Buying or selling a treatment center in Texas: licenses, contracts and due diligence

Does the license transfer?

No. HHSC's Form 3207 instructions say chemical dependency treatment facility licenses are non-transferable and have no change-of-ownership application process. When a new entity buys a licensed facility and the purchase affects the legal name and federal tax ID, the existing provider submits a closure form (Form 3206) and relinquishes the license, and the new entity applies as a new applicant through the initial process. The form cites the old rule number, 25 TAC 448.401(c); the rule now sits at 26 TAC 564.401.

What a new applicant goes through, under 26 TAC 564.403: a complete application, an operational plan, the items on HHSC's new-applicant checklist, proof of liability insurance and the fee. HHSC says within 45 days whether the application is materially complete. After filing, the applicant has 6 months to show the program meets the rules, or the application is denied. Fees under 26 TAC 564.408, as of October 2026: a $1,200 base fee and $125 for each site at a separate address. A license runs two years (564.404).

Ask HHSC licensing in writing how it will treat your specific transaction before you sign. The closure-and-reapply instruction is triggered by a change in legal name and tax ID; an entity purchase that keeps both may be handled differently, but you'll still have ownership and control changes to report.

Mental-health-only programs aren't under chapter 564. A freestanding mental health IOP may hold no facility license at all, which shifts the weight of the deal to its contracts, its staff and its referral base.

Asset purchase or entity purchase

This is a decision for your attorney and CPA. What it changes on the operating side:

The trade-off is the classic one: the entity purchase keeps the revenue running but brings the history with it; the asset purchase leaves the history behind but means rebuilding the license and contracts. Diligence on billing matters most in an entity deal, and timing matters most in an asset deal.

Payer contracts and enrollments

• Read every facility contract's assignment, change-of-control and termination clauses. Some let the plan terminate on a change of control; some require consent before assignment. List each plan, its share of revenue and what it requires.
• Check the rate exhibits. The contracted rates, the levels of care covered and the timely filing limits are what the revenue projection rests on. Rates in old contracts may not be offered to a new tax ID.
• Count the accreditation-only plans. TRICARE requires IOP and PHP programs to be accredited (Joint Commission, CARF or COA), and many commercial plans do too. If accreditation doesn't carry over, those contracts wait for a new survey.
• Plan the re-credentialing. In an asset deal, apply for each facility contract as soon as the new license allows; expect about 90 days per plan. That's the work our credentialing service does every day.
• Every clinician's linkage to the group or facility moves too: CAQH practice locations, the plans' rosters, and NPPES for the organization NPI. A clinician not linked to the new tax ID is a denied claim.

Medicare and Medicaid ownership changes

• Medicare: most freestanding IOPs and PHPs can't bill Medicare for those levels; Medicare pays for them only through hospitals, community mental health centers and a few other provider types (CMS 2024 outpatient rule). If the target or its clinicians are enrolled, Medicare has its own change-of-ownership reporting through the CMS-855 enrollment forms, and how liabilities follow depends on the structure. Work it through with your attorney and the Medicare Administrative Contractor before closing.
• Texas Medicaid: enrollment runs through TMHP and its PEMS portal, and then each Medicaid managed care plan holds its own contract. A new tax ID generally means new enrollment and new managed care contracts; check TMHP's current change-of-ownership rules for your case. Medicaid enrollment also revalidates at least every five years (HHSC), so check the target's revalidation date.
• Exclusions: check the owners, managers and every staff member against the OIG exclusion list and the Texas Medicaid exclusion list. An excluded person on payroll taints the claims they touch.

The due-diligence checklist

What we'd ask for, and what we'd do with it. Get it under a confidentiality agreement, with client information withheld or limited to what the law allows until closing.

Billing compliance is where we'd spend the most time. A chart audit read the way a payer auditor reads it, with the claims next to the notes, is the fastest way to see whether the revenue is defensible. Our sister product Comply publishes the chart audit checklist we work from, and a Joint Commission checklist for the survey side. If the deal goes ahead, a mock survey in the first months shows the new owner where the program stands.

Client records and Part 2

Substance use treatment records are protected by 42 CFR Part 2 as well as HIPAA, and Part 2 has a specific rule for a program that's discontinued or taken over by another program (42 CFR 2.19): records generally can't simply pass to the new owner without the patient's written consent, unless the law requires them to be kept, in which case they're sealed and kept for that period. Texas also requires chemical dependency facilities to keep records at least six years, and adolescent records at least five years after the client turns 18 (26 TAC 564.508). Settle in the purchase agreement who is custodian of the old records, where they're kept and how former clients get copies. Before closing, plan how current clients consent to continue care with the new owner.

Closing without a gap

• Map every dependency on the seller's license, tax ID and contracts, with the date each moves to the buyer.
• Don't bill under the seller's numbers for care your entity provides unless your attorney has set up an arrangement that allows it. Billing under someone else's NPI or tax ID is how buyers inherit fraud exposure.
• Keep services running. HHSC retires a site's license after more than 60 days without services unless inactive status is granted, and a closure needs every client appropriately discharged or transferred first (564.406).
• Keep the clinical team. Contracts, rates and the license are paperwork; the counselors and the referral relationships are the program. Plan retention before the announcement.
• Re-credential in parallel. File the new license application and the payer applications as early as the deal allows, so the gap between closing and in-network billing is as short as possible. See our credentialing prices and timelines.

If you're selling

• Clean up before you market it: run a chart audit, close open corrective actions, refund known overpayments, and get credential files current. Buyers price in every gap they find.
• Assemble the data room from the checklist above. A program that can produce its license history, contracts and audit file in a day sells faster.
• Plan your exit filings (our guide to closing a treatment program has the full list): the HHSC closure form if the license won't continue, notices to each plan, the accreditor and TMHP, and the records custody arrangement. The license fee is owed for any licensure period in which you provided treatment, even if a closure isn't reported (564.408).

Questions

Moving the program after you buy it? See how to move a licensed treatment program. Adding PHP or IOP? See how to add a level of care. Starting new instead of buying? Compare with how to start an IOP or PHP in Texas and the IOP / PHP Program Launch.

Sources

• Texas HHSC, Form 3207 instructions (non-transferable licenses; closure and new application on a purchase)
• Texas HHSC, Chemical Dependency Treatment Facilities (Form 3206, closure)
• 26 TAC 564.401, 564.403, 564.404, 564.406, 564.408; Cornell LII, 26 TAC chapter 564 (564.508 records)
• eCFR, 42 CFR Part 2 (2.19, discontinued or taken-over programs)
• CMS, CY 2024 outpatient rule fact sheet; TMHP; HHSC, Medicaid revalidation; HHS-OIG, exclusions
• Texas Legislature, Occupations Code chapter 102 (Patient Solicitation Act); 18 U.S.C. 220 (EKRA)