Walking around Rimrock’s 40-bed addiction treatment facility in Billings, CEO Lenette Kosovich says as many as half of the beds could be empty on any given day.

It’s not for lack of need. With about 90,000 Montanans estimated to have a substance use disorder and roughly 10% of those seeking treatment, demand for detox and rehabilitation services is high. Kosovich places the blame for the unused beds on a decades-old federal rule dictating which mental health and addiction services can be covered by Medicaid, the public health insurance program for low-income people, and what treatments are out of bounds for government reimbursement. 

The 1965 rule was meant to guard against the historically unethical warehousing of mentally ill people at large facilities, referred to as Institutions of Mental Disease (IMD), and to incentivize states to invest in smaller-scale community-based treatment. Kosovich’s 40-bed facility, the largest treatment center at Rimrock, is on the wrong side of the IMD rule. Because it’s licensed for more than 16 beds, it can’t accept patients insured by Medicaid. 

“It infuriates me because it’s not just,” Kosovich said, calling the hurdle for publicly insured patients, as opposed to those with private insurance, “a parity issue.”

Rimrock has worked within the rule to create treatment avenues for Medicaid patients, such as serving them in smaller residential facilities licensed for fewer than 16 beds and having the facility’s detox center licensed separately as a “suite” within the larger building. But in the coming months, to Kosovich’s relief, those workarounds will be a thing of the past. 

A new agreement between state and federal health officials carves out an exception to the IMD rule, allowing Kosovich’s 40-bed facility to scale up treatment for an estimated 350 additional Medicaid patients a year. But the win for Rimrock is only part of the state’s overall plan to expand inpatient treatment beds for Montanans with acute mental illnesses and substance use disorders. And that broader goal has been stalled by one prominent and beleaguered psychiatric facility with hundreds of patients: the Montana State Hospital in Warm Springs.


Montana’s health department received approval in July for part of a plan it submitted to the federal Centers for Medicaid and Medicare Services (CMS) last October. That proposal would help implement Republican Gov. Greg Gianforte’s signature HEART Initiative, a far-reaching set of reforms meant to improve mental health and substance use treatment in Montana partly funded by recreational marijuana tax revenues. 

Among other requests, the state asked for Medicaid to cover short-term treatments for serious mental illness, serious emotional disturbance and addiction at facilities with more than 16 beds, an exception to the IMD rule. The proposal identified Rimrock and the state psychiatric hospital as existing institutions that would benefit from the change.   

In a July 1 letter addressed to state Medicaid Director Mike Randol, CMS greenlit only part of the plan. The agency said Medicaid could begin covering addiction treatment at large inpatient facilities, making Montana one of 34 states with similar amendments to the IMD policy. Officials from Gianforte’s office called Kosovich to share the good knews.

“It’s a huge change for Montanans that need help,” she told Montana Free Press. 

But even as Kosovich and the Gianforte administration had cause for celebration, the federal government’s letter also included a significant set-back for the state’s proposal: CMS said it would not allow Medicaid to cover short-term treatments for serious mental illnesses at large facilities, pointing to the state hospital at Warm Springs as the reason for the denial. 

“At this time, CMS is not approving coverage for [serious mental illness or serious emotional disturbance] services provided in an IMD,” the letter read, “given the termination of Montana State Hospital’s participation” in Medicaid and Medicare earlier this year. 

The state psychiatric facility lost its accreditation with the Medicaid and Medicare programs in April, following media reports and federal investigations into patient injuries, deaths and widespread staffing shortages. While the hospital had only received roughly $7 million in annual reimbursements for elderly patients from the Medicare program, the termination underscored the facility’s failing health care standards and safety protocols for patients and staff. Without federal accreditation, CMS said, Medicaid funding for the state hospital was off the table. 

Among the states that have appealed to the federal government for more Medicaid funding, few have lost accreditation for a state-run facility while their waiver application was pending, said Madeline Guth, a Medicaid policy analyst at the Kaiser Family Foundation who specializes in the type of waiver request submitted by Montana.

“I do think what happened in Montana is pretty unique,” Guth said. “Certainly when I saw the letter from CMS saying that they were not approving due to the termination of the state hospital’s participation [in Medicaid and Medicare], that was not something that’s familiar to me.”

The spotlight on Warm Springs’ inadequacies isn’t the only bruising implication for state health officials and the Gianforte administration. The federal decision also carries steep financial implications for the state’s coffers. At Warm Springs, a facility with about 220 patients as of mid-July, Medicaid reimbursements could have ranged between $13 and $15 million annually for short-term patients between the ages of 21 and 65, according to calculations spelled out in the state’s October proposal. Over five years, the projected expenditures for treating the state hospital’s population would have exceeded $70 million. Without Medicaid reimbursements, those expenses remain as they have been: the sole responsibility of state taxpayers.

“That’s real money,” said Scott Malloy, a behavioral health program manager at the Montana Healthcare Foundation, a research and grantmaking organization. He said behavioral health providers, including the state health department, are always assessing, “[h]ow do you leverage and maximize any and all federal dollars? That’s what all of this is about.”

Comparatively, Rimrock stands to receive a much smaller amount in Medicaid reimbursements for its now-federally approved substance use treatments, according to calculations presented in the state plan. Over five years, Medicaid is anticipated to cover less than $4 million worth of short-term addiction services at the Billings facility. 


Montana State Hospital, operating on a $97 million biennium budget largely funded by state tax dollars, does not have a strong financial forecast. Adam Meier, the outgoing head of the state Department of Public Health and Human Services, told lawmakers in March the hospital was more than $7 million over budget, mostly because of its reliance on costly contract workers to fill gaping staff vacancies.

Despite the tens of millions of dollars Medicaid coverage could bring the hospital, state health officials are not jumping at the opportunity to fix the primary problem preventing federal support: accreditation. 

In a July interview with MTFP, Meier and his soon-to-be successor, Charlie Brereton, did not commit to pursuing accreditation for the state hospital, saying the state has not decided on a plan for the future of the facility.

“At this point, it’s too early to say what the best use of that facility is,” Meier said in a July 21 phone interview. Referencing Alvarez & Marsal, a recently hired private consulting firm tasked with reviewing the hospital’s operations, he continued, “That’s why we’ve brought in experts to really help us assess what’s the best use of our facilities.”

Brereton, the agency’s current chief of staff, said the state’s interest in IMD waivers for certain facilities does not mean the state hospital will necessarily follow the same route, despite the state’s October proposal seeking permission to do so. He indicated that the federal government’s reference to accreditation in its July letter was not particularly influential. 

“IMD [waiver] approvals are not going to directly factor or influence the work that we’re doing at [Montana State Hospital] and our ongoing assessment of whether accreditation makes sense,” Brereton said. “We view those as two separate issues.”

Asked about the state’s projection that Medicaid could cover roughly $70 million of the hospital’s treatment costs over five years, Meier was unperturbed. 

“I would have to look at that to see if that would even be accurate,” Meier said. “But again, there may be ways that we can meet some of those [cost projections] in Medicaid elsewhere in the system more efficiently.”

“IMD [waiver] approvals are not going to directly factor or influence the work that we’re doing at [Montana State Hospital] and our ongoing assessment of whether accreditation makes sense. We view those as two separate issues.”

Incoming DPHHS Director Charlie Brereton

The state is continuing to negotiate with the federal health agency about other IMD waiver requests for private facilities, Meier and Brereton said, such as hospitals with psychiatric units.

“That’s the intent all along,” Meier said. “It’s to be able to build capacity across the state by providing a reimbursement incentive for a large swath of our population. And so that’s why we are continuing to pursue that segment of the waiver.”

Montana Medicaid Director Randol said the state has had weekly meetings with CMS officials to discuss the remaining parts of its waiver applications, but that he couldn’t pinpoint a precise timeline for the federal agency’s future responses.

“Working with CMS is an extremely slow process. We’re one state and one program out of 56 different programs,” Randol said. “We will continue to negotiate and work with them and we’ll have a positive outcome.”


Ed Amberg worked at the state hospital in Warm Springs for three decades, spending most of his last 10 years as the hospital’s administrator before retiring in 2009. A decision by the state health department and the Gianforte administration to not pursue federal accreditation, he said, could signal dramatic changes for the hospital, including downsizing units or contracting with private providers for some services.

“That is one thing you can look at — are they trying to sabotage it?” Amberg said. “Or do they want it to go down so they can move on to something different, whether that’s privatizing the facility or moving the facility somewhere else?”

Those possibilities, which Meier and Brereton did not specifically discuss, would create waves of impact across Montana’s psychiatric care landscape. Unlike some psychiatric facilities in other states, Montana State Hospital is legally obligated to accept a wide variety of patients, many of whom have been committed by judges or turned away from local facilities because of lack of space or staff capacity. 

Amberg said that requirement has made the hospital an essential public service, and that past efforts to limit the types of patients who go to Warm Springs hit many obstacles. In an ideal system, he said, Montana would have inpatient beds spread out around the state, a tactic that could allow the state hospital to take a smaller number of high-needs or long-term residential patients. 

“I think if we could better develop some inpatient capacity on the community level it would be much better,” Amberg said. “Because people do need that service, and I don’t think they should have to go all the way across the state to the state hospital for a short-term stay.”

“That is one thing you can look at — are they trying to sabotage [Warm Springs]? Or do they want it to go down so they can move on to something different, whether that’s privatizing the facility or moving the facility somewhere else?”

Former State Hospital Administrator Ed Amberg

With the Gianforte administration’s interest in pursuing Medicaid coverage for private facilities that treat serious mental illnesses, building up psychiatric units in a variety of communities  could be a next step for Montana, said Matt Kuntz, executive director of the mental health advocacy group NAMI Montana. The group has spent decades lobbying against the restrictive IMD rule through its state chapters and nationally.

“I’m confident that we got the IMD exclusion waiver. And now we have to figure out how to apply it to more places,” Kuntz said in a July interview. “I don’t see how we go back. I think it’s only going to be more facilities approved.”

But in a display of the often divergent visions for how to meet Montana’s mental health care needs, other advocates and policy makers strongly oppose expanding treatment for patients in hospital settings. That approach, said nine-term state legislator and current state Rep. Mary Caferro, D-Helena, is trying to fix a downstream problem without first addressing the upstream source.

“The community services need the attention and they need it now. Or there’s going to be no option but the most expensive care that pulls people out of their communities,” Caferro said, referring to the state hospital. “The best care is to avoid sending people there in the first place.”

The split over less restrictive, community-based treatment and more intensive institutional care is at the heart of the debate over Medicaid’s IMD rule. Policy makers often disagree about where to invest first and where to invest most — building up hospital units so mental health patients can access treatment in moments of acute need, or laying the preventative groundwork to stave off such crises in the first place. 

In Caferro’s view, the latter strategy is the most critical for Montana right now, and the state has a plethora of opportunities to invest in non-institutional community services, including case managers, social workers, crisis responders and therapists. To that end, she and other Democratic lawmakers on the Legislature’s Children, Families, Health and Human Services Interim Committee have urged the Gianforte administration to help boost health care worker pay by increasing the state’s Medicaid reimbursement rates, which often fall far short of the true cost of providing health care services. 

The governor’s office and state health officials have indicated that they see provider rates as a core issue as well. Meier has acknowledged that without offering competitive pay, health care administrators have a difficult time recruiting and retaining staff. With fewer staff comes a squeeze on quality of service for patients.

Meier and Brereton pointed to the multi-month provider rate study the state health department commissioned last fall as proof of the state’s commitment to addressing the problem. The takeaways from that as yet unreleased report, they said, will help the administration shape its proposed health care budget for the 2023 legislative session. 

Above all, Meier and Brereton said that investing in inpatient care and community-based preventative measures should not be seen as an either/or proposition. The state needs all parts of the behavioral health care system to be functional, they said. 

“They’re not mutually exclusive,” Brereton said. “You need a healthy balance and combination of both for a healthy continuum of care. And that’s exactly what we’re working on.”

The administration’s pursuit of waivers to the IMD rule, he said, is taking advantage of a chance to make one part of the system stronger. 

“There is a demand in Montana for treatment in this sort of institutionalized setting,” Brereton continued. “And we are using the tools at our disposal with what we have at this point in time to meet that demand.”

The Montana Healthcare Foundation, whose behavioral health program manager Scott Malloy is quoted as a source for this story, is a 2021 financial supporter of Montana Free Press. MHF had no involvement in the production of the story.

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Mara writes about health and human services stories happening in local communities, the Montana statehouse and the court system. She also produces the Shared State podcast in collaboration with MTPR and YPR. Before joining Montana Free Press, Mara worked in podcast and radio production at Slate and WNYC. She was born and raised in Helena, MT and graduated from Seattle University in 2016.