Intensive outpatient programs (IOPs) are a highly utilized service in the behavioral healthcare continuum for both mental health (MH) and substance use disorders (SUDs). IOPs have long been reimbursed by commercial payers, but only recently achieved Medicare coverage through the 2024 CMS Final Rule.
Coverage for IOP services under state Medicaid plans, meanwhile, has historically been an optional benefit. The lack of clarity in state Medicaid coverage guidelines and reimbursement rates has limited providers from offering access to IOP services for Medicaid beneficiaries.
Over the last few years, however, several states have begun to better define their IOP coverage requirements and reimbursement rates, which is enticing more providers to establish IOP programs with Medicaid plan participation.
To better highlight the key differences in state-specific Medicaid IOP coverage, ECG studied 21 states and created a map (below) depicting:
- Whether those states offer IOP coverage for MH or SUD service.
- If the coverage exists through a waiver.
- The state's fee-for-service reimbursement rates.
Additionally, we identified four key takeaways across state Medicaid IOP coverage models:
1. Service Coverage
Of the states reviewed, 20 of 21 covered SUD IOP services for Medicaid beneficiaries; only 13 of 21 covered MH IOP services.¹ Of note, Montana covers MH IOP services, but only for children (<21) when they meet serious emotional disturbance (SED) criteria. Utah is also interesting because both MH and SUD IOP service coverage are actually established by county and by plan.
2. Reimbursement Rates and Methodology
We found that when states cover both SUD and MH IOP services (9 do²), more than half (5) do not impose a rate differential between MH and SUD. This differs from ECG's experience with most commercial payers' approach to IOP reimbursement
Additionally, only ten of the states we reviewed reimbursed IOPs based on a per diem payment; three of these only reimburse a per diem for MH IOP, not SUD. Three states—Alabama, Nebraska (SUD), and South Carolina (SUD)—reimburse by the hour. Pennsylvania and West Virginia reimburse based on 15-minute increments. Montana (SUD) reimburses on a per week cadence. One state, Oregon, reimburses on a per service basis. Massachusetts was the only state to offer a different per diem rate for children (<21). Louisiana offers a different per diem rate for prenatal or postpartum patients.
3. Billing and Coding Variability
When states cover IOP services under their fee-for-service Medicaid programs, IOP billing guidelines (i.e., CPT codes, allowable units) are consistent throughout managed Medicaid entities. There are two CPT codes commonly associated with billing IOP services for states’ FFS Medicaid and Managed Medicaid plans:
- H0015, used to bill for IOP alcohol and/or drug services
- S9480, used to bill for IOP psychiatric services
If a state's Medicaid program allows IOP services and explicitly defines these services as IOP, it is very likely using these codes.
Alternatively, if the state does not clearly define IOP, the CPT code for such service can vary. For example, Alabama does not explicitly cover IOP services; however, like services could be billed under H2012, behavioral health day treatment. In such instances, reimbursement may not be a defined per diem but rather a per time-based unit rate.
4. ILOS: States May Not Cover IOP but Allow MCOs to Do So
Over the last decade, demand for access to behavioral healthcare for Medicaid beneficiaries has increased significantly. Some states, acknowledging this demand but facing limitations in their Medicaid budget, have opted for an "In Lieu of Service" (ILOS) approach. Through this approach, private MCOs can offer medically appropriate and cost-effective behavioral health services that may not otherwise be covered by the state's Medicaid plan.¹
Of the 21 states reviewed, two employ ILOS to allow IOP coverage for their Medicaid beneficiaries: Texas and Florida. MCOs in these states can opt to provide IOP as an ILOS offering and set their own reimbursement for the service, as there is no state fee schedule to reference. Whether and where to offer this coverage in a given state is at the MCO's discretion. Florida is one example of this; coverage of IOP through ILOS varies across MCOs and, for a given MCO, can vary across networks and geography.²
Given the variability in Medicaid coverage guidelines by state, we advise any organizations contemplating expansion of existing IOP programs into new states to do their research before finalizing investment decisions. ECG's managed care experts in our Payer Strategy and Contracting division are always available to assist providers with market research, market expansion, and contract negotiations across all financial classes.
