TITLE 1. ADMINISTRATION

PART 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 353. MEDICAID MANAGED CARE

The Texas Health and Human Services Commission (HHSC) adopts amendments to Texas Administrative Code Title 1, Part 15, Chapter 353, Subchapter A (regarding General Provisions), §353.2, concerning Definitions; Subchapter G (regarding STAR+PLUS), §353.603, concerning Member Participation; Subchapter H (regarding STAR Health), §353.702, concerning Member Participation; Subchapter I (regarding STAR), §353.802, concerning Member Participation; and Subchapter N (regarding STAR Kids), §353.1203, concerning Member Participation. HHSC also adopts new Subchapter G (regarding STAR+PLUS), §353.609, concerning Service Coordination. The amendments and new rule are adopted without changes to the proposed text as published in the May 12, 2017, issue of the Texas Register (42 TexReg 2455), and therefore will not be republished.

BACKGROUND AND JUSTIFICATION

Under the 2014-15 General Appropriations Act (Senate Bill 1, 83rd Legislature, Regular Session, 2013, Article II, Health and Human Services Commission, Rider 51(b)(15)), HHSC was directed to improve care coordination through a capitated managed care program for remaining Medicaid fee-for-service populations. As a result, HHSC will transfer the Adoption Assistance (AA), Permanency Care Assistance (PCA), and Medicaid Breast and Cervical Cancer (MBCC) populations from traditional fee-for-service Medicaid (FFS) to Medicaid managed care on September 1, 2017. The amendments to §353.603, §353.802, and §353.1203 add the AA, PCA, and MBCC populations as mandatory groups for the appropriate managed care programs.

The amendments to §§353.603, 353.702, and 353.1203 also impact Former Foster Care Children (FFCC) in a 1915(c) waiver.

Adoption Assistance (AA)

The Department of Family and Protective Services (DFPS) AA program facilitates the adoption of children with special needs by providing certain adoption assistance benefits to families. One of the benefits provided is Medicaid health coverage for the child being adopted. The Medicaid AA population consists of approximately 44,500 children who were adopted from DFPS conservatorship. This population currently receives Medicaid services through the FFS delivery model, and will start to receive Medicaid services through the managed care delivery model on September 1, 2017. Specifically, the child to be adopted will receive Medicaid services either through the STAR or STAR Kids program, as appropriate.

Permanency Care Assistance (PCA)

The DFPS PCA program provides benefits to certain individuals who assume managing conservatorship of a child who was previously in the temporary or permanent managing conservatorship of DFPS. One of the benefits provided is Medicaid health coverage for the child under conservatorship. The PCA program consists of approximately 1,935 children who were previously under the temporary or permanent managing conservatorship of DFPS. This population currently receives Medicaid services through the FFS delivery model and will start to receive Medicaid services through the managed care delivery model on September 1, 2017. Specifically, the child under conservatorship will receive Medicaid services either through the STAR or STAR Kids program, as appropriate.

Medicaid for Breast and Cervical Cancer (MBCC)

The HHSC MBCC program provides full Medicaid coverage to women who are screened and found to need treatment for breast or cervical cancer. Services are not limited to the treatment of breast and cervical cancer, and continue as long as the Medicaid provider certifies that active treatment is required for breast or cervical cancer. As of June 2015, there were approximately 4,785 MBCC recipients. This population currently receives Medicaid services through the FFS delivery model and will start to receive Medicaid services through the managed care delivery model on September 1, 2017. Specifically, the MBCC recipients will receive Medicaid services through the STAR+PLUS program.

Former Foster Care Children (FFCC)

The FFCC is a Medicaid eligibility type for young adults who aged out of the conservatorship of DFPS. FFCC individuals ages 18-20 in a 1915(c) waiver are in STAR Health today. The amendments allow this population to choose to remain in STAR Health or opt into STAR Kids. FFCC individuals ages 21-26 in a 1915(c) waiver are currently in fee-for-service Medicaid. The amendments make this population mandatory for STAR+PLUS.

In addition to amending rules for the transition to managed care, HHSC adopts new §353.609 regarding service coordination for the STAR+PLUS program.

COMMENTS

The 30-day comment period ended June 12, 2017. During this period, HHSC did not receive any comments regarding the proposed rules.

SUBCHAPTER A. GENERAL PROVISIONS

1 TAC §353.2

STATUTORY AUTHORITY

The amendment is adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority, and Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 9, 2017.

TRD-201703030

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Effective date: September 1, 2017

Proposal publication date: May 12, 2017

For further information, please call: (512) 462-6385


SUBCHAPTER G. STAR+PLUS

1 TAC §353.603, §353.609

STATUTORY AUTHORITY

The amendment and new section are adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority, and Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 9, 2017.

TRD-201703031

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Effective date: September 1, 2017

Proposal publication date: May 12, 2017

For further information, please call: (512) 462-6385


SUBCHAPTER H. STAR HEALTH

1 TAC §353.702

STATUTORY AUTHORITY

The amendment is adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority, and Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 9, 2017.

TRD-201703032

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Effective date: September 1, 2017

Proposal publication date: May 12, 2017

For further information, please call: (512) 462-6385


SUBCHAPTER I. STAR

1 TAC §353.802

STATUTORY AUTHORITY

The amendment is adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority, and Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 9, 2017.

TRD-201703033

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Effective date: September 1, 2017

Proposal publication date: May 12, 2017

For further information, please call: (512) 462-6385


SUBCHAPTER N. STAR KIDS

1 TAC §353.1203

STATUTORY AUTHORITY

The amendment is adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority, and Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 9, 2017.

TRD-201703034

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Effective date: September 1, 2017

Proposal publication date: May 12, 2017

For further information, please call: (512) 462-6385


CHAPTER 355. REIMBURSEMENT RATES

SUBCHAPTER H. REIMBURSEMENT METHODOLOGY FOR 24-HOUR CHILD CARE FACILITIES

1 TAC §355.7103

The Texas Health and Human Services Commission (HHSC) adopts amendments to §355.7103, concerning Rate-Setting Methodology for 24-Hour Residential Child-Care Reimbursements. The amended rule is adopted with changes to the proposed text as published in the June 23, 2017, issue of the Texas Register (42 TexReg 3213), and therefore will be republished.

BACKGROUND AND JUSTIFICATION

The amended rule complies with the 2018-19 General Appropriations Act (Article II, Department of Family and Protective Services, Senate Bill 1, 85th Legislature, Regular Session, 2017).

The 2018-19 General Appropriations Act (the Act) appropriated general revenue for general payment rate increases for the 24-Hour Residential Child Care (24 RCC) program as described in Department of Family and Protective Services (DFPS) Rider 42. In addition, the Act appropriated general revenue for a new Intense Plus service level for General Residential Operations/Residential Treatment Centers (GRO/RTCs) and for the new services Treatment Foster Family, Integrated Care Coordination Placement, Integrated Care Coordination Case Management and Temporary Emergency Placement. Amended §355.7103 adds the new rates for the 24 RCC program and adds a reimbursement methodology for the new services.

Also, the amended rule adds a one percent risk corridor for rates for Single Source Continuum Contractors (SSCCs) under the Community-based Foster Care program. Rates for SSCCs are determined using the official forecast of case mix for paid foster care for the catchment area in which the SSCC operates that is available when the payment rates are determined. Once the SSCC rates are determined, they do not change unless rates for legacy 24 RCC are updated. SSCC rates do not vary by the child's level of need, while legacy rates do vary by level of need. As a result, changes in case mix and associated changes in provider costs are accounted for in the legacy system but are not accounted for in the Community-based Foster Care program. The addition of a risk corridor will allow HHSC to update SSCC rates to recognize changes in a catchment area's case mix when the impact of such changes exceeds a certain percentage, either positive or negative.

COMMENTS

The 30-day comment period ended July 23, 2017. During this period, HHSC received comments regarding the proposed rule from four commenters, including the Texas Alliance of Children and Family Services (TAFCS), Child Protective Services (CPS) staff at DFPS, and provider agencies New Horizons and Prairie Harbor. A summary of comments relating to the rule and HHSC's responses follow.

Comment: Three of the commenters stated that the child-placing agency (CPA) retainage is not sufficient to increase capacity and improve the quality of care to children in State conservatorship. The commenters stated that the distribution of the CPA rate between the CPA retainage and the Foster Family Pass Through components does not reflect the costs incurred by the CPA. One of the commenters suggested one-time verification payments, longevity payments, and outreach and advertising payments as potential ways to alleviate this discrepancy in costs.

Response: The rate increases for the 24 RCC program were specified by service and level of care in DFPS Rider 42 and, therefore, cannot be revised. Implementation of one-time verification payments, longevity payments, or outreach and advertising payments is a policy decision and, as such, is part of DFPS' authority as the operating agency. HHSC will not revise the rule in response to this comment.

Comment: One commenter stated that emergency shelters are full, but they did not receive a rate increase, which may lead to issues with capacity. The commenter suggested that emergency shelters be part of a longer-term continuum of service.

Response: The rate increases for the 24 RCC program were specified by service and level of care in DFPS Rider 42 and, therefore, cannot be revised. The inclusion of emergency shelters as part of a continuum of service is a policy decision and, as such, is part of DFPS' authority as the operating agency. HHSC will not revise the rule in response to this comment.

Comment: Three of the commenters recommended changes to the GRO/RTC rate structure, with two of the commenters recommending a single, blended rate and the third recommending a single rate for the Specialized and Intense levels of care. The commenters stated that this approach would address the issue that a GRO/RTC's costs do not change when a child's level of care is reduced.

Response: The rate increases for the 24 RCC program were specified by service and level of care in DFPS Rider 42 and, therefore, cannot be revised. The revision of the level care system for GRO/RTCs is a policy decision and, as such, is part of DFPS' authority as the operating agency. HHSC will not revise the rule in response to this comment.

Comment: Two of the commenters, including CPS staff at DFPS, recommended reducing the risk corridor for the Community Based Foster Care program to one percent.

Response: As the operating agency, DFPS has final authority regarding policy decisions, including the risk corridor percentage. HHSC will revise the rule from five percent to one percent in response to this comment.

Comment: One commenter stated that the requirement for a GRO/RTC provider to continue to provide care to a child at a lower level of care while waiting for the child to be placed in a less restrictive environment can result in a significant loss of revenue for the provider. The commenter suggested replacing the payment for placements with payments for beds with limitations on rejection/ejection of children placed in the facility.

Response: The rate increases for the 24 RCC program were specified by service and level of care in DFPS Rider 42 and, therefore, cannot be revised. Providing payments for beds as opposed to placements is a policy decision and, as such, is part of DFPS' authority as the operating agency. HHSC will not revise the rule in response to this comment.

Comment: Three of the commenters suggested that HHSC review the rate setting methodology and consider contracting for a study to evaluate the methodology to ensure it aligns with modern foster care provider practice.

Response: Pursuant to House Bill 5, 85th Legislature, Regular Session, 2017, (HB 5), DFPS will separate from the Health and Human Services system effective September 1, 2017. Although HB 5 requires DFPS to contract with HHSC for the provision of administrative support services, including rate setting, decision-making authority concerning the methodology will rest with DFPS, not HHSC, after September 1, 2017. As a result, HHSC will not revise the rule in response to this comment.

Comment: One commenter stated that cost reports standardize costs that are different for each provider, and some costs that are necessary to operate are unallowable. Therefore, the costs that are allowable do not represent true costs to operate; this commenter suggested replacing the current system of allowable and unallowable costs with reasonable cost ranges.

Response: Texas obtains matching funds through Title IV-E of the Social Security Act for the 24 RCC program. Title IV-E has specific guidelines regarding allowable and unallowable costs and the percent of matching funds available for specific types of costs. The details in the cost report and the associated rules regarding allowable and unallowable costs are necessary to ensure that Texas appropriately requests Title IV-E matching funds; failure to do so can jeopardize federal funding for the program. HHSC will not revise the rule in response to this comment.

The following minor editorial changes were made:

Section 355.7103(d)(3)(C) was revised to change "institution for mentally retarded" to "intermediate care facility for individuals with an intellectual disability or related conditions."

Section 355.7103(t)(6) was revised to remove the word "prospective."

In §355.7103(f)(4), (p), (t)(1), and (u)(1), rule cross-references were updated.

HHSC received other comments that pertained to the related rule proposal in Title 40 of the Texas Administrative Code (40 TAC) Chapter 700, relating to Child Protective Services. These comments are addressed elsewhere in this issue of the Texas Register.

STATUTORY AUTHORITY

The amended rule is adopted under Texas Government Code, §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority.

§355.7103.Rate-Setting Methodology for 24-Hour Residential Child-Care Reimbursements.

(a) The following is the authority and process for determining payment rates:

(1) For payment rates established prior to September 1, 2005, the Department of Family and Protective Services (DFPS; formerly the Department of Protective and Regulatory Services) reviewed payment rates for providers of 24-hour residential child care services every other year in an open meeting, after considering financial and statistical information, DFPS rate recommendations developed according to the provisions of this subchapter, legislative direction, staff recommendations, agency service demands, public testimony, and the availability of appropriated revenue. Before the open meeting in which rates were presented for adoption, DFPS sent rate packets containing the proposed rates and average inflation factor amounts to provider association groups. DFPS also sent rate packets to any other interested party, by written request. Providers who wished to comment on the proposed rates could attend the open meeting and give public testimony. Notice of the open meeting was published on the Secretary of State's web site at http://www.sos.state.tx.us/open. DFPS notified all foster care providers of the adopted rates by letter.

(2) For payment rates established September 1, 2005 and thereafter, the Health and Human Services Commission (HHSC) approves rates that are statewide and uniform. In approving rate amounts HHSC takes into consideration staff recommendations based on the application of formulas and procedures described in this chapter. However, HHSC may adjust staff recommendations when HHSC deems such adjustments are warranted by particular circumstances likely to affect achievement of program objectives, including economic conditions and budgetary considerations. Reimbursement amounts will be determined coincident with the state's biennium. HHSC will hold a public hearing on proposed reimbursements before HHSC approves reimbursements. The purpose of the hearing is to give interested parties an opportunity to comment on the proposed reimbursements. Notice of the hearing will be provided to the public. The notice of the public hearing will identify the name, address, and telephone number to contact for the materials pertinent to the proposed reimbursements. At least ten working days before the public hearing takes place, material pertinent to the proposed statewide uniform reimbursements will be made available to the public. This material will be furnished to anyone who requests it.

(b) For payment rates in effect for state fiscal year (SFY) 2002 and 2003, DFPS develops rate recommendations for Board consideration for foster homes serving Levels of Care 1 through 4 children as follows:

(1) For all Level of Care 1 rates, DFPS analyzes the most recent statistical data available on expenditures for a child published by the United States Department of Agriculture (USDA) from middle income, dual parent households for the "Urban South." USDA data includes costs for age groupings from 0 to 17 years of age. An age differential is included with one rate for children ages 0-11 years, and another rate for children 12 years and older. Foster homes providing services to Level of Care 1 children receive the rate that corresponds to the age of the child in care.

(A) DFPS excludes health care costs, as specified in the USDA data, from its calculations since Medicaid covers these costs. USDA specified child-care and education costs are also excluded since these services are available in other DFPS day-care programs.

(B) DFPS includes the following cost categories for both age groups as specified in the USDA data: housing, food, transportation, clothing, and miscellaneous.

(C) The total cost per day is projected using the Implicit Price Deflator-Personal Consumption Expenditures (IPD-PCE) Index from the period covered in the USDA statistics to September 1 of the second year of the biennium, which is the middle of the biennium that the rate period covers. Information on inflation factors is specified in subsection (h) of this section.

(2) For Levels of Care 2 through 4 rates, DFPS analyzes the information submitted in audited foster home cost surveys and related documentation in the following ways:

(A) A statistically valid sample of specialized (therapeutic, habilitative, and primary medical) foster homes complete a cost survey covering one month of service if they meet the following criteria:

(i) the foster home currently has a DFPS foster child(ren) residing in the home; and

(ii) the number of children in the home, including the children of the foster parents, is 12 or fewer.

(B) For rates covering the fiscal year 2002-2003 biennium, child-placing agency homes are the only foster homes that complete a cost survey because the children they serve are currently assigned levels of care verified by an independent contractor. By September 1, 2001, children served in DFPS specialized foster homes will also be assigned levels of care verified by an independent contractor. All future sample populations completing a one-month foster home cost survey will include both child-placing agency and DFPS specialized foster homes. As referenced in subsection (j) of this section, during the 2004-2005 biennium, when the rate methodology is fully implemented, DFPS specialized foster homes and child-placing agency foster homes will be required to receive at a minimum the same foster home rate as derived by this subsection.

(C) Cost categories included in the one-month foster home cost survey include:

(i) shared costs, which are costs incurred by the entire family unit living in the home, such as mortgage or rent expense and utilities;

(ii) direct foster care costs, which are costs incurred for DFPS foster children only, such as clothing and personal care items. These costs are tracked and reported for the month according to the level of care of the child; and

(iii) administrative costs that directly provide for DFPS foster children, such as child-care books, and dues and fees for associations primarily devoted to child care.

(D) A cost per day is calculated for each cost category and these costs are combined for a total cost per day for each level of care served.

(E) A separate sample population is established for each type of specialized foster home (therapeutic, habilitative, and primary medical). Each level of care maintenance rate is established by the sample population's central tendency, which is defined as the mean, or average, of the population after applying two standard deviations above and below the mean of the total population.

(F) The rates calculated for each type of specialized foster home are averaged to derive one foster care maintenance rate for each of the Levels of Care 2 through 4.

(G) The total cost per day is projected using the IPD-PCE Index from the period covered in the cost report to September 1 of the second year of the biennium, which is the middle of the biennium that the rate period covers. Information on inflation factors is specified in subsection (h) of this section.

(c) For payment rates in effect for state fiscal year (SFY) 2002 and 2003, DFPS develops rate recommendations for Board consideration for child-placing agencies serving Levels of Care 1 through 4 children as follows:

(1) The rate-setting model defined in subsection (g) of this section is applied to child-placing agencies' cost reports to calculate a daily rate.

(2) At a minimum, child-placing agencies are required to pass through the applicable foster home rate derived from subsection (b) of this section to their foster homes. The remaining portion of the rate is provided for costs associated with case management, treatment coordination, administration, and overhead.

(3) For rate-setting purposes, the following facility types are included as child-placing agencies and will receive the child-placing agency rate:

(A) child-placing agency;

(B) independent foster family/group home;

(C) independent therapeutic foster family/group home;

(D) independent habilitative foster family/group home; and

(E) independent primary medical needs foster family/group home.

(d) For payment rates in effect for state fiscal year (SFY) 2002 and 2003, DFPS develops rate recommendations for Board consideration for residential care facilities serving Levels of Care 1 through 6 as follows:

(1) For Levels of Care 1 and 2, DFPS applies the same rate paid to child-placing agencies as recommended in subsection (c) of this section.

(2) For Levels of Care 3 through 6, the rate-setting model defined in subsection (g) of this section is applied to residential care facilities' cost reports to calculate a daily rate.

(3) For rate-setting purposes, the following facility types are included as residential care facilities and will receive the residential care facility rate:

(A) residential treatment center;

(B) therapeutic camp;

(C) intermediate care facility for individuals with an intellectual disability or related conditions;

(D) basic care facility;

(E) halfway house; and

(F) maternity home.

(e) For payment rates in effect for state fiscal year (SFY) 2002 and 2003, DFPS develops rate recommendations for Board consideration for emergency shelters as follows:

(1) DFPS analyzes emergency shelter cost report information included within the rate-setting population defined in subsection (f) of this section. Emergency shelter costs are not allocated across levels of care since, for rate-setting purposes, all children in emergency shelters are considered to be at the same level of care.

(2) For each cost report in the rate-setting population, the total costs are divided by the total number of days of care to calculate a daily rate.

(3) The total cost per day is projected using the IPD-PCE Index from the period covered in the cost report to September 1 of the second year of the biennium, which is the middle of the biennium that the rate period covers. Information on inflation factors is specified in subsection (h) of this section.

(4) The emergency shelter rate is established by the population's central point or central tendency. The measure of central tendency is defined as the mean, or average, of the population after applying two standard deviations above and below the mean of the total population.

(f) For payment rates in effect for state fiscal year (SFY) 2002 and 2003, level of care rates for contracted providers including child-placing agencies, residential care facilities, and emergency shelters are dependent upon provider cost report information. The following criteria applies to this cost report information:

(1) DFPS excludes the expenses specified in §700.1805 and §700.1806 of this title (relating to Unallowable Costs and Costs Not Included in Recommended Payment Rates). Exclusions and adjustments are made during audit desk reviews and on-site audits.

(2) DFPS includes therapy costs in its recommended payment rates for emergency shelters and for Levels of Care 3 through 6, and these costs will be considered as allowable costs for inclusion on the provider's annual cost report, only if one of the following conditions applies. The provider must access Medicaid for therapy for children in their care unless:

(A) the child is not eligible for Medicaid or is transitioning from Medicaid Managed Care to fee-for-service Medicaid;

(B) the necessary therapy is not a service allowable under Medicaid;

(C) service limits have been exhausted and the provider has been denied an extension;

(D) there are no Medicaid providers available within 45 miles that meet the needs identified in the service plan to provide the therapy; or

(E) it is essential and in the child's best interest for a non-Medicaid provider to provide therapy to the child and arrange for a smooth coordination of services for a transition period not to exceed 90 days or 14 sessions, whichever is less. Any exception beyond the 90 days or 14 sessions must be approved by DFPS before provision of services.

(3) DFPS may exclude from the database any cost report that is not completed according to the published methodology and the specific instructions for completion of the cost report. Reasons for exclusion of a cost report from the database include, but are not limited to:

(A) receiving the cost report too late to be included in the database;

(B) low occupancy;

(C) auditor recommended exclusions;

(D) days of service errors;

(E) providers that do not participate in the level of care system;

(F) providers with no public placements;

(G) not reporting costs for a full year;

(H) using cost estimates instead of actual costs;

(I) not using the accrual method of accounting for reporting information on the cost report;

(J) not reconciling between the cost report and the provider's general ledger; and

(K) not maintaining records that support the data reported on the cost report.

(4) DFPS requires all contracted providers to submit a cost report unless they meet one or more of the conditions in §355.105(b)(4)(D) of this chapter (relating to General Reporting and Documentation Requirements, Methods, and Procedures).

(g) For payment rates in effect for state fiscal year (SFY) 2002 and 2003, a rate-setting model is applied to child-placing agencies' and residential care facilities' cost report information included within the rate-setting population defined in subsection (f) of this section. Three allocation methodologies are used in the rate-setting model to allocate allowable costs among the levels of care of children that are served. The methodologies are explained below and are applied as follows:

(1) The first methodology is a staffing model, validated by a statistically valid foster care time study, driven by the number of direct care and treatment coordination staff assigned to a child-placing agency or residential care facility to care for the children at different levels of care. The staffing model produces a staffing complement that is applied to direct care costs to allocate the costs among the levels of care.

(A) Staff positions reported on the direct care labor area of the cost report are grouped into the following categories to more clearly define the staffing complement required at each level of care:

(i) case management;

(ii) treatment coordination;

(iii) direct care;

(iv) direct care administration; and

(v) medical.

(B) A categorized staffing complement for each Level of Care 1 through 6 is derived as follows:

(i) A 14-day foster care time study is applied to a representative sample of residential care facilities and child-placing agencies that completed a cost report.

(ii) Contracted staff, or employees, within the sampled facilities complete a foster care time study daily activity log that assigns half-hour units of each employee's time to the individual child(ren) with whom the employee is engaged during the time period. By correlating the distribution of the employee's time with the level of care assigned to each child, the employee's time is distributed across the Levels of Care 1 through 6.

(iii) The foster care time study daily activity log also captures the type of activity performed. The total amount of time spent in each of these activities is a component in determining the number of staff needed in each of the categories included in the staffing complement. The activities performed include:

(I) care and supervision;

(II) treatment planning and coordination;

(III) medical treatment and dental care; and

(IV) other (administrative, managerial, training functions, or personal time).

(iv) An analysis of the cumulative frequency distribution of these time units by level of care of all children served in the sample population, by category of staff performing the activity, and by type of activity, establishes appropriate staffing complements for each level of care in child-placing agencies and in residential care facilities. These time units by level of care are reported as values that represent the equivalent of a full-time employee. The results are reported in the following chart for incorporation into the rate-setting model:

Figure: 1 TAC §355.7103(g)(1)(B)(iv) (No change.)

(v) The foster care time study should be conducted every other biennium, or as needed, if service levels substantially change.

(C) Staff position salaries and contracted fees are reported as direct care labor costs on the cost reports. Each staff position is categorized according to the staffing complement outlined for the time study. The salaries and contracted fees for these positions are grouped into the staffing complement categories and are averaged for child-placing agencies and residential care facilities included in the rate-setting population. This results in an average salary for each staffing complement category (case management, treatment coordination, direct care, direct care administration, and medical).

(D) The staffing complement values, as outlined in the chart at paragraph (1)(B)(iv) of this subsection, are multiplied by the appropriate average salary for each staffing complement category. The products for all of the staffing complement categories are summed for a total for each level of care for both child-placing agencies and residential care facilities. The total by level of care is multiplied by the number of days of service in each level of care, and this product is used as the primary allocation statistic for assigning each provider's direct care costs to the various levels of care.

(E) Direct care costs include the following areas from the cost reports:

(i) direct care labor;

(ii) total payroll taxes/workers compensation; and

(iii) direct care non-labor for supervision/recreation, direct services, and other direct care (not CPAs).

(2) The second methodology allocates the following costs by dividing the total costs by the total number of days of care for an even distribution by day regardless of level of care. This amount is multiplied by the number of days served in each level:

(A) direct care non-labor for dietary/kitchen;

(B) building and equipment;

(C) transportation;

(D) tax expense; and

(E) net educational and vocational service costs.

(3) The third methodology allocates the following administrative costs among the levels of care by totaling the results of the previous two allocation methods, determining a percent of total among the levels of care, and applying those percentages:

(A) administrative wages/benefits;

(B) administration (non-salary);

(C) central office overhead; and

(D) foster family development.

(4) The allocation methods described in paragraphs (1) - (3) of this subsection are applied to each child-placing agency and residential care facility in the rate-setting population, and separate rates are calculated for each level of care served. Rate information is included in the population to set the level of care rate if the following criteria are met:

(A) Providers must have at least 30% of their service days within Levels of Care 3 through 6 for residential settings. For example, for the provider's cost report data to be included for calculating the Level of Care 3 rate, a provider must provide Level of Care 3 services for at least 30% of their service days.

(B) For Levels of Care 5 and 6, a contracted provider could provide up to 60% of "private days" services to be included in the rate-setting population. They must provide at least 40% state-placed services.

(5) Considering the criteria in paragraph (4) of this subsection, the rate-setting population is fully defined for each level of care. Based on this universe, each level of care rate will be established by the group's central point or central tendency. The measure of central tendency is defined as the mean, or average, of the population after applying two standard deviations above and below the mean of the total population.

(6) The total cost per day for each child-placing agency and residential care facility is projected using the IPD-PCE Index from the period covered in the cost report to September 1 of the second year of the biennium, which is the middle of the biennium that the rate period covers. Information on inflation factors is specified in subsection (h) of this section.

(h) For payment rates in effect for state fiscal year (SFY) 2002 and 2003, DFPS uses the Implicit Price Deflator - Personal Consumption Expenditures (IPD-PCE) Index, which is a general cost inflation index, to calculate projected allowable expenses. The IPD-PCE Index is a nationally recognized measure of inflation published by the Bureau of Economic Analysis of the United States Department of Commerce. DFPS uses the lowest feasible IPD-PCE Index forecast consistent with the forecasts of nationally recognized sources available to DFPS when the rates are prepared. Upon written request, DFPS will provide inflation factor amounts used to determine rates.

(i) All reimbursement rates will be equitably adjusted to the level of appropriations authorized by the Legislature.

(j) There will be a transition period for the fiscal year 2002-2003 biennium. During this period current rates will not be reduced, and any increased funding will be applied to those levels of care that are less adequately reimbursed according to the methodology. Since increased funding was appropriated at a different percentage for each year of the 2002-2003 biennium, the rates will be set separately for each year instead of setting a biennial rate, and inflation factors will be applied to the middle of each year of the biennium.

(k) For the SFY 2004 through 2005, DFPS determines payment rates using the rates determined for SFY 2002 and 2003 from subsections (a) - (h) of this section, with adjustments for the transition from a six level of care system to a four service level system of payment rates.

(l) For the state fiscal year 2006 through 2007 biennium, the 2005 payment rates in effect on August 31, 2005 will be adjusted by equal percentages based on a prorata distribution of additional appropriated funds.

(m) For the state fiscal year 2008 through 2009 biennium, rates are paid for each level of service identified by the DFPS. For foster homes, the payments effective September 1, 2007 through August 31, 2009 for each level of service will be equal to the minimum rate paid to foster homes for that level of service in effect August 31, 2007 plus 4.3 percent. For Child Placing Agencies (CPAs), the rates effective September 1, 2007, through August 31, 2009 for each level of service will be equal to the rate paid to CPAs for that level of service in effect August 31, 2007, plus 4.3 percent. Additional appropriated funds remaining after the rate increase for foster homes and CPAs shall be distributed proportionally across general residential operations and residential treatment centers based on each of these provider type's ratio of costs as reported on the most recently audited cost report to existing payment rates.

(n) HHSC may adjust payment rates, if determined appropriate, when federal or state laws, rules, standards, regulations, policies, or guidelines are changed or adopted. These adjustments may result in increases or decreases in payment rates. Providers must be informed of the specific law, rule, standard, regulation, policy or guideline change and be given the opportunity to comment on any rate adjustment resulting from the change prior to the actual payment rate adjustment.

(o) To implement Chapter 1022 of the Acts of the 75th Texas Legislature, §103, the executive director may develop and implement one or more pilot competitive procurement processes to purchase substitute care services, including foster family care services and specialized substitute care services. The pilot programs must be designed to produce a substitute care system that is outcome-based and that uses outcome measures. Rates for the pilot(s) will be the result of the competitive procurement process, but must be found to be reasonable by the executive director. Rates are subject to adjustment as allowed in subsections (a) and (m) of this section.

(p) Payment rates for psychiatric step-down services are determined on a pro forma basis in accordance with §355.105(h) of this chapter. Payment rates for psychiatric step-down services effective September 1, 2017, will be equal to the rates in effect on August 31, 2015.

(q) Definitions.

(1) Child-placing agency (CPA)--Child-placing agencies as defined in 40 Texas Administrative Code (TAC) §745.21.

(2) Community-based Care--Community-based Care as defined in 40 TAC §700.108.

(3) CPA retainage--The portion of the rate that includes the CPA's costs for administering the service, including, but not limited to recruiting and training foster families, matching children with foster families, monitoring foster families and foster homes, and the associated overhead costs.

(4) Emergency Care Services--Emergency care services as defined in 40 TAC §748.61.

(5) Foster home--Foster home as defined in 40 TAC §749.43 and §750.43.

(6) General Residential Operation (GRO)--General residential operations as defined in 40 TAC §748.43.

(7) Integrated Care Coordination (ICC)--Integrated Care Coordination as defined in 40 TAC §700.110.

(8) Levels of service--Levels of service as described in 40 TAC Chapter 700, Subchapter W.

(9) Residential Treatment Center (RTC)--Residential treatment center as defined in 40 TAC §748.43.

(10) Temporary Emergency Placement (TEP)--Temporary Emergency Placement as defined in 40 TAC §700.1337.

(11) Treatment Foster Care (TFF)--Treatment Foster Care as defined in 40 TAC §700.1335.

(r) Rates effective September 1, 2015. Rates are paid for each level of service identified by DFPS.

(1) For CPAs, the rate consists of a foster home payment described in paragraph (2) of this subsection and a CPA retainage. Effective September 1, 2015, the CPA retainage for each level of service will be equal CPA retainage for that level of service in effect August 31, 2015:

(A) plus 9.39 percent for the basic level of service;

(B) plus 1.14 percent for the moderate level of service;

(C) plus 0.42 percent for the specialized level of service; and

(D) plus 0.01 percent for the intense level of service.

(2) For foster homes, the minimum daily rate to be paid to a foster home effective September 1, 2015, for each level of service will be equal to the rate for that level of service in effect August 31, 2015.

(3) For GROs and RTCs, the rates effective September 1, 2015, will be equal to the rates paid to GROs and RTCs in effect August 31, 2015:

(A) plus 9.58 percent for the specialized level of service;

(B) plus 0.3 percent for the intense level of service; and

(C) unchanged for other levels of service.

(4) For emergency care services the rates effective September 1, 2015, will be equal to the rates in effect August 31, 2015, plus 6.0 percent.

(s) Rates effective September 1, 2017. Rates are paid for each level of service identified by DFPS.

(1) For CPAs, the rate consists of a foster home payment described in paragraph (2) of this subsection and a CPA retainage. Effective September 1, 2017, the combined CPA retainage and foster home payment for each level of service will be:

(A) $48.47 for the basic level of service;

(B) $85.46 for the moderate level of service;

(C) $109.08 for the specialized level of service; and

(D) $186.42 for the intense level of service.

(2) For foster homes, the minimum daily rate to be paid to a foster home effective September 1, 2017, for each level of service will be:

(A) $27.07 for the basic level of service;

(B) $47.37 for the moderate level of service;

(C) $57.86 for the specialized level of service; and

(D) $92.43 for the intense level of service.

(3) For GROs and RTCs, the rates effective September 1, 2017, will be:

(A) $45.19 for the basic level of service;

(B) $103.03 for the moderate level of service;

(C) $197.69 for the specialized level of service;

(D) $277.37 for the intense level of service; and

(E) $400.72 for the intense plus level of service.

(4) For emergency care services, the rate effective September 1, 2017, will be $129.53.

(5) For treatment foster care, the rate effective September 1, 2017, will be $277.37.

(t) Community-based Care.

(1) Initial payment rates for a defined rate period for Single Source Continuum Contractors under Community-based Care are determined on a pro forma basis in accordance with §355.105(h) of this chapter using the official forecast of case mix for paid foster care for each specific catchment area for the rate period available at the time the payment rates are calculated.

(2) HHSC will recalculate payments rates whenever a new official forecast of case mix for paid foster care is available.

(3) HHSC will compare the payment rates calculated using actual paid foster care case mix data for each catchment area to the payment rates in place for the rate period to determine the percentage difference between the two sets of payment rates.

(4) If the payment rates calculated using actual paid foster care case mix data for a catchment area are at least 1% greater than the initial payment rates for the rate period, HHSC will increase the catchment area payment rates.

(5) If the payment rates calculated using actual paid foster care case mix for a catchment area are at least 1% less than the initial payment rates for the rate period, HHSC will reduce the catchment area payment rates;

(6) Calculations and rate adjustments, if any, will be performed separately for each catchment area.

(u) Treatment Foster Family, Integrated Care Coordination Placement, Integrated Care Coordination Case Management, and Temporary Emergency Placement.

(1) The payment rates for these services are developed based on rates determined for other programs that provide similar services. If payment rates are not available from other programs that provide similar services, payment rates are determined using a pro forma approach in accordance with §355.105(h) of this chapter. The information in §355.101 of this chapter (relating to Introduction) and §355.105(g) of this chapter also applies.

(2) Reporting of cost. To gather adequate financial and statistical information upon which to base reimbursement, HHSC may require a contracted provider to submit a cost report for one or more of these services.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 10, 2017.

TRD-201703049

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Effective date: August 30, 2017

Proposal publication date: June 23, 2017

For further information, please call: (512) 707-6066


1 TAC §355.7109

The Texas Health and Human Services Commission (HHSC) adopts new §355.7109, concerning Reimbursement Methodology for Residential Child Care Case Management and Family-Based Safety Services. New §355.7109 is adopted with changes to the proposed text as published in the June 23, 2017, issue of the Texas Register (42 TexReg 3215), and therefore will be republished.

BACKGROUND AND JUSTIFICATION

New §355.7109 is necessary to comply with Senate Bill 11, 85th Legislature, Regular Session, 2017, which transfers the case management functions related to children in state custody from the Department of Family and Protective Services (DFPS) to community-based, nonprofit entities. HHSC, under its authority and responsibility to administer and implement rates, adopts new §355.7109 to codify the reimbursement methodology for Residential Child Care Case Management Services and Family-Based Safety Services provided by community-based, nonprofit entities.

COMMENTS

The 30-day comment period ended July 23, 2017. During this period, HHSC received one comment regarding the proposed rule from three commenters, including the Texas Alliance of Child and Family Services (TACFS), and provider agencies New Horizons and Prairie Harbor. The comment and HHSC's response follow.

Comment: The commenters suggested that HHSC review the rate setting methodology and consider contracting for a study to evaluate the methodology to ensure it aligns with modern foster care provider practice.

Response: Pursuant to House Bill 5, 85th Legislature, Regular Session, 2017 (HB 5), DFPS will separate from the Health and Human Services system effective September 1, 2017. Although HB 5 requires DFPS to contract with HHSC for the provision of administrative support services, including rate setting, decision-making authority concerning the methodology will rest with DFPS, not HHSC, after September 1, 2017. As a result, HHSC will not revise the rule in response to this comment.

The following minor editorial changes were made to new §355.7109:

In the title and in subsection (a), Family-Based Supportive Services was changed to Family-Based Safety Services to be consistent with a related DFPS rule.

Also in subsection (a), "title" was changed to "chapter" in rule cross-references, and "applies" was changed to "apply."

STATUTORY AUTHORITY

The new rule is adopted under Texas Government Code, §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority.

§355.7109.Reimbursement Methodology for Residential Child Care Case Management and Family-Based Safety Services.

(a) The payment rates for residential child care case management and family-based safety services are developed based on rates determined for other programs that provide similar services. If payment rates are not available from other programs that provide similar services, payment rates are determined using a pro forma approach in accordance with §355.105(h) of this chapter (relating to General Reporting and Documentation Requirements, Methods, and Procedures). The information in §355.101 of this chapter (relating to Introduction) and §355.105(g) of this chapter also apply.

(b) Reporting of cost. To gather adequate financial and statistical information upon which to base reimbursement, HHSC may require a contracted provider to submit a cost report.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 10, 2017.

TRD-201703051

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Effective date: August 30, 2017

Proposal publication date: June 23, 2017

For further information, please call: (512) 707-6066


SUBCHAPTER J. PURCHASED HEALTH SERVICES

DIVISION 4. MEDICAID HOSPITAL SERVICES

1 TAC §355.8052

The Texas Health and Human Services Commission (HHSC) adopts amendments to §355.8052, concerning Inpatient Hospital Reimbursement. The amended rule is adopted without changes to the proposed text as published in the June 23, 2017, issue of the Texas Register (42 TexReg 3216), and therefore will not be republished.

BACKGROUND AND JUSTIFICATION

The amendment to §355.8052 revises the definition of a rural hospital.

The amendment is consistent with the 2018-19 General Appropriations Act (Article II, S.B. 1, 85th Legislature, Regular Session, 2017, Rider 180), which allocates certain funds appropriated to HHSC to provide increased reimbursement for rural hospitals. The rider contains a definition of a rural hospital for purposes of allocating the appropriated funds that differs from the definition prescribed by the two previous legislatures. By revising the definition of "rural hospital" in §355.8052, HHSC is ensuring consistent categorization of hospitals across multiple Medicaid reimbursement programs. A hospital will not be reimbursed as "rural" for providing inpatient services while being reimbursed as "urban" for providing outpatient services.

The amendment is also consistent with the 2018-19 General Appropriations Act (Article II, S.B. 1, 85th Legislature, Regular Session, 2017, Rider 202), which requires HHSC to evaluate Medicaid funding initiatives for rural inpatient and outpatient hospital services. This rider contains the same definition of a rural hospital as Rider 180.

To be consistent with the definition of "rural hospital" in the riders mentioned above, the amended rule defines a rural hospital as (1) a hospital located in a county with 60,000 or fewer persons according to the 2010 U.S. Census; or (2) a hospital designated by Medicare as a Critical Access Hospital (CAH), Sole Community Hospital (SCH), or a Rural Referral Center (RRC) that is not located in a Metropolitan Statistical Area (MSA), as defined by the U.S. Office of Management and Budget; or (3) a hospital that (a) has 100 or fewer beds, (b) is designated by Medicare as a CAH, SCH, or RRC, and (c) is located in an MSA.

COMMENTS

Following publication of the proposed amendment, HHSC received comments from the following commenters: the Texas Hospital Association, United Regional Health Care System, Northwest Texas Healthcare System, South Texas Health System, Laredo Medical Center, Baptist Hospital of Southeast Texas and the Texas Organization of Rural and Community Hospitals. A summary of comments relating to the rule amendment and HHSC's responses follows.

Comment:

Commenters do not agree with the application of the definition of rural hospitals in rider 180 to hospitals that are already designated as RRCs or SCHs. The commenters suggest amending proposed §355.8052 to include one of the following options:

(a) Grandfather those RRCs and SCHs that are major safety net hospitals and only impose the new definition moving forward.

(b) Implement transition periods for impacted hospitals to alleviate some of the burden that will result from the rural hospital re-classification. Some commenters suggested a transition period of three years. Commenters state that a phase down period would provide impacted hospitals time to prepare for the decrease in reimbursement rates. Commenters also indicated that HHSC should be more specific about the timing of the suggested changes.

Response:

(a) HHSC disagrees that "major safety net hospitals" should be grandfathered. First, being a safety-net hospital is not currently, and never has been, a factor in determining the eligibility of a hospital to be reimbursed by Medicaid using "rural" hospital methodologies. The public policies that support higher reimbursement for rural hospitals, including ensuring access to critical services in remote areas, do not apply to "major safety net providers" located in large urban areas. Additionally, it would be illogical to categorize hospitals as rural on the basis of being a "major safety net hospital" when the term "safety-net hospital" is defined in §355.8052(b)(31) as an "urban or children's hospital" that is eligible for the Disproportionate Share Hospital program.

Under the rule, safety-net hospitals are eligible for an add-on that rural hospitals are not eligible to receive. Rider 180 specifically allocates significant add-on funds for urban Safety-Net hospitals in the upcoming biennium. Eight of the nine hospitals affected by the change proposed in this rule are eligible to receive the Safety-Net Add-on if classified as an urban hospital. The Safety-Net Add-on for FY 2018 will see a substantial increase over FY 2017. The increased add-on for the impacted RRCs and SCH will help mitigate the reduction in Medicaid reimbursement that results from the rule amendment.

For these reasons, HHSC made no change to the rule in response to this comment.

(b) HHSC disagrees that a transition period should be provided for the impacted hospitals to adjust back to reimbursement as urban hospitals. The requested three year period for transition out of the rural hospital reimbursement is not reasonable. All of the non-state-owned hospitals that are affected by the change in the definition of a rural hospital transitioned to the rural methodology within the last 12 months. The proposed amendment was published in June, 2017, at least three months before the beginning of the 2018 hospital fiscal year for most of the impacted hospitals, and as much as six months before others, providing an opportunity to make adjustments to their budgets. Additionally, as explained above, increased safety-net add-on amounts are anticipated to mitigate the reduction in reimbursement resulting from the rule amendment.

The amended definition of rural hospital will be effective on September 1, 2017. For any hospital impacted by the amendment, the state-wide SDA with add-ons calculated for that hospital will apply for inpatient fee-for-service claims for services provided beginning September 1, 2017.

HHSC made no change in response to this comment.

Comment:

One commenter requested that HHSC request clarification of the legislative intent of Rider 180, and whether the intent was to impact SCHs and CAHs in MSAs given the Medicare requirements for these hospitals.

Response:

No CAH is impacted by the rule amendment, because the designation for Medicare purposes is limited to hospitals of 25 beds or fewer. With regard to SCHs, HHSC believes that it is the intent of the legislature that hospitals located in large urban areas not be reimbursed as rural hospitals. That intent is indicated in the language of Rider 180, which directs HHSC's expenditures of certain appropriated funds and does not include SCHs located in MSAs in the definition of "rural hospital." It would be unreasonable for HHSC to use a different definition of the term for expenditures of other appropriated funds. Additionally, the appropriations for hospital reimbursement do not appear to include amounts for the higher cost-based SDA currently paid to the SCH impacted by this rule change. For these reasons, no changes were made to the rule in response to this comment. If HHSC receives clarification that the legislative intent of Rider 180 was to continue to treat the SCH as a rural hospital, a subsequent rule amendment will be proposed.

Comment:

One commenter states that one SCH will be treated differently than all other SCHs under the proposed rule. The commenter suggests that HHSC should treat all SCHs with the same Medicaid payment methodologies, regardless of bed size and MSA status.

Response:

HHSC disagrees with this comment. The proposed definition is consistent with Rider 180, which treats an SCH located in an MSA different from rural SCHs. The Rider definition is similar to the definition that was used for rural hospitals prior to September 1, 2013. By continuing to allow large urban hospitals to be reimbursed under a cost based Standard Dollar Amount (SDA) applicable to hospitals in rural areas, the intent of the statewide SDA methodology would not be followed. No changes to the rule were made in response to this comment.

Comment:

Commenters point out that hospital budgets are created six to nine months in advance of their fiscal year and the reduction in payments could result in a corresponding decrease in expenses, including for services or staff and therefore adversely impact Medicaid recipients.

Response:

HHSC recognizes the timing of budgeting and understands the difficulties of this modification to the Medicaid reimbursement. However, the non-state-owned hospitals impacted by the change in definition have only been receiving the increased reimbursement for a period of one year or less. As noted in a previous response, most of the hospitals were aware of the proposed change at least three months before the beginning of the hospitals' 2018 fiscal year, and some as much as six months, providing an opportunity to make adjustments to their budgets. Additionally, increased safety-net add-on amounts are anticipated to mitigate the reduction in reimbursement resulting from the rule amendment. For these reasons, HHSC made no change in response to this comment.

Comment:

One commenter suggested that HHSC delay adoption of the proposed rule to accommodate public review and access to care.

Response:

HHSC disagrees with this comment. The only hospitals that will be reclassified from rural to urban status as a result of this rule amendment are hospitals located in large urban areas. The public policies that support higher reimbursement for rural hospitals, including ensuring access to critical services in remote areas, do not apply to hospitals located in large urban areas. HHSC provided the legally required public notification of the change in administrative rule and a 30-day public comment period.

Comment:

One commenter stated that the rider language regarding rural hospitals has historically sought to protect small, rural hospitals and they feel that it still meets that primary objective.

Response:

HHSC agrees that the rider language continues to protect rural hospitals, as well as CAHs and small RRCs and SCHs located inside of MSAs.

STATUTORY AUTHORITY

The amendment is adopted under Texas Government Code §531.033, which authorizes the Executive Commissioner of HHSC to adopt rules necessary to carry out HHSC's duties; Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; Texas Government Code §531.021(b), which establishes HHSC as the agency responsible for adopting reasonable rules governing the determination of fees, charges, and rates for medical assistance payments under the Texas Human Resources Code, Chapter 32.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 11, 2017.

TRD-201703120

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Effective date: August 31, 2017

Proposal publication date: June 23, 2017

For further information, please call: (512) 707-6088


DIVISION 14. FEDERALLY QUALIFIED HEALTH CENTER SERVICES

1 TAC §355.8261

The Texas Health and Human Services Commission (HHSC) adopts amendments to §355.8261, concerning Federally Qualified Health Center Services Reimbursement. The amended rule is adopted without changes to the proposed text as published in the June 23, 2017, issue of the Texas Register (42 TexReg 3220), and therefore will not be republished.

BACKGROUND AND JUSTIFICATION

The amendments to §355.8261 are necessary to comply with Legacy Community Health Services, Inc. v. Janek, 184 F. Supp. 3d 407 (S.D. Tex. 2016), which requires changes to the FQHC payment process.

Under federal law (42 U.S.C. §1396a(bb)), Federally Qualified Health Centers (FQHCs) must be paid for services provided to Medicaid clients in an amount that is equal to the average of the FQHC's per visit costs. This amount is called its encounter rate.

If an FQHC provides services under a contract with a managed care organization (MCO) or dental maintenance organization (DMO) (also referred to in §355.8261 as dental managed care organization), 42 U.S.C. §1396a(bb)(5) requires the state to make a supplemental, or "wrap," payment to the FQHC in the amount of the difference between the federally required encounter rate and the amount of the payments provided under the contract. Since September 1, 2011, HHSC has required MCOs and DMOs, for both Medicaid and Children's Health Insurance Program (CHIP) services, to pay FQHCs their full encounter rate, rather than a contracted rate, thus eliminating the need for a wrap payment.

Legacy Community Health Services, an FQHC, filed suit against HHSC in January 2015, claiming HHSC's reimbursement policy with respect to Medicaid services violates the Medicaid Act, 42 U.S.C. ch. 7, subch. XIX. In May 2016, the United States District Court for the Southern District of Texas held that HHSC had improperly delegated its payment obligations to MCOs by requiring them to pay the full encounter rate. In February 2017, the Court granted a joint motion that permits HHSC to implement a wrap payment process, and thus be in compliance with the initial court order, no later than September 1, 2017. As a result, HHSC amends §355.8261 to describe how the agency will operationalize the Court's ruling.

COMMENTS

The 30-day comment period ended July 23, 2017. During this period, HHSC received comments regarding the proposed rule from one commenter, the Texas Association of Community Health Centers. A summary of comments relating to the rule and HHSC's responses follows.

Comment: The commenter supported the amendment to §355.8261(b)(11), regarding the FQHC wrap payment process.

Response: HHSC appreciates the commenter's support for the amendment.

Comment: The commenter expressed concern that the payment dispute resolution process in §355.8261(c) lacks sufficient specificity, including timeframes for an MCO or DMO to resolve an appeal or comply with HHSC direction and for HHSC to respond to an unresolved dispute. The commenter also cited the rule's lack of a required mechanism for an MCO or DMO to communicate a decision to an appealing FQHC and its undefined HHSC complaint process.

Response: HHSC disagrees that the payment dispute resolution process in §355.8261(c) requires additional information. Details of the dispute process are provided in section 8.2.4.2 of the Uniform Managed Care Contract, Appeal of Provider Claims, including that "the MCO must respond fully and completely to each Medicaid Provider's claims payment appeal" and that "the MCO is subject to liquidated damages if at least 98 percent of Provider Appeals are not resolved within 30 calendar days of the MCO's receipt." These same requirements are applied to DMOs through section 8.2.3.2 of the Dental Services Contract.

HHSC maintains internal guidelines for complaints resolution that vary based on the complexity and urgency of the complaint. Section 3.28 of the Uniform Managed Care Manual provides timeframes for MCO resolution of HHSC-referred issues and complaints.

Comment: The commenter noted that §355.8261(a)(8) references the Independent Rural Health Clinic/Freestanding FQHC Cost Report (Form CMS 222-92), which was replaced on October 1, 2014, with the Freestanding FQHC Cost Report (Form CMS 224-14). The commenter requested that this reference and relevant surrounding language be updated and provided suggested amendments to this subsection.

Response: HHSC declines to make the suggested change at this time because it is outside the scope of revisions to §355.8261(c). HHSC appreciates the comment, however, and may include the update in a future rule amendment.

STATUTORY AUTHORITY

The amended rule is adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; and Texas Government Code §531.02192(b)(2), which requires HHSC to ensure that FQHCs are paid in accordance with 42 U.S.C. §1396a(bb).

The amendment implements Texas Human Resources Code Chapter 32 and Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 9, 2017.

TRD-201703028

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Effective date: September 1, 2017

Proposal publication date: June 23, 2017

For further information, please call: (512) 730-7413