How to start an IOP or PHP in Texas

How long it takes

Plan on roughly nine to twelve months from first decisions to a full caseload of insured clients. The license and the insurance contracts are the long poles, and they happen in sequence: most plans won't contract with a program until the state license is issued, and many won't contract with an IOP or PHP until it's accredited.

Stage	Typical time
Plan, budget and form the business	1–2 months
Site, build-out, certificate of occupancy and fire inspection	2–4 months
HHSC license: application to inspection	up to 6 months after filing
Facility contracts with insurance plans	about 90 days each, after the license
Accreditation survey	a few months after you open and have charts

1. Plan the program and the money

• Choose your levels of care and who you'll serve: PHP, IOP, outpatient; adults or adolescents; substance use, mental health or co-occurring; day or evening tracks. The license, schedule, staffing and contracts all follow from this.
• Check demand and payer rates: who refers in your area (hospitals, detox units, therapists), which plans pay for these levels and roughly what, and how many clients a day you need to break even.
• Budget for the gap. A program usually needs several months of payroll and rent in the bank before insurance money arrives: credentialing takes about three months after the license, and first payments come a month after that.
• Pick a health-care attorney and a CPA early. Texas has a strong corporate practice of medicine doctrine, so who owns the program and how a medical director is paid are questions for your attorney before you sign anything.

2. Form the business

• Choose the entity with your attorney or CPA (programs are often an LLC) and file the certificate of formation with the Texas Secretary of State through SOSDirect. File an assumed name certificate if you'll operate under another name.
• Get an EIN from the IRS, open the business bank account, and get the organization NPI (Type 2) with a clinic or facility taxonomy. Use the same legal name, exactly, everywhere.
• Set up a governing body that meets and keeps minutes, and a current ownership chart: the license application, Medicaid and most plans ask who owns 5% or more.
• Put the Texas franchise tax report on the calendar (usually due May 15), and decide on workers' compensation: it's optional for most Texas private employers, but non-subscribers must notify the Division of Workers' Compensation and their employees.

3. Find a site that can be licensed

The most expensive mistake is a lease on a building the city won't approve for treatment. Before you sign:

• Ask the city in writing whether a treatment program is allowed at the address under its zoning.
• Check for group rooms sized for your groups, private offices, accessible entrances and restrooms, parking, and locked space for records and any medications.
• Sign the lease in the company's name, with a way out if zoning, the certificate of occupancy or the license falls through, and free rent to cover the build-out.
• After the build-out, get the certificate of occupancy and pass the fire marshal's inspection. Keep both: HHSC and your accreditor will ask.

4. The HHSC chemical dependency treatment facility license

A Texas program that treats substance use disorders must be licensed by the Texas Health and Human Services Commission (HHSC) as a chemical dependency treatment facility before it treats anyone, under Texas Health and Safety Code chapter 464 and 26 TAC chapter 564. Mental-health-only programs fall under different rules (see licensing a mental health IOP or PHP in Texas).

• The application includes HHSC's forms (3207 and 3208), an operational plan, and proof of ownership, insurance and the site.
• Time it carefully. After filing you must show HHSC that the program meets the rules within 6 months, or the application is denied. File only when the site, policies and staff files are close to ready.
• HHSC reviews the site, the policies and staff files and, once you're serving clients, the charts.

Match every rule in 26 TAC 564 to the policy, form or record that meets it before you file (our plain-English map of 26 TAC 564 lists each one and the document that proves it). It makes both the application and the inspection go faster.

5. Policies, Part 2 and compliance

• A policy and procedure manual written for your program, organized by accreditation chapter: rights, care, records, medications, infection control, safety, emergency management, HR, leadership and performance improvement.
• 42 CFR Part 2. If you hold yourself out as treating substance use disorders and are federally assisted (Medicare or Medicaid, a DEA registration or federal funds all count), Part 2 protects your records. Consents to release need Part 2 language, and released records carry the federal notice.
• HIPAA: a written security risk analysis, then close the gaps, and a BAA from every vendor that touches client data.
• The intake packet: consent to treatment, client rights, the grievance process, program rules, financial agreement, Part 2 consent, privacy notice and orientation checklist.
• Safety and emergency plans with a drill schedule, infection control and TB screening, incident and abuse reporting, a performance improvement plan and a compliance program (a compliance officer, exclusion checks, regular billing and documentation audits).

6. Design the clinical program

• Admission, continued-stay and discharge criteria based on The ASAM Criteria dimensions, spelling out what qualifies a client for PHP, IOP and OP and what moves them between levels.
• A weekly schedule that lets each client meet the hours: most payers expect about 20 hours a week for PHP and at least 9 hours a week for adult IOP.
• A group curriculum (CBT, DBT skills, relapse prevention, motivational work, family and health education; see a sample IOP group curriculum), with each group tied to treatment-plan goals so notes show why the client was there.
• The education topics Texas requires, commonly HIV and other sexually transmitted infections, tuberculosis and tobacco, on a regular cycle. Check the current 26 TAC 564 list.
• Medication for addiction treatment: decide how clients get medications for opioid and alcohol use disorders. Don't turn away clients because they take them.
• A crisis and suicide-risk procedure, a drug testing policy (instant cups need a CLIA certificate of waiver), and step-down and aftercare partners.

7. Staff it with the right credentials

• Name the program director and clinical director early; the license application asks who they are. Contract a medical director with a written agreement at fair market value for hours actually worked.
• In a Texas SUD program, counseling is provided by or under qualified credentialed counselors (QCCs), such as LCDCs and certain other licensed professionals; counselor interns need QCC supervision.
• Check every hire against the federal OIG exclusion list and the Texas Medicaid exclusion list, verify licenses with the issuing board, and build a credential file surveyors can pull.
• Train everyone before the first client: HIPAA and Part 2, client rights, emergencies, abuse reporting, suicide risk, de-escalation, documentation and the EHR.

8. Get paid: credentialing and contracts

• Pick the plans your future clients actually carry, and apply as a facility once the license is issued: the organization application, license, insurance certificates, policies and often a site visit. Expect about 90 days each. How we handle credentialing.
• Texas Medicaid enrollment goes through TMHP, and then you credential with each Medicaid managed care plan in your service area (STAR, STAR+PLUS, STAR Kids, CHIP), because most Texas Medicaid clients are in managed care.
• Medicare pays for PHP, and since 2024 IOP (CMS's 2024 outpatient rule), only through hospitals, community mental health centers and a few other provider types such as FQHCs and rural health clinics. Most freestanding programs can't bill Medicare for these levels, so plan your payer mix without it.
• TRICARE requires IOP and PHP programs to be accredited (Joint Commission, CARF or COA), and many commercial plans contract only with accredited programs.
• Until a contract is effective, a single case agreement for one client, at a rate agreed in writing before admission, can bridge the gap.

9. Billing codes and authorizations

Programs commonly bill a daily rate (the full code reference is in IOP and PHP billing codes, and the set-up steps in the IOP billing checklist). Each plan decides which codes and claim form it accepts, so confirm with every contract:

Level	Common HCPCS (CMS-1500)	Common revenue codes (UB-04)
PHP	S0201	0912, 0913
SUD IOP	H0015	0906
Mental health IOP	S9480	0905

• Verify benefits and get authorization before admission. Our VOB checklist covers what to ask.
• Schedule each concurrent review, and draft the continued-stay note about 5 days before an authorization ends, citing the ASAM dimensions or the plan's criteria.
• Enroll with a clearinghouse, set up each plan's portal, ERA and EFT, and work rejections and denials every week. Know each plan's timely filing limit.
• If a billing company would be paid a percentage of collections, have your attorney approve the arrangement first.

10. Accreditation

Accreditation isn't usually a Texas licensing requirement for an IOP or PHP, but TRICARE and many commercial plans expect it. Choose Joint Commission or CARF, do a gap assessment against the standards, and apply once you're serving clients and have charts to review (which accreditor fits is covered in Joint Commission vs. CARF, and when a brand-new program can apply in accreditation for new programs). Train staff for tracers, run a mock survey, and keep the recurring work (drills, safety checks, chart reviews) on a schedule from day one. Our sister product Comply publishes the full compliance calendar.

11. Referrals, the legal way

Never pay or give anything of value for client referrals. The Texas Patient Solicitation Act (Texas Occupations Code chapter 102) bans it for all payers; EKRA (18 U.S.C. 220) covers recovery homes, treatment facilities and labs for all payers; and the federal Anti-Kickback Statute covers Medicare and Medicaid. Build referral relationships on outcomes, communication and fast admissions instead.

Or book a free 30-minute call and we'll walk through your timeline.