Raleigh, NC: Disability Rights NC filed a motion to intervene in the case Tiffany Healthcare, Inc., et al. v. NC Department of Health and Human Services, Division of Medical Assistance. This case was filed last Thursday at the Office of Administrative Hearings on behalf of the owners of eighteen Adult Care Homes (ACHs) who were notified that as Institutions for Mental Disease (IMD), their residents were no longer eligible to receive services under Medicaid.

“The outcome of this case could have a profound effect on the welfare of adults with mental illness—people we are mandated to protect,” said Vicki Smith, executive director of Disability Rights NC. “In the event that the Administrative Law Judge (ALJ) rejects Tiffany Healthcare, Inc.’s claim, the subsequent loss of Medicaid funding would require a change in the residential placements of more than one thousand individuals. Many of these residents live with mental illness. All of the residents are disabled to some degree.”

A little over a year ago, the Centers for Medicare and Medicaid Services (CMS) informed NC DHHS/DMA that it must develop a method of determining whether ACHs whose residents receive Medicaid benefits qualify as IMDs. NC was required by CMS to develop a protocol to assess whether certain ACHs meet the definition of an IMD and to assure that Medicaid dollars were not being used inappropriately to pay services to residents of those homes.

If the ALJ rules in favor of the State, the consequence would be the immediate termination of Medicaid payments to the facility. One likely consequence is that, once found to be an IMD, an ACH may face immediate closure owing to the loss of a significant revenue stream for the facility. It is also possible that the ACH might fail to provide the required 30-days’ notice of discharge to each resident. More importantly, the need to find alternative placements for all of the discharged ACH residents could overwhelm the ability of the local Department of Social Services and the Local Management Entities to meet the discharge needs of the displaced residents as guaranteed by law.

Smith stated, “In the event that the affected residents lose their Medicaid eligibility, an orderly process for locating alternative housing—which is required by law—must be assured. Both Chambers of the General Assembly have recognized the need to budget some transitional support for ACHs. It is our hope that those funds will be specifically targeted to pay for residents’ medications and other medical expenses while alternative housing and services are located.”

The ALJ issued a TRO on Friday, June 15 preventing the State from immediately terminating Medicaid benefits. Further proceedings are scheduled at the Office of Administrative Hearings for June 28.

Background on North Carolinians with Mental Illness Housed in Adult Care Homes

The state’s practice of employing adult care homes as the default residential placement for people with mental illness has been a longstanding subject of interest, investigation and study by Disability Rights NC. In July 2010, Disability Rights NC filed a complaint with the U.S. Department of Justice claiming that the practice of warehousing adults with mental illness in adult care homes violated the Americans with Disabilities Act and the U.S. Supreme Court’s decision in Olmstead v. L.C., 527 U.S. 581 (1999). One year later, the Department of Justice issued a letter containing its findings, and concluded that “adult care homes are institutional settings that segregate residents from the community” and that those with mental illness “are relegated indefinitely and unnecessarily to adult care homes because of systemic State actions and policies…”