Senate committee reviews S.36 and Vermont’s residential substance‑use treatment system

Senate Health & Welfare Committee members heard detailed testimony on S.36 and the state’s residential substance‑use treatment system on Feb. 19, with public health officials, treatment providers and family advocates offering competing views on length of stay, Medicaid payment rules and gaps in aftercare.

Kelly Daugherty, deputy commissioner at the Vermont Department of Health’s Division of Substance Use Programs, told the committee that residential treatment in Vermont is delivered across a small number of Medicaid‑covered programs and that clinical assessment — not a fixed number of days — should determine length of stay. “Length of stay is based off of evaluation from a healthcare provider,” Daugherty said, adding that “it is not at all clinical best practice to define a predetermined need for a particular length of stay.”

The department and clinical witnesses framed the issue as a systems problem: Daugherty and Tony Folland, clinical services manager for the Division of Substance Use, described a continuum that includes hospital care, medically managed residential services (high intensity), clinically managed low‑intensity residential services, intensive outpatient and recovery housing. Folland emphasized relapse as common in a chronic condition and said residential care’s goal is stabilization before step‑down and long‑term engagement.

Why it matters: Witnesses agreed that gaps at transitions — especially the period immediately after discharge from residential care — are where people are most likely to relapse or re‑enter high‑cost services such as emergency care or the justice system. Several testifiers urged that payment and placement rules be adjusted so residential providers can offer longer, coordinated episodes of care for people with complex, co‑occurring needs.

Key testimony and perspectives - Department of Health: Daugherty said Vermont does not classify facilities as “short‑term” or “long‑term” and that Medicaid does not dictate a fixed length of stay. She explained limits imposed by the federal “IMD exclusion” and Vermont’s Section 1115 Medicaid waiver: because some residential facilities are considered IMDs (more than 16 beds), Vermont may only provide Medicaid funding for those services if the statewide average length of stay does not exceed 30 days. Daugherty said episodic payments, implemented in 2019 for high‑intensity residential sites, were intended to incentivize appropriate admissions and are calculated by diagnosis and medical complexity; pharmaceuticals are billed separately and stays under three days are paid at a per‑diem rate.

- Treatment providers and advocates: Mark Redmond, executive director of Spectrum Youth and Family Services, and Chris Smith, Spectrum’s chief clinical officer, urged longer, more integrated episodes of care and better connections between residential treatment, partial hospitalization and intensive outpatient care. Redmond argued that “treating individuals at the highest level of care for short periods of time is a failing cycle” and pointed to neighboring New Hampshire providers that offer longer, coordinated sequences (detox → residential → partial hospitalization → intensive outpatient).

Chris Smith described two composite client sketches to illustrate gaps: one patient who succeeded with coordinated aftercare, and another with co‑occurring mental health and complex substance exposures who cycled back into crisis after a short residential stay and fragmented follow‑up. Smith said the state should increase co‑located or better‑coordinated services for people with complex, co‑occurring needs.

- Family advocates: Dawn Tetro, founder of Jenna’s Promise and a parent who lost a child to overdose, said current stays commonly called “14 days” are effectively detox and too short for engagement, particularly with fentanyl and xylazine in the drug supply. “People cannot get aftercare plans set up” in 14 days, she said, and urged adoption of longer episodes mirroring other states to reduce repeated cycles of emergency care and incarceration.

- Recovery housing: Candace Gale, director of community relations for Vermont Foundation of Recovery (B4), asked the committee to preserve the distinction between clinical residential treatment and certified recovery residences (sober living). Gale said recovery residences provide non‑clinical peer support and housing and urged the committee to defer technical bill language to the Department of Health to avoid unintended changes that would conflate housing and clinical treatment.

- Medicaid oversight: Alex McCracken of the Department of Vermont Health Access (DVHA) told the committee the agency is reviewing the episodic payment rate structure with a planned report by July 1 and that any changes to rates or payment design would be tied to agency review and budget authority.

Data and program details cited to the committee - Medicaid‑covered residential providers: two organizations operate five Medicaid‑covered residential locations in Vermont: Valley Vista (two sites: Bradford and Vergennes) and Recovery House, Inc. (three sites: Serenity House, Grace House and Magee House). Valley Vista and Serenity House are described as medically managed (high intensity) and require 24‑hour nursing supervision; Grace House and Magee House are described as clinically managed, lower‑intensity residential settings.

- Length of stay and utilization: Department figures presented to the committee show median and average lengths of stay for high‑intensity residential programs in calendar years 2023–24 in the low‑teens of days (medians ~14 days, averages 11–12 days) and longer stays and wider ranges for low‑intensity residential programs (examples cited: Medicaid population stays at Grace House up to 112 days in 2023 and 52 days in 2024 for particular cases). Daugherty said the pre‑episodic payment era (circa 2018) produced similar averages (roughly 17 days average for high intensity).

- Readmissions: Readmission rates to high‑intensity facilities were characterized as low in the 1–7 day window, slightly higher in 8–30 days (up to ~5% in 2023), and higher again at 31–90 days (just under 12% in 2024); witnesses emphasized that re‑engagement in services is not always a negative indicator because substance use disorder is chronic and relapses can reflect renewed help‑seeking.

- Payment policy: Episodic payments, in place since 2019 for high‑intensity residential programs, provide a bundled payment per episode with diagnostic factors affecting the rate (alcohol often yields higher episodic payments than opioid use disorder because of medical complexity). Daugherty noted that if statewide average length of stay for IMDs exceeds the waiver limit, Vermont must backfill costs with state dollars.

Discussion highlights and proposed directions - Aftercare navigators: The Health Department has proposed a FY2026 budget request to base aftercare navigators at high‑intensity residential providers to help clients operationalize discharge plans and increase follow‑up care. Daugherty and providers told the committee that current follow‑up adherence (the percentage of people who attend their next scheduled outpatient appointment after residential discharge) is under 25% and that navigators are intended to raise that number.

- System connectivity and co‑occurring care: Multiple witnesses urged strengthened coordination across hospital, residential, outpatient, hub‑and‑spoke medication programs and recovery housing; some recommended co‑location or formal transportation and placement arrangements like programs described in New Hampshire.

- Cautions about fixed lengths of stay: Health Department witnesses and clinicians warned against legislating specific lengths of stay, calling that practice clinically invalid and likely to cause mismatches between clinical needs and authorization rules.

What the committee heard but did not decide The committee received testimony and technical descriptions but took no formal votes or motions on S.36 during the hearing. DVHA said it will report on episodic payment review by July 1; the Health Department requested time to supply additional data (annual detox counts and the proportion of residential patients who move into certified recovery housing).

Ending: The committee signaled further work ahead. Senators and witnesses asked for written testimony, more data on transitions to recovery housing, and review of episodic payment structures; committee members said they expected additional conversations on how to align payment, placement and aftercare to reduce cycling among high‑cost services and protect patients at high risk of post‑discharge overdose.