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Minnesota - Residential Care Service — Licensing, Medicaid Enrollment and Startup Requirements

Last reviewed: 2026-09-10

The Minnesota Department of Human Services (DHS) licenses 24-hour residential care under Minnesota Statutes Chapter 245D as Intensive Support Services, specifically categorized as Community Residential Services or Corporate Adult Foster Care. These services are funded primarily through the Brain Injury (BI), Community Alternative Care (CAC), Community Access for Disability Inclusion (CADI), and Developmental Disabilities (DD) waivers.

Effective January 1, 2026, DHS implemented a 24-month moratorium on all new 245D license applications, halting new provider enrollment through December 31, 2027. Applications are only accepted if a lead agency (a county, Tribal Nation, or managed care organization) submits a formal exception request demonstrating a specific capacity need for a waiver participant.

1. Service Definition and Scope

In Minnesota, 24-hour residential care is not licensed under a generic "residential care" umbrella; instead, it falls under Chapter 245D Home and Community-Based Services (HCBS) as an Intensive Support Service. Providers deliver habilitation, supervision, and personal assistance in licensed settings.

The specific service names billed under the waivers include Community Residential Services (CRS) and Family Residential Services (FRS). These services require the provider to hold both the 245D license for the service and a setting license, such as a Community Residential Setting or Adult Foster Care license, for the physical address.

2. Regulatory and Oversight Agencies

The Minnesota Department of Human Services (DHS) is the primary regulatory authority for HCBS waiver services, handling both the 245D licensure and Medicaid provider enrollment. Within DHS, the Licensing Division oversees compliance, background studies, and facility inspections.

For providers that also offer home care services, the Minnesota Department of Health (MDH) may issue an integrated license with an HCBS designation, though intensive support services like 24-hour residential care strictly require the DHS 245D license.

3. Gatekeeping Prerequisites: Who Can Even Apply

A strict statutory moratorium currently blocks all new 245D license applications. Authorized by Minnesota Statutes section 245A.03, subd. 7a and Executive Order 25-10, this moratorium took effect January 1, 2026, and is scheduled to last until December 31, 2027.

During this period, DHS will not issue new 245D licenses, accept new applications, or add new services to existing licenses unless an exception is granted. The only pathway to apply is through a lead agency exception request.

4. Licensure and Certification Requirements

If a provider secures a lead agency exception, they must complete the standard 245D Intensive Support Services application process. This requires demonstrating compliance with all programmatic, staffing, and policy requirements outlined in Chapter 245D.

Providers must also secure the appropriate setting license (e.g., Community Residential Setting) for the physical location where services will be delivered, which involves fire marshal inspections and local zoning compliance.

5. Medicaid Provider Enrollment

After obtaining the 245D license, providers must enroll with Minnesota Health Care Programs (MHCP) to bill for waiver services. Enrollment is processed through the MHCP Provider Screening and Enrollment portal.

Providers must register for MN–ITS, the state's web-based HIPAA-compliant billing and communication system. Enrollment requires proof of the 245D license, liability insurance, and completion of the HCBS Programs Request Form.

6. Staffing, Training and Background Checks

All owners, managerial officials, and direct care staff must pass a background study through the DHS NETStudy 2.0 system before having direct contact with individuals receiving services.

Chapter 245D mandates specific qualifications for Designated Coordinators and Designated Managers, who oversee service delivery and program management. Direct support professionals must complete orientation and annual training on recipient rights, maltreatment reporting, and individual service plans.

7. Documentation, Policies and Records

Providers must maintain comprehensive documentation as dictated by Chapter 245D. This includes individualized Coordinated Service and Support Plans (CSSP) and CSSP Addendums for each recipient.

DHS requires providers to maintain specific policies, including maltreatment reporting, grievance procedures, emergency response, and safe medication administration. Providers are encouraged to use DHS sample self-monitoring checklists to ensure ongoing compliance.

8. Billing, Rates and Claims

Reimbursement for 245D Community Residential Services is determined by the Disability Waiver Rate System (DWRS), which calculates individualized rates based on the recipient's assessed needs and staffing ratios.

Claims are submitted electronically via MN–ITS. As of late 2025, DHS implemented a pre-payment review process for high-risk Medicaid services, meaning claims may be subject to advanced analytics and manual review before payment is released.

9. Approval Sequence and Timeline

The approval sequence is currently dictated by the moratorium. A provider cannot begin the process without a lead agency exception. Once an exception is granted, the provider submits the 245D application to DHS Licensing.

After DHS approves the policies and issues the 245D license, the provider applies for MHCP enrollment. The entire process, assuming an exception is granted, typically takes 4 to 6 months.

10. Common Denials and Survey Findings

The most frequent cause for application denial or cancellation is the 245D moratorium; applications submitted without a prior lead agency exception are automatically rejected.

During compliance surveys, DHS frequently cites providers for failing to update CSSP Addendums, incomplete medication administration records, and failure to complete required staff background studies before direct contact occurs.

11. Key Contacts and Resources

The primary resource for HCBS providers in Minnesota is the Community-Based Services Manual (CBSM), which details all waiver service requirements and policies.

Providers should monitor the MHCP Provider News and Updates page for announcements regarding the moratorium, pre-payment reviews, and billing changes.

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