Legal Risks of Poor Documentation, and how Therapists can Protect Themselves

Documentation is a key component of therapeutic practice and ethical professional practice. Therapists have an obligation to keep comprehensive, up-to-date, and accurate session records with their clients. Poor documentation exposes therapists to the risk of lawsuits such as malpractice action, complaints with licensing boards, and denial of claims. This piece explains the legal ramifications of inadequate documentation and describes means through which therapists can protect themselves, including adherence to specific laws, purchasing malpractice insurance, and engaging in peer consultation.

The Legal Risks of Poor Documentation

1. Malpractice Lawsuits

Among the primary risks to the therapist who does not maintain proper records is the danger of malpractice claims. Clients with incomplete or erroneous files will pose a difficulty in defending allegations of negligence, wrongdoing, or damage in the court of law. Important material such as plans for treatment, informed consent forms, session reports, and danger evaluations can turn into pivotal points during court action.

A therapist accused of malpractice may be asked to prove that they had rendered appropriate care. Without clear and detailed documentation, compliance with professional standards is hard to demonstrate. Poor documentation also makes it challenging to refute unsubstantiated claims, leaving therapists vulnerable to costly settlements or judgments (Hobensack et al, 2022.)

Relevant Law: State-Specific Malpractice Laws

Malpractice statutes differ by state, but all states require therapists to practice a standard of care that is commensurate with their profession. Lack of proper documentation constitutes a deviation from this standard, and therapists become susceptible to lawsuits. In most states, malpractice suits need to prove the following:

• Duty of care: The therapist had a professional relationship with the client.
• Breach of duty: The therapist failed to meet the accepted standard of care.
• Causation: The therapist’s actions (or lack of actions) directly caused harm.
• Damages: The client suffered measurable harm as a result.

2. Licensing Board Complaints

State licensure boards also possess the authority to investigate complaints against therapists. Insufficient documentation can result in disciplinary action, suspension, fines, or licensure revocation. Therapists are typically requested by licensure boards to demonstrate that they applied ethical and legal standards through their documentation processes. Common complaints leading to licensing board investigations include:

• Failure to maintain client confidentiality
• Incomplete or missing treatment records
• Lack of documentation for informed consent
• Failure to report risk factors for harm (e.g., suicidality, abuse)

If a therapist was being investigated, it could become important for him to turn his records over as evidence. Incongruent or missing documents can create an impression of neglect, even for satisfactory treatment from the therapist.

Relevant Law: State Licensing Regulations

Each state has specific licensing requirements for mental health professionals, including documentation standards. For example:

• California: The Board of Behavioral Sciences (BBS) mandates that therapists keep records for at least seven years after the last client contact.
• Texas: The Texas Behavioral Health Executive Council requires that records must document treatment plans, client progress, and any ethical considerations.

3. Insurance Claim Denials

Insurance companies require proper documentation in order to pay claims. If a therapist supplies incomplete or conflicting records, there is a chance of claim denials, and this can lead to loss of money or audit. In serious situations, charges of insurance fraud can be made if records don’t support services billed.

Common documentation errors that lead to claim denials include:

• Missing or vague progress notes
• Billing for services not documented in client records
• Lack of medical necessity justification
• Incorrect coding for therapy sessions

Relevant Law: Health Insurance Portability and Accountability Act (HIPAA)

HIPAA demands reliable and secure client records of therapists. Ineffective documentation resulting in HIPAA noncompliance can result in heavy fines and court mandates. Additionally, the False Claims Act (FCA) charges false billing, for example, misrepresentation of services due to lack of record-keeping (DeAnn and Rhea, 2022.)

4. Breach of Confidentiality and Ethical Violations

Poorly kept or absent files can cause confidentiality violations, especially when the therapists do not store the files safely or fail to write informed consent down. Organizational standards by groups such as the American Psychological Association (APA) and the National Association of Social Workers (NASW) all emphasize data confidentiality.Failing to properly secure physical or electronic records

• Sharing client information without appropriate releases
• Improper disposal of client records

Relevant Law: HIPAA & 42 CFR Part 2

These guidelines cover confidentiality and privacy of records of alcohol and drug use treatment and substance abuse treatment records. HIPAA provides national privacy standards for storing client health care data, but 42 CFR Part 2 imposes additional protections on the confidentiality of treatment records of alcohol and drug use. Being noncompliant can risk therapists facing action in court and damaging their professional images.

How Therapists Can Protect Themselves

1. Maintain Comprehensive and Accurate Documentation

Therapists should follow best practices for documentation, including:

• Recording session notes promptly after each appointment
• Documenting client progress, treatment plans, and informed consent
• Including details about risk assessments, referrals, and termination of services
• Ensuring records meet state and federal legal requirements
• Using a structured documentation template to ensure consistency
• Conducting periodic self-audits to identify and correct documentation errors

Recommended Standard: SOAP Notes Format

Applying the Subjective, Objective, Assessment, and Plan (SOAP) format ensures uniformity and thoroughness in clinical documentation (Reiter and Sabo, 2023.) When applying this format, therapists can document:

• Subjective: Client’s self-reported symptoms and concerns
• Objective: Observations and assessments by the therapist
• Assessment: Clinical impressions and diagnostic considerations
• Plan: Treatment strategies and next steps

2. Adhere to Legal and Ethical Guidelines

Federal and state legislation that regulate documentation and professional organizations’ ethics guidelines must be kept in mind by therapists. In order to remain updated, therapists should:

• Regularly review updates from licensing boards and professional associations
• Attend continuing education courses focused on documentation best practices
• Consult with legal professionals when uncertain about documentation policies

Key Ethical Standards:

• APA Ethical Principles of Psychologists and Code of Conduct
• NASW Code of Ethics
• ACA Code of Ethics (for counselors)

3. Secure Malpractice Insurance

Malpractice insurance provides economic protection from lawsuits or complaints to the licensing board. Policies typically cover the cost of legal defense, settlements, and judgments for claims of professional negligence.

Considerations When Choosing a Policy:

• Coverage limits and exclusions
• Whether the policy includes licensing board defense
• The reputation of the insurance provider
• Coverage for electronic health record (EHR) data breaches
• Whether coverage extends to teletherapy services

4. Engage in Peer Consultations and Supervision

Regular consultations with colleagues or supervisors help therapists improve their documentation practices and ensure they are adhering to legal and ethical standards (Balkova, 2022.) Therapists should:

• Join peer consultation groups to discuss challenging cases and documentation concerns
• Seek supervision from experienced professionals to review documentation methods
• Participate in case reviews where ethical and legal considerations are discussed
• Establish a network of trusted colleagues to provide accountability

Benefits of Peer Consultation:

• Reduces risk of isolation in clinical decision-making
• Provides support in handling complex cases
• Ensures compliance with ethical and legal standards
• Offers guidance on best documentation practices

Conclusion

Poor documentation poses serious legal threats to therapists from malpractice litigation, board complaints, to economic losses due to insurance claims denials. Through state and federal laws compliance, proper record-keeping, procuring malpractice insurance, and peer consultation, therapists can safeguard their professional practice and offer ethical compliance. Proper documentation is not only legally beneficial to therapists but also introduces quality care to clients. Therapists can also use Mentalyc to capture and structure the content of their session so they are not diverting attention towards physically taking notes during session which also helps to avoid the threats that comes from poor documentation.