If you want to manage a mental health practice, you must provide great care while handling the financial side with precision.
From billing insurance companies for therapy services to keeping track of diagnosis codes, insurance claims, and proper reimbursement, a well-organized accounting workflow is essential. Mental health professionals often juggle complex billing practices, insurance provider requirements, and administrative tasks, making it crucial to establish a solid financial system.
Here’s how you can streamline your accounting workflow for your mental health services and ensure your practice remains financially healthy.
Building the foundation of your accounting system
In a mental health practice, you’ll deal with specific challenges related to insurance plans, therapy sessions, service codes, and claims.
Set up a comprehensive chart of accounts (COA)
A detailed chart of accounts (COA) is the backbone of your financial management. Whether you’re running a private practice or a larger clinic, organizing your income and expenses properly will help you track revenue from therapy sessions, reimbursements, and insurance claims with ease.
For a mental health practice, your COA should include:
- Revenue: Payments from services such as individual psychotherapy, 45-minute sessions, 60-minute psychotherapy sessions, psychological testing, and reimbursements from various insurance providers
- Expenses: Office rent, malpractice insurance, payroll for social workers and administrative staff, and practice management software costs
- Liabilities: Loans, taxes owed, and pending insurance claims from health plans and insurance companies
By organizing your revenue and expenses based on common services like psychiatric services, individual psychotherapy, and physical therapy, you’ll have a clear picture of your financial health.
Record transactions in real-time
One of the most critical aspects of maintaining a healthy accounting system is recording transactions as they happen. Whether you’re documenting payments for a 30-minute therapy session or filing insurance claims for complex sessions, recording everything in real-time helps avoid discrepancies.
- Client payments: Document all payments for therapy services, including individual psychotherapy, couples therapy, and extended sessions.
- Insurance claims: File claims to insurance companies promptly, ensuring the correct procedure codes, ICD-10 codes, and billing codes are used.
- Payroll: Keep track of payroll for all mental health professionals in your practice, including social workers, administrative staff, and therapists.
Real-time documentation is essential for minimizing billing errors and ensuring smooth communication with insurance companies, especially when dealing with pre-authorization and other insurance requirements.
Regular financial reconciliation
Reconciling your accounts is a must for any mental health practice. It ensures that every transaction — whether from client payments, insurance reimbursements, or administrative costs — matches what’s in your bank account.
Reconcile bank statements and ensure clean claims
Regularly reconciling your bank statements ensures that all transactions align with your internal records. This is especially important for mental health practices that handle frequent insurance claims for therapy sessions, psychiatric services, and psychological testing.
- Clean claims: Submitting clean claims with the correct procedure codes, service codes, and code modifiers helps avoid delays in reimbursement. Make sure you’re submitting claims with the proper ICD-10-CM codes for conditions like depressive disorder, panic disorder, or generalized anxiety disorder.
Staying on top of reconciliations will help you spot errors, missed payments, or issues with reimbursement rates.
Managing accounts receivable (AR) and timely reimbursements
In a mental health practice, managing accounts receivable is critical for maintaining a healthy cash flow. Because insurance claims often delay payments, tracking AR effectively ensures that you’re not waiting too long for reimbursements.
Track accounts receivable and follow up on claims
Effective AR management involves monitoring outstanding payments, both from patients and insurance companies, to ensure your practice gets reimbursed for the therapy services provided.
- Billing software: Use practice management software to track outstanding balances for services like psychiatric services, couples psychotherapy, or psychological testing.
- Follow-ups: Keep an eye on claims to insurance providers and follow up when necessary to resolve any billing process issues, particularly when pre-authorization was required.
AR tracking helps your practice maintain consistent cash flow, which is essential for paying employees and covering expenses such as malpractice insurance and administrative costs.
Managing payroll and taxes for mental health professionals
Payroll is a critical part of any mental health practice, especially if you have a team of mental health providers, social workers, and administrative staff. Ensuring that payroll is accurate and taxes are filed correctly is essential for keeping your practice compliant and financially healthy.
Monitor payroll and tax obligations
Use reliable payroll systems to track employee wages, benefits, and tax withholdings. Accurate payroll management is important not only for staying compliant but also for ensuring that your mental health professionals are paid on time.
- Staff payments: Include payments for all provider types, from social workers to therapists delivering services such as individual psychotherapy or psychiatric services.
- Tax filings: Make sure you’re correctly filing payroll taxes and accounting for expenses like malpractice insurance, software costs, and health plan contributions.
Generating regular financial reports
To keep your practice financially healthy, generating regular financial reports is crucial. These reports help you monitor your income, expenses, and overall financial health while providing insights into how well your billing processes are working.
Review income statements and balance sheets regularly
Financial reports provide a clear view of your practice’s financial performance, helping you make informed decisions.
- Income statements: Break down revenue sources, such as 45-minute sessions, psychological testing, and reimbursements for services like individual psychotherapy or physical therapy.
- Balance sheets: Provide a snapshot of your practice’s financial health, showing assets, liabilities, and equity.
These reports help you understand whether you’re being reimbursed correctly by insurance providers and if any adjustments are needed in your billing practices.
Tax preparation and filing
Keeping organized throughout the year will help make tax season less stressful. Having accurate records of your income, expenses, and insurance claims ensures you’re prepared for filing.
Prepare and file taxes on time
Be sure to deduct all eligible business expenses, including malpractice insurance, practice management software, and office supplies. Accurate tracking of your insurance claims, patient payments, and reimbursements ensures a smooth tax filing process.
- Deductible expenses: Track everything from rent to software, ensuring all costs for patients, such as therapy services and psychological testing, are accounted for.
Ensuring compliance with legal and billing standards
Mental health practices are required to comply with strict billing practices and legal standards, such as HIPAA. Ensuring that your practice is submitting claims in the correct format and using the proper billing codes is key to staying compliant.
Maintain compliance with billing guidelines and insurance credentialing
Complying with billing guidelines ensures you receive proper reimbursement for your mental health services. Make sure to submit claims with the correct CPT/HCPCS codes, code descriptions, and diagnostic codes.
- Insurance credentialing: Ensure all your providers are credentialed with the relevant insurance plans and health care professionals.
- Clean claims: Submit claims with the correct format and code therapy usage for mental health services, including ICD-10-CM codes and revenue codes.
Using practice management software for efficiency
Practice management software is essential for mental health practices. From handling administrative tasks to managing insurance claims, these systems ensure that your practice runs efficiently.
Benefits of using practice management software
Practice management software automates administrative tasks like submitting insurance claims, tracking diagnostic codes, and managing billing processes. This helps reduce errors and ensures smooth communication with insurance companies.
With advanced features like online portals, claims portals, and all-in-one EHR systems, you can easily handle everything from initial visits to family therapy sessions, while staying compliant with billing standards.
How we can help
Managing the financial side of a mental health practice can be complicated, but Leichter Accounting is here to help. We specialize in providing accounting services for mental health providers, from streamlining payroll to handling insurance claims and taxes. Let us handle your accounting so you can focus on providing the best care to your patients.