Public Comment Regarding 2026 Appropriations Act – Items 291.BB.6 and BB.7

Timber Ridge School provides PRTF and ASAM services for males between the ages of 12-18.  We have provided these services for 55 years from the northwestern area of the Commonwealth and provided these services to youth from all across Virginia. 

We appreciate the opportunity to provide comments regarding the proposed State Plan Amendment implementing Items 291.BB.6 and BB.7 of the 2026 Appropriations Act, which would maintain the rate ceilings in effect as of June 30, 2026, while eliminating rebasing and inflation adjustments for Psychiatric Residential Treatment Facilities (PRTFs) and qualifying Addiction and Recovery Treatment Services (ARTS) residential providers.

While we recognize the Commonwealth's responsibility to manage Medicaid expenditures, eliminating future rebasing and inflationary adjustments will have significant unintended consequences for providers serving Virginia's most vulnerable youth.

In our case, due to the reduction in revenue of over $300,000 based on our cost study provided and inflation, we plan to reduce the number of Virginia Medicaid beds capacity for the PRTF from 29 beds to 10 beds and for the ASAM (ARTS 3.5) from 32 beds to 16 beds.  This will ensure our ability to remain within ratio but also requires us to maintain little flexibility in expansion and contraction of available beds as is common in these types of programs.  To maintain stability, we will increase our effort to expand admissions from other states. 

PRTFs and ARTS residential programs are labor-intensive services that rely on highly qualified clinical, nursing, psychiatric, educational, and direct care staff. Over the past several years, providers have experienced substantial increases in operating costs, including:

• Rising wages necessary to recruit and retain qualified employees in an increasingly competitive workforce.
• Continued pressure from increases in minimum wage, resulting in wage compression and the need to adjust compensation across all staffing levels.
• Significant increases in employer-sponsored health insurance premiums and employee benefit costs.
• Escalating salaries and contract costs for psychiatrists, psychiatric nurse practitioners, psychologists, registered nurses, and other licensed behavioral health professionals, all of whom remain in critically short supply.
• Increased costs for electricity, natural gas, water, fuel, food, insurance, technology, and other utilities necessary to safely operate 24-hour residential treatment facilities.
• Growing maintenance and capital expenses required to preserve aging facilities, maintain regulatory compliance, and ensure safe therapeutic environments for children and adolescents.

Unlike many industries, residential behavioral health providers cannot substantially reduce staffing or services without negatively impacting patient safety, treatment quality, regulatory compliance, and accreditation standards. The overwhelming majority of operating expenses are personnel-related, and these costs continue to increase regardless of whether reimbursement rates remain frozen.

Without periodic rebasing and inflationary adjustments, Medicaid reimbursement will continue to lose purchasing power each year. This effectively reduces provider reimbursement in real dollars, creating financial instability that threatens access to care for children and adolescents with complex psychiatric and substance use disorders.

The likely consequences include:

• Increased difficulty recruiting and retaining qualified clinical and direct care staff.
• Reduced investment in facility maintenance, safety improvements, and therapeutic programming.
• Financial strain that may force providers to reduce capacity, delay expansion, or discontinue services.
• Increased reliance on emergency departments, inpatient hospitals, and state-operated facilities due to reduced community-based capacity.

Virginia has made significant investments in strengthening its behavioral health system and expanding access to residential treatment. Freezing reimbursement rates while eliminating future rebasing and inflation adjustments places those investments at risk and undermines the long-term sustainability of providers that deliver these essential services.

We respectfully urge DMAS and the General Assembly to reconsider this policy or establish an alternative mechanism that allows reimbursement rates to reflect documented increases in provider costs. At a minimum, periodic inflationary updates or scheduled rebasing are necessary to ensure that reimbursement keeps pace with the actual cost of delivering high-quality, evidence-based residential behavioral health services.

Protecting access to care for Virginia's children and families requires a reimbursement methodology that recognizes the economic realities providers face and supports the continued availability of these critical services.