Most clinicians researching IOP/PHP programs want to know one thing before anything else: what’s the actual revenue per patient per day. It’s a fair question, and the answer is frustratingly inconsistent across the industry. Reimbursement rates for intensive outpatient programs and partial hospitalization programs vary dramatically depending on the payer, the state, the billing codes used, and whether you’re in-network or out-of-network. But there are real ranges and policy anchors you can work with when building a financial model. Here’s what the numbers and rules actually look like, with links you can take straight to the source.
How IOP and PHP Reimbursement Works: Per Diem, Not Per Service
The first thing to understand about IOP/PHP insurance reimbursement rates is that most payers reimburse on a per diem (daily) basis, not per individual service. That means you’re not billing separately for the group therapy session, the individual check-in, and the psychoeducation block; instead, you’re submitting one bundled claim for the entire day of programming under a per diem code or APC. CMS Manual System – Medicare Benefit Policy, Pub. 100‑02
For IOP, Medicare and many commercial payers define the level of care as at least 9 hours of services per week, typically delivered in 3–5 days of structured programming, while PHP is generally defined as a minimum of 20 hours per week of intensive therapeutic services. CMS Manual System – Medicare Benefit Policy, Pub. 100‑02 Center for Health Care Strategies – IOP Coverage Overview
Day to day, that usually looks like roughly 3+ hours per day for IOP and 4–6 hours per day for PHP, though exact schedules vary by program and payer. CMS Manual System – Medicare Benefit Policy, Pub. 100‑02
This per diem structure is both a blessing and a curse. On the upside, it simplifies billing and gives you a single daily rate to model against. On the downside, if a patient misses enough time that you can’t document the minimum daily service threshold, the claim risks denial for that day—there’s rarely partial credit. NAHRI – CMS Billing Requirements for Condition Code 92
IOP Reimbursement Rates by Payer Type
These ranges are directional and should be used for scenario modeling, not as guaranteed rates. Exact numbers will depend on your contracts, geography, and program profile.
Commercial Insurance (Blue Cross, Aetna, UnitedHealthcare, Cigna)
Commercial payers are typically among the highest-paying for IOP services, especially for well‑credentialed, dual‑diagnosis programs in high‑cost markets. Publicly reported benchmarks and industry analyses suggest commercial IOP per diem rates often fall in the mid‑hundreds of dollars, with many markets clustering in the low‑to‑mid $300s per day and some higher‑cost markets going above that. Kaiser Family Foundation – Mental Health Service Use and Spending
Because there is no national fee schedule for commercial IOP, think of the often‑quoted $250–$600+ per day range as an observed industry band rather than a fixed rule of thumb. If you are in a high‑cost urban market with strong payer mix and limited competition, your contracted IOP rates may skew toward the upper end of that range; in more competitive or lower‑cost markets, they can land closer to (or below) the lower end. (This is an observation from payer contracting practice, not a published national schedule.)
Factors that tend to push commercial IOP rates higher include:
Dual‑diagnosis programming (mental health plus substance use disorder)
Higher‑credentialed providers (e.g., MD, PhD, PsyD on staff)
Strong outcomes/measurement‑based care data
Limited local provider competition
Out‑of‑network reimbursement can be significantly higher on paper because charges are not tied to contracted rates, but it comes with more administrative burden, higher denial risk, and increased scrutiny around balance billing and parity compliance. U.S. Department of Labor – MHPAEA Guidance
Medicaid
Medicaid reimbursement for IOP is generally lower than commercial and varies widely by state because it is set in state‑specific fee schedules and often administered by managed care organizations (MCOs). MACPAC – Medicaid’s Role in Behavioral Health
Some states historically paid around $100–$150 per day for IOP, while others recently implemented targeted increases to strengthen community‑based behavioral health. For example, Virginia increased its Medicaid rates for “Mental Health – Intensive Outpatient” services effective January 1, 2024, as part of a broader behavioral health rate update under budget language VVVV.2. Virginia DMAS – Behavioral Health Service Rate Updates Effective January 1, 2024 (PDF)
Most states now deliver behavioral health Medicaid through MCOs, which may negotiate modest variations around the state’s base fee schedule; in practice, Medicaid IOP per diem rates in many states land somewhere in the low‑hundreds of dollars. MACPAC – Medicaid Managed Care and Behavioral Health
Medicare
Medicare is the newest major player in IOP reimbursement. Section 4124 of the Consolidated Appropriations Act of 2023 established Medicare coverage and payment for IOP services, and coverage took effect January 1, 2024 under the 2024 OPPS Final Rule. CMS Manual System – Medicare Benefit Policy, Pub. 100‑02
Medicare IOP reimbursement is paid under the Outpatient Prospective Payment System (OPPS) using new APCs for IOP days, with separate payment levels depending on the number of qualifying services delivered that day. CMS CY 2024 OPPS/ASC Final Rule Fact Sheet
As a rough directional benchmark, Medicare behavioral health day‑based payments (including PHP and now IOP) typically land below average commercial per diem rates and closer to Medicaid‑like levels, once you account for geographic adjustments. Center for Health Care Strategies – IOP Coverage Expansion
One important caveat: freestanding behavioral treatment facilities are not currently eligible to bill Medicare for IOP; covered sites include hospital outpatient departments, Medicare‑certified community mental health centers (CMHCs), federally qualified health centers (FQHCs), rural health clinics (RHCs), and opioid treatment programs (OTPs). CMS Manual System – Medicare Benefit Policy, Pub. 100‑02 Center for Health Care Strategies – IOP Coverage Expansion
PHP Reimbursement Rates by Payer Type
PHP commands higher reimbursement across the board because it is a more intensive level of care—by definition, at least 20 hours per week of structured treatment, often delivered 4–6 hours per day, 4–5 days per week. CMS Manual System – Medicare Benefit Policy, Pub. 100‑02
Commercial Insurance
In commercial plans, PHP per diem rates are generally higher than IOP from the same payer, reflecting the higher intensity and daily hours. Industry data and benefit summaries commonly show PHP day rates in the mid‑hundreds of dollars and up, with many programs seeing a 40–70% uplift over their IOP per diem from the same payer. (This uplift range is a commonly observed spread in contracting scenarios rather than a formal published benchmark.)
Premium programs—especially those offering dual‑diagnosis care, specialized clinical tracks, or higher levels of medical oversight—can sometimes secure rates at the top end of the commercial PHP spectrum, though these programs also carry higher operating costs. KFF – Behavioral Health Service Spending
Medicaid
Medicaid PHP rates are usually higher than Medicaid IOP, but still below commercial in most markets. States that have recently invested in behavioral health have explicitly increased PHP and IOP rates to stabilize access. For example, Virginia’s 2024 behavioral health rate update increased Medicaid rates for “Mental Health – Partial Hospitalization” under the same budget authority that raised rates for Mental Health – Intensive Outpatient. Virginia DMAS – Behavioral Health Service Rate Updates Effective January 1, 2024 (PDF)
Because each state publishes its own Medicaid fee schedule (often with separate PHP line items), you really do have to pull your state’s schedule or MCO contract to understand whether your PHP daily rate will be closer to the low‑ or high‑hundreds of dollars. MACPAC – Medicaid’s Role in Behavioral Health
Medicare
Medicare has covered PHP much longer than IOP, and PHP payment is well‑established under the OPPS and CMHC methodologies, with per diem payment rates based on APC groupings. CMS CY 2024 OPPS/ASC Final Rule Fact Sheet
Medicare covers PHP when delivered in hospital outpatient departments and CMHCs (and in certain other qualifying facility types), as long as patients require a minimum of 20 hours of therapeutic services per week. CMS Manual System – Medicare Benefit Policy, Pub. 100‑02
For beneficiaries, Medicare Part B typically pays 80% of the approved amount for PHP after the annual Part B deductible is met, leaving 20% coinsurance unless supplemental coverage applies. Medicare.gov – Outpatient Mental Health Coverage
The Billing Codes That Drive IOP/PHP Reimbursement
Getting the coding right is non‑negotiable; using the wrong code is one of the quickest ways to trigger a denial.
Common IOP codes (non‑Medicare):
S9480 – Intensive outpatient psychiatric services, per diem. Widely used by commercial plans and some Medicaid programs for mental health IOP. AMA/HCPCS Level II – S9480
H0015 – Alcohol and/or drug services, intensive outpatient, per diem. Frequently used for substance use disorder IOP services in Medicaid and some commercial plans. CMS HCPCS Level II
Common PHP codes (non‑Medicare):
H0035 – Mental health partial hospitalization, treatment, less than 24 hours. Standard PHP per diem for many Medicaid and commercial payers. CMS HCPCS Level II
S0201 – Partial hospitalization services, less than 24 hours, per diem. An alternate PHP code that some commercial insurers prefer. AAPC – S0201 Code Description
Medicare‑specific billing elements:
IOP claims must include condition code 92 on the UB‑04 claim form to identify IOP services. CMS MLN Matters MM13264 – IOP Billing Requirements (PDF)
PHP claims use condition code 41 to designate partial hospitalization days. CMS MLN Matters – Partial Hospitalization Billing
Most IOP and PHP services billed as facility‑based programs are submitted on UB‑04 (institutional) claims, not CMS‑1500 professional claims, because they are paid through OPPS or analogous facility payment systems. CMS – Medicare Claims Processing Manual, Pub. 100‑04
Some commercial plans carve out behavioral health to separate managed behavioral health organizations (MBHOs) that may have unique requirements or carve‑out codes, so always confirm payer‑specific billing rules during implementation.
What Actually Drives Rate Variation
If you’re wondering why the ranges above are so wide, these are the main levers that typically explain the spread:
Geography matters a lot. Medicare and many commercial payers use geographic wage indices and local cost adjustments under OPPS and related fee schedules, which means markets like New York or San Francisco often see higher allowable amounts than rural or lower‑cost regions. CMS CY 2024 OPPS/ASC Final Rule Fact Sheet
Your payer contract is negotiable. For commercial and Medicaid managed care, the first rate in a contract proposal is rarely the only option; plans will sometimes move when you bring strong clinical quality, outcomes data, or unique access (e.g., limited local alternatives or specialty programming). This is based on payer contracting experience rather than a formal rule, but it’s a real‑world pattern across markets.
Provider credentials affect perceived value. While most per diem schedules don’t explicitly pay more just because a psychiatrist rather than a mid‑level runs a group, payers do consider overall program quality, scope of services, and medical oversight when deciding whether to credential and how aggressively to negotiate. Joint Commission – Behavioral Health Care Accreditation Overview
In‑network vs. out‑of‑network changes everything. In‑network programs typically accept lower allowed amounts in exchange for higher volume and more predictable payment. Out‑of‑network strategies can yield higher gross charges but face more denials and tighter scrutiny under parity and surprise billing regulations. U.S. Department of Labor – MHPAEA Guidance
Facility type and licensing shape eligibility. For Medicare in particular, only certain facility types (hospital outpatient departments, CMHCs, FQHCs, RHCs, OTPs) can bill IOP/PHP, and accreditation/licensing can also influence whether commercial payers will contract and at what level. CMS Manual System – Medicare Benefit Policy, Pub. 100‑02 Joint Commission – Behavioral Health Care Accreditation Overview
Building a Realistic Revenue Model
To make this more concrete, let’s walk through a simplified example and then talk about what you would adjust for your own program.
Say you’re running a 12‑person IOP track that operates five days a week, and your average in‑network commercial per diem from your contracts is $350 (a plausible mid‑range in many markets, though your actual rate will be contract‑specific). If you maintain 80% census (around 10 patients attending daily), that’s $3,500 in gross revenue per day, or roughly $17,500 per week. Over a 4‑week month, that’s about $70,000 in gross collections from a single IOP track, before denials, write‑offs, and no‑shows.
This is not a published benchmark; it’s a simple modeling exercise using numbers many operators see in practice. The actual story under the hood will depend on your payer mix (commercial vs. Medicaid vs. Medicare), denial rates, collection lag, and how tightly your team manages authorizations, documentation, and utilization review. HHS – Behavioral Health Financing Overview
Now factor in that many organizations run multiple tracks (morning and evening IOP, or simultaneous IOP and PHP) out of the same footprint. The unit economics can scale favorably, but only if you can reliably hit medical necessity criteria, maintain attendance, and keep your revenue cycle processes tight enough that per diem rates actually convert into cash. CMS – Program Integrity and Medical Necessity Guidance
FAQ
What is the average IOP reimbursement rate per day?
There is no single national “average” IOP per diem, but many commercial contracts land in the mid‑hundreds of dollars per day, with some markets seeing rates in the $250–$600+ range depending on geography, competition, and program profile. This band should be treated as a directional planning range rather than a guaranteed benchmark, since commercial plans don’t publish uniform IOP fee schedules. KFF – Mental Health and Substance Use Spending
Medicaid IOP rates are typically lower and vary by state fee schedule, often in the low‑hundreds of dollars per day, while Medicare IOP per diem payments (effective 2024) are set under OPPS and generally fall below average commercial rates once geographic adjustments are applied. CMS Manual System – Medicare Benefit Policy, Pub. 100‑02 MACPAC – Medicaid’s Role in Behavioral Health
How much does PHP pay per day compared to IOP?
PHP per diem reimbursement is generally higher than IOP from the same payer, because PHP requires a minimum of 20 hours of services per week and offers a more intensive level of care. CMS Manual System – Medicare Benefit Policy, Pub. 100‑02
In practice, operators often see PHP day rates running roughly 40–70% higher than IOP with the same commercial payer, though this uplift is based on observed contracting patterns rather than an official rule. Medicaid and Medicare PHP rates are also higher than their IOP counterparts because of the additional daily hours and service mix, but you need to check your specific state fee schedule and local OPPS rates to get precise numbers. CMS CY 2024 OPPS/ASC Final Rule Fact Sheet
Does Medicare cover IOP services?
Yes. As of January 1, 2024, Medicare Part B covers intensive outpatient program (IOP) services for beneficiaries with mental health and substance use conditions, closing a longstanding gap between outpatient therapy and PHP or inpatient care. CMS Manual System – Medicare Benefit Policy, Pub. 100‑02
Covered settings currently include hospital outpatient departments, CMHCs, FQHCs, RHCs, and opioid treatment programs, while other freestanding community behavioral health facilities are not yet authorized to bill Medicare for IOP under this benefit. Center for Health Care Strategies – IOP Coverage Expansion
What billing codes are used for IOP and PHP?
For non‑Medicare payers, the most common IOP codes are S9480 (intensive outpatient psychiatric services, per diem) and H0015 (alcohol and/or drug services, intensive outpatient, per diem), while PHP is typically billed with H0035 (mental health partial hospitalization, less than 24 hours) or sometimes S0201 (partial hospitalization services, per diem). CMS HCPCS Level II AAPC – S0201 Code Description
For Medicare facility claims, IOP days must be billed with condition code 92 and PHP days with condition code 41 on the UB‑04, and payment is determined under OPPS based on the assigned APC. CMS MLN Matters MM13264 – IOP Billing Requirements (PDF) CMS MLN Partial Hospitalization Booklet
Can you negotiate higher IOP/PHP reimbursement rates with insurance companies?
Yes. For commercial payers and Medicaid managed care plans, initial rate offers are typically starting points, and providers can often negotiate higher rates by demonstrating strong clinical outcomes, specialized programming (e.g., dual‑diagnosis, trauma tracks), geographic access, and expected patient volume. This is grounded in common contracting practice rather than a formal federal policy.
Bringing objective quality measures, accreditation (e.g., Joint Commission or CARF), and clear data on local access gaps tends to strengthen your negotiating position. Joint Commission – Behavioral Health Care Accreditation Overview HHS – Behavioral Health Financing Overview
What happens if a patient misses hours during an IOP day?
Medicare’s IOP benefit requires that beneficiaries receive at least 9 hours of services per week in an IOP setting, and individual days must contain enough qualifying services to be counted as IOP days for payment under the relevant APC. CMS Manual System – Medicare Benefit Policy, Pub. 100‑02
Most commercial and Medicaid plans take a similar stance: if the documented services for a given day don’t meet the plan’s minimum service/time threshold for IOP or PHP, the claim for that day can be denied or downgraded, which is why tight scheduling, documentation, and patient engagement are critical to revenue integrity. NAHRI – CMS Billing Requirements for Condition Code 92
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.