What Software Should a Recovery Housing or Adult Residential Program Use to Bill Medicaid?

The Short Answer

Most recovery housing and sober living homes cannot bill Medicaid for room and board. Medicaid does not pay room and board in a recovery residence, and in some states like New York, recovery residences cannot bill Medicaid for any services at all.

If your state allows billing for peer support services or residential treatment under an 1115 waiver, you will need software that handles clinical documentation, provider enrollment, claims submission, and eligibility verification. If you operate housing only, without billable clinical services, you need property management tools—not a clinical EHR.

Why Most Recovery Housing Cannot Bill Medicaid

Two federal rules create the barrier:

First, Medicaid generally excludes room and board payments. The housing fee itself is not a covered service.

Second, the Institution for Mental Diseases (IMD) exclusion blocks Medicaid payment for most adults ages 21 to 64 in facilities with 17 or more beds that primarily provide treatment for mental health or substance use conditions. The exclusion applies to facilities with more than 16 beds—meaning 17 beds triggers IMD status.

Facilities that rely on peer counseling and meetings to promote group support, using primarily lay persons as counselors, are not considered IMDs and the services they provide are not eligible for Medicaid reimbursement because they do not provide medical assistance under Medicaid's definition.

Some states have obtained 1115 waivers that allow Medicaid payment for residential SUD treatment at ASAM levels 3.1 through 3.7, but these waivers come with strict limits on duration, require clinical staffing, and do not apply to non-clinical recovery residences.

What Can Be Billed (Where Allowed)

Peer Support Services

In 2007, CMS released guidance allowing states to cover peer support services under Medicaid. States that have adopted this option require:

1. Naming the Medicaid funding authority used for coverage and payment
2. Describing the service, the provider, and provider qualifications in full detail
3. Describing utilization review and reimbursement methodologies

H0038 is a commonly used HCPCS code for peer support services (self-help/peer services, per 15 minutes), though states also use H0025 for group peer support, H0039 for peer support groups, T1012, and state-specific codes. Not all states cover this code, and those that do set their own certification requirements and service limits.

Residential Treatment Services

States have flexibility in how they pay for withdrawal management and SUD treatment services under section 1915(l) of the Social Security Act, added by the SUPPORT for Patients and Communities Act. These are clinical programs with licensed staff, medical oversight, and ASAM level-of-care assessments—not peer-run sober living homes.

Recovery Support Services

The majority of recovery support services are not defined, or even discussed, by CMS in policy guidance related to SUD, and there is wide variation in how states define and pay for these services.

State-by-State Differences

Medicaid coverage for recovery housing and related services varies sharply by state. Below are the requirements in states where primary sources were available.

| State | What Can Be Billed | Key Requirements | Duration Limits | |-------|-------------------|------------------|------------------| | California | Recovery services under DMC-ODS; residential treatment at ASAM 3.1, 3.3, 3.5 | Facilities licensed by state agencies other than DHCS must have ASAM LOC Certification by January 1, 2024 | 30 days for initial assessment period (60 for under-21) | | Florida | Peer support services through DCF and Medicaid | Only Certified Recovery Peer Specialists (CRPS) can bill; minimum 2 years recovery | Florida limits FACT services (H0040) to 1 unit per day for 365/366 days per state fiscal year | | Maryland | Residential treatment at ASAM 3.3, 3.5, 3.7 | Maryland's 1115 waiver was approved by CMS in December 2016, with some SUD residential treatment benefits beginning July 1, 2017 | Two 30-day stays per rolling year----.aspx); room and board beyond approved days paid by state funds | | Massachusetts | Peer recovery coach services | At least 2 years sustained recovery; meet EOHHS requirements | Varies by MCE | | New York | None | Recovery residences cannot bill Medicaid for any services | N/A | | Ohio | SUD treatment services at all ASAM levels | Services must follow ASAM criteria | Varies by level | | Virginia (ARTS) | Residential treatment at ASAM 3.1, 3.3, 3.5, 3.7, 4.0 | ASAM level-of-care assessment; provider enrollment | Varies by level;

California (DMC-ODS)

By January 1, 2024, facilities licensed by state agencies other than DHCS (e.g., Department of Social Services, Department of Public Health) delivering residential treatment at levels 3.1, 3.3, or 3.5 must have an ASAM LOC Certification. To receive services, a beneficiary must be enrolled in Medi-Cal, reside in a participating county, and meet DMC-ODS criteria.

Covered services are reimbursable for up to 30 days following the first visit with a Licensed Practitioner of the Healing Arts (LPHA) or registered/certified counselor, whether or not a DSM diagnosis is established (60 days if the beneficiary is under 21).

Recovery services can be delivered standalone using procedure codes H2017, H2035, and H2015 with a U6 modifier. State regulations are found in California Code of Regulations, Title 22, Division 3, Subdivision 1, Chapter 3.

Florida

Only services provided by Certified Recovery Peer Specialists (CRPS) are billable through DCF and Medicaid. The CRPS-A Adult certification requires lived experience as an adult in recovery for a minimum of 2 years from a substance use or mental health condition.

Maryland

Effective July 1, 2017, Maryland Medicaid began reimbursing for therapeutic services of up to two 30-day stays per rolling year for Medicaid-eligible participants ages 21 through 64. All additional days beyond the two stays and all room and board costs are paid out of state funds for individuals who continue to meet medical necessity.

Virginia (ARTS)

Services are reimbursable by managed care organizations for managed care enrolled members and through DMAS for fee-for-service members. Effective July 1, 2021, FAMIS MOMS enrollees became eligible for coverage for medically necessary services in an IMD.

New York

Recovery residences cannot bill Medicaid for any services, as stated in the February 2026 OASAS applicant conference.

What People Commonly Get Wrong

Assuming Medicaid Pays for Housing

The most common mistake is believing that Medicaid will reimburse the monthly housing fee charged to residents. It will not. Room and board is explicitly excluded from Medicaid coverage in recovery settings. Operators who build budgets around this assumption create a funding gap that cannot be closed.

Misunderstanding the 16-Bed Threshold

The IMD exclusion applies to institutions with more than 16 beds—meaning 17 or more beds trigger the exclusion for adults ages 21 to 64. Some operators incorrectly believe that staying at or below 16 beds guarantees Medicaid eligibility, but this only removes one barrier. The service itself must still be a covered Medicaid benefit, which peer-driven recovery housing typically is not.

Blurring Housing and Clinical Services

When housing fees and billable services are not clearly separated in resident agreements, documentation, and accounting, operators create compliance risk. If you charge one combined fee and bill Medicaid for part of it, auditors will ask how you allocated costs and whether residents understood what portion was for covered services versus room and board.

Clear separation requires:

• Separate line items in resident agreements
• Distinct service descriptions and schedules
• Documentation that shows when billable services were delivered, by whom, and for how long
• Financial records that show the housing revenue stream separately from the clinical revenue stream

Treating All Waivers as Equivalent

State 1115 waivers differ in scope, duration limits, covered levels of care, and provider requirements. A waiver that covers residential treatment in one state does not mean your state has the same waiver, or that your facility qualifies under your state's waiver terms.

What Software You Actually Need

The right software depends entirely on whether you have billable services.

If You Have No Billable Services

You do not need an electronic health record or a billing system. You need:

• Property management software to track beds, leases, and rent payments
• Accounting software to manage operating funds
• A resident database to track move-in, move-out, and house compliance

Adding clinical EHR software when you have no clinical revenue adds cost and complexity without benefit.

If You Bill Peer Support Services

You need software that handles:

• Eligibility verification: Real-time Medicaid eligibility checks before delivering services
• Clinical documentation: Notes that capture the peer support encounter, the time spent, and the activities provided
• Claims submission: Ability to submit claims electronically with the correct procedure code (typically H0038) and any required modifiers
• Remittance processing: Automated posting of payments and denials from Medicaid
• Provider enrollment tracking: Records of which staff members hold active peer certifications and are enrolled as Medicaid providers

Peer support billing is simpler than residential treatment billing, but it still requires a system that connects documentation to claims. A property management system will not do this.

If You Bill Residential Treatment Under a Waiver

You need a full behavioral health EHR and billing platform that supports:

• ASAM assessments: Tools to document level-of-care evaluations and continued stay criteria
• Treatment plans: Individual treatment or service plans that meet your state's Medicaid requirements
• Daily progress notes: Documentation of groups, individual sessions, case management, and other covered services
• Prior authorization management: Submission and tracking of authorization requests, since most states require prior auth for residential levels
• Claims with modifiers: Ability to bill the correct procedure codes with level-of-care modifiers, place-of-service codes, and diagnosis codes
• Coordination with room and board accounting: A way to track which portion of the resident's cost is Medicaid-reimbursable and which is not

Residential treatment billing has the same documentation requirements as outpatient behavioral health, plus the operational complexity of a 24-hour facility.

The Steps to Set Up Billing (If Your State Allows It)

Step 1: Confirm What Your State Covers

Contact your state Medicaid agency or managed care organizations directly. Ask:

• Does the state Medicaid plan cover peer support services, recovery support services, or residential SUD treatment?
• What are the procedure codes?
• What are the provider qualifications?
• Are there limits on units per day, days per year, or episodes per rolling period?

Do not rely on vendor blogs or conference presentations. Get the information from the state Medicaid provider manual or a state representative.

Step 2: Obtain Required Certifications

States control peer specialist qualifications, and training should address specific peer support competencies. If your state allows peer support billing, your staff must complete state-approved training and maintain continuing education.

For residential treatment, your facility must meet ASAM certification or state licensure requirements, and clinical staff must hold the credentials your state requires (licensed counselors, social workers, or other licensed practitioners).

Step 3: Enroll as a Medicaid Provider

Both the organization and individual practitioners must enroll. This process includes:

• Submitting an application to the state Medicaid agency or managed care organization
• Providing proof of licensure, accreditation, or certification
• Passing background checks
• Signing provider agreements

Enrollment can take weeks to months. You cannot bill until enrollment is complete and you have a Medicaid provider number.

Step 4: Set Up Your Documentation and Billing Workflow

Before delivering the first billable service:

• Create templates for service documentation that capture the required elements (date, time, duration, service provided, who provided it, resident signature if required)
• Train staff on documentation standards
• Test your software's ability to submit claims to your state's Medicaid system or managed care plans
• Verify that eligibility checks are working
• Establish a process for reviewing remittances, posting payments, and working denials

Step 5: Separate Housing Fees from Service Fees

Residents must receive clear written agreements that show:

• The monthly housing fee (not billed to Medicaid)
• The service fee (billed to Medicaid if eligible)
• What each fee covers
• What happens if Medicaid denies the claim

This protects both the resident and the program.

What to Do If Your State Does Not Allow Billing

If your state does not cover peer support services, does not have an 1115 waiver for residential treatment, or excludes recovery residences from Medicaid reimbursement, you have three options:

1. Private pay only: Charge residents a monthly fee that covers all housing and support services. No billing software is needed beyond basic accounting.

1. Scholarship or subsidy funding: Seek grants, state recovery housing vouchers, or charitable funding to cover costs for residents who cannot pay. Track this separately from any clinical billing.

1. Refer residents to separate billable services: Partner with outpatient programs that can bill Medicaid for counseling, case management, or peer support, while you continue to provide housing on a private-pay basis.

Many successful recovery residences operate entirely outside the Medicaid system. The absence of Medicaid billing does not mean the program cannot serve low-income residents—it means the funding model must rely on other sources.

When to Choose Simpler Software

If you are not billing insurance, do not buy software built for insurance billing. Property management platforms, resident databases, and basic accounting tools cost less, are easier to learn, and do exactly what you need.

The complexity and cost of a clinical EHR with integrated billing is only justified when you have clinical staff delivering billable services under Medicaid or commercial insurance contracts.

AgenciesForge runs charting, scheduling, EVV, and billing on one record with no per-seat fees and an included clearinghouse, covering behavioral health, residential, and waiver services when you need that level of integration.