CMS Guidance on Heightened Scrutiny Indicates States can Create Tiered Standards for HCBS Settings

The Centers for Medicaid and Medicare Services (CMS) has issued a FAQ document regarding expectations around heightened scrutiny for settings that are subject to the home and community based services (HCBS) rule that went into effect on March 17, 2014. The document also offers an important clarification about the ability of states to use their transition plans to create a “tiered standard” for settings within their HCBS programs. CMS also addresses provisions in the rule regarding respite, provider-controlled settings lease agreements, and 1915(b)(3) services.

Tiered Standard

The final question and answer in the document contains perhaps the most significant policy clarification. CMS indicates that states may use their transition plan to “establish that certain settings currently in use in a home and community-based services waiver may continue within the waiver, as long as they will be able to meet the minimum standard set in the rule on or before the end of the transition period, but the state may suspend admission to the setting or suspend new provider approval or authorizations for those settings.” Simultaneously, “the state may establish or promote new or existing models of service that more fully meet the state’s standards for home and community-based services.” CMS clarifies that “this arrangement, though established through the transition plan, may continue beyond the transition period.” In other words, while all settings must meet the minimum standards established by CMS for HCBS, the state may identify a “tiered standard” so that only those meeting more stringent standards than requirements in the federal regulation, established by the state, will be developed in the future, while those already-existing settings meeting the federal floor but not the higher state standard will continue to be funded without obligating the state to fund new settings of the same type.

Heightened Scrutiny

Review Criteria: The document addresses CMS’ criteria for reviewing state requests for heightened scrutiny. According to the FAQ, CMS “will review the information [submitted by the state as part of its heightened scrutiny request] to determine whether each and every one of the qualities of a home and community based setting outlined in 42 CFR 441.301(c)(4)/ 441.530(a) are met, whether the state can demonstrate that persons receiving services are not isolated from the greater community of individuals not receiving Medicaid Home and Community Based Services, and whether CMS concludes that the information indicates that there is strong evidence the setting does not meet the criteria for a setting that has the qualities of an institution.” CMS will review the information or documentation “to ensure that all participants in that setting are afforded the degree of community integration required by the regulation and desired by the individual.” Providing documentation that a percentage or “some” participants have community access, CMS specifies, will not be considered sufficient to show that the setting meets the regulations. The document makes clear that “CMS will also consider information provided by other parties.”

Evidence to satisfy heightened scrutiny: The document also specifies what type of information CMS expects the state to submit to support a claim that a particular setting that meets the heightened scrutiny criteria has the qualities of HCBS and does not have the qualities of an institution. Evidence of how a setting overcomes its presumed institutional qualities, CMS says, “should focus on the qualities of the setting and how it is integrated in and supports full access of individuals receiving home and community-based services into the greater community, not on the aspects and/or severity of the disabilities of the individuals served in the setting.” For heightened scrutiny requested under 1915(c) or 1915(i), such information should also include the information the state received during the public input process. For 1915(k) Community First Choice (CFC) programs, information should be submitted as part of the state’s request for heightened scrutiny for any such settings included in the CFC State Plan Amendment (SPA). When requesting heightened scrutiny of a setting in a publicly or privately-owned facility that provides inpatient treatment, or located on the grounds of or immediately adjacent to a public institution, the state “at a minimum…should submit information clarifying that there is a meaningful distinction between the facility and the community-based setting such that the latter is integrated in and supports full access of individuals receiving HCBS.” CMS offers a list of possible specific types of information that could be included in a heightened scrutiny request (see Q3, page 2). 

The information submitted “may also include a report from an on-site visit to the setting conducted by the state…, public input on the setting in question, [and] consumer experience surveys that can be linked to the site for which evidence is being submitted.” Supporting information “could include participant interviews outside the presence of the provider.” CMS indicates it may conduct an onsite review as well.

Processes for collecting evidence: CMS makes clear that states are free to develop their own tools for collecting and evaluating information about settings they have flagged for heightened scrutiny. In addition, states “are expected to solicit public input” on such settings, with the expectation that “this public reaction will facilitate the state’s understanding of how the community at large views the settings in question.” CMS indicates that a site visit is “highly recommended in order for CMS to evaluate the evidence,” but does not offer a specific protocol for a site visit. A site visit should “include a significant amount of time that is observational in nature,” the purpose being “to observe the individual’s life experience and the presence or absence of the qualities of home and community-based settings.” Record reviews and interviews are “supplemental,” but CMS indicates they are “important to corroborate adherence to requirements, and should align with observations.” The document offers several suggestions for site visit activities (see Q9, page 7).

Heightened scrutiny outcomes: CMS makes clear that if the agency’s review “determines that not all regulatory requirements are met, and the setting is included in the state’s Statewide Transition Plan, the state can use the remaining transition period to bring the setting into compliance with all requirements, transition individuals from that setting to a compliant setting, transition the coverage authority to one not requiring provision in a home or community based setting, or transition to non- Medicaid reimbursement.” However, if the setting is included in a new 1915(c) waiver, new 1915(i) state plan amendment, or new 1915(k) CFC SPA, Federal reimbursement for services provided to individuals in that setting “will not be available unless or until the setting achieves compliance with all requirements.” CMS also clarifies that “approval of any heightened scrutiny request only pertains to the individual settings subject to the request.” Further, the approval only applies to the setting barring any significant alteration of its characteristics. In the approval of the document containing the heightened scrutiny request, CMS will “communicate the settings and the scope under which they are adjudicated to be home and community-based services, and indicate that any material changes to the settings approved through heightened scrutiny such as an increase in licensing capacity, the establishment of additional disability-oriented settings in close proximity (e.g., next door), or changes in the ways in which community integration is realized, will require the state to update CMS and may result in a reevaluation of the setting.”


CMS reiterates that the rule permits the use of institutional settings to provide respite services for individuals participating in an HCBS waiver or state plan, if such services are provided for in the approved waiver or state plan. According to the guidance, states will not be required to assess settings used exclusively for respite for compliance with the rule, as these types of settings are considered by CMS to be a way to support caregivers to help preserve an individual’s placement in the community rather than a long-term residential placement. Significantly, the guidance indicates that CMS intends to permit states to use institutional settings for the provision of “short-term” respite services that typically do not exceed 30 days in duration. Neither the rule nor the statute set such a time limit, which is new in this guidance.

Provider-Controlled Settings

The guidance provides additional clarification regarding the provider-controlled property lease or residency requirement in the rule. CMS indicates that if a provider “does not lease or own the property, but has a direct or indirect financial relationship with the property owner, [it] would presume that the setting was provider controlled”. This presumption could be overcome if “the property owner or provider establishes that the nature of the relationship did not affect either the care provided or the financial conditions applicable to tenants.”

1915(b)(3) Services

The guidance clarifies that “HCBS services (services that fit into the benefit package authorized under 1915(c), 1915(i) or 1915(k)) requested as part of new 1915(b)(3) managed care savings arrangements must adhere to the home and community- based settings requirements by the effective date of the waiver.” HCBS services that are currently approved under 1915(b)(3) authority “are afforded the same transition flexibility (ending March 17, 2019) as exists for currently approved 1915(c) waivers.” Settings in which these services are provided, CMS indicates, “should be assessed for compliance with the settings requirements and described in the state’s Statewide Transition Plan.”