Institutes for Mental Disease (IMD)

Medicaid coverage and benefits are based in a joint state-federal partnership that requires the state to administer Medicaid benefits in accordance with federal laws and regulations. Some have been updated and modernized and others have been in place for many decades, even since the inception of the program. One example is the policy around paying for inpatient and residential care related for individuals with behavioral health disorders. In 1965, Congress passed the Social Security Act which established Medicare and  Medicaid. Within this initial bill, Section 1902 (A)(b) created the term Institutes for Mental Disease or IMDs.

An IMD is defined as “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.”  
The federal government established the IMD exclusion which states that no Medicaid payment can be made for services provided either in or outside the facility for patients receiving care in an IMD. One of the goals of this policy was to get people out of institutionalized care, and back into their communities, and increase the availability of publicly funded community based behavioral health services.

States use the State Medicaid Manual, Section 4390 for guidance in determining if a facility is an IMD. Please visit the site above for more specific information regarding IMD criteria.

States have worked to implement IMD policies in such a way that meets the federal guidelines as well as continue to meet the treatment needs of members.

See below for more detailed information related to specific institute types and distinct populations.

IMD ExclusionWhat is an IMDExamples of potential IMD Settings
Federal law prohibits states from receiving federal funding for stays within an IMD for adults ages 21-64 and youth in facilities outside the "psych under 21 benefit"An institution with more than 16 beds primarily engaged in diagnosis, treatment, or care of individuals with behavioral health diagnosesCrisis Stabilization Units, psychiatric hospitals. residential treatment. nursing facilities

Behavioral Health Campus Policy

Effective January 1, 2024, HCPF will enact new guidance for campus settings with multiple residential behavioral health components to navigate Institute of Mental Disease (IMD) criteria. HCPF has worked with providers, industry subject matter experts, and CMS to design Colorado’s new Behavioral Health Campus Component Policy.  

This new policy will provide a roadmap for options to providers hoping to expand the residential services their facilities can provide to their communities.

Please reach out to HCPF_IMD@state.co.us for more information.

Managed Care Authority

The Managed Care 2016 Final Rule from CMS (Centers for Medicare & Medicaid Services) states that individual states utilizing a managed care plan to deliver Medicaid services are able to pay for up to 15 days in a capitation month if services provided fall under the “in lieu of services (ILOS)” authority.  Find more details on the ILOS rule.

Colorado’s 1915 (b)3 Waiver has always included the authority to continue receiving FFP for members receiving mental health services at private freestanding psychiatric hospitals as an “in lieu of” service if the member is enrolled with a managed care entity.

Contact John Laukkanen, Behavioral Health Strategy Manager, if you have additional questions.

IMD Forums

Upcoming Provider Forum

HCPF will be restarting IMD forums to discuss access and reimbursement challenges providers face while providing care to members in need of intensive mental health support and psychiatric care.  We will be using the recent findings from Health Management Associates’ research to set our initial agendas and will expand dynamically as topics and lines of discussion evolve. 

The IMD Forum is scheduled for the last Thursday of each month at 2PM. Please click to join. 

July 27, 2023 Forum Agenda
August 31, 2023 Forum Agenda
September 28, 2023 Forum Agenda
October 26, 2023 Forum Agenda
November 30, 2023 Forum Agenda

Contact Carly Donohue, if you have additional questions.

Inpatient Psychiatric Hospitals

Both private and public facilities in Colorado provide inpatient behavioral health care and meet the criteria of an IMD. Inpatient Psychiatric Hospitals can receive Medicaid reimbursement in line with the In Lieu Of authority described above. 

The two state run Mental Health Hospitals (Colorado Mental Health Hospitals in Pueblo & Fort Logan) are IMDs and can only receive Medicaid funding for services provided to members under 21 or over 64 years of age.

Reference the Inpatient and Outpatient Billing Manual for information.

Contact Jessica Short, Hospital Policy Specialist, if you have additional questions.

Child-Serving Residential Facilities

Many children are able to be covered in an IMD setting under the “Psych Under 21” benefit. There is more information about this exemption from the IMD exclusion here

This benefit allows children under 21 to be placed in a Psychiatric Residential Treatment Facility (PRTF), which can be paid for by Medicaid (including room and board).  However, any other facility type (i.e, Qualified Residential Treatment Program) is not eligible under this benefit and needs to adhere to requirements to avoid IMD designation. 

For more information regarding PRTFs and QRTPs

Contact Christina Winship, Child Health State Plan Policy Specialist, if you have additional questions.

Nursing Facilities & Skilled Nursing Facilities

Since the IMD exclusion applies primarily to members ages 21-64, facilities that serve members 65 years and older navigate the IMD policy by ensuring they keep their census of members with a behavioral health diagnosis under 50%.  

All Nursing Facilities are required to screen admissions for serious mental illness to ensure members have the appropriate care and services.

Please reference the Pre-Admission Screening and Resident Review Program webpage for more information.

More information on Nursing Facilities and what services are available through Medicaid can be found on the Nursing Facilities website. 

Please note that Assisted Living Facilities are considered Home and Community-Based Services and do not assess for or treat serious mental illness.

Substance Use Disorder (SUD) Providers

Under Colorado’s 1115 Waiver, residential SUD Facilities with more than 16 beds are eligible to receive reimbursement through Health First Colorado (Colorado’s Medicaid program).

For more information, visit the SUD webpage.

Contact our SUD policy staff at HCPF_sudbenefits@state.co.us if you have additional questions.

Recent IMD-Related Projects

2022/2023 ARPA 2.0 IMD Risk Mitigation Project

HCPF has explored the parameters of a Mental Health 1115 Waiver related to the federal IMD exclusion guidelines in order to seek flexibility for a continuum of mental health services on a campus for residential and step-down mental health services. This project considered barriers to supporting continuum or step-down services such as shared staffing and number of treatment beds on a campus, as well as the 15-day reimbursement policy.  

HCPF contracted with Health Management Associates (HMA) to research and provide support in identifying an appropriate scope for this waiver based on CMS guidelines, a survey of other states’ solutions for campus continuums, and alignment with Colorado continuum efforts. HMA facilitated this stakeholder engagement and gave a final summation presentation on June 5, 2023. The slide deck for this meeting can be found on page 30 in the IMD Stakeholder Summary Final Report.

Additional Reports and Resources from this project:

HMA contracted with HMA in 2020 to do a distinct analysis on average length of stay in IMDs. The findings of this analysis can be found in the HMA Options Medicaid Coverage of Institutions for Mental Diseases report.