF report, the disparity in enrollment drops between states is partly attributed to how quickly they chose to implement the unwinding of pandemic policies. The CMS allowed states to take up to 12 months to carry out the process of eligibility assessment and benefits renewal, but some states chose to move more quickly.

Most children who lost coverage may very well still be eligible for continued benefits, but they were disenrolled from Medicaid due to procedural factors like deadlines and paperwork. The bottom line is many children who are among the nation’s most vulnerable are not receiving the medical coverage they’re entitled to.

According to the CCF, no state had finished its unwinding process yet as of May. The great unwinding of a historically strong period of public health care coverage for Americans has offered harsh lessons about the different pathways forward in the wake of a crisis. It has also highlighted where states are willing to provide a stronger safety net for vulnerable populations like children.

The role of Medicaid expansion and other solutions for continuous coverage

In December, HHS Secretary Xavier Becerra sent letters to the governors of the states seeing the most Americans dropped from Medicaid rolls. The letters encouraged them to make renewals easier for children and families, remove barriers like fees and premiums that make it difficult for families to enroll kids in CHIP, improve call center operations, and expand their Medicaid programs.

“We strongly urge all states to do their part to make sure eligible children keep the coverage they need to grow and thrive,” CMS administrator Chiquita Brooks-LaSure said in a statement.

States that have expanded Medicaid eligibility saw fewer children drop from health care enrollment at the end of the federal continuous coverage period. Affordable Care Act Medicaid expansion broadened eligibility, including for more low-income households.

In nonparticipating states in the Medicaid expansion, including Texas and Georgia, organizations warn that the unwinding process is hitting families with incomes below the federal poverty threshold hardest.

American families who have received notice that their children may be losing coverage for any reason can apply for low-cost health insurance through the Health Insurance Marketplace. They can apply for coverage and ultimately enroll as early as 60 days before losing Medicaid or CHIP coverage, with new coverage beginning at the start of the month following enrollment.

Story editing by Alizah Salario. Copy editing by Paris Close.

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