Value Options is Neither – And A Judge Agrees

I’m going to post this without commentary.

Ok, one thing.

Value Options,  your days of taking our tax dollars to deny children services are numbered.

Any emphasis is mine.



We call your attention to this January 31, 2013 decision granting a TRO against defendants in the United States District Court for the Central District of Illinois.


This was a suit alleging violation of the Medicaid early and periodic screening, diagnostic and treatment (“EPSDT”) provisions. The “Collaborative,” as you may know, is operated by Value Options, Inc. (“VO”) to provide managerial oversight to the Individual Care Grant program. When VO first took over and created the Collaborative, we predicted that the number of ICG applications actually granted would fall dramatically. At the time VO came onboard, there were approximately four hundred ICGs

Now, there are less than 140 and the number actually granted during 2012 was only thirteen. VO has steadily received increasing fees in the millions while more mentally ill children go without services.

The lawsuit involved the Collaborative discontinuing funding for P.G.’s placement at Kemmerer Village, which is a residential facility. In addition, another minor, S.K., was also involved and was in the hospital as described below. P.G. is a sixteen year old Medicaid eligible boy who is psychotic, challenged by Reactive Attachment Disorder, as well as Oppositional Defiant Disorder, and has been hospitalized numerous times. He was accepted into the ICG program in July 2011, which is partially Medicaid funded. The Collaborative, but not Value Options, was sued because they run the ICG program. In August of 2011, P.G. was placed by ICG, but the Collaborative was planning to terminate his funding at Kemmerer Village on January 31, 2013, the day of the court’s ALERT 2 decision. The court observed that if this occurs, P.G. would be discharged from Kemmerer Village. The complaint further stated that if discharge occurred, P.G. would be at risk for further hospitalization and institutionalization. He would also be unable to attend school while he is hospitalized or institutionalized, and he has not successfully responded to outpatient services previously made available.

Essentially, the allegations claim that a discharge, ostensibly because residential placement is no longer “medically necessary,” violates Medicaid law and further residential placement is, in fact, medically necessary and appropriate. 

A.K. is an eleven year old boy suffering from Mood Disorder; Anxiety Disorder; ADHD; Oppositional Defiant Disorder; Learning Disorders; and Reactive Attachment Disorder. He is currently hospitalized at the Methodist Medical Center in Peoria, Illinois, which is a psychiatric hospital. On January 22, 2013 the attending psychiatrist recommended that A.K. receive residential treatment. Moreover, according to the complaint, if A.K. does not receive residential mental health services, he will be at risk for further hospitalization. When he is in the hospital, he is unable to attend school or leave the hospital. Furthermore, outpatient services were unsuccessful in maintaining a sufficiently supervised therapeutic setting for this child.

The complaint states very clearly that both of the plaintiffs need a residential setting for maximum reduction of their mental disability and for restoration to the best possible functional level because sufficient intensive home and community based services have not been made available to them (or been successful).

The plaintiffs seek a temporary restraining order (“TRO”) while the case pends in order to continue funding for P.G. at Kemmerer Village, and in order to provide A.K. with an appropriate psychiatric residential facility. Essentially, qualified personnel have recommended residential mental health treatment for the two young plaintiffs and the Collaborative has ignored these recommendations. The complaint essentially takes the position that psychiatric residential care is medically necessary and to deny it for both children would violate EPSDT provisions of Medicaid. The law mandates that EPSDT services for all persons under age twenty-one must be provided by states accepting Medicaid, which Illinois does. See 42 USC 1396d(a)(4)B. Moreover, psychiatric residential treatment services have been held to be included in the EPSDT rubric. See Collins v. Hamilton, 349 F. 3d371, 374-5(7th Cir. 2003).


The plaintiffs were requesting a TRO to enjoin defendants from failing to take immediate and affirmative steps to arrange and fund the plaintiffs’ medically necessary residential treatment as required by the EPSDT provisions. The court held that the plaintiffs have shown that they are reasonably likely to succeed on the merits of the case, that no adequate remedy at law exists, and that plaintiffs will likely suffer irreparable harm if the TRO is not entered. Moreover, the harm that the plaintiffs will suffer clearly outweighs the harm defendants might suffer if the injunction is granted.

Since Medicaid is a cooperative federal-state program that provides federal funding for state medical services for the poor, if states decide to participate, they must comply with all federal requirements. One requirement is that every participating state have “early and periodic screening, diagnostic, and treatment services,” for persons under twenty-one. The 7th Circuit Appellate Court has interpreted the Medicaid Act to mean that placement in a psychiatric residential treatment facility, where such placement is determined to be medically necessarily through EPSDT screening, is included “within the ambit of covered EPSDT services.” See Collins v. Hamilton. The Collins court was an Indiana case claiming the State of Indiana failed to provide Medicaid eligible children under the age of twenty-one with psychiatric residential treatment facility placements in similar circumstances. The Collins court noted that states are required to provide appropriate psychiatric residential care as a part of EPSDT. In fact, the Collins court stated that “inpatient psychiatric hospital services for individuals under age twenty-one” are coverable Medicaid expenses so long as they abide by the directions of subsection (h) of the Medicaid law. This language, the Collins court found, broadened the definition of inpatient psychiatric hospitals to include services rendered in psychiatric residential treatment facilities (“PRTFs”) by expressly incorporating other inpatient settings as specified by the secretary in regulations. Such regulations were accordingly promulgated to specifically include psychiatric residential treatment facilities as possible venues for patients under the age of twenty-one to receive medically necessary and restrictive psychiatric treatment.


The federal judge granted the defendant’s motion for TRO and ordered defendants (under pain of contempt) to take affirmative steps to arrange and fund the plaintiffs’ medically necessary treatment as required by the EPSDT provisions of the Medicaid Act, including maintaining P.G.’s placement at Kemmerer Village and in addition, maintaining A.K.’s placement at Methodist Medical Center while continuing to seek an appropriate residential facility and fund same.

It should be noted that the Central District (Springfield), Judge Myerscough, U.S. District Judge, has scheduled a hearing for February 15, 2013 at 10:00 a.m. for entry of a permanent injunction against the practices of the collaborative and its co-defendants.

This case should be monitored closely. There is some discussion that the EPSDT issue may eventually reach class action status in light of the rampant ICG denials last year. 

Courtesy of: Whitted, Cleary + Takiff LLC 3000 Dundee Road, Suite 303 Northbrook, Illinois 60062 (847) 564-8662 Fax: (847) 564-8419

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  • Kathy Craig February 8, 2013 at 11:46 pm

    Interesting to say the least. Thanks for the head's up Chrisa!

  • Anonymous October 21, 2013 at 7:25 pm

    I'm not sure if this is the right forum but wanted to voice the chronic miss appropriation, management and practices of 'Value Options' as it applies to mental health coverage. Did you know they are now requiring therapists and counselors to send their notes of all visits? they are apparently not trusting the diagnoses of these people and want more information. What are they planning to do with this? Therapists I have spoken to are refusing to do this and good for them! I can't imagine getting all bent out of shape because someone thinks a company is taking too much market share when Value Options has total control with no competition! this is just plain scary. If there is a class action suit against these people please write and I will sign up. Also..note to value options: if you are reading this please do not insult our intelligence and say this is not the case. (signed – frustrated with a monopoly)

  • Shannon Heffernan October 23, 2013 at 12:07 pm

    If you are still in contact with those therapist, would you please pass along my contact information? I'd be interested in hearing more from them for a news report.