IMDs and Family First

An RCCF is a Residential Child Care Facility. It is defined in rule in 7.705 and 7.714. Some RCCFs are designated by the Colorado Department of Human Services (CDHS) Office of Behavioral Health to provide mental health services. These mental health services are billed to Medicaid on a fee-for-service basis.

The Family First Prevention Services Act (Family First) created a new placement type called Qualified Residential Treatment Programs (QRTPs). Placement in a QRTP must be necessary, temporary and treatment focused. A QRTP is a program that: 

• Is licensed and nationally accredited;
• Has a trauma-informed treatment model;
• Has registered or licensed nursing staff and other licensed clinical staff available 24/7;
• Facilitates family outreach and participation in the child or youth’s treatment program; and 
• Provides discharge planning and family-based aftercare supports for at least six months postdischarge.

Institutions for Mental Diseases (IMD) is a hospital, nursing facility, or other institution of more than 16 beds that is primarily engaged in providing diagnosis, treatment or care of persons with mental diseases, including medical attention, nursing care and related services. Whether an institution is an institution for mental diseases is determined by its overall character as that of a facility established and maintained primarily for the care and treatment of individuals with mental diseases, whether or not it is licensed as such.

IMDs were created in 1965 when the federal Helping Families in Mental Health Crisis Act changed the way mental health services are funded and delivered so individuals with mental illnesses would no longer languish in large institutions. The law prohibited Medicaid reimbursement for any costs while a person is in an IMD.

A PRTF is a Psychiatric Residential Treatment Facility. It differs from an RCCF in that it is a medical model of treatment. A PRTF is exempted from being defined as an IMD regardless of the number of beds for which it is licensed. A child or youth can only be served in a PRTF if the child or youth meets medical necessity for PRTF level of care. Find CMS guidance on PRTFs here.

While the creation of QRTPs under Family First put a spotlight on the IMD issue, IMDs have existed in federal law since 1965. With the passage of Family First, states have grappled with the question of whether QRTPs statutorily fall under the definition of an IMD. This is important because if a facility is designated as an IMD, children and youth in their care can no longer access Medicaid funding to cover behavioral health costs, or physical, dental, and pharmaceutical costs. In Colorado, members access  approximately $19.7 million in Medicaid funding annually for these purposes. 

While it was not the intent of Family First, the creation of QRTPs set up a conflict in federal law: To be in alignment with Family First, RCCFs need to transition to QRTPs. But due to the primary focus on treatment, becoming a QRTP could risk IMD designation and the loss of Medicaid funding. 

The Centers for Medicare and Medicaid Services (CMS) largely left it up to states to decide whether their facilities qualified as IMDs.

Any mental health or substance use diagnosis found in the Diagnostic and Statistical Manual (DSM) is considered a mental disease. For IMD purposes, intellectual disabilities are excluded.

CDHS and the Colorado Department of Health Care Policy and Financing (HCPF) have been working in close partnership on this issue since November 2019. We conducted a careful analysis of the federal IMD criteria and CMS guidance, conducted site visits to individual residential facilities to gather more information, talked with other states and jurisdictions, and explored every possible argument that would allow Colorado to confidently move forward with QRTPs without risking an IMD designation.  

In July 2020, California’s Medicaid agency submitted a letter to CMS, outlining their case that QRTPs are not IMDs. That letter reflected many of the same arguments that others in Colorado have made,. CMS’ response to California made clear that states must adhere to the IMD statute in their designation of facilities, and that CMS considers QRTPs of more than 16 beds to be IMDs. 

Given all of this, our agencies have come to the joint conclusion that any existing RCCF of more than 16 beds that seeks to be a QRTP may be designated an IMD by CMS. Even those with campus settings or multiple locations. 

CMS’s strict interpretation also carries implications for existing facilities. Based on CMS guidance, RCCFs that have more than 16 beds are also at risk of being designated as IMDs, even if they do not pursue QRTP designation. 

CDHS and HCPF believe that the only way to truly mitigate this risk is to begin proactively adapting our practices and infrastructure now towards serving a smaller number of children/youth in residential facilities.

CDHS is convening a Future Congregate Care Work Group to explore how we can adapt our practices and infrastructure.

HCPF is the state Medicaid authority, and it makes the determination if a facility meets the criteria of an IMD. This is based on the criteria and guidance detailed in the State Medicaid Manual. It is not based on “level of care.” Rather, it is based on size, purpose and programming, and administrative factors.

In an attempt to address the IMD issue, other states have created what is often referred to as an IMD assessment. They have used these tools in an attempt to determine whether their facilities are IMD or not.  For Colorado, there is not currently an official “assessment” tool. There is a definition with criteria listed in section 4390 of the State Medicaid Manual.  Each state is responsible for determining how they would assess a facility and creating a tool if they choose. Ultimately, HCPF does not have a tool.

The federal CMS description of an IMD can be found on its website. See, Chapter 4: SERVICES zip folder. Inside that zip folder, the document that includes section 4390 is titled, “sm_4_4270_to_4390.1.doc”

Prior to Family First, several states, including Utah, had reduced the size of facilities in their provider network in order to avoid IMD status, so implementing Family First is not impacting them in the same way.  

Some states have different financial structures that make the impact different than what Colorado expects. For example, they do not currently claim Medicaid, have bundled reimbursement rates or are not state-supervised, county administered.  

One clear carve-out for Family First and QRTP placements is for children and youth at risk of being sex trafficked. Some states have considered deeming any child or youth in child welfare as being at risk of trafficking. However, Colorado does not believe this is an approach we can take in good conscience. 

Colorado’s RCCFs vary in the number of beds for which they are licensed. Currently, almost all of Colorado’s RCCFs designated by the Office of Behavioral Health have more than 16 beds.

All RCCFs that have 16 or more beds or are operated by a parent organization that has other RCCFs with more than 16 beds are at risk of being found to be IMDs.

IMD does not limit the number of day treatment students served at a facility. Day treatment is not a residential service and day treatment facilities are a seperate license

We do not believe so because shelters are different entities, with a different type of programming and staffing structure. A facility would need to hold an RCCF license in order to start the process of gaining a QRTP designation.  Our current work is focused on addressing conflicts in federal law impacting RCCFs and QRTPs.

• Family First Fact Sheet
• California letter to CMS
• CMS response to California
• September 2019 CMS Q&A about QRTPs and IMDs