Occupational Therapy Insurance Denied: How to Appeal an OT Claim Denial

Occupational Therapy Insurance Denied: How to Appeal an OT Claim Denial

Occupational therapy (OT) helps people recover or maintain the ability to perform daily activities — from children with developmental delays learning self-care skills, to stroke survivors regaining the ability to dress themselves, to adults recovering from injuries restoring hand function. Despite OT's clinical importance, insurance denials for occupational therapy are extremely common.

If your insurer has denied coverage for occupational therapy, this guide explains the most common reasons and how to fight back effectively.

Why Occupational Therapy Claims Are Denied

"No longer medically necessary" / plateau: The most common OT denial. Your insurer's clinical reviewer concludes you have reached maximum benefit and further OT is maintenance only. This denial is often premature and based on incomplete clinical information.

Visit limit reached: Many insurance plans cap OT at a specific number of visits per year (often shared with physical therapy and speech therapy under a combined "outpatient rehab" benefit). Once the cap is reached, further visits are denied.

Maintenance care classification: Insurers distinguish between "restorative" OT (expected improvement — covered) and "maintenance" OT (preventing decline — frequently excluded or limited). The distinction is often applied incorrectly, and many OT services inappropriately classified as maintenance are actually restorative.

Prior authorisation not obtained: Many plans require prior authorisation after an initial period of OT. If the authorisation lapses or is denied, claims are denied.

Provider credentials: Claims denied because the occupational therapist is not credentialed with the insurer or not licensed in the relevant jurisdiction.

Children's OT: "educational" vs. "medical" classification: For children, insurers sometimes deny OT arguing it is "educational" (school-based — the school's responsibility) rather than "medical" (health insurance's responsibility). This argument is often incorrect — clinically necessary OT for a diagnosed medical condition is a health insurance benefit, not an educational one.

"Not progress-based" determination: Insurer argues the patient has not shown sufficient progress to justify continued treatment. This requires a rebuttal with objective progress data.

The "Skilled Care" vs. "Maintenance" Distinction

In the US, a landmark case (Jimmo v. Sebelius, 2013 settlement) clarified that Medicare cannot deny coverage for OT (or PT or speech therapy) solely because the patient's condition is not improving, as long as the treatment requires the skills of a licensed therapist to prevent deterioration or maintain function. This "Jimmo standard" applies to Medicare and has influenced commercial insurance as well.

How to use the Jimmo standard:

• If your insurer denies OT on "plateau" or "maintenance" grounds, argue that skilled OT care is required to maintain your current level of function and prevent decline
• Document specifically why the skills of a licensed occupational therapist (not just a caregiver) are necessary
• Reference the Jimmo settlement and its policy guidance if your plan follows Medicare standards

Medical Necessity for Occupational Therapy: Building Your Case

Objective functional documentation is the foundation of a successful OT appeal:

Standardised assessment scores:

• Functional Independence Measure (FIM)
• Barthel Index
• Canadian Occupational Performance Measure (COPM)
• Pediatric Evaluation of Disability Inventory (PEDI — for children)
• Modified Rankin Scale (for stroke)

Include these scores from the beginning of OT and at each reassessment to demonstrate measurable functional outcomes.

Specific goal documentation: Your OT's treatment plan should include specific, measurable, time-bound goals — e.g., "Patient will independently don shirt with affected upper extremity within 8 weeks" — not vague goals like "improve ADL function."

Documentation of skilled care requirements: Your OT's notes should explicitly document why the skills of a licensed occupational therapist are required for each treatment session — not just what activities were performed.

Physician support: Your treating physician's letter should specifically support ongoing OT as medically necessary and reference your diagnosis, functional limitations, and realistic goals.

Step-by-Step: Appealing an Occupational Therapy Denial

Step 1: Identify the Denial Reason

Review the denial notice:

• Is this a "plateau" / medical necessity denial?
• Is this a visit limit denial?
• Is this a maintenance care classification?
• Is this a prior authorisation issue?

Step 2: Obtain Comprehensive OT Documentation

Ask your occupational therapist to provide:

• Initial evaluation: Documentation of functional baseline at start of treatment
• Progress notes: Objective functional measurements at each reassessment showing improvement or maintenance of clinically necessary function
• Current assessment: Standardised functional scores showing where the patient currently is
• Ongoing treatment plan: Specific goals for the next treatment period and clinical rationale

Step 3: Obtain Your Physician's Letter

Your referring physician should write a letter specifically:

• Supporting the medical necessity of continued OT
• Explaining the patient's diagnosis and functional limitations
• Explaining why skilled OT care is necessary
• Stating realistic functional goals achievable with continued OT

Step 4: Address "Plateau" Denials Specifically

For plateau denials:

• Provide objective functional data showing progress (even small, measurable progress)
• Invoke the Jimmo standard (for Medicare and Medicare-like plans) if the goal is maintaining function, not just improving
• Explain why the skilled intervention of an OT is needed (not just caregiver assistance)
• Document new goals arising from clinical reassessment

Step 5: For Children: Address the Educational vs. Medical Distinction

For children denied OT as "educational":

• OT for a diagnosed medical condition (developmental delay, cerebral palsy, sensory processing disorder, autism) is a medical benefit when ordered by a physician and delivered by a licensed OT outside the school setting
• School-based OT addresses educational needs; medically necessary OT addresses health and developmental needs
• These are two separate entitlements — a child can receive both
• Include the physician's order, the medical diagnosis, and the OT's documentation that the services address functional goals related to health and development, not educational curriculum

Step 6: Submit Your Appeal

Include:

• Your appeal letter
• OT's comprehensive documentation (eval, progress notes, treatment plan)
• Physician's letter
• Standardised functional assessment scores
• Clinical guidelines from the American Occupational Therapy Association (AOTA)

Step 7: Request External Review

After exhausting internal appeals, request external review. Clearly specify that the reviewer should have occupational therapy expertise.

Step 8: Mental Health Parity (If Applicable)

If the OT is for a mental health condition (e.g., OT for depression, anxiety, PTSD, eating disorders), invoke the Mental Health Parity and Addiction Equity Act. Insurers cannot apply more restrictive OT visit limits to mental health conditions than to comparable medical conditions.

Visit Limit Disputes

If OT is denied because a shared "outpatient rehab" visit limit has been reached:

• Determine whether your plan has a combined or separate visit limit for OT, PT, and speech therapy
• If combined: argue that the combined limit violates the medical necessity of each individual therapy
• Check your state's laws — some states require more generous OT coverage
• For patients with conditions requiring all three therapies, advocate for separate limits or medical necessity exceptions

Conclusion

Occupational therapy denials — particularly "plateau" denials and visit limit denials — are among the most successfully appealed insurance decisions when proper clinical documentation is provided. Objective functional measurement, skilled care documentation, and physician support are the key elements of a successful OT appeal. Use ClaimBack at claimback.app to generate a professional appeal letter for your occupational therapy insurance denial.

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