Most behavioral health programs that try to expand beyond their home state never really hit their stride in new markets. They underestimate licensing timelines, blow their cash reserves on real estate before they have payer contracts, and hire clinical staff before they have patients. State behavioral health licenses often take months to secure, and operators can’t bill Medicaid or Medicare until enrollment and certification are complete, which creates a real cash-flow drag if they’ve already locked in a lease and payroll. https://www.cms.gov/medicare/provider-enrollment-and-certification/provider-enrollment
Sandstone Care didn’t avoid every mistake — no one does — but they avoided them well enough that those mistakes didn’t stop their growth. They built a model, tested it, refined it, and replicated it. That’s worth studying closely.
Sandstone Care is a teen and young adult behavioral health company that operates IOPs, PHPs, and residential programs across Colorado, Virginia, and Maryland. They’ve grown into one of the more recognized names in adolescent behavioral health at a time when youth mental health needs have risen sharply, with recent national data showing that about 1 in 5 U.S. adolescents has a mental, emotional, developmental, or behavioral disorder and high school suicidal behaviors increased by more than 40% in the decade before 2019. https://www.ncbi.nlm.nih.gov/books/NBK587174/
Their expansion wasn’t accidental.
What Sandstone Care Actually Built
Before expanding anywhere, Sandstone Care got very clear on what their product was.
They didn’t try to be everything to everyone. They picked a lane — teens and young adults — and built their entire clinical model around that population. That kind of specificity matters when you’re trying to replicate across states, because a vague clinical identity is almost impossible to credential, market, or staff consistently.
Their core offering is a continuum of care: residential, PHP, IOP, and outpatient. That continuum is the engine behind their revenue model. A patient entering at PHP level can step down to IOP with the same provider, which is aligned with how many payers and clinical guidelines envision step-down care across levels of intensity and can support continuity, retention, and outcomes over a longer episode of care. https://store.samhsa.gov/product/tip-42-substance-use-disorder-treatment-for-people-with-co-occurring-disorders/PEP20-02-01-004
If you’re a clinician thinking about expansion, that’s the first lesson: know exactly what you’re building before you try to build it somewhere else.
The Multi-State IOP Expansion Playbook
Step 1: Saturate Your Home Market First
Sandstone Care didn’t open in Virginia because they were struggling in Colorado. They opened there because Colorado was working.
This is the opposite of what a lot of struggling programs do — they expand to “start fresh” in a new state when the real problem is operational. Multi-state IOP expansion amplifies whatever you’re already doing, good or bad. If your billing is broken in one state, it’ll be broken in three.
By the time Sandstone Care moved into Virginia and Maryland, they had proven their clinical model, refined their intake process, and built name recognition with referral sources in Colorado. In other words, they had something to replicate — not just a concept, but an actual system.
Step 2: Pick States Strategically, Not Geographically
Virginia and Maryland aren’t next door to Colorado. Sandstone Care didn’t expand based on geography — they expanded based on perceived market opportunity.
Virginia has high commercial coverage: employer-sponsored and individual commercial plans cover a large share of the population, and commercial insurance is a major payer for adolescent and young adult behavioral health. https://www.kff.org/other/state-indicator/health-insurance-coverage-distribution-by-payer At the same time, multiple national data sources have documented a worsening youth mental health crisis, with a 35% increase in diagnosed mental or behavioral health conditions among adolescents between 2016 and 2023 and significant rises in anxiety and depression diagnoses. https://www.ncbi.nlm.nih.gov/books/NBK608531/ That demand environment drives referral volume if you can execute.
Maryland’s proximity to Northern Virginia also made operational management more efficient since leadership could cover both markets in a single trip.
When you’re evaluating where to open a second or third location, look at: payer mix in the target state, existing competition at your specific level of care, Medicaid reimbursement rates if you plan to accept it, and state licensing timelines. Licensing timeframes can vary significantly across states because each health department or behavioral health authority sets its own application, survey, and approval processes, and separate accreditation from organizations like CARF or The Joint Commission can add additional steps before payers will contract with you.
That variation alone can make or break a business plan.
Step 3: Lead With Insurance Credentialing, Not Real Estate
One of the most common mistakes operators make when expanding is signing a lease before they have payer contracts. You can have the most beautiful outpatient clinic in Northern Virginia — if a major commercial payer or Medicaid plan won’t credential you for months, you’re burning cash on a space you can’t fill.
A more disciplined sequence looks like this: establish the legal entity in the new state, begin the credentialing process immediately, and only commit to physical space once you have reasonable confidence in the payer timeline. For Medicare and Medicaid, enrollment and certification as a behavioral health provider are prerequisites to billing, and for many commercial plans, facility credentialing and contracting follow their own multi-month cycle. https://www.cms.gov/medicare/provider-enrollment-and-certification/provider-enrollment
This sequencing is particularly critical for adolescent programs because TRICARE, Medicaid, and many commercial plans serving children and young adults layer their own plan-specific requirements on top of standard credentialing processes.
Step 4: Build a Regional Operations Infrastructure
You cannot manage a three-state behavioral health operation with a single clinical director who’s also doing intakes on Tuesdays.
Sandstone Care invested in regional operational infrastructure — dedicated clinical leadership in each market, centralized billing and compliance functions, and standardized documentation systems. Centralizing core administrative and revenue cycle functions is a common way multi-site behavioral health organizations maintain consistent quality and documentation standards while controlling overhead. https://www.samhsa.gov/sites/default/files/ebp-resource-center/ebp-tips-implementation-support.pdf
For clinicians thinking about their second location, this is where an MSO (Management Services Organization) model becomes relevant. Billing, credentialing, HR, compliance — these functions get dramatically more complex when you cross state lines, because you’re now dealing with multiple Medicaid programs, state-specific regulations, and payer contracts. Building them from scratch in each new state is expensive and slow. Having a centralized infrastructure to drop into new markets is one way programs like Sandstone Care scale without imploding.
Why Most Multi-State Expansions Fail
Let’s be direct: many behavioral health programs that attempt multi-state expansion don’t make it past the second state.
The reasons are predictable. They often don’t have enough cash reserves to absorb the several-month gap between opening and meaningful reimbursement in a new market, especially once you factor in licensure, accreditation, and payer contracting timelines. They don’t have centralized billing infrastructure, so revenue cycle management breaks down as volume increases and denials or coding errors quietly erode margins. They hire clinical staff without having referral pipelines established, so they’re paying salaries while group rooms sit empty.
Sandstone Care’s expansion worked because they treated each new state like a new business — with its own startup budget, its own credentialing timeline, its own referral development strategy — while sharing the operational backbone across all sites.
What Clinicians Can Actually Take From This
If you’re a therapist, counselor, or psychologist reading this and thinking about opening your own IOP or PHP, here’s the honest takeaway from Sandstone Care’s model:
Expansion is a business problem, not a clinical one. The clinical part — what you do in session, how you structure groups, your therapeutic modalities — that’s the part you already know. The part that determines whether you survive long enough to help patients is operations: licensing, credentialing, billing, compliance, and cash flow management.
Sandstone Care scaled because they solved the operational side. The clinicians who struggle to get past one location are almost always struggling with the same things: they can’t get credentialed fast enough, they’re losing money on billing errors they don’t have time to track, and they’re spending 30 hours a week on administrative tasks instead of growing referral relationships.
Getting the business infrastructure right isn’t a distraction from clinical work — it’s what makes clinical work sustainable.
FAQ
How long does it take to open an IOP in a new state?
It depends heavily on the state and the payers you’re targeting. State behavioral health licensing can easily take several months, and commercial and government payer credentialing processes often add another 90–180 days, so many operators plan for roughly 12 months from decision to first billable session to build in a realistic buffer. https://www.cms.gov/medicare/provider-enrollment-and-certification/provider-enrollment
How much does it cost to open a second IOP location?
A lean IOP expansion into a new state often requires several hundred thousand dollars in startup capital once you factor in build-out, furniture and equipment, early staffing, and months of operating expenses before reaching breakeven census. The biggest cost overruns usually come from committing to real estate or full staffing before payer contracts and referral pipelines are in place.
What’s the difference between an IOP and a PHP when expanding to new states?
PHPs are considered a higher level of care and typically involve more clinical hours per week (Medicare defines PHP patients as needing a minimum of 20 hours of services per week), more intensive oversight, and in some states, additional regulatory or certification requirements. IOPs generally provide at least 9 hours of structured programming per week, often between 9 and 19 hours, which makes them a lighter-touch but still intensive level of care that is often quicker to launch and credential in a new market. https://www.cms.gov/files/document/opps-fact-sheet-iop.pdf https://store.samhsa.gov/product/tip-47-substance-abuse-intensive-outpatient-treatment/pep20-02-01-021
Do I need a separate license in every state I want to operate in?
Yes. Behavioral health program licensing is state-specific; there is no single federal facility license that covers IOP or PHP operations across multiple states. You’ll need to meet each state’s requirements for facility certification and program standards, and some payers or states may also require accreditation from organizations like CARF or The Joint Commission.
What is a behavioral health MSO and how does it help with expansion?
A Management Services Organization (MSO) provides centralized administrative infrastructure — billing, credentialing, compliance, HR, and other back-office functions — to clinical programs under a shared services model. For operators expanding to new states, an MSO can reduce the need to rebuild administrative capacity from scratch in each market, which can lower startup costs and shorten the operational learning curve.
How did Sandstone Care fund their expansion?
Sandstone Care has received private equity backing, which funded their multi-state growth. Most independently owned programs expanding to new states either use retained earnings from their existing location, bring on a capital partner, or work with an MSO or similar structure where operational support is paired with some form of financial participation.
Ready to Build Something Like This?
ForwardCare is a behavioral health MSO (Management Services Organization) that partners with clinicians, sober living operators, healthcare entrepreneurs, and investors to launch and scale behavioral health treatment centers. We handle the business side — licensing support, insurance credentialing, billing, compliance, and operational infrastructure — so our partners can focus on growth and clinical quality.
If you’re serious about opening or expanding a behavioral health treatment center but don’t want to navigate the business side alone, ForwardCare may be worth a conversation.