Medicare Intensive Outpatient Program Billing: Who Can Bill It

As of October 2026, Medicare pays for intensive outpatient program (IOP) services only when they are billed by one of six provider types: a hospital outpatient department, a critical access hospital, a Community Mental Health Center (CMHC), a Rural Health Clinic, a Federally Qualified Health Center, or, for opioid use disorder only, an Opioid Treatment Program. A freestanding licensed IOP in Oregon or Washington that is none of those cannot bill Medicare for the program, however good the clinical model is. For CY 2026 the national per diem runs from $127.74 (CMHC, three services) to $418.45 (hospital, four or more services), and the CY 2027 proposed rule would raise both.

Who can bill Medicare for intensive outpatient services?

The benefit was created by Section 4124 of the Consolidated Appropriations Act, 2023 and took effect January 1, 2024, for both mental health and substance use disorder treatment. The coverage rules live at 42 CFR 410.44, and the payment tiers are set each year in the Hospital Outpatient Prospective Payment System (OPPS) rule. The billing setting decides the claim form, the type of bill and the rate.

Rates are CY 2026 national unadjusted per diems from the CY 2026 OPPS final rule (APCs 5851, 5852, 5861 and 5862), before wage-index adjustment and the 20% beneficiary coinsurance. FQHC rates are confirmed in CMS MLN Matters MM14309 (December 2025), and RHC and FQHC payment is set at 42 CFR 405.2462(j).

In Oregon and Washington, all of these institutional claims go to Noridian Healthcare Solutions, the Medicare Administrative Contractor for Jurisdiction F, which covers both states.

Why can't a freestanding IOP bill Medicare for the program?

Because Medicare defines IOP as a provider-type benefit, and a state behavioral health license is not a Medicare provider type. An Oregon program certified by OHA under the OAR 309-019 outpatient behavioral health rules or a Washington agency licensed under WAC 246-341 can run a clinically excellent nine-hour-a-week program and still have no Medicare channel to bill the per diem. The license qualifies you for Medicaid and commercial contracts. It does not make you a hospital department or a CMHC.

What a freestanding program can bill is the work of its enrolled practitioners. Psychologists, clinical social workers and, since January 1, 2024, marriage and family therapists and mental health counselors can bill psychotherapy codes such as 90837 and 90853 under the Physician Fee Schedule. That is outpatient therapy paid code by code, not the IOP benefit, and for a program built on three-hour group days the economics rarely hold. The enrollment side of this, including CMS-855I and reassignment, is covered in our Medicare behavioral health billing and enrollment guide.

What does Medicare require before an IOP claim will pay?

The clinical gate is the physician certification. Under 42 CFR 424.24(d), a physician must certify that the patient requires a minimum of nine hours of IOP services per week, that services are furnished while the patient is under a physician's care, and that they follow a written plan of treatment. Recertification is required at intervals the provider sets, but no less often than every 60 days. Partial hospitalization is stricter: 20 hours a week, a first recertification by day 18, then every 30 days.

The billing gate is the claim itself. CMS instructions in the Medicare Claims Processing Manual, Chapter 4, as restated in MAC guidance such as First Coast's IOP institutional billing requirements and Noridian JF's condition code 92 article, set these requirements:

• Condition code 92. It identifies the claim as IOP on hospital (13X), CMHC (76X) and CAH (85X) claims. Non-IOP mental health services for an IOP patient go on the same claim.
• Revenue codes on every line. IOP uses 0905 (psychiatric) and 0906 (chemical dependency) alongside 0900, 0904, 0914, 0915, 0916, 0918, 0942, 043X and 0250.
• HCPCS on hospital and CMHC claims. Hospitals report CPT or HCPCS by revenue code, for example 90853 and G0410 under 0915. CAHs report revenue code visit counts without HCPCS.
• Line-item dates. Hospitals and CMHCs report each service on its own line with its own date of service.
• Claims in sequence. Interim bills (XX2, XX3, XX4) for a continuing course of treatment must be submitted in order, and Medicare edits for interim consistency.
• No PHP overlap. An IOP claim that overlaps a PHP claim within seven days returns to the provider.

How much does Medicare pay per IOP day, and what changes in 2027?

CMS pays IOP as a daily per diem in two tiers per provider type: days with three services and days with four or more. The CMHC rates are set at 40% of the hospital rates, which is the single most important number in the CMHC decision. IOP and PHP pay the same per diem within each setting; the difference between them is the hours requirement, not the rate.

The CY 2027 OPPS proposed rule (CMS-1850-P), released July 2, 2026, keeps the two-tier structure and the 40% CMHC methodology and would raise the per diems by roughly 9.4% (three services) and 11.1% (four or more). Those are proposed figures. The final rule usually publishes in early November and takes effect January 1, 2027; plan your 2027 budget on the CY 2026 numbers until it does.

One trap for hospital partnerships: a new off-campus hospital department that is not grandfathered under the site-neutral rules must append the PN modifier to each line, which moves payment to a Physician Fee Schedule-based amount. A hospital that "acquires" your freestanding IOP as a new off-campus department does not automatically earn the hospital per diem in the table.

Is CMHC certification the right route for a freestanding IOP?

For most freestanding Oregon and Washington programs that want Medicare IOP, CMHC is the only route they control. It is also a real build. Under the 42 CFR 410.2 definition, a CMHC must provide outpatient services to specified populations, 24-hour emergency care, day treatment or partial hospitalization or IOP or psychosocial rehabilitation, and screening for state mental health facility admissions. It must meet the state's CMHC licensing or certification requirements and provide at least 40% of its services to people who are not Medicare beneficiaries. It then has to meet the CMHC Conditions of Participation at 42 CFR part 485, subpart J, enroll on the CMS-855A, and pass a survey.

We walk operators through this decision with five questions:

The arithmetic: ten concurrent Medicare patients attending three four-service days a week for a year is 1,560 IOP days. At the CY 2026 CMHC rate of $167.38 that is about $261,000 in allowed amounts before wage index; at the hospital rate it would be about $653,000. That gap is why some operators pursue a hospital or FQHC partnership instead, and others refer Medicare patients to a hospital program. All three are defensible answers. Guessing is not.

What about Medicare Advantage and opioid treatment programs?

Medicare Advantage plans must cover the IOP benefit, but who they contract with and how they pay is set by the plan contract, so a freestanding program's Medicare Advantage path runs through each plan's network team rather than through Noridian. Work those contracts the way you work commercial ones; our commercial payer map for Oregon and Washington covers the carriers that also run Medicare Advantage products here.

Certified OTPs have their own channel. CMS lets an OTP bill the weekly add-on G0137 for intensive outpatient services for opioid use disorder patients who need at least nine hours of IOP services a week and receive at least nine IOP services that week, on top of the OTP bundle. It does not cover other substance use disorders or mental health diagnoses. The OTP denial patterns we see most are in our OTP billing mistakes guide.

Which Medicare IOP billing errors cost programs the most?

These are the failures we find when we review Medicare IOP claims, with the fix for each:

These are setup failures, and they repeat every month until someone fixes the template. For the broader denial workflow, see our behavioral health denials guide, and for how long Medicare balances should sit before they are worked, our AR aging benchmarks by payer class.

How do Medicare IOP rules compare with Oregon and Washington Medicaid?

Medicaid in both states lets a certified or licensed behavioral health agency bill IOP directly; Oregon pays it under H0015 on the OHP fee schedule. Medicare inverts that: the state license is irrelevant and the Medicare provider type is everything. Programs that grew up on Medicaid often lose months learning this. The state detail is in our H0015 billing guide for Oregon and Washington.

Saint Health Group's billing team has run treatment programs, so we read a Medicare IOP denial the way a clinical director and a biller read it together: was the patient certified, was the plan written for nine hours, did the claim say so. That is the work behind our behavioral health billing service and our revenue cycle and payer practice, and it ties into our revenue cycle and collections hub.

Frequently asked questions

Can a freestanding IOP bill Medicare for intensive outpatient services?

No. As of October 2026, only hospital outpatient departments, critical access hospitals, CMHCs, RHCs, FQHCs and, for opioid use disorder, OTPs can bill the Medicare IOP benefit. A freestanding program can bill its enrolled practitioners' individual services under the Physician Fee Schedule, or pursue CMHC certification or a hospital or FQHC partnership.

How much does Medicare pay for IOP in 2026?

CY 2026 national unadjusted per diems are $127.74 and $167.38 for CMHCs (three services and four or more) and $319.38 and $418.45 for hospital outpatient departments, which FQHCs and RHCs also receive. Wage index and the 20% coinsurance change the actual payment.

How often must a Medicare IOP patient be recertified?

Under 42 CFR 424.24(d), recertification is required at intervals the provider sets, but no less often than every 60 days. The certification must state that the patient needs at least nine hours of IOP services per week.

What is condition code 92?

Condition code 92 identifies a Medicare institutional claim as intensive outpatient. Hospitals, CMHCs and critical access hospitals must report it on IOP claims, along with revenue codes such as 0905 or 0906 and line-item dates of service.

Will Medicare IOP rates change in 2027?

The CY 2027 OPPS proposed rule would raise the CMHC per diems to $139.81 and $185.98 and the hospital per diems to $349.52 and $464.99. These are proposed rates; the final rule is expected in early November 2026 and would take effect January 1, 2027.

See what your billing is leaving uncollected

If you serve Medicare patients and are not sure you are billing the right benefit correctly, start with the numbers. Our free 90-day claims audit reviews your Medicare, commercial and Medicaid claims under a signed BAA and returns written findings with dollar amounts: which Medicare days denied and why, which certifications lapsed, and whether a CMHC or partnership route is worth modeling for your census. If the answer is that your current biller is the problem, our switching process moves you in 7 to 14 days without losing a month of cash.