Community Intermediate Care Facilities for Individuals with Intellectual Disabilities (ICF/IIDs) should be explicitly excluded from the proposed elimination of inflation adjustments. Eliminating inflation adjustments would have a significant financial impact on these essential providers. Community ICF/IIDs operate in small, highly specialized settings that serve individuals with the most significant intellectual disabilities and complex medical needs. Unlike larger providers that may be able to absorb increasing costs across larger operations, community ICF/IIDs typically serve only four to twelve individuals. Fixed costs—including 24-hour nursing, direct support staffing, specialized clinical services, utilities, insurance, and regulatory compliance—continue to increase each year regardless of occupancy. Without regular inflationary adjustments, reimbursement will increasingly fail to reflect the actual cost of providing care, forcing providers to absorb growing operating losses.

The financial impact is compounded by the inherent vulnerability of these small programs. Across Virginia, Community Services Boards operate just 38 homes serving 262 individuals, while private providers operate 24 homes serving 138 children and adults. Because costs are distributed across so few residents, even a single vacancy or an individual with exceptionally complex medical needs can substantially affect a home's financial stability. Eliminating inflation adjustments would further widen the gap between reimbursement and actual costs, placing these providers at increased risk of financial distress and eventual closure.

The downstream consequences would extend far beyond provider budgets. Community ICF/IIDs deliver one of the highest levels of community-based care available for individuals whose medical and behavioral needs cannot safely be met in other residential settings. If reimbursement fails to keep pace with inflation and rising operating expenses, providers will face difficult decisions about limiting admissions, reducing capacity, or closing programs altogether. This would reduce access to essential services for some of Virginia's most medically fragile individuals while increasing reliance on more costly hospital, crisis, and institutional resources.

These concerns are particularly acute given the planned closure of Hiram Davis Medical Center, which has long served as a critical medical resource for individuals with intellectual and developmental disabilities with complex healthcare needs. As specialized medical resources become less available, maintaining a financially stable network of community ICF/IIDs becomes even more important. Reducing reimbursement growth through the elimination of inflation adjustments risks undermining this critical infrastructure at a time when demand for these specialized services is increasing.

Although reimbursement for community ICF/IIDs is governed by 12VAC30-90-10(6), which provides for retrospective reimbursement based on reasonable costs consistent with Medicare principles, these providers remain subject to reimbursement limitations that already constrain cost recovery. The elimination of inflation adjustments would further erode reimbursement over time, making it increasingly difficult for providers to recruit and retain qualified staff, maintain clinical expertise, and continue delivering the level of care required by this population.

For these reasons, community ICF/IIDs should be expressly excluded from this proposed policy. Eliminating automatic inflation adjustments for these providers would not generate efficiencies in service delivery; instead, it would steadily weaken the financial viability of a small but indispensable provider network, reduce access to highly specialized community-based care, and ultimately increase costs elsewhere in Virginia's Medicaid and healthcare systems.