Disclaimer: This blog was originally published on the National Academy for State Health Policy (NASHP) website (nashp.org) on 11.18.25. It is reproduced here with the permission of the author. You can access the original blog post at this link: How States Are Modernizing Facility Licensure to Advance Integrated Care – NASHP

Modernizing facility licensure is a strategic process that can help states reduce provider burden, align with the state’s policy goals, and build a more coordinated, modernized continuum of behavioral health care. This strategy supports the ability of safety-net providers such as health centers, community behavioral health providers, and Certified Community Behavioral Health Clinics to meet the whole health needs of patients. It also aligns with implementation of federal initiatives such as the Centers for Medicare and Medicaid Services Innovations in Behavioral Health model. 

Background

State health and human services agencies are typically responsible for licensing health care facilities such as clinics and residential treatment centers. States generally require clinics and treatment facilities to obtain a facility-level license, separate from the occupational licensure of individual staff. This license ensures that the organization meets standards for staffing, service scope, patient safety, and the physical environment. If clinics want to bill Medicaid or receive other funding, they may need to meet additional facility licensing and certification requirements beyond standard licensure. These often include rigorous inspections, adherence to state- and federally defined structural and operational standards, and ongoing compliance monitoring. 

Most states engage professional licensing boards to oversee individual practitioners by enforcing standards related to education, training, and ethical practice. There is some variability in how regulatory functions are organized in the executive branch and the degree of authority and responsibility of the licensing boards. To learn more about how states structure professional licensure and board oversight, see the National Governors Association State Health Workforce Toolkit on Licensing and Regulation.

Regulatory Landscape

Historical separation of facility licensure of behavioral health and primary care, has created several challenges to behavioral health and primary care integration, including: 

• Separate licensure and regulatory systems for mental health, substance use, and medical care facilities can create inconsistent standards and siloed oversight, making it difficult to deliver integrated, team-based care. 
• Providers must maintain multiple licenses and navigate additional — and often duplicative — requirements, driving up administrative costs and limiting co-location of services. 
• Access to integrated care services can be unintentionally limited, especially in underserved areas, and can result in slow adoption of delivery and payment reforms such as value-based arrangements and advanced coordinated care models.  

State Strategies

States are advancing a variety of strategies to promote integrated care informed by their specific regulatory and legislative environments. For example, in South Carolina, county substance use authorities are now able to enroll as physician group providers, expanding access to integrated care. Colorado began transitioning to a combined licensure model for behavioral health entities in 2024, which operates under an entity-wide license with location-specific service endorsements.  

Unlocking Behavioral Health Integration: State Actions on Licensure Reform

State-level analysis of licensure systems to identify structural challenges and misalignments that hinder behavioral health integration 

• Aligning licensure standards across agencies that allow co-located and integrated services 
• A focus on outpatient settings, where most integration efforts begin 
• Engaging providers early to inform practical, workable reforms 
• Providing technical assistance and clear guidance to support provider adoption

State Spotlight: New York

New York created an Integrated Outpatient Services (IOS) license, which enables providers to deliver primary care, mental health, and substance use services under a multiple licensure framework. The licensing regulations for IOS are identical for provider licensure across three agencies: the Office of Mental Health, Office of Alcoholism and Substance Abuse Services, and Department of Health (14 NYCCR Part 598, 14 NYCRR Part 825, and 10 NYCRR Part 404, respectively).  

Shared governance and oversight

The Office of Mental Health, Office of Alcoholism and Substance Abuse Services, and Department of Health formalized their approach through a joint governance structure to align priorities, co-develop clinical and physical plant standards, and unify licensure processes. The collaboration broke down historical silos, enabling agencies to share oversight responsibilities through a “host” agency model. Under this model, facilities with multiple licenses are surveyed once, easing provider burden while maintaining compliance.   

State officials noted key elements of success as well as challenges. IOS provided a framework for providing integrated care, and 235 program sites were licensed under this model, dramatically increasing the provision of integrated care for primary care, mental health, and addiction. There are a few limitations to this model, including: 

• The “host agency” framework means that providers can only treat individuals with co-occurring disorders who also must have a diagnosis consistent with their host agency license.  
• Providers needed to follow multiple regulations (host agency, co-occurring agency, and IOS), leading to confusion and complexity. 

A Three-Tiered Licensing Approach 

To maintain the successes of the IOS approach and address the regulatory challenges, the mental health and substance use provider agencies developed a web-based single application and shared a guidance document, which standardized requirements across systems. And, through safety and access lenses, the agencies developed a strategic framework. New York made regulatory changes to establish the following three levels:  

• Minimum Level: This establishes clear, baseline regulatory standards requiring mental health clinics to integrate substance use screening, assessment, and referral — “saying it out loud” in regulations to set explicit expectations. This level focuses on care standards over rigid facility descriptions and offers multiple licensure pathways. 
• Capable Level: Clinics receive integrated licensure, allowing delivery of co-occurring care without separate licenses, approved via endorsement. This simplifies expansion of service scope while maintaining quality oversight. 
• Enhanced Level: This represents full integration with a “no wrong door” approach, supported by new licensing and joint certification processes that unify clinical standards, billing, and oversight. The state is applying lessons from crisis stabilization center licensing to support this level. 

New York’s approach emphasizes tiered implementation, giving provider practices options to provide different levels of integration based on local needs and resources; see the Frequently Asked Questions for more details. 

Key strategies included: 

• Creating a single survey oversight: The state established a single “host” agency, reducing duplicative inspections and simplifying compliance. 
• Leveraging federal flexibilities: The state used the Certified Community Behavioral Health Clinic demonstration project to pilot integrated care and licensing innovations, helping bridge statutory limitations during reform. 
• Cultivating cross-agency communication: Regular coordination meetings and shared governance allowed agencies to resolve jurisdictional challenges and align regulatory goals. 
• Facilitating provider engagement: Ongoing feedback helped identify administrative pain points, guiding iterative improvements in regulations and operational processes. 
• Integrating data systems: Promoting shared physical and behavioral health records strengthened care coordination and supported unified oversight. 

State Spotlight: New Jersey

New Jersey’s licensure reform was informed by a comprehensive study led by Seton Hall Law School. The report reviewed statutory and regulatory complexity impeding access to integrated care and made recommendations to regulatory framework governing reimbursement and licensure that balances quality oversight and access to integrated care.  

In response, in 2017, the state enacted the single license legislation, which directed the Department of Health, in partnership with the Department of Human Services, to develop a unified licensure process for ambulatory care facilities providing integrated services to reduce regulatory redundancy while preserving appropriate oversight for specialized services.  

The legislation outlined eight core elements of integration, including staffing requirements, shared clinical space, data-sharing protocols, and information system interoperability. The proposed regulations (awaiting public comment) support five categories of integrated services: primary care, behavioral health care, mental health care, substance use and addiction services, and opioid treatment programs. 

Under this framework, providers no longer need to apply for separate licenses but must comply with integration-specific standards, such as having a medical director and meeting applicable federal requirements (e.g., 42 CFR Part 2). For a brief overview of the state’s efforts, see this presentation summarizing the policy change.

These new regulations will also codify changes included in a health department waiver designed to expand access to addiction medicine. Key changes include:  

• Allowing facilities to maintain unified medical records for patients, 
• Eliminating requirements for separate physical spaces and entrances 
• Enabling shared treatment spaces and infrastructure 
• Permitting providers to offer “adjunctive services” such as wound care and preventive care without requiring full licensure for each service type 
• Expanding access to withdrawal management services and medications for addiction treatment such as buprenorphine 
• Enabling qualified physicians to deliver reproductive health services without unnecessary barriers and eliminating the requirement of a staff OB/GYN to provide essential care 
• Allowing integration of counseling and therapy into primary care without full behavioral health licensure 

Acknowledgments

NASHP would like to express our gratitude to West Health for its support and partnership with the Behavioral Health Integration Workgroup.

Photo by Ryan Waring on Unsplash