HCPCS Code T1040: Medicaid community behavioral health clinic billing

Key Takeaways

HCPCS Code T1040 describes Medicaid certified community behavioral health clinic services billed per diem – one claim per qualifying day, not per individual service

T1040 is valid only for CMS-certified CCBHCs participating in the Medicaid demonstration program; standard outpatient behavioral health clinics cannot use it

Reimbursement is set by each state Medicaid agency under a Prospective Payment System (PPS) rate, so dollar amounts vary by state and year

Pabau’s claims management software and digital documentation tools help CCBHC billing teams track per diem triggers, capture required notes, and submit clean T1040 claims

HCPCS Code T1040 describes Medicaid certified community behavioral health clinic services, per diem. A single T1040 claim represents all qualifying services a patient receives on a given calendar day, not a charge for each individual session or intervention.

It falls within behavioral health practice billing as a HCPCS Level II code maintained by the Centers for Medicare and Medicaid Services (CMS). The T-code range is reserved for state Medicaid agency-assigned codes, and T1040 specifically applies only to clinics holding Certified Community Behavioral Health Clinic (CCBHC) status.

What is a CCBHC and how does T1040 apply?

Certified Community Behavioral Health Clinics are a federally designated clinic type created under the Protecting Access to Medicare Act of 2014. CMS, in partnership with the Substance Abuse and Mental Health Services Administration (SAMHSA), certifies CCBHCs and authorizes them to participate in a Medicaid demonstration program that uses a different reimbursement structure from standard outpatient behavioral health clinics.

That structure is the Prospective Payment System (PPS). Instead of billing individual service codes for each therapy session or psychiatric evaluation, a CCBHC submits one T1040 claim for every day a qualifying patient receives any covered service.

The PPS rate bundling approach is designed to support clinics serving patients with complex needs, including those with serious mental illness (SMI), substance use disorders (SUD), and co-occurring conditions.

• CCBHC status is granted by the state Medicaid agency, following CMS certification criteria
• Participation in the demonstration program is a prerequisite for T1040 billing eligibility
• Standard community mental health centers (CMHCs) that are not CCBHC-certified cannot use T1040
• Each state that participates in the demonstration program has its own CCBHC-approved provider list

Behavioral health billing teams considering CCBHC certification should confirm their state’s demonstration program status with the state Medicaid agency before attempting T1040 billing.

What services does HCPCS Code T1040 cover?

The per diem rate for HCPCS Code T1040 is designed to bundle an entire day’s worth of qualifying services into one claim. This is a meaningful distinction from fee-for-service billing, where each CPT code corresponds to a discrete encounter. Under T1040, the day triggers the claim, not the service count.

Qualifying services that count toward a billable T1040 day include, but are not limited to:

• Crisis mental health services, including 24-hour crisis lines and mobile crisis response
• Screening, assessment, and diagnosis, including risk assessments
• Person-centered treatment planning and review
• Outpatient mental health and substance use disorder treatment
• Peer support and family support services
• Targeted case management
• Psychiatric rehabilitation services
• Primary care screening and monitoring for individuals with mental illness
• Community-based mental health services for veterans

Not every service a patient receives needs to be itemized on the T1040 claim. The PPS rate covers the day as a bundle. However, accurate documentation of which services were provided on that day is essential for audit defense and HIPAA compliance requirements when records are requested.

How T1040 per diem billing works

A billing day under HCPCS Code T1040 is triggered when a patient enrolled in the CCBHC program receives at least one qualifying service on a calendar day. The claim is submitted with one unit of T1040, regardless of how many services were delivered that day.

Here is how the billing sequence works in practice:

1. Qualifying service delivered: The patient receives one or more CCBHC-covered services on a single calendar day.
2. Clinical documentation completed: The treating clinician documents the services, duration, clinical notes, and any crisis interventions in the patient record.
3. Date of service confirmed: The billing team confirms the service date and verifies the patient’s CCBHC enrollment status and Medicaid eligibility for that date.
4. T1040 submitted: One unit of T1040 is submitted to the state Medicaid payer with the appropriate modifier (if required) and date of service.
5. PPS rate applied: The state Medicaid agency applies the pre-established PPS rate for that CCBHC and pays accordingly.

A common confusion: billing T1040 twice on the same date of service for the same patient is incorrect. One calendar day equals one unit. Multiple same-day services do not generate additional T1040 units. Submitting more than one unit per day is a billing error that may trigger a Medicaid audit or compliance review.

T1040 vs T1041: key differences

HCPCS Code T1040 and T1041 are adjacent codes in the CCBHC billing range, and they are frequently confused. The distinction between them is the Medicaid demonstration encounter reporting period a state selects for CCBHC billing, not a difference in time of day or care setting. T1040 is used for per diem reporting, and T1041 is used for per month reporting.

A state Medicaid agency selects one reporting period for its CCBHC demonstration program. Using T1041 where your state requires T1040, or vice versa, is a billing compliance issue that can result in claim denials or overpayment recovery requests.

Confirm which encounter reporting period your state Medicaid agency uses for the CCBHC demonstration program. Some states require per diem reporting under T1040, while others require per month reporting under T1041.

This is a program-design choice made at the state level. It is not a distinction between daytime and overnight or residential services, and there is no CMS-recognized “night” CCBHC per diem code. You can look up both codes in the AAPC Codify HCPCS database to confirm current descriptions and status.

T1040 fee schedule and reimbursement rates (2025-2026)

Reimbursement for HCPCS Code T1040 is not set by a single national fee schedule. Unlike Medicare Part B rates, which CMS publishes via the Physician Fee Schedule lookup tool, T1040 rates are determined by each state Medicaid agency using the Prospective Payment System methodology.

The PPS rate is calculated based on a CCBHC’s actual operating costs, adjusted for factors such as clinic size, service volume, and regional cost variations. State Medicaid agencies review and update these rates periodically, often annually. For 2025 and 2026, specific per diem rates vary considerably across participating states.

Never rely on a single published rate as universally applicable. Contact your state Medicaid agency’s provider relations office to confirm your clinic’s current PPS per diem rate for T1040 billing.

Modifiers used with HCPCS Code T1040

Modifier requirements for HCPCS Code T1040 vary by state Medicaid policy, and several states require T1040 to be billed with no modifier at all. CMS’s CCBHC demonstration guidance references modifier Q2, which is typically applied to the service-level detail line rather than the T1040 encounter claim line itself.

The additional modifiers below have been seen in select state CCBHC billing manuals. Confirm current requirements with your specific state Medicaid agency before use.

Always reference your state Medicaid CCBHC billing manual before appending a modifier. Incorrect modifier use is one of the most common reasons T1040 claims are denied on first submission.

Manage CCBHC billing with confidence

Pabau helps behavioral health clinics track per diem service documentation, manage HCPCS billing workflows, and maintain the clinical records needed to support clean T1040 claims. See it in action.

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Documentation requirements for T1040 claims

A clean T1040 claim depends on complete clinical documentation. Because the per diem rate bundles all services delivered on a single day, the medical record must demonstrate that at least one qualifying CCBHC service was provided on the date of service claimed.

Billing teams using digital intake forms and structured clinical note templates are better positioned to capture required documentation elements consistently. Below are the core documentation requirements most state Medicaid auditors look for when reviewing T1040 claims:

• Patient’s name, Medicaid ID, and date of birth
• CCBHC enrollment confirmation and eligibility verification date
• Date of service with start and end times of the qualifying encounter
• Name and credentials of the rendering clinician or qualified behavioral health professional
• Clinical service provided (e.g., individual therapy, crisis intervention, case management)
• Diagnosis codes (ICD-10-CM) supporting medical necessity
• Patient’s current treatment plan reference or date of last treatment plan review
• Any referrals or coordination with primary care providers required under CCBHC standards

Incomplete documentation is the primary reason T1040 claims fail post-payment audits. Practices that rely on paper charts or disconnected EHR systems often find that individual clinician notes are missing required fields when records are requested. Structured documentation workflows reduce this risk significantly.

Common billing errors and denial reasons for T1040

Duplicate claim submission is easy to catch. The costliest T1040 errors are the ones that slip through initial edits and surface during a post-payment audit, when CCBHC clinics face recoupment on claims paid months earlier.

Billing staff managing CCBHC claims across mental health EMR systems should watch for these denial patterns:

• Billing T1040 for a non-CCBHC-certified clinic: T1040 is only valid for state-certified CCBHCs. Standard community mental health centers are ineligible. This error results in immediate denial.
• Multiple units per date of service: T1040 is billed as one unit per day. Submitting 2+ units on the same DOS for the same patient is incorrect and triggers automated payer edits.
• Missing or expired Medicaid eligibility: Verify patient eligibility on the specific date of service, not just at enrollment. Patients may lose Medicaid eligibility between visits.
• No qualifying service documented: A T1040 claim without a documented qualifying service in the medical record will not survive audit, even if payment is initially made.
• Incorrect or missing modifier: Some state Medicaid programs require specific modifiers on T1040 claims. Submitting without a required modifier results in denial. Submitting with an incorrect modifier may cause underpayment or delay.
• Wrong code for your state’s reporting period (T1041 submitted instead of T1040, or vice versa): T1040 (per diem) and T1041 (per month) are alternate CCBHC demonstration encounter reporting periods that states choose between – not a daytime/overnight distinction. Submitting the code for the wrong reporting period is a misuse that can trigger audit flags or overpayment recovery.

State-specific considerations for T1040 billing

The CCBHC demonstration program is not active in every US state. As of 2025-2026, CMS has expanded the program through Medicaid state plan amendments and continuing demonstration rounds, but CCBHC eligibility and T1040 billing authority depend on each state’s participation status. Practices managing billing across multiple states should review multi-state HIPAA compliance obligations alongside CCBHC billing requirements.

Key state-level variables that affect HCPCS Code T1040 billing include:

• PPS rate amount: Set individually by each state Medicaid agency. Rates can differ substantially between states, reflecting cost-of-living, service mix, and state budget decisions.
• Modifier requirements: Some states require population-based or service-type modifiers. Others do not. Always check your state’s CCBHC billing manual.
• Claim form requirements: Most Medicaid claims are submitted on the UB-04 or CMS-1500 form, depending on the provider type. Confirm the required form with your state Medicaid agency.
• Same-day service restrictions: A small number of states restrict which CPT-coded services can be billed on the same day as a T1040 per diem claim. Review state-specific carve-out rules.
• Demonstration program participation: States can enter and exit the CCBHC demonstration. Confirm your state’s current participation status with CMS before billing T1040.

How Pabau supports CCBHC and behavioral health billing

Behavioral health clinics navigating CCBHC billing requirements face two parallel challenges: capturing the clinical documentation that supports per diem claims, and maintaining the audit trail that protects those claims if Medicaid reviews them. Pabau’s claims management software is built to address both.

For CCBHC teams specifically, the platform’s structured clinical note templates and automated billing workflows help ensure that every qualifying service delivered on a per diem day is captured in the patient record before a T1040 claim is submitted. This reduces the mismatch between services delivered and services documented, which is the most common source of T1040 audit risk.

Practices managing psychiatry and behavioral health documentation alongside CCBHC billing also benefit from Pabau’s centralized patient record structure, which keeps treatment plan references, ICD-10-CM diagnosis codes such as ICD-10 Code F09, and encounter notes in one system, reducing the risk of fragmented records during a Medicaid audit.

Pabau’s reporting tools also help billing managers track per diem claim submission rates, flag missing documentation before claims are sent, and monitor denial patterns, so T1040 billing errors get caught in-house rather than during a payer review. See the workflow in action by booking a demo with the team.

Related codes and broader HCPCS context

HCPCS Code T1040 does not exist in isolation. CCBHC billing teams commonly encounter these adjacent codes and should understand when each applies. Diagnosis codes such as ICD-10 Code F69 are frequently paired with T1040 claims to support medical necessity documentation.

For full HCPCS Level II code lookup and current code status, use the NLM Clinical Table HCPCS API, which provides programmatic access to the CMS code database. ICD-10 Code F99 is one example of a behavioral health diagnosis code commonly paired with T1040 claims.

Conclusion

HCPCS Code T1040 is a specialized billing code that only applies in a specific programmatic context: Medicaid-certified CCBHCs participating in the CMS demonstration program. Getting the basics right is what separates clinics that collect cleanly from those that face audit recoveries:

• One unit per day
• The correct modifier for your state
• Documentation that supports every service bundled into the per diem

Pabau’s claims management and clinical documentation tools are designed for exactly this kind of structured behavioral health billing environment, supporting CCBHC workflows from documentation through clean claim submission. Speak with the team about your clinic’s specific billing setup to see it in action.

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