Texas Medicaid for IOP and PHP programs: in-lieu-of services, contracts and codes

Part of our credentialing guide for Texas practices and programs. For plan line-ups see Texas Medicaid plans by area.

At a glance

What "in lieu of" means for your revenue

HHSC's Uniform Managed Care Manual chapter 16.3, "In-Lieu-of-Covered Services and Settings", lists services HHSC has approved that a Medicaid managed care plan may provide instead of a covered service. Partial hospitalization and intensive outpatient programs are on the list as alternatives to inpatient psychiatric hospitalization, along with coordinated specialty care. Two rules follow from it:

• The plan chooses. An in-lieu-of service is an option a plan may offer, not a benefit every plan must pay. Whether a plan pays for your PHP or IOP days depends on that plan's choice and your contract with it.
• The member chooses. The plan can't require a member to use an in-lieu-of service instead of the covered service, but may offer it.

The same chapter treats acute psychiatric care in an institution for mental disease (up to 15 days a month for members 21 to 64) and residential SUD treatment as separate in-lieu-of settings; those are different services from outpatient PHP and IOP.

In practice, several large plans publish that they offer PHP and IOP: Superior HealthPlan, Aetna Better Health of Texas (mental health and SUD PHP and IOP for STAR members) and Texas Children's Health Plan have each issued notices. For any other plan, ask in writing before you plan on the revenue.

Which members and which programs

Members

• Adults over 20: Superior offers PHP and IOP as in-lieu-of services to adult members in STAR, STAR+PLUS and STAR Health; Aetna Better Health's notice covers its STAR members.
• Under 21: Superior notes PHP and IOP may be available through the Texas Health Steps (EPSDT) benefit, which covers medically necessary care for Medicaid members under 21.
• CHIP: CHIP is a separate program with its own benefit list. Check each plan's CHIP rules separately.
• Dual eligibles: for members with Medicare too, Medicare is primary. Freestanding programs generally can't bill Medicare for IOP or PHP, so these clients need careful verification.

Programs

• Substance use: TMHP announced that, from January 1, 2019, Medicaid SUD treatment, outpatient or residential, may only be delivered in a licensed chemical dependency treatment facility (TMHP's SUD benefit notice). The order is the HHSC license, then TMHP enrollment as a CDTF, then the plans. See how to get a Texas CDTF license.
• Mental health only: a mental-health-only IOP or PHP faces different licensing and enrollment questions; read licensing a mental health IOP or PHP in Texas and ask each plan which provider types it contracts for S9480 and PHP before you build.

The codes plans require

HHSC asked Medicaid plans to track PHP and IOP use by HCPCS code, matching fee-for-service Medicaid. Superior's notice says adult PHP and IOP claims must carry the HCPCS code, that the revenue code is optional, and that the HCPCS code has been needed for payment since July 1, 2025; before that Superior accepted revenue codes alone where a contract or single case agreement allowed it (Superior's billing code update, September 2025).

That's Superior's mapping; confirm each plan's in your contract and its provider manual. Our sister site's IOP and PHP billing codes guide explains each code and unit, and per diem billing for IOP and PHP covers what makes a program day billable.

Prior authorization and reviews

• Before day one: Superior requires prior authorization for PHP and IOP, submitted no less than five business days before services start, and says approval isn't a guarantee of payment.
• What to send: Superior's PHP/IOP provider checklist asks, for substance use, for history including the longest sobriety, treatment history, the treatment plan, drug screens and a discharge plan, by fax or its provider portal.
• Why five days matters: a same-day admission can't meet a five-business-day window, so build your admissions flow around the plan's rules. If a client needs care sooner, ask the plan how it handles urgent requests and document the call.
• Continued stays: ask for the review schedule at contracting. Write each review against ASAM dimensions; our sister site's continued-stay documentation guide shows how.

Our utilization review guide sets up the authorization log, and the prior authorization guide on our VOB site covers the requests.

Getting the contract: step by step

1. HHSC license for the site and levels of care (for SUD, a CDTF license).
2. Organization NPI with the right taxonomy; see NPI Type 1 vs Type 2.
3. TMHP enrollment as a facility in PEMS, paying the federal application fee if it applies (our Texas Medicaid guide).
4. Pick the plans in your service area that serve the members you'll treat (our plans by area page).
5. File each facility application: the TAHP Texas facility application through Availity, or the plan's own form (Superior uses its Behavioral Health Facility and Ancillary Credentialing Application; Wellpoint starts with a letter of interest).
6. Negotiate the PHP and IOP terms before signing (the questions below), and check timely filing; Superior's billing training lists 95 days from the date of service.
7. Load everything in your EHR: effective dates, payer IDs, the code map, the authorization rules. A program EHR like Cima for IOP and PHP tracks the authorization units against attendance.

On our Texas roadmaps, the facility contracts wait for the HHSC license and TMHP, and we budget about 90 days for them. Plan the cash for the gap; our IOP startup cost guide shows the budget.

Questions to ask each plan

Ask these in writing during contracting and keep the answers with the contract:

1. Do you offer adult PHP and IOP as in-lieu-of services in our service area, for which programs (STAR, STAR+PLUS, STAR Health)?
2. For members under 21, do you authorize PHP and IOP through Texas Health Steps, and with what criteria?
3. Which HCPCS and revenue codes, and what per diem rate, for each level?
4. What's the prior authorization lead time, the clinical documentation list, and the concurrent review schedule?
5. Do you credential our clinicians individually, or only the facility?
6. Do you require accreditation (Joint Commission or CARF) for PHP or IOP?
7. What's the timely filing limit, and where do corrected claims and appeals go?
8. Does anyone other than you manage behavioral health authorizations or claims for your members?

Why Medicaid IOP and PHP claims deny

• No authorization, or days past the approved end date or units.
• Missing HCPCS code on a PHP or IOP line (revenue code only).
• Wrong plan: the member switched plans this month. Check eligibility before admission and each month.
• Not in network for that program: a contract that covers STAR but not STAR+PLUS, or a plan that doesn't offer the in-lieu-of service.
• License or enrollment mismatch: SUD services from a site without a CDTF license, or TMHP enrollment not showing the service location.
• Late filing past the contract's limit.

Our sister site's guide to behavioral health claim denials covers reading the denial codes and fixing each one.

What we do and what it costs

We take a Texas program from the HHSC license through TMHP and each Medicaid facility contract, ask every question above in writing, and set up the code map and authorization log. A program's facility contract with one plan is $450 per plan; Texas Medicaid enrollment with the first plan is $350 per clinician; clinicians a plan credentials individually are $175 per plan each.

The IOP / PHP Program Launch carries the license, policies, clinical program, credentialing and billing set-up on one dated roadmap:

Questions

More Texas plan guides: Superior HealthPlan · Wellpoint Texas · Texas Medicaid plans by area · Start an IOP or PHP in Texas

Sources

All checked October 24, 2026. HHSC and the plans revise these rules; open the current version before you rely on any detail.

1. Texas HHSC, Uniform Managed Care Manual 16.3, "In-Lieu-of-Covered Services and Settings." hhs.texas.gov
2. Superior HealthPlan, "Medicaid Partial Hospitalization Program and Intensive Outpatient Program MH and SUD Services Available." superiorhealthplan.com
3. Superior HealthPlan, "Behavioral Health PHP and IOP Billing Code Update," September 11, 2025. superiorhealthplan.com
4. Superior HealthPlan, BH PHP/IOP Provider Checklist (2021). superiorhealthplan.com
5. Superior HealthPlan, Medicaid Behavioral Health Billing Clinic (timely filing). superiorhealthplan.com
6. Aetna Better Health of Texas, In-Lieu-Of Services: Adult PHP and IOP. aetnabetterhealth.com
7. Texas Children's Health Plan, "In-Lieu-Of Services" provider alert. texaschildrenshealthplan.org
8. TMHP, "Substance Use Disorder Benefits to Change for Texas Medicaid January 1, 2019," November 16, 2018. tmhp.com

This guide is general information. Cima Consulting isn't a law firm or an accounting firm. HHSC, TMHP and each health plan make their own coverage and payment decisions; we don't guarantee approvals, rates or dates.