News & Perspectives

Home and Community-Based Settings Regulation – Heightened Scrutiny

14. April 2022 PCG Human Services

The information within this article, originally published on the PCG website in March 2019, was updated on April 14, 2022, to reflect program changes and new developments as a result of the Coronavirus Disease 2019 (COVID-19) public health emergency (PHE).


The much-awaited guidance from the Centers for Medicare and Medicaid Services (CMS) on Heightened Scrutiny was issued on March 22, 2019 (SMD#19-001). In the form of frequently asked questions (FAQs), the guidance “is designed to ensure that implementation decisions balance the need for robust stakeholder engagement with administrative feasibility.”

In addition to addressing the process of Heightened Scrutiny, the CMS guidance provides clarification on assessing individual’s private residences to determine compliance with the Settings Rule, and whether an individual must live in a compliant setting when receiving Medicaid-funded non-residential Home- and Community-Based Services (HCBS).

April 2022 Update:

Less than one year after CMS issued the guidance on Heightened Scrutiny, the U.S. Department of Health and Human Services (HHS) declared the COVID-19 PHE on January 31, 2020. Acknowledging the impact of the COVID-19 PHE on community integration programs and related efforts nationwide, CMS issued a State Medicaid Director letter on July 14, 2020 (SMD#20-003) wherein CMS extended the overall timeline for states to come into compliance with the Settings Rule to March 17, 2023. States must have all implementation activities completed by this deadline to demonstrate compliance.

In addition to extending the overall timeline for the Settings Rule, the letter also referenced and revised the timelines related to Heightened Scrutiny originally identified within certain FAQs of the above-mentioned guidance (SMD#19-001). CMS issued revised FAQs related to Heightened Scrutiny with the July 14th letter, including, of note, its revision to Question 3: “If the state determines, through their assessment and validation activities, that a setting that isolates individuals from the broader community has implemented remediation strategies to bring the setting into compliance with the settings criteria by the new timeline of July 1, 2021, the setting will not need to be submitted to CMS for heightened scrutiny review. This replaces the original date published in the March 2019 FAQs.”

Of the original 13 FAQs issued in March 2019, nearly half were revised as a result of the COVID-19 PHE. In addition to this timeline extension, states had until October 31, 2021 to submit to CMS for review those settings identified for heightened scrutiny that have not completed the necessary remediation activities for compliance. Additional information regarding HCBS compliance requirements can be found in the CMS HCBS Toolkit.

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