Earlier this month, the American Society of Addiction Medicine (ASAM) hosted a webinar bringing together representatives from payer and provider organizations to discuss implementation of The ASAM Criteria, 4th Edition. Participants included Optum, members of NAATP, the National Association for Behavioral Healthcare (NABH), and the National Council for Mental Wellbeing. The session focused on structural and clinical changes in the new edition, how payers like Optum are adjusting contracts, and the implications for provider operations and reimbursement.

Major Changes in Levels of Care

Dr. Deb Nussbaum of Optum outlined how the 4th Edition reshapes the care continuum and its impact on contracting with Optum:

• Level 4: Inpatient is now reserved for acute care general hospitals only, removing it from freestanding psychiatric hospital contracts. A new category, “Level 4 Psych,” will be used for inpatient psychiatric care with co-occurring substance use treatment needs, using updated codes to distinguish this population.
• Level 3.7: Medically Managed Residential (formerly Medically Monitored Inpatient) now includes 3.7-Withdrawal Management (WM) and reflects a residential, not inpatient, setting. This reclassification affects revenue codes and facility licensing requirements.
• Level 3.5: Clinically Managed High-Intensity Residential will now encompass services previously categorized as 3.2-WM and 3.3, which are being phased out as standalone contracts.
• Level 3.1: Low-Intensity Residential has been expanded significantly, now including 9–19 hours of clinical services weekly alongside 24-hour residential support. Optum plans to contract for 3.1 commercially once states begin licensing it under the updated definition.
• Level 2.7: Medically Managed Intensive Outpatient is a new level requiring both clinical and medical services for 20+ hours per week. It differs from Level 2.5: High-Intensity Outpatient (HIOP), which replaces the old PHP model and has no medical component. Level 2.1 (IOP) and Level 1.7 (Medically Managed Outpatient) round out the outpatient spectrum.

Questions from Providers and Clarifications from ASAM and Optum

Several providers raised concerns and questions related to implementation:

• Medical complexity in Level 3.7: Dr. Nussbaum clarified that this level is appropriate not only for withdrawal management but also for managing chronic or acute medical and psychiatric conditions (ASAM Dimensions 1–3).
• Medicaid adoption: Medicaid adoption of the 4th Edition depends on state licensing and code guidance. Only Kentucky has formally adopted the 4th Edition so far (effective June 25, 2025). Until further notice, Medicaid contracts with Optum in other states remain based on the 3rd Edition.
• Structured living and Level 3.1: Providers asked whether IOPs (2.1) can partner with recovery residences (RRs) to qualify for 3.1 billing. ASAM clarified that RR and IOP may be paired if they are close in proximity and meet the clinical oversight and service characteristics for Level 3.1.
• Medication access in outpatient settings: ASAM recommends stocking key medications (for withdrawal management and medications for opioid use disorder (MOUD)) on-site at Level 2.7 programs to support continuity of care.
• Rate considerations: Optum indicated that rate changes are only expected for newly contracted services (e.g., 2.7), not for reclassified services like 3.7 or 3.5.
• Concerns about inadequate handoffs: Providers expressed concern about poor transitions from inpatient care (especially psychiatric hospitals) to lower levels of SUD care. ASAM emphasized the need for strong discharge planning and network relationships to avoid gaps in care continuity.
• Risks of misaligned residential partnerships: There was concern that 2.1 + RR arrangements could replicate exploitative “Florida model” practices. ASAM reiterated the need for quality oversight and payer accountability to ensure ethical provider behavior and proper care delivery.

Contracting and Revenue Code Updates

Optum is revising its contracts, and some revenue codes will change.                 

• Level 4 Psych: Revenue code 124 + SUD Co-Occurring code (HCPC H0008) to designate the rate difference from a regular 124 (mental health inpatient).
• Level 3.7: Code 1000
• Level 3.5: Code 1002 (no change)
• Level 3.1: Code 1003
• Level 2.7: Codes 944/945
• Level 2.5: Code 907 (codes 912 and 913 are removed)
• Level 2.1: Code 906 (no change)

Final Takeaways

This webinar highlighted that while ASAM and Optum are actively updating systems and contracts to align with the 4th Edition, adoption timelines will vary, especially with Medicaid. Providers will need to adjust programming, staffing, and billing workflows to meet revised definitions and documentation requirements. Both organizations expressed optimism that these changes represent progress toward more precise, needs-based levels of care—but acknowledged that meaningful reform will require time and continued collaboration with providers.