Department of Mental Health reclassifies CRT as SMI and retools residential payments; agency vows not to displace residents

Samantha Sweet, deputy commissioner at the Department of Mental Health, briefed the committee on April 23 about a recent programmatic change: CRT (community rehabilitation and treatment) has been transitioned out of an HCBS waiver into a state plan amendment and is now treated as a rehabilitative SMI (severe mental illness) service. The shift changes billing rules, documentation and how residential services are paid.

Samantha said the move requires that every service provided to people meeting SMI criteria meet medical‑necessity standards and be documented through the Vermont version of the ANSA (Adult Needs and Strengths Assessment). She emphasized that the diagnostic criteria and treatment history standards did not change with the reclassification, but prior authorization and documentation practices have become more formalized.

SMI eligibility continues to cover five primary service buckets the department uses for this population, including residential treatment and targeted case management. Samantha explained that ANSA is used as a communication, eligibility and treatment‑planning tool; staff must pass training and the assessment is intended to be collaborative among the treatment team and the individual receiving services.

The most immediate operational issue discussed was residential care funding. Federal rules restrict Medicaid from paying for permanent housing. DMH staff said many existing residential facilities in the state function as permanent homes (including units with HUD funding or long‑term leases). Medicaid can pay for residential services when there is an active, treatment‑oriented goal; it cannot pay simply to subsidize permanent housing. DMH is working to (1) design a new fee‑for‑service rate structure for residentials, (2) align payments with the Certified Community Behavioral Health Clinic (CCBHC) transition, and (3) use contingency payments and reconciliations during the transition.

Samantha said the agency engaged Guidehouse to help develop reimbursement models because Vermont residential arrangements are heterogeneous (leases, housing authority ownership, HUD involvement) and a single national rate model does not fit easily. DMH moved a planned implementation date to align with CCBHC changes and avoid unintended interruptions.

On prior authorizations, Samantha reported that since July 1 the department has recorded five residential denials: two due to missing paperwork, one because the primary diagnosis was substance use rather than an SMI primary diagnosis, and two because the individuals did not meet SMI criteria. She said the department has not removed any residents from their beds when agencies documented treatment goals and supports.

Committee members repeatedly raised fears that residents could become homeless if residentials lose Medicaid funding. Samantha responded directly: "We are not in the business of making anyone homeless. We do not want anyone to lose their housing. We do not." She said DMH is exploring creative funding shifts, contingency payments, and coordination with the legislature and housing partners to preserve beds and avoid displacement.

What happens next: DMH will continue rate design work with Guidehouse, coordinate with designated agencies and the legislature on funding options, and use prior authorization reviews to target services to those meeting SMI treatment criteria. DMH asked agencies to alert the department if any individual appears at risk of becoming unhoused so it can intervene.

The committee did not take formal action during the briefing; members asked for continued updates and for DMH to coordinate potential legislative solutions to preserve housing and treatment capacity.