Attorney General's Opinion

Attorney General Richard Blumenthal

August 31, 1994

Representative Thomas S. Luby
House Majority Leader
State of Connecticut
General Assembly
State Capitol
Hartford, CT 06106

Senator M. Adela Eads
State Republican Leader
State of Connecticut
General Assembly
State Capitol
Hartford, CT 06106

Dear Representative Luby and Senator Eads:

You have requested our advice regarding the interpretation of Conn. Gen. Stat.  17a-17 and regulations promulgated thereunder. These provisions require the Commissioner of Children and Families and the Commissioner of Education to jointly develop regulations to implement "a single cost accounting system" which is the system of determining payment for room, board and education to private residential treatment centers.1 These centers provide treatment to children who have emotional or learning disorders. The regulations were developed and adopted by the two agencies and now govern per diem rates paid for children placed in these centers by the Department of Children and Families (DCF) or local educational agencies (LEAs).

Both the statute and the regulations have been the subject of recent litigation. Last September, Judge Robert Satter issued a ruling in CACCA v. Senatore, Docket No. CV 92-0703543S upholding the regulations as validly promulgated and implemented. You inquire whether this ruling means that the rates are subject to negotiations. We conclude that payments to residential treatment centers are to be based on the single cost accounting system and arrived at through a purchase of service agreement. Neither the statute nor the ruling requires the parties to negotiate over the terms of the agreement. The ruling is clear that the regulatory scheme for the single cost accounting system is the basis for paying rates pursuant to these agreements.

The regulations in question state:

Reg.  17-42la-2. Per Diem Payment for Residential Care

(a) DCYS [now DCF] will reimburse on a per diem payment basis each treatment center for the residential care of children under the supervision of the Commissioner. For each treatment center, the system for determining per diem payment rates shall be on a base year (ASCAR) cost-related rate system.

(b) DCYS shall promulgate annually the per diem payment rates for treatment centers to be effective July 1st of that year, based on costs reported in the ASCAR filed the preceding December.

(c) Per diem rates for residential care for each treatment center shall be computed in accordance with Section 17-42la-11 of these regulations and other applicable sections of these regulations.

Essentially identical provisions exist with regard to payment and computation of educational per diem rates in Reg.  17-42la-3. The language in these sections establishes that DCF and Department of Education (DOE) must compute and promulgate one rate for each treatment center.

Judge Satter explains in his decision that:

The Connecticut statute [Conn. Gen. Stat.  17a-17] creates two caveats to a state obligation to pay the reasonable expenses of residential treatment centers: (1) the single cost accounting system is only 'the basis' for paying reasonable expenses, and (2) such payment shall be by purchase of service agreement. . . . . Ultimately the statute provides for a consensual arrangement whereby the cost accounting system becomes the basis upon which the Providers, DCYS and LEAs, with the approval of the State Department of Education, agree upon the rates the Providers will receive and the state will pay.

CACCA v. Senatore, at 24.

The court further points out in the decision that the treatment centers are not required to sign such agreements since they cannot be forced to accept any particular child. A rate could conceivably be revised if a child required special services (e.g. one on one care, specialized educational programming, etc.). However the state's basic rate structure must be based on the single cost accounting system. If the center finds the rate calculated by the state to be unacceptable, the center may decline to enter into the purchase of service agreement, or they may seek a temporary supplement while the agreement is in effect.

In conclusion, the CACCA v. Senatore decision does not mandate negotiations over rates for residential and educational services.

Very truly yours,


Susan T. Pearlman
Assistant Attorney General

James Kelly
Assistant Attorney General



1 The single cost accounting system (SCAS) is a retrospective system, in that it uses historic costs to set future rates. The SCAS uses audited financial information from each treatment center to calculate the specific rates for that center. The SCAS contains limitations on the growth of expenditures in certain categories, but allows unlimited growth in certain "fixed" expenses such as insurance, utilities and rent.

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