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In an attempt to save money, Washington state has been illegally denying needed services to two dozen developmentally disabled residents for more than two years, according to a recently completed federal review.

The move was meant to save more than $1 million. But breaking the law may cost the state $16 million — and may have done irreparable damage to the residents, advocates say.

The review found the Department of Social and Health Services (DSHS) broke the law at least 41,231 times by deciding in 2011 to take away services such as physical therapy, personal-care training and recreation from 27 of the residents at Spokane County’s Lakeland Village.

In a Nov. 7 letter to state officials, Carol Peverly of the Centers for Medicare and Medicaid Services cited requirements that federally funded long-term care facilities provide the specialized services residents need.

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“After a review of all evidence and correspondence, we find that Lakeland Village nursing facility is not in compliance,” Peverly wrote, adding that the removal of services “violated federal law, and as a consequence the state has received (federal funds) in error.”

Peverly wrote that the feds want their money back, and also plan to examine other DSHS facilities.

DSHS officials downplayed the letter, with spokeswoman Chris Case saying it was based on “a technicality.” Case said DSHS may have actually provided the services but simply has not been able to find paperwork documenting it.

The federal letter said that after reviewing “copious treatment records” provided by DSHS as part of the months-long inquiry, “there is little evidence that the transferred residents have been receiving any specialized services, let alone all of the services to which they are entitled.”

David Carlson of Disability Rights Washington, an advocacy organization that alerted DSHS to potential violations, said the “neglect is irreversible” for the residents, who are still not receiving the services.

“They didn’t just stall out as stage three of a 10-step process of reintegrating into society,” Carlson said. “They go back to zero. It’s really appalling.”

Lakeland Village is one of four state residential habilitation centers for residents with developmental disabilities like Down syndrome, cerebral palsy and severe autism.

At the center, and others in Buckley, Selah and Shoreline, residents receive services funded with state and federal money.

The Lakeland situation dates to October 2010, when state officials told the center to cut its budget by 6.3 percent. In response, then-Acting Superintendent Diane Kilgore said she hoped to cut $1.89 million by furloughing employees and consolidating programs.

As part of the consolidation, Lakeland moved 27 residents from its intermediate-care facility to a nursing facility.

The nursing facility is cheaper because it operates like a normal nursing home, focused on basic medical treatment. The intermediate-care facility provides “specialized services” like recreation; physical, occupational and speech therapy; and training in personal care, behavioral norms and job skills — all meant to help residents function better in society.

“It’s the difference between brushing someone’s teeth and teaching them to brush their own teeth,” said Carlson, the advocate.

Evelyn Perez, DSHS assistant secretary for the Developmental Disabilities Administration, said the 27 residents were transferred because “every agency was looking for efficiencies, and these individuals had high nursing needs and would benefit from the nursing facility.”

The federal government found “the transfer was primarily motivated by economic concerns and was not based on ‘the residents’ welfare and the residents’ needs,’ ” as the law states, according to the letter.

“Lakeland Village nursing facility was not and is not an appropriate setting for any of the 27 transferred residents,” the letter added.

Disability Rights Washington, which had warned Lakeland against the transfers, alerted DSHS to potential violations last year. DSHS contacted the federal government.

The ensuing investigation culminated in the Nov. 7 letter.

This week, Perez said “no one is questioning that these individuals received the highest-quality nursing care possible.” But she acknowledged Lakeland erred in not providing or documenting needed additional services.

“We didn’t make good documentation, or indeed, we didn’t provide some of them,” she said.

Carlson said DSHS officials “can’t find the paperwork because it doesn’t exist.”

He said Disability Rights Washington investigated on its own and found the residents received little support in the nursing facility and were not allowed to regularly go outside.

“They gave up on these individuals and made them waste away in a setting where they had nothing but being able to watch Jerry Springer on TV with the blinds drawn,” Carlson said.

DSHS is working on a response to the federal government, which could affect how much the state is penalized.

The Nov. 7 letter estimated a penalty of $16 million, but said the actual amount “will be adjusted consistent with any supporting documentation the state chooses to submit.”

DSHS officials said they don’t think they’ll lose more than $4 million, but did not explain why.

The officials said any loss would likely come out of the department’s general budget.

Brian M. Rosenthal: 206-464-3195 or On Twitter @brianmrosenthal

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