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Light at the end of the tunnel: St. Croix Health & Rehab Center finally able to file for Medicaid approval

Orchard View Terrace, the county’s assisted living facility, operates at well below capacity in large part due to its inability to accept Medicaid clients. Tom Lindfors / RiverTown Multimedia 1 / 2
Kitty Rhoades Memory Care Center has been operating at below capacity since it opened in July 2017 due to its inability to accept Medicaid clients. Tom Lindfors / RiverTown Multimedia 2 / 2

On May 5, 2015, following several years of debate and two referenda, the St. Croix County Board of Supervisors completed a five-year strategic plan and approved a $20 million referendum to build a new 50-bed skilled nursing facility and remodel the existing nursing home into a 48-bed assisted living facility and a 10-bed memory care facility.

Today the St. Croix Health & Rehab Center (SCHRC) skilled nursing facility operates at near capacity while the assisted living facility, Orchard View Terrace, and the memory care facility, Kitty Rhoades Memory Care Center, operate at well below capacity in large part due to their inability to accept Medicaid clients.

It has been a long road for the SCHRC filled with frustration and disappointment as they have waited for a decision from the Centers for Medicare and Medicaid Services (CMS) on whether or not to allow them to accept Medicaid funded clients into the two facilities. It has been frustrating as well for the taxpayers and residents of St. Croix County who paid for the facilities fully expecting to be able to afford to use them with assistance from Medicaid.

That frustration may at last be coming to an end.

On Friday, March 22, CMS finally delivered the implementation guidance they have been promising since August 2018.

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In a letter emailed to State Medicaid Directors and posted to the CMS website, CMS Deputy Administrator and Director Chris Taylor laid out in an 11-page document, Frequently Asked Questions designed to help states determine whether institutions originally prevented from receiving Medicaid funding under the 2014 Final Setting rule HCBS could now qualify to receive that funding via the heightened scrutiny process (

This is the opportunity the St. Croix Health & Rehab Center has been waiting on since the state initially submitted their evidentiary package to CMS back in September 2018.

Current status

New Richmond resident Tom Olien's elderly mother suffered from heart-related health issues. Following her treatment in the hospital, she was moved to The Deerfield to convalesce. Upon completing her rehabilitation at The Deerfield, there were no rooms available for her to stay, so Olien moved his mother to the St. Croix County Health & Rehab Center (SCCHC), a place she was familiar with having worked there as a housekeeper for nearly 10 years.

"Come to find out that the floor that my mother's on, which is assisted living, is about half full and those are all self-pay people. In 2014, the federal government passed some kind of new legislation requiring the Health Center to get the okay from the federal government to be able to accept Medicaid for that building. That building's been open since September of last year and they have not been able to get anyone in there with Medicaid since then. This is a county facility. We paid for it. None of the people working there are very happy about this. They want to be able to help people but it's out of their control. We're fortunate enough to have the means for now to be able to pay the $4,700 a month that it costs for assisted living, but there's a lot of people who can't afford it and who need Medicaid in this county," said Olien.

According to St. Croix County Health & Rehab Center Administrator Sandy Hackenmueller, the three different facilities on campus each require a different license to accept specific types of Medicaid payments. The new Health & Rehab Center building is classified as a skilled nursing facility and inherited its license from its previous location in what is now Orchard View Terrace. That license allows it to accept all sources of payment from private pay to insurance to Medicaid and Medicare. As of this story, 48 of its 50 beds are occupied.

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Orchard View Terrace, classified as an assisted living facility, and, Kitty Rhoades, classified as a memory care facility, were built to be considered as Community Based Residential Facilities in the eyes of Medicaid. These were new licenses to the county. By arrangement between the State Department of Health Services and CMS which distributes federal Medicaid funds to the states, a CBRF cannot accept Medicaid funds (Title 19) unless it is eligible for a Home and Community Based Waiver.

On Jan. 10, 2014, CMS released a final setting requirements rule known as HCBS intended to give states more flexibility on how they would be able to use federal Medicaid funds to pay for home and community-based services ( Certain provisions in that rule are currently preventing both Orchard View Terrace and Kitty Rhoades from accepting Medicaid clients.

According to Hackenmueller, of the 48 total beds available at Orchard View Terrace, 15 are currently occupied by private pay residents. Of the 10 total beds available at Kitty Rhoades, four are currently occupied by private pay residents as well.


The initial 2014 CMS rule was intended to promote settings that are home and community-based and do not have the qualities of an institution. It attempted to deter the "warehousing" of people by preventing programs located in, on the grounds of, or immediately adjacent to nursing facilities, institutions for mental disease, intermediate care facilities for individuals with intellectual disabilities and hospitals from automatically qualifying for Medicaid funding.

Per the rule, home and community-based settings must meet conditions that ensure specific rights of people living in those settings. These include things like privacy in living units and bedrooms, control over schedules and activities, ability to have visitors, and protections from eviction.

Initially, because both Orchard View Terrace and Kitty Rhoades are county-owned and located on the grounds of the adjacent St. Croix County Health & Rehab Center, they appeared ineligible to accept Medicaid-funded clients. However HCBS recognized there might be exceptions to the rule so it provided a mechanism called "heightened scrutiny" whereby a state could make a case for such an institution to receive waiver funding.

"The final rule also identifies other settings that are presumed to have institutional qualities, and therefore do not meet the threshold for Medicaid HCBS. If states seek to include such settings in Medicaid HCBS programs, the rule gives them the opportunity to demonstrate that the setting does not have the qualities of an institution through a process called 'heightened scrutiny," said Elizabeth Schinderle, the Midwest Media Contact for CMS.

This provision of the settings rule provided states with a process whereby they could make a case that excluded institutions that met the criteria in the final rule to be eligible to receive Medicaid waiver funding.

Kitty Rhoades Memory Care Center has been operating at below capacity since it opened in July 2017.

Jim Williams is the Director of Member Enrichment at LeadingAge Wisconsin, a trade association serving both not-for-profit and for profit long-term care providers.

"What ended up happening was, because both Orchard View and Kitty Rhoades were opened after March 2014 and because both are county-owned and located on the grounds of the adjacent facility, they could not secure waiver funding, i.e. Family Care funding, without first going through the heightened scrutiny process.

"What CMS was really trying to do was to ensure that waiver dollars that are supposed to be used in community settings like assisted living were not being used to fund people in institutions that are out in a corn field somewhere isolated from the community.

"It was unfortunate because places like Kitty Rhoades and Orchard View Terrace were specifically created at the behest of the community to serve some unique populations that were not otherwise being served, " said Willaims.

It was CMS' expectation that after the publication of the final regulation, stakeholders would not invest in the construction of settings that are presumed to have institutional qualities, but would instead create options that promote full community integration.

HCBS went into effect March 17, 2014.

Aug. 4, 2015, St. Croix County broke ground on its new $20 million health and rehab facility.

"If we had our Medicaid certification, we would be operating according to our projected budget, we'd be paying our debt, and we'd be full," said St. Croix County District 12 Supervisor Dan Hansen. "We knew we would have to reapply, but we were under the impression that the application would be a matter of routine paperwork. We didn't know that it would be a problem.

"Here's the other thing, non-government owned facilities are getting their permits, but government owned facilities have not, which appears pretty unfair to me. It's unfair to the taxpayers who invested in this facility and expressed their belief in this facility. Our community is being short shrifted. This lack of Medicare has put us in a bind. It's been terribly frustrating," added Hansen.

In 2016, CMS issued additional guidance which specified that settings presumed to have the qualities of an institution (such as St. Croix) cannot be determined to be compliant with the HCBS regulatory requirements through heightened scrutiny until they are operational and occupied by beneficiaries.


Orchard View Terrace and Kitty Rhoades Memory Center were not scheduled to open until July 2017.

So before Orchard View and Kitty Rhoades could even convene the heightened scrutiny process they would have to be occupied by clients.

No one was more frustrated with the situation than Hackenmueller.

"If we had already had a CBRF in place, we could have extended its eligibility to accept Medicaid during construction and had at least a year to provide a transition plan.

"Instead, we had to prove first to the state and then to CMS, that Orchard View and Kitty Rhoades were in compliance with the HCBW. But before we could do that, we had to have people in the building that we were caring for that met specific programming stipulations," said Hackenmueller.

By November 2017, Hackenmueller had demonstrated to DHS that SCHRC provided services for clients in a manner that met CMS' definition for home and community-based care. Clients had to be independent, able to come and go as they please, have jobs, have locking doors, be able to bus to community events and leave the campus to attend activities such as family dinners and church.

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"We were one of the first five (institutions) to go through this process in the State of Wisconsin. We have completed everything the state asked for. We've gone through answering all their questions and the public comment period. On Sept. 28, 2018, the State sent the information on to the federal government (CMS) saying, 'Yes, the St. Croix Health Center, Kitty Rhoades and Orchard View meet the intent of the HCBW.' So it's now in the hands of the CMS to say yes or no," said Hackemueller.

"Wisconsin is not the only state in this situation. There are other states also waiting for CMS to make a decision," said Williams.

Estimates put the number at more than 100 nursing homes waiting on CMS in Wisconsin alone.

The last update Hackenmueller had received came from DHS in January and it was not encouraging.

"The bureau of adult programs and policy for the division of Medicaid Services from the State said that CMS is holding the heightened scrutiny and reviews until they issue guidance. They indicated that (CMS) intended to release that guidance on Aug. 28, 2018. The State has heard nothing from them," Hackenmueller said.

Hackenmueller said she gets calls at least twice a week from community members asking about the Medicaid situation.

"I would love to be able to say yes, but I can't. The federal government wrote the regulation. In order for people to be able to utilize Family Care (HCBW), the facilities have to meet this regulation. Seriously there's nothing we can do but wait," said Hackenmueller.

U.S. Sen. Tammy Baldwin's office has been working with St. Croix County to pressure CMS into action. According to Baldwin's office, CMS declined to provide a clear answer as to when they might act on DHS's September submission on behalf of St. Croix County.

In their response, CMS did allude to a mysterious six-state pilot program they were conducting to "determine what guidance states find helpful as they compile their heightened scrutiny (HS) request packets." Those six states were Ohio, Oregon, New Hampshire, Montana, North Dakota and Nevada. Data from the pilot project was supposed to be used to create an FAQ document states would be able to refer to for guidance as they prepare their heightened scrutiny (HS) request packets. CMS reiterated that they would not be reviewing any HS requests until the FAQ document had been released which they expected to be "soon."

"My office has been working to assist St. Croix County on this issue for the past several years and I have been pressing CMS to move this process forward as quickly as possible. I have also expressed my frustration with CMS because I share the very real concern of the residents and their families who wish to have them stay where they currently reside and are receiving quality care," said Baldwin.

When asked about the six-state pilot project, Schinderle had this to say.

"As provisions of the rule have taken effect, CMS has continued to conduct extensive stakeholder engagement with beneficiaries, advocates, providers and states. Based on those discussions, CMS is in the process of finalizing updated implementation guidance on the heightened scrutiny regulatory provisions. CMS anticipates this guidance being released shortly, and will discuss its implications for this setting with the State of Wisconsin."

Elizabeth Goodsitt, Communications Specialist with Wisconsin DHS confirmed Schinderle's update.

"Earlier this month, CMS informed us it is not concluding any reviews until formal guidance is published. CMS gave us no timeline for that publication. We do have a conversation scheduled with CMS, and hope to know more next month," said Goodsitt.

To further understand what the pilot project consisted of and the current status of the project, the News spoke with Nancy Nikolas-Maier, Director of Aging Services with the North Dakota Department of Human Services.

"After the 2014 rule, each state was sort of working at their own pace to get that done based on the situation in their respective state. North Dakota just happened to be in a position where we needed to submit a heightened scrutiny package. So we did that in March 2016," said Nikolas-Maier.

North Dakota initially submitted an evidentiary package on behalf of an Intermediate Care Facility for individuals with intellectual disabilities located on the grounds of a public facility in 2015 to begin the heightened scrutiny process.

CMS originally responded to that submission with feedback in August 2015. North Dakota resubmitted their package in March 2016.

Then on June 8, 2018, CMS sent them a "Summary of Findings," asking for additional information and inviting the staff in North Dakota to participate in a "follow-up conference call with the CMS team to discuss next steps or request technical assistance."

In emails traded back and forth between Nikolas-Maier's office and CMS the conference call was identified as the pilot project.

According to Nikolas-Maier, the pilot project consisted of a one-hour conference call between staff from her office and CMS officials on Aug. 15, 2018.

"There's been no action since then for North Dakota," said Nikolas-Maier.

New guidance

On March 17, 2019, St. Patrick's Day, it was five years since the HCBS final settings rule went into effect. Members of the St. Croix County Board of Supervisors have been speculating on how much longer residents should have to pay for a facility they cannot use.

With the delivery March 22 of the implementation guidance and FAQ document from CMS, it looks like the heightened scrutiny process which had laid dormant mysteriously for years stymying the SCHRC's efforts to secure Medicaid funding, may be back on track.

Goodsitt confirmed DHS has received the new guidance from CMS and is optimistic about moving forward with St. Croix County's application.

"We did indeed just get the guidance from CMS. We will look at it to ensure our application is complete. We believe we have submitted all necessary information. We are pleased that CMS has taken this step that will allow that agency to move forward," said Goodsitt.

What happens next is still up to CMS, but the process appears to be moving again providing hope that St. Croix County residents may soon be able to afford to use the facilities they fought so hard to build in their backyard.