A patient balance can seem insignificant next to an insurer’s payment for treatment. On the other hand, a dispute about how an organization handled that balance is anything but insignificant.
That is why the patient cost-share audit deserves a closer look. In behavioral health, there is plenty of hearsay about what one looks like, how it starts, and what happens when one arrives, including talk of disputes involving millions of dollars in reimbursement.
I set out to see how much of that could be documented. What do payers demand? How much activity do they consider sufficient? How many of these audits happen in a year? What triggers an audit? How many fail, and how are they resolved? I asked ChatGPT, Claude, and Grok to run deep research on those same questions.
What a patient cost-share audit examines
For behavioral-health facilities that accept commercial insurance, a patient cost-share audit examines how a provider handled the balance an insurance company cites as the member’s responsibility. An insurance company may review whether the provider billed the patient, pursued payment, made an arrangement, granted a waiver, or documented its decisions. The review may happen as part of a claims audit, or it may occur independently.
The concern is often described as fee forgiveness: the insurance company suspects that the provider has waived an obligation the plan expects the patient to bear. For in-network providers, the stakes can be higher, because a confirmed waiver may also breach the provider’s contract with the insurance company.
The history reaches beyond behavioral health
Commercial insurance company scrutiny of patient cost sharing predates the modern behavioral-health cases. The 1983 Feiler dental decision describes a Blue Shield inquiry in 1980 and another in February 1983 into a dentist’s copayment practices. It also describes an Aetna-administered plan reducing payments after an investigation into waived copayments. These examples show how long payers have been scrutinizing patient cost-share practices.
For behavioral health, the earliest case the research identified dates to April 2014, when Cigna began reviewing Sure Haven’s patient cost-share practices. Same concept, but with more than three decades between the earliest payer inquiry the research found and the earliest behavioral-health case.
Sure Haven shows the effect of payment denials
Sure Haven was a substance-abuse and mental-health treatment center. In February 2015, Cigna requested evidence that patients had incurred and personally paid their financial responsibility. Cigna applied a fee-forgiving flag and denied subsequent claims without adequate proof of payment.
Sure Haven filed for bankruptcy in 2017. To be clear, I am not implying that the audit caused the bankruptcy. I’m mentioning it because it explains why the lawsuit that produced the public record was brought by Sure Haven’s successor rather than Sure Haven itself.
That successor, Bristol SL Holdings, sued Cigna over 106 patients whose unreimbursed claims totaled $8.6 million. The $8.6 million figure describes reimbursement sought by the successor. In Bristol SL Holdings v. Cigna, the Ninth Circuit affirmed Cigna’s benefits determinations on May 31, 2024, under a deferential standard of review.
TML Recovery raises a different question
The follow-up research found a second behavioral-health case. In 2015, Cigna’s Special Investigations Unit opened an investigation into TML Recovery, an out-of-network substance-use-disorder treatment provider, with suspected waiver of member-responsibility amounts among its concerns. Its October 2019 audit findings alleged $5,536,838.22 in damages, a figure that spans several alleged grounds and cannot be read as cost-share alone.
Where Sure Haven was asked to prove that patients had actually paid, TML turned on a different question: whether those amounts had been waived or pursued with reasonable collection efforts. In March 2024, the court in TML Recovery v. Cigna found that question genuinely disputed and left it open. The case moved toward settlement later that year, and the research located neither its terms nor any record of what, if anything, Cigna recovered.
The Research
The first pass across three platforms found one case. A deliberate follow-up found a second. Both surfaced through court records, and both involve Cigna. In my experience, though, many of the major insurers and some of the lesser-known ones conduct these audits regularly. Two is what this research found, not a measure of how often this happens.
Commercial payers were already scrutinizing patient cost sharing nearly five decades ago. What surprised me was how little public information I could find about these audits in behavioral health. I can’t say with certainty why, and I won’t speculate.
What we do know is what the consequences can be: requests for patient ledgers and payment evidence; prospective payment flags; reduced reimbursement; complete claim denials absent proof of cost-share payment; retroactive recoupment demands; appeals; arbitration or litigation; and, in some cases, multimillion-dollar amounts in dispute.
The Record
Most of the organizations whose cost-share workflows I have assessed or assisted with reached out after a failed audit, not before. A letter or an email arrives, and the organization is asked for proof of work it did not know it was expected to do to that extent. In the matters I have handled, payers asked to see receipts, paid invoices, merchant statements, and documented follow-up activity. How much follow-up counts as sufficient is the question the research leaves open.
I believe in healthcare integrity. But when the first time an organization learns what a payer expects is the audit itself, the process needs to be reevaluated. I went looking through a public record and found two behavioral-health cases. That is not much to prepare from. Whatever standard applies, the record an audit asks for has to exist before the letter arrives.
Freddy Khalil is the Founder and Principal of Grace Advocacy & Compliance. This article reflects the operational perspective behind GAC, shaped by his experience across behavioral health direct care, admissions, financial communication, and patient-responsibility operations. It provides general operational information and is not legal, clinical, compliance, or billing advice.
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