Institutes for Mental Disease (IMD)

In 1965, when Medicaid was established, Section 1902 (A) (b) created the term Institutes for Mental Disease or IMDs. These were 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.” However, the federal government established the IMD exclusion at the same time. That states, “no Medicaid payment can be made for services provided either in or outside the facility for IMD patients.” 

The 2016 Final Rule from Centers for Medicare & Medicaid Services (CMS) stated that states can pay for up to 15 days in a capitation month if services fall under the “in lieu of services” rule. However, stays longer than 15 days result in a full recoupment of all payment made to the IMD in that month. Each state uses the State Medicaid @smanual to determine if a facility is an IMD.

Current IMD-Related Projects

ARPA 2.03 IMD Risk Mitigation Project
The Department of Health Care Policy & Financing (the Department) is exploring 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 waiver will not seek to waive length of stay limitations, but will consider other barriers to supporting continuum or step-down services such as shared staffing and number of treatment beds on a campus. 

Health Management Associates (HMA) has contracted with the Department 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 will facilitate stakeholder engagement involving this work into 2023. Contact John Laukkanen, Behavioral Health Policy and Benefit Operations Unit Supervisor, if you have questions.



Additional questions can be sent to John Laukkanen

Child-Serving Residential Facilities

Additional questions can be sent to Christina Winship

Inpatient Psychiatric Hospitals

Reference the Inpatient and Outpatient Billing Manual for information.

Additional questions can be sent to Jessica Short.

Substance Use Disorder (SUD) Providers

Under Colorado’s 1115 Waiver, “Expanding the Substance Use Disorder Continuum of Care'' Residential SUD Facilities—including those with more than 16 beds—are eligible to receive reimbursement through Health First Colorado (Colorado’s Medicaid program). Visit the SUD webpage for more information. Email the SUD inbox if you have questions.

Nursing Facilities

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