Behavioral Health Newsletter

November 2023

CMS Establishes New IOP Benefit

On November 2, 2023, the Centers for Medicare &Medicaid Services (“CMS”) issued a Hospital Outpatient Prospective Payment System (“OPPS”) final rule expanding Medicare coverage of behavioral health services. Most critically, the OPPS final rule establishes coverage for Intensive Outpatient Program (“IOP”)services effective January 1, 2024. Outpatient mental health services have traditionally been covered under Medicare as partial hospitalization and outpatient service benefits. While outpatient service benefits cover isolated encounters, partial hospitalization program (“PHP”)benefit eligibility requires certain mental health services to be provided for 20 or more hours per week. The Consolidated Appropriations Act of 2023 (“CAA”) requires coverage of this intermediate level of services that are provided between 9 and 19 hours per week. This new Medicare benefit is designed to bridge the gap in coverage for individuals with Medicare requiring more frequent care than standard outpatient therapy but less intensive than a PHP.

Q: In what care settings will Medicare cover IOP services?

A: Covered IOP services, as defined by CMS in the final rule, must be a distinct and organized intensive ambulatory treatment program designed for individuals with acute mental illness or substance use disorder. These services cannot be delivered in the patient’s home or in an inpatient or residential setting. Covered IOP services may be provided in the following settings:

Hospital Outpatient Departments (“HOPDs”)
Community Mental Health Centers (“CMHCs”)
Federally Qualified Health Centers (“FQHCs”)
Rural Health Clinics (“RHCs”)
Opioid Treatment Programs (“OTPs”)

Q: What are the Medicare coverage requirements for IOP services?

A: Medicare will cover IOP services when a physician certifies, at least once every 60 days, that a patient needs IOP services for a minimum of 9 but no more than 19 hours per week. The patient’s plan of care must demonstrate that the patient has received a mental health or substance abuse disorder diagnosis, is not a danger to themselves or others, has a separate support system outside of the IOP, and has the cognitive and emotional ability to tolerate IOP services.

Additionally, to qualify for payment, the patient must receive at least three IOP services per day, with at least one service from the list of Final PHP/IOP Primary Services (see Table 99 on p. 695 of the HOPPS Final Rule), and the remaining services from the Final HCPCS Applicable for PHP and IOP list (see Table 98 on p. 693 of the HOPPS Final Rule).

IOP services rendered in OTP settings must be deemed medically reasonable and necessary and not duplicative of any service covered under bundled payments for a given episode of care in a week. Additionally, a physician or non-physician practitioner must certify that the beneficiary requires a higher level of care intensity compared to existing OTP services.

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