MARSH — FRS: Restore DWRS
Minnesota Association of Residential Service Homes
Family Residential Services (FRS): Restore DWRS — Protect Person-Centered Care
A MARSH Legislative Brief  •  2026 Session  •  marshmn.org
Legislative
Brief
The Issue

Minnesota has transitioned Family Residential Services (FRS) to a flat-rate reimbursement system, replacing the individualized DWRS framework that matched funding to each person's actual, assessed care needs. This change is already causing harm to providers and the individuals they serve.

45%+
Funding Reductions
For high-acuity individuals under the flat-rate system
~3,300
Individuals at Risk
Estimated people who could lose their community home
~70%
Providers at Risk of Closure
Projected under the tiered flat-rate system
What FRS Actually Is
FRS Is Not a "Program Cost"

FRS is structured around the individual. It is:

  • Based on individualized assessments through MnCHOICES
  • Governed by person-centered planning requirements
  • Required to meet federal HCBS standards under 42 CFR 441.301
  • Delivered under 245D Minnesota Statute

Flat rates break this model.

The Real Math — Not the Myth

Claims that providers earn "$1M+ annually" are inaccurate.

Typical example: $409/day × 3 residents × 365 days = $447,855 gross — before expenses including:

  • 24/7 staffing, often at 1:1 or 2:1 ratios
  • Awake overnight staff
  • Payroll taxes and insurance
  • Housing, food, transportation
  • Medical coordination and compliance

This is the cost of care — not profit.

Emerging Crisis: Case Mix Suppression

Providers are reporting systemic problems at May 2026 renewals that compound the damage of the flat-rate transition.

What Providers Are Reporting
  • Lower case mix levels assigned at renewal
  • No corresponding decrease in individual needs
  • Case managers deferring to assessors without recourse
  • No transparency in how lower tiers are assigned
What This Means
  • Funding artificially reduced through the assessment process
  • Individuals effectively penalized for stable care outcomes
  • Providers unable to appeal or seek correction
  • Accountability removed from the rate-setting process
Federal Compliance Concern
Under 42 CFR 441.301(c)(3), changes to service levels are permitted only when tied to actual changes in individual need — not to produce a lower rate. Systematic case mix suppression tied to flat-rate outcomes constitutes a potential federal compliance violation that removes transparency and accountability from the process.
System Impact
What Happens If the Flat Rate Stands
  • FRS homes will close across the state
  • Individuals forced into more restrictive, more costly settings
  • Costs to the state will increase, not decrease
  • Providers face compliance risk under federal HCBS rules
  • Minnesota's Olmstead Plan community integration goals are reversed
Staff Wage Reality
  • Flat rate pays only for "staffing hours" — not total provider costs
  • Current hourly rates range from $8.12 to $15.97 under the flat system
  • CRS facilities pay a minimum of $20.50/hour
  • Staff will not work for below-market wages when alternatives exist
  • DWRS covered staffing, transportation, programming, benefits, and administration
Our Position

There is no workable percentage adjustment to the flat rate. The system is fundamentally incompatible with the variable-acuity nature of Family Residential Services.

MARSH is requesting full restoration of FRS to the DWRS rate methodology — the framework that was already working before this transition.

This is not a budget issue. This is a human rights issue.
Take Action Now

The 2026 legislative session ends May 18. Both chambers are assembling omnibus bills now. Your voice can still move this.

1
Write your letter. Contact members of the House Ways and Means Committee and Senate Finance Committee. Ask them to add amendment language restoring the DWRS framework to the Human Services Omnibus bill. Letter templates are available at admin@marshmn.org.
2
Share your story. Legislators need to hear from providers, families, case managers, and the people served. Personal accounts of financial impact and displacement risk are the most persuasive evidence available. Forward letter templates to everyone connected to the individuals you serve.
3
Report planned closures. If you are considering closing your home, notify MARSH at admin@marshmn.org. This data directly supports MARSH's legislative and legal advocacy. Every closure reported strengthens the case for correction.
MARSH Lawsuit
MARSH has filed suit against DHS (case no. 62-CV-26-447) and is engaged directly with CMS on federal compliance concerns. Legislative action and legal action are proceeding in parallel. Contact admin@marshmn.org for updates.
Not yet a MARSH member? Visit marshmn.org to learn how membership supports advocacy like this on behalf of every provider and every person we serve.

MARSH  •  admin@marshmn.org  •  marshmn.org
Minnesota Association of Residential Service Homes  —  245A / 245D / FRS / AFC / HCBS