How to start an IOP in Tennessee: the TDMHSAS license, fees and steps

Who wrote this, honestly

We're Texas operators: we run a licensed Texas outpatient program, PHP through outpatient, and built our own EHR to run it. When we help an owner open in another state, the first step on that client's roadmap is finding the state's licensing rule and checking it against the agency's current text. This guide is that check for Tennessee, written up, and it's the same work our IOP / PHP Program Launch does for a client opening outside Texas. Where we couldn't confirm a detail from Tennessee's rules or TDMHSAS's publications, we left it out or told you who to ask.

Comparing states? Read how to start an IOP or PHP in Texas next to this one, or our guides for Georgia, North Carolina and Louisiana. The steps that don't change from state to state are in how to start an IOP.

Tennessee at a glance

Question	Tennessee's answer
Who licenses SUD programs	The Tennessee Department of Mental Health and Substance Abuse Services (TDMHSAS), Office of Licensure, through regional offices in Memphis, Nashville and Knoxville
License category	Alcohol and drug non-residential rehabilitation treatment facility (rule chapter 0940-05-43)
Rules every facility meets	0940-05-01 (definitions), 0940-05-02 (licensure administration and procedures), 0940-05-04 (life safety), 0940-05-05 (facility environment and ancillary services), 0940-05-06 (minimum program requirements for all facilities)
License fee	$810 per non-residential site for one distinct service category, more for more categories, plus invoiced inspection fees (rule 0940-05-02-.05)
First license	An initial license for up to one year, after the survey and any corrections
Counselor licenses	The Board of Alcohol and Drug Abuse Counselors (Department of Health): licensed alcohol and drug abuse counselors (LADAC), Level I and Level II
Medicaid	TennCare; members are in BlueCare, UnitedHealthcare Community Plan or Wellpoint (formerly Amerigroup), and TennCare Select in some cases
Does accreditation count?	Yes, as "deemed compliance" with program requirements (rule 0940-05-02-.12), but not for life safety and environment, and not in place of the unannounced inspections the statute requires

Which license an IOP needs

TDMHSAS licenses mental health and substance use facilities by category, each with its own "minimum program requirements" chapter in Title 0940, Subtitle 0940-05. For an outpatient addiction program, three chapters are easy to confuse:

• 0940-05-43, alcohol and drug non-residential rehabilitation treatment facilities. Outpatient facilities that provide assessment, referral, counseling and education to people with alcohol or drug abuse or dependency disorders. This is the category an IOP fits.
• 0940-05-42, non-residential opioid treatment program facilities. Methadone and other opioid treatment programs. Not the IOP chapter, despite the neighboring number.
• 0940-05-47, alcohol and drug outpatient detoxification treatment facilities. If you'll add ambulatory withdrawal management, you need this category too.

The rule we read doesn't set weekly hours for an IOP. Payers do, so plan to ASAM Level 2.1 and confirm each plan's definition. Here are IOP schedule templates, and how the ASAM levels line up.

The rules to read

Rule	What it covers
0940-05-01	Definitions used in all the licensure rules (revised February 2025), including the non-residential facility definition
0940-05-02	Licensure administration and procedures: applications, fees (.05), inspections and deemed compliance (.12)
0940-05-04, -05 and -06	Life safety, facility environment and ancillary services, and minimum program requirements for all facilities. Chapter 0940-05-43 points the governing body to all three.
0940-05-43	The non-residential rehabilitation chapter: policies, staffing, individual program plans
Title 0940 index	The Secretary of State's list of every current TDMHSAS chapter, with the latest PDF of each

The copy of 0940-05-43 we could read is the October 2008 revision; the Secretary of State's index still lists the chapter, and the 2025 definitions chapter uses the same facility definition. Download the current PDF of every chapter from the index before you write policies. Our launch package builds the policy manual as a crosswalk: every requirement in 0940-05-43 and the general chapters matched to a policy, form or record.

The non-residential rule, line by line

Requirement	What 0940-05-43 says	What it means for your build
Other rules	The governing body also complies with the life safety rule, the facility environment and ancillary services chapter, and the minimum program requirements for all facilities	Read 0940-05-04, -05 and -06 before you pick a building or write a policy
Policy manual (.03)	Written policies on intake, assessment, treatment, aftercare, exclusion criteria, infection control and restrictive procedures for disruptive behavior	One section per item, plus 42 CFR Part 2 and HIPAA
Treatment staff (.04)	Direct treatment provided by qualified alcohol and drug personnel	Job descriptions that match the rule's definitions in 0940-05-01
Physician (.04)	A physician employed or retained	A medical director agreement (see the medical director role)
CPR (.04)	At least two staff certified in CPR on duty at all times	CPR cards in staff files, and a schedule that never drops below two
Individual program plan (.06)	Within 30 days of admission or by the third face-to-face contact, whichever comes first	In an IOP meeting three times a week, the third contact comes first: the plan is due in week one (our SUD treatment plan guide)

Applying, step by step

TDMHSAS's Become a Licensed Provider page lays out the process. This is the version we read, with our notes.

1. Learn the categories TDMHSAS licenses and pick yours (here, non-residential rehabilitation, plus outpatient detoxification if you'll offer it).
2. Send the forms to the regional office of licensure nearest the site (West in Memphis, Middle in Nashville, East in Knoxville): the Initial Application, a Fact Sheet, the Background Check and Privacy Statement Form, and a Financial Statement.
3. Pay the licensing fee when the Office of Licensure invoices you, after it receives the forms.
4. Pass any required life safety inspection.
5. Host the on-site survey. Once paperwork, payment and any life safety inspection are done, a licensure surveyor visits. The initial inspection generally covers life safety, environment and ancillary services, and certain policies and procedures.
6. Correct any deficiencies.
7. Receive the initial license, issued for up to one year. Some license types have extra requirements; the regional manager can tell you what applies.

Want the license work done for you? It's part of the program launch package, or $4,500 on its own as our state facility license application service.

Fees

• License fee. Rule 0940-05-02-.05 charges non-residential facilities per site, by the number of distinct service categories at that site: $810 for one category, with higher tiers for two, three, four and more than four. A state filing from 2018 shows the same $810 figure. Each initial and renewal application comes with the fee, and fees are nonrefundable.
• Inspection fees are separate: you pay within 30 days after you receive the invoice.
• Check the current table. We read the fee from Cornell's copy and couldn't confirm it in the December 2022 PDF, so ask your regional office for the current fee schedule before you budget.

For the rest of the budget (rent during the wait, payroll before revenue, the EHR, accreditation), see what it costs to start an IOP.

Counselors and staffing

• Addiction counselors are licensed by the Tennessee Board of Alcohol and Drug Abuse Counselors in the Department of Health, as licensed alcohol and drug abuse counselors (LADAC) at Level I or Level II; the board's rules are chapter 1200-30-01. Verify each license with the board.
• Licensed clinicians: professional counselors and marital and family therapists are licensed by their own board, and social workers, psychologists and physicians by theirs. Use the definitions in 0940-05-01 to decide who counts as qualified alcohol and drug personnel for each role.
• Background checks: the application includes TDMHSAS's background check and privacy statement form. Check every hire against the federal OIG exclusion list too.

We build personnel files from our staff credential file checklist and add each state's items; in Tennessee that includes the CPR cards the two-on-duty rule depends on.

Site, life safety and zoning

• Life safety is a licensing rule here, not just a local one: chapter 0940-05-04 applies, and the initial inspection covers it. Deemed compliance doesn't excuse it.
• Zoning is local. Ask the city or county in writing whether an outpatient substance use treatment facility is allowed at the address, and lease with a way out if zoning or the license falls through.
• Plan the space for groups: group rooms sized for your groups, private offices for assessments, locked records storage and, if you'll test on site, a private collection area and a CLIA certificate of waiver.

TennCare

• The plans. TennCare's managed care page lists BlueCare, UnitedHealthcare Community Plan and Wellpoint (formerly Amerigroup), with TennCare Select in some cases. Behavioral health is covered by the same plans as physical health.
• Enroll, then credential with each plan. Enrolling with TennCare doesn't put you in a plan's network; each plan has its own contracting and credentialing (see TennCare's managed care contractors page). UnitedHealthcare's Tennessee behavioral health facility application, for example, makes acceptance depend on its credentialing committee and recredentials about every 36 months. Our credentialing service files facility contracts in any state, and Medicaid enrollment is $350 per clinician.
• Medicare pays for IOP and PHP only through hospitals, community mental health centers and a few other provider types, so most freestanding programs plan without it (CMS 2024 outpatient rule).

Before every admission, verify benefits and authorization; our sister product's prior authorization guide covers what each kind of plan asks for.

Accreditation and deemed compliance

Tennessee gives accreditation real weight. Under rule 0940-05-02-.12, a facility or service accredited or certified by a listed body may be deemed by TDMHSAS to comply with the applicable licensure program requirements ("deemed compliance status"). The 2019 text lists The Joint Commission (under its older name) and CARF, among others; confirm the list in the current version. To get it:

• Send proof. The licensee submits official proof of accreditation, with any cited deficiencies and the plan of correction.
• Know the limits. Deemed facilities still have to show compliance with the life safety and environmental rules, and deemed status doesn't relieve you of correcting deficiencies found in the unannounced inspections state law requires.

Deemed status comes after you're licensed and accredited, so it helps from your first renewal on. TRICARE requires accreditation for IOP and PHP (see TRICARE credentialing), and many commercial plans contract only with accredited programs. Choosing between the two main accreditors? Start with Joint Commission vs CARF, or let Program Launch + Accreditation carry the work through the survey.

The steps, in order

1. Define the program: service categories (non-residential rehabilitation, plus outpatient detox if you'll offer it), adults or adolescents, hours and days, co-occurring track.
2. Call the regional office for the current forms, fee schedule and any extra requirements for your categories.
3. Form the business with the Tennessee Secretary of State, get the EIN and the organization NPI, and line up a health-care attorney and CPA.
4. Find a site that meets 0940-05-04 and local zoning, and lease with a way out.
5. Hire the leadership: a physician (employed or retained), a clinical director and qualified alcohol and drug personnel, with at least two CPR-certified staff for every hour you're open.
6. Write the policy manual from 0940-05-43 and the general chapters, and add 42 CFR Part 2 and HIPAA.
7. Set up the EHR before the survey: Cima's IOP and PHP plan keeps levels of care, group notes, attendance, program plans and authorizations in one place.
8. File with the regional office, pay the invoice, pass the life safety inspection and the on-site survey, and correct deficiencies.
9. Once licensed, credential with the TennCare plans and the commercial plans.
10. Open, accredit, then request deemed compliance, and keep renewals, drills and chart reviews on a schedule (the compliance calendar).

Questions

What license does a substance use IOP need in Tennessee?

A TDMHSAS license as an alcohol and drug non-residential rehabilitation treatment facility, under rule chapter 0940-05-43, plus compliance with the general chapters 0940-05-02, -04, -05 and -06. Outpatient detoxification is a separate category (0940-05-47).

How much is a Tennessee TDMHSAS license?

Rule 0940-05-02-.05 charges non-residential facilities per site: $810 for one distinct service category, more for each additional tier, plus inspection fees invoiced separately. Fees are nonrefundable. Confirm the current schedule with your regional office.

How long is an initial license good for in Tennessee?

TDMHSAS issues an initial license for up to one year once deficiencies, if any, are corrected.

Does accreditation replace Tennessee licensing inspections?

Partly. Under rule 0940-05-02-.12, accreditation by a listed body can earn deemed compliance with program requirements, but you must still meet the life safety and environmental rules, and the unannounced inspections the statute requires still happen.

Who licenses addiction counselors in Tennessee?

The Board of Alcohol and Drug Abuse Counselors, in the Department of Health, licenses LADACs at Level I and Level II under chapter 1200-30-01.

Can a Texas company help with a Tennessee program?

Yes, if it's honest about how. We run a Texas program, so in Tennessee we work from the 0940-05 chapters and TDMHSAS's process, check each against the current text, and tell you where TDMHSAS, TennCare, the plans or your attorney has the final word. We don't guarantee a license, contract or date.

Want to talk it through first? Book a free 30-minute call and we'll walk through what Tennessee will ask of you.

Cima Consulting isn't a law firm or an accounting firm. Tennessee agencies make their own decisions; we don't guarantee approvals, rates or dates. Never pay or accept anything of value for patient referrals: federal law (EKRA and the Anti-Kickback Statute) applies in every state, and ask your attorney about Tennessee's own rules. Our guide to patient brokering laws explains the federal ones.

Sources

• TDMHSAS, Become a Licensed Provider: tn.gov; Licensing: tn.gov
• Rule 0940-05-43 (October 2008 revision): Tennessee Secretary of State; Title 0940 index: Tennessee Secretary of State
• Rule 0940-05-01 (February 2025): Tennessee Secretary of State; Rule 0940-05-02 (December 2022): Tennessee Secretary of State; (June 2019, deemed compliance list): Tennessee Secretary of State; 0940-05-02-.05, fees: Cornell LII; Subtitle 0940-05: Cornell LII
• Board of Alcohol and Drug Abuse Counselors: tn.gov; rules 1200-30-01: Tennessee Secretary of State; Board for Licensed Professional Counselors, Marital and Family Therapists and Clinical Pastoral Therapists: tn.gov
• TennCare managed care organizations: tn.gov; managed care contractors: tn.gov; UnitedHealthcare Community Plan of Tennessee, behavioral health facility application: uhcprovider.com
• OIG exclusions: oig.hhs.gov; CMS, CY 2024 outpatient rule: cms.gov; EKRA, 18 U.S.C. 220: Cornell LII

Comparing states? See Texas and our guides for Arizona, California, Colorado, Florida, Georgia, Louisiana, Massachusetts, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania and Utah, or how to start an IOP for what every state has in common.