State Identified Request Form for In Lieu of Services in an Institute for Mental Disease

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Cost–Effective Alternative Services (In Lieu of)

Effective July 6, 2016, federal regulations allowed and clarified the use of cost–effective alternative services that are approved by the State to be offered by Medicaid Managed Care Organizations (MMCOs). These regulations encourage innovation and promote efficiency and quality by enabling MMCOs to offer their enrollees physical and behavioral health services that are not covered under the Medicaid State Plan.

MMCOs may, as a cost–effective alternative to Medicaid State Plan services and settings, provide Medicaid Managed Care enrollees with alternative services and settings as permitted by 42 CFR 438.3(e)(2) and approved by the State. These cost–effective alternative services are often referred to as "in lieu of services" (ILS). The cost of such services must be included in the development of the MMCO rates.

ILS are defined as alternative services or settings that are not included in the State Plan but are medically appropriate, cost–effective substitutes for covered services or settings.1 "State Approved ILS" means ILS proposed by an MMCO that has been approved by the State. "State Identified ILS" means ILS that has been identified by the State as appropriate ILS for the Medicaid Managed Care program. Both State Approved and State Identified ILS will be posted on State agency websites.

Requirements for ILS Provision:

  • MMCOs may not provide ILS pursuant to 42 CFR 438.3(e)(2) without first applying to the State, obtaining State approval to offer the ILS, and demonstrating all of the following requirements will be met. Pursuant to 42 CFR 438.3(e)(1), MMCOs may voluntarily agree to provide any service to an enrollee outside of an approved ILS construct, however the cost of such voluntary services may not be included in determining State premium rates.
    • Voluntary for Enrollee: A MMCO cannot require an enrollee to use an ILS instead of a State Plan–covered service or setting but can offer enrollees the option of such services when doing so would be medically appropriate and cost–effective.
    • Voluntary for MMCO: It is a MMCO´s option to offer ILS. A MMCO may apply to the State for approval if it chooses to provide an ILS.
    • Proposals for ILS must demonstrate that the alternate services are medically appropriate and cost–effective.
    • Proposal must define population and criteria for the alternate service(s). The MMCO is responsible to calculate the cost–benefit analysis.
    • ILS may not include expenditures that are prohibited by CMS, such as training or equipment for law enforcement and room and board.
  • Once the State approves an ILS application for an MMCO:
    • The ILS must be added to the MMCO´s Medicaid Managed Care contract (amendment to Appendix M).
    • The ILS will be posted on State agency websites as a State Approved ILS.
    • The cost and utilization of ILS will be factored into the medical portion of the MMCO´s rates.
    • MMCO must inform enrollees of new ILS benefits and must post approved ILS publicly, including on MMCO website and in an updated member handbook or member handbook insert.
    • The MMCO will be responsible for offering the ILS to all enrollees that meet the defined population and criteria for the alternate service. Enrollees have the right to request internal appeal, external appeal, and fair hearing regarding the denial of a State approved ILS offered by the MMCO.
    • Encounter data tracking: MMCOs must use rate codes that have been approved by the State to track the claiming and provision of ILS.
    • Cost reports: MMCOs must have mechanisms to track and report ILS expenditures in a manner and format established by the State.
  • Termination of ILS:
    • State–initiated termination: State may terminate ILS if it is determined to be harmful to the enrollee or is not cost effective.
    • MMCO–initiated termination: MMCO may terminate ILS upon notice to NYS. The MMCO must publicize a termination date and provide 90 days´ notice to enrollees. The MMCO must create and implement a plan for continuity of care for member(s) who are in receipt of ILS.
    • Termination date must occur at the end of the fiscal quarter, except in the case when ILS is terminated due to a threat against the health, safety or welfare of the MMCO´s enrollees.

Process for Requesting Approval of In Lieu of Services:

MMCOs must complete the In Lieu of Request Form attached to this guidance and submit for review and approval to NYS Department of Health at: [add BML].

MMCOs may apply to the State for approval to:

  1. provide State Identified ILS by completing only Section One below;
  2. provide a State Approved ILS previously developed by another MMCO as posted on State agency websites by completing only Section One below; and/or
  3. Initiate a new ILS by completing the full application.

The State will use the information provided by the MMCO via this Request Form to approve or deny the request, and to serve as documentation for the State´s actuary and/or the Centers for Medicare and Medicaid Services (CMS) regarding the cost–effectiveness of the service. The Office of Mental Health and the Office of Alcohol and Substance Abuse Services, in consultation with the Department of Health, will determine the clinical appropriateness of the proposed ILS intended for HARP enrollees and for Behavioral Health ILS.

MMCOs may submit requests for approval of ILS to the State at any time. The State will review requests upon receipt. Upon approval, MMCOs may begin providing the ILS only at the beginning of a state fiscal quarter.

New York State Medicaid Managed Care In Lieu of Services Request Form

The MMCO should answer each question as comprehensively as practical. Questions should be directed to the [ILS BML] at the New York State Department of Health


MMCO Plan Name:
Contact Person: Title:
Phone: Email:


Complete only this section to provide State Approved or State Identified ILS. Add additional lines if necessary. If the MMCO is modifying any portion of the State Approved or State Identified ILS, describe the change by completing the appropriate section(s) in Section Two of this form.

1. ILS to be Provided NYS Authorization Number Expected start date for provision of service Target area for availability of service Related to DSRIP/VBP 

2. MMCO Monitoring Activities – Describe activities, reports, and/or analyses your MMCO will use to monitor the provision, utilization, quality, cost–benefit and/or outcomes of the in lieu of service. MUST be completed for State Identified ILS.



Complete this section if the plan is initiating a new ILS. Complete appropriate areas as necessary if the MMCO is modifying a State Approved or State Identified ILS.

  1. In Lieu Of Service Name and Description – Describe the proposed in lieu of service with sufficient detail so that the State can evaluate and assess the nature of this request. (One service per request form)
    Proposed In Lieu of Service
    A. Service name Inpatient Psychiatric admission in an Institution for Mental Disease (IMD)
    B. Description of service, including which State Plan service this may be offered as a substitute for Short term intensive stay in a private IMD licensed by OMH. This is an alternative setting in lieu of the State Plan Inpatient Psychiatric services available in OMH licensed inpatient units of Article 28 hospitals.
    C. Proposed procedure code(s) defining service The current process of reporting MH inpatient encounters for this service will be used.

    Specifically, the Rate Code, (2858: Private Psychiatric Hospitals; or 2896; ALT Care Day, HRF Level Private Psych Hospital), and

    If applicable: Procedure Codes, Category of Service, DRG code, Diagnosis code, Invoice Type and Provider NPI.
    D. Is this ILS related to a DSRIP project or VBP contract  No
    E. Expected start date for provision of service October 1, 2019
    F. Target area for availability of service or indicate ILS will be offered in full MMCO service area. Available statewide, restricted to plan´s service area. The private IMD´s are:
    • Four Winds Hospital (Westchester County)
    • Four Winds Hospital (Saratoga County)
    • Gracie Square Hospital (NYC)
    • BryLin Hospital (Buffalo)
    • Brunswick Hospital Center (Long Island)
    • South Oaks Hospital (Long Island)
    G. Assessment of capacity to provide this service within each target area The private IMD hospitals listed above currently provide inpatient psychiatric services to Medicaid Managed Care enrollees and have sufficient capacity to continue to provide this service.
  2. Information about the Population(s) that may receive the In Lieu Of Service – Describe the anticipated enrolled managed care population that will use/receive the proposed in lieu of service.2
    Population Age Range Approximate Number of Expected Users over 12–Month Period Characteristics of the Population (e.g., acuity level, gender, family status, placement setting, other)
    Adults 21 – 64 yo   Individuals needing care in an acute inpatient psychiatric unit, determined by whether the individual meets defined medical necessity criteria.
  3. Goals and Objectives– Describe the rationale for providing this service.
    Admission into IMDs will enable the stabilization of individuals with acute, worsening, destabilizing or sudden onset psychiatric conditions of short and severe duration in order to prevent potential long term inpatient psychiatric stays.
  4. Expected Outcomes – Describe the expected outcomes resulting from the provision of this in lieu of service on member´s health status, utilization of services, cost of care, functional status and/or community integration. If your MMCO has provided this service in other programs or states, please describe the outcomes observed. The purpose of this question is to inform how the service will provide the same or better quality of care as the State Plan service for which it is being substituted.2
    Stays in a private IMD hospital will increase Medicaid Managed Care enrollee access to short–term acute psychiatric inpatient care in order to stabilize individuals with psychiatric conditions. This will result in reduced isolation of members and increased community reintegration, as well as a reduced cost of care. In addition, care fragmentation is avoided, as a member is able to receive needed stabilizing care without having to disenroll from managed care.
  5. Staffing Qualifications, Credentialing Process, and Levels of Supervision, Administrative, and Clinical Required – Describe the provider´s licensure or certification (if required), staffing patterns, and clinician oversight (if required) over unlicensed practitioners. Describe how your MMCO will enroll/screen qualified providers that meet the requirements to deliver the service with the quality outlined in #4 above.
    The IMD must be a private psychiatric hospital providing inpatient care licensed by the New York State Office of Mental Health. The facilities must meet all criteria outlined on their OMH license.
  6. Unit of Service – For each proposed procedure code listed in question #1, what is the unit of service that defines this alternative in lieu of service (e.g., 1 hour, 1 day, a visit, 15 minutes)? If different units of service apply to different procedure codes, delineate in the following table as applicable. Add more rows as needed.
    Procedure Code Unit of Service Definition Other Information (optional)
    Various per diem See Question #10
  7. Anticipated Units of Service per User – For each proposed procedure code listed in question #1, what is the anticipated average number of expected users and average number of units per expected user over a 12–month period? (Time frame, LOS, expected units) If this metric varies by population, delineate by population type.2
    Population Age Range Approximate Number of Expected Users over 12–Month Period Procedure Code (must indicate unique identifier to track service) Approximate Number of Units of Service Per User Per 12–Month Period
    Adults 21 – 64 yo   See Question #10  
  8. Targeted Duration of Service – For the service, describe the expected average duration of the service to achieve the desired outcomes. This could be the average length of treatment/care (e.g., 6 weeks, 6 months) or, if the service is not directly tied to a course of treatment, it could be the frequency at which the service is expected to be delivered to each user (e.g., weekly, monthly, as needed).
    15 days or less in a calendar month
  9. Cost–Effectiveness – For the population intended to receive the in lieu of service, provide information on the cost–effectiveness of the in lieu of service versus the State Plan service(s) available. The State is requesting this information to determine if the requested in lieu of service is cost–effective, consistent with the provisions of 42 CFR 438.3(e)(2).2

This question requires the MMCO to complete two Parts: Part 1 requests information on expenditures on the State Plan service(s) that the in lieu of service would be offered to replace, and Part 2 requests information on anticipated expenditures on the in lieu of service.**

For the in lieu of service to be considered cost–effective, the total expected expenditure on the in lieu of service must be less than or equal to the total expected cost of comparable State Plan service(s).

Part 1: Computation of Comparable State Plan Service(s) Cost (include type, amount, frequency, etc.)

State Plan Service Name/Description State Plan Service Identifying Code(s) Unit  of Service Definition Average Number of Expected Users over 12–Month Period Average Number of Units of Service Per User Per 12 Month Period Average Unit Cost
Inpatient Psychiatric Hospitalization   Per Diem      

Part 2: Computation of In Lieu Of Services Cost (include type, amount, frequency, etc.)

In Lieu Of Services Name/Description In Lieu Of Services Identifying Code(s) Unit  of Service Definition Average Number of Expected Users over 12–Month Period Average Number of Units of Service Per User Per 12– Month Period Average Unit Cost
Inpatient Psychiatric Hospitalization in an IMD See Question #10 Per Diem      

** MMCOs may propose a different cost analysis approach that includes comparison of state plans services vs ILS to demonstrate projected cost with and without ILS.

  1. Encounter Data Reporting – Describe the process by which your MMCO will submit valid and complete encounter data applicable to the in lieu of service. If possible, include descriptions of record/claim type(s), provider codes/taxonomies, and other data elements so that the State and its actuary will have the ability to locate and analyze actual encounter data for the requested in lieu of service.
    Current reporting processes for MH inpatient encounters will be used for this service. Specifically, Rate Code (2858: Private Psychiatric Hospitals; or 2896: ALT Care Day, HRF Level Private Psych Hospital) if applicable, Category of Service, Procedure Codes, DRG code, Diagnosis code, Invoice Type and provider NPI (Four Winds Hospital (Westchester County), Four Winds Hospital (Saratoga County), Gracie Square Hospital (NYC), BryLin Hospital (Buffalo), Brunswick Hospital Center (Long Island), South Oaks Hospital (Long Island)
  2. Financial Statement Reporting – Please explain your MMCO´s ability to track in lieu of service expenditure. These expenditures will be required to be reported in the plans Operating Reports (i.e., MMCOR). The reporting requirements are under development. The information will inform the State and its actuary the amount of in lieu of expenditure for the development of prospective managed care capitation rates.
    At this time MMCOs are not required to report any additional information for this in–lieu of service. NYS will track this service using encounter data reporting used in the process outlined in Question #10. Information about ILS MMCOR reporting will be forthcoming.
  3. MMCO Monitoring Activities – Describe activities, reports, and/or analyses your MMCO will use to monitor the provision, utilization, quality, cost–benefit and/or outcomes of the in lieu of service. This MUST be completed for state identified ILS.
    Must be completed by the MMCO in Section 1, question 2 of the application.
  4. Other Information – Provide any other relevant information for the State´s consideration of this request. This could include, if the MMCO wishes to submit it, information like references to medical and scientific evidence in support of the proposed ILS, provider– and/or enrollee–facing information regarding of the purpose of the ILS, authorization requirements for ILS, or other operational considerations.
    This question is not required for the Inpatient Psychiatric admission in an IMD in–lieu of application.


1.CFR 438.3(e)(2),;1
2. MMCOs should utilize experience and knowledge of their enrolled populations and any research/findings available regarding the proposed ILS to best estimate or approximate the information requested. The State will use this information in its assessment of the MMCO´s application, however will not consider the estimates or approximations as binding for actual service delivery or outcomes.;2