TITLE 1. ADMINISTRATION

PART 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 355. REIMBURSEMENT RATES

SUBCHAPTER J. PURCHASED HEALTH SERVICES

The executive commissioner of the Texas Health and Human Services Commission (HHSC) proposes amendments to §355.8443, concerning Reimbursement Methodology for School Health and Related Services (SHARS), and §355.8600, concerning Reimbursement Methodology for Ambulance Services.

BACKGROUND AND PURPOSE

The purpose of the proposal is to align the rule with current updated practices and reduce administrative burdens by modernizing the informal review process for cost reports.

SECTION-BY-SECTION SUMMARY

Proposed amendment to 355.8443(b) updates the cost report due date and method of submittal to be in a manner specified by HHSC.

Proposed amendment to 355.8443(e) updates language for clarity related to the cost reconciliation and settlement process.

Proposed amendment to 355.8443(i) removes the requirement for a request for an informal review to be submitted in writing, and replaces it with a requirement that the request for informal review must be received in a manner prescribed by HHSC and updates language to clarify requirements when requesting an informal review.

Proposed amendment to 355.8443(j) updates references for consistency in formatting.

Additional proposed amendments to §355.8443 include administrative updates for clarity and transparency throughout the rule and removes language related to requiring an informal review or extension request to be signed by an individual legally responsible for the requesting entity since that language is already included in §355.110.

Proposed amendment to 355.8600(a) updates the definition of governmental ambulance for clarity.

Proposed amendments to 355.8600(c) remove the written requirement for eligibility requests for supplemental payments and states eligibility requests must be submitted in the manner HHSC requires and updates the cost report due date and method of submittal to be in the manner specified by HHSC.

Additional proposed amendments to §355.8600 include administrative updates for clarity and transparency throughout the rule.

FISCAL NOTE

Trey Wood, HHSC Chief Financial Officer, has determined that for each year of the first five years that the rules will be in effect, enforcing or administering the rules does not have foreseeable implications relating to costs or revenues of state or local governments.

GOVERNMENT GROWTH IMPACT STATEMENT

HHSC has determined that during the first five years that the rules will be in effect:

(1) the proposed rules will not create or eliminate a government program;

(2) implementation of the proposed rules will not affect the number of HHSC employee positions;

(3) implementation of the proposed rules will result in no assumed change in future legislative appropriations;

(4) the proposed rules will not affect fees paid to HHSC;

(5) the proposed rules will not create new regulations;

(6) the proposed rules will not expand, limit, or repeal existing regulations;

(7) the proposed rules will not change the number of individuals subject to the rules; and

(8) the proposed rules will not affect the state's economy.

SMALL BUSINESS, MICRO-BUSINESS, AND RURAL COMMUNITY IMPACT ANALYSIS

Trey Wood has also determined that there will be no adverse economic effect on small businesses, micro-businesses, or rural communities.

The rules do not impose any additional costs on small businesses, micro-businesses, or rural communities that are required to comply with the rules.

LOCAL EMPLOYMENT IMPACT

The proposed rules will not affect a local economy.

COSTS TO REGULATED PERSONS

Texas Government Code §2001.0045 does not apply to these rules because the rules do not impose a cost on regulated persons and the rules are amended to reduce the burden or responsibilities imposed on regulated persons by the rules.

PUBLIC BENEFIT AND COSTS

Victoria Grady, Director of Provider Finance Department, has determined that for each year of the first five years the rules are in effect, the public benefit will be a reduced burden for contracted Medicaid providers related to the submission and processing of informal reviews and formal appeals.

Trey Wood has also determined that for the first five years the rules are in effect, there are no anticipated economic costs to persons who are required to comply with the proposed rules because the proposed amendments decrease the requirements to comply with the proposed rules.

TAKINGS IMPACT ASSESSMENT

HHSC has determined that the proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under Texas Government Code §2007.043.

PUBLIC COMMENT

Written comments on the proposal, including information related to the cost, benefit, or effect of the proposed rule, as well as any applicable data, research, or analysis, may be submitted to Rules Coordination Office, P.O. Box 13247, Mail Code 4102, Austin, Texas 78711-3247, or street address 4601 West Guadalupe Street, Austin, Texas 78751; or emailed to HHSRulesCoordinationOffice@hhs.texas.gov.

To be considered, comments must be submitted no later than 21 days after the date of this issue of the Texas Register. Comments must be (1) postmarked or shipped before the last day of the comment period; (2) hand-delivered before 5:00 p.m. on the last working day of the comment period; or (3) emailed before midnight on the last day of the comment period. If the last day to submit comments falls on a holiday, comments must be postmarked, shipped, or emailed before midnight on the following business day to be accepted. When emailing comments, please indicate "Comments on Proposed Rule 26R030" in the subject line.

DIVISION 23. EARLY AND PERIODIC SCREENING, DIAGNOSIS, AND TREATMENT (EPSDT)

1 TAC §355.8443

STATUTORY AUTHORITY

The amendment is authorized by Texas Government Code §524.0151, which provides that the executive commissioner of HHSC shall adopt rules for the operation and provision of services by the health and human services system; Texas Government Code §524.0005, which provides the executive commissioner of HHSC with broad rulemaking authority; Texas Human Resources Code §32.021 and Texas Government Code §532.0051, which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; and Texas Government Code §532.0057(a), which establishes HHSC as the agency responsible for adopting reasonable rules governing the determination of fees, charges, and rates for Medicaid payments under Texas Human Resources Code Chapter 32.

The amendments affect Texas Government Code §§524.0151, 524.0005, 532.0051, and 532.0057(a). It also affects Texas Human Resources Code Chapter 32.

§355.8443. Reimbursement Methodology for School Health and Related Services (SHARS).

(a) Introduction. Reimbursement is available to a Local Education Agency (LEA) for providing certain direct medical and transportation services, known as SHARS, to a Medicaid-enrolled student with a disability age 20 years of age or younger. SHARS services are described in and must be prescribed in accordance with §354.1341 of this title (relating to Benefits and Limitations).

(b) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise.

(1) Cost report--A yearly [An annual] report for all Medicaid-allowed [documenting the LEA's Medicaid-allowable] costs for all SHARS services provided by an LEA [delivered] during the previous federal fiscal year. The Texas Health and Human Services Commission (HHSC) sets the due date for the report, [cost report is due on or before April 1 of the year following the reporting period] and it must be certified in the [a] manner specified by HHSC [the Texas Health and Human Services Commission (HHSC)]. The [primary purposes of the] cost report should [are to]:

(A) document the LEA's total Medicaid-allowable costs for delivering SHARS, including direct costs and indirect costs, based on federally mandated cost allocation methodologies; and

(B) reconcile interim payments to total Medicaid-allowable costs based on approved cost allocation methodology procedures.

(2) Eligible student--A Medicaid-enrolled student with a disability age 20 years of age or younger that receives a direct medical or transportation service as prescribed by §354.1341 of this title.

(3) Interim claim--A claim for a direct medical or transportation service paid at the interim rate that is provisional in nature pending the completion of a cost reconciliation and cost settlement for the cost reporting period.

(4) Local Education Agency (LEA)--A Texas independent school district or public charter school.

(5) Time study--A statistically valid random sampling method used to identify the percentage of time spent performing actual direct medical services irrespective of payer and administrative cost.

(c) Parental Consent. Prior to submitting its annual cost report, the LEA must meet the parental consent requirements in §354.1342 of this title (relating to Conditions for Participation) for each student included in the numerator of the following ratios required in the cost report.

(1) IEP ratio.[--]A comparison of the total number of students enrolled in Medicaid with individualized education programs (IEPs) requiring direct medical services to the total number of students with IEPs requiring direct medical services.

(2) One-way trip ratio.[--]A comparison of the total one-way trips for students enrolled in Medicaid with IEPs requiring specialized transportation services, who received direct medical services the same day, to the total one-way trips for all students with IEPs requiring specialized transportation services.

(3) Section 504 Plan ratio.[--]A comparison of the total number of students enrolled in Medicaid with Section 504 Plans requiring audiology services to the total number of students with Section 504 Plans requiring audiology services.

(d) Time study. The LEA must participate in the HHSC-administered time study in the manner prescribed by HHSC.

(e) Reimbursement methodology. LEAs are reimbursed for direct medical and transportation services provided under the SHARS program on a cost basis.

(1) Interim rates. The interim rate is developed based on a percentage of the average per-unit cost for each SHARS service using actual cost data collected on cost reports and is subject to change under §355.109 of this chapter (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs). Interim rates are updated annually or as determined by HHSC.

(2) Interim claims.

(A) LEAs must submit:

(i) at least one interim claim for each direct medical service that an eligible student receives within the cost report period;

(ii) interim claims for all personal care services that an eligible student receives within the cost report period; and

(iii) interim claims for all eligible specialized transportation trips provided within the cost report period.

(B) Requirements for interim claims will be adjusted as needed based on direction from the Centers for Medicare and Medicaid Services.

(C) Interim claims must be valid and reimbursed to meet the requirements in this paragraph.

(3) Interim payment. LEAs are reimbursed for SHARS direct medical services and transportation services per unit of service at the lesser of:

(A) the LEA's billed charges; or

(B) the interim rate.

(4) Final reimbursement. The amount an LEA receives after HHSC completes a cost reconciliation and cost settlement process. The total costs for direct medical and transportation services are reviewed and adjusted by HHSC. Adjustments are made using federally required allocation methods. [The LEA's final reimbursement amount is arrived at by a cost reconciliation and cost settlement process. As reported in the cost report, the LEA's total costs for both direct medical and transportation services are adjusted using the federally mandated allocation methodologies.]

(A) Direct medical services costs. Salary and contract costs must be reported in the manner prescribed by HHSC.

(i) Direct costs. From the annual cost report, HHSC aggregates allowable costs for direct medical services, resulting in total direct costs. Direct costs for direct medical services include payroll costs and other costs that can be directly charged to direct medical services provided by contractors and LEA staff (i.e., salaries, benefits, and contract compensation). Direct medical services costs do not include transportation personnel costs.

(ii) Indirect costs. Indirect costs are determined by applying the LEA's specific unrestricted indirect cost rate to its net direct costs. Texas LEAs use predetermined fixed rates for indirect costs. The Texas Education Agency (TEA) has, in cooperation with the United States Department of Education (USDE), developed an indirect cost plan to be used by LEAs in Texas. As authorized in 34 CFR §75.561(b), TEA approves unrestricted indirect cost rates for LEAs for the USDE, which is the cognizant agency for LEAs.

(iii) Net allowable cost. Direct and indirect costs are added together and adjusted by the direct medical time study percentage, the IEP ratio, and the 504 Plan ratio, resulting in a net Medicaid allowable cost for direct medical services.

(B) Transportation services. Salary and contract costs must be reported in the manner prescribed by HHSC.

(i) Direct costs. From the annual cost report, HHSC aggregates allowable direct costs for transportation, resulting in total direct costs. Direct costs for covered transportation services include payroll costs and other costs that can be directly charged to covered transportation services. Direct payroll costs include total compensation (i.e., salaries, benefits, and contract compensation) of bus drivers and mechanics. Other direct costs include costs directly related to the delivery of covered transportation services, such as professional and contracted services, contracted transportation costs, gasoline and other fuels, other maintenance and repair costs, vehicle insurance, interest, rentals, and vehicle depreciation.

(ii) Indirect costs. Indirect costs are determined by applying the LEA's specific unrestricted indirect cost rate to its net direct costs. Texas public LEAs use predetermined fixed rates for indirect costs. TEA has, in cooperation with the USDE, developed an indirect cost plan to be used by LEAs in Texas. As authorized in 34 CFR §75.561(b), TEA approves unrestricted indirect cost rates for LEAs for the USDE, which is the cognizant agency for LEAs.

(iii) Net allowable cost. Net direct costs and indirect costs are added together and adjusted by the one-way trip ratio, resulting in a net Medicaid allowable cost for transportation services.

(f) Cost reporting requirements. HHSC excludes from reimbursement determinations any unallowable expenses included in the cost report and makes the appropriate adjustments to expenses and other information reported by LEAs.

(1) Certification. Each LEA certifies through the cost report process its total actual federal and non-federal costs and expenditures.

(2) Reimbursement determinations and allowable costs. LEAs are responsible for reporting only allowable costs on the cost report, except where HHSC prescribes that other costs are to be reported in specific lines or sections. Only allowable cost information is used to determine recommended reimbursement. All costs relating to Shared Service Arrangements and Co-operatives must be allocated to each respective LEA.

(g) Cost reconciliation. The Medicaid-allowable costs for direct medical and transportation services are added together and adjusted by the federal Medicaid assistance percentage (FMAP) to arrive at the federal share owed to the LEA. This amount is then reconciled with interim payments already made to the LEA.

(h) Cost settlement. HHSC uses a cost settlement process as follows.

(1) HHSC retains one percent of the federal share of the total certified Medicaid allowable cost as an administrative fee to be used for Health and Human Services administrative activities, including compliance monitoring, technical assistance, and to establish and maintain an audit reserve fund.

(2) If an LEA's interim payments exceed 99 percent of the LEA's federal portion of the total certified Medicaid allowable costs, HHSC recoups the overpayment using one of these two methods:

(A) HHSC offsets all future claims payments from the LEA until the amount is recovered; or

(B) the LEA returns an amount equal to the amount owed.

(3) If 99 percent of the LEA's federal portion of the total certified Medicaid allowable costs exceeds the interim Medicaid payments, HHSC pays the difference to the LEA.

(4) HHSC issues a notice of settlement within 24 months of the end of the reporting period.

(i) Informal review. An LEA who disputes an action or decision [determination] under this chapter may request an informal review under §355.110 of this chapter [title] (relating to Informal Reviews and Formal Appeals). This section provides clarification unique to the SHARS program.

(1) HHSC Provider Finance must receive a [written] request for an informal review [in a manner prescribed by HHSC] no later than 30 calendar days after [from] the date on the notice [written notification] of [the] adjustments. The informal review request must be submitted in a manner prescribed by HHSC. If the 30th [calendar] day falls on [is] a weekend or a [day,] national or state holiday, the request is due on the next business day. [or state holiday, then the first business day following the 30th calendar day is the final day the receipt of the written request will be accepted.] HHSC Provider Finance may [will] extend this deadline if a [it receives a written] request for an [the] extension is received within the same 30-day period. [in a manner prescribed by HHSC, no later than 30 calendar days from the date of the written notice of adjustments.] If the extension is approved, the requester has 45 calendar days from the date on the original notice to submit the informal review request. [The extension gives the requester a total of 45 calendar days from the date of the written notice of adjustment to file a request for an informal review.] If the 45th [calendar] day falls on [is] a weekend or a [day,] national [holiday,] or state holiday, [then] the deadline moves to [45th day is considered] the next business day. [following the 45th calendar day.] Any [A] request for an informal review or an extension that arrives after the [is not received by the stated] deadline will not be accepted.

(2) An LEA must provide [must, with its request for an informal review, submit] a brief and complete [concise] statement of the [specific] actions or decisions [determinations] it is disputing. [disputes,] The LEA must also include its recommended resolution[,] and any relevant supporting documentation. [the LEA deems relevant to the dispute.] It is the LEA's responsibility [of the LEA] to provide [render] all important [pertinent] information at the time it requests [of its request for] an informal review. HHSC will only consider any disputed items that are clearly stated in the request. [Disputed actions or determinations that are not explicitly stated in the request will not be considered by HHSC, and failure of HHSC to act on implied items of dispute will not be considered grounds for a formal appeal.] Any [A] request for an informal review that does not meet these [the] requirements [of this paragraph] will not be accepted.

[(3) The written request for the informal review or extension must be signed by an individual legally responsible for the conduct of the LEA or a legal representative for the LEA. The administrator or director of the LEA is not authorized to sign the request unless the administrator or director has this legal authority. A request for an informal review that is not signed by an individual legally responsible for the conduct of the LEA or a legal representative for the LEA will not be accepted.]

(j) General information. In addition to the requirements of this section, the cost reporting guidelines will be governed by the information in: §355.101 of this chapter (relating to Introduction); §355.102 of this chapter (relating to General Principles of Allowable and Unallowable Costs); §355.103 of this chapter (relating to Specifications for Allowable and Unallowable Costs); §355.104 of this chapter (relating to Revenues); §355.105 of this chapter (relating to General Reporting and Documentation Requirements, Methods, and Procedures); §355.106 of this chapter (relating to Basic Objectives and Criteria for Audit and Desk Review of Cost Reports); §355.107 of this chapter (relating to Notification of Exclusions and Adjustments); §355.108 of this chapter (relating to Determination of Inflation Indices); §355.109 of this chapter (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs); and §355.110 of this chapter (relating to Informal Reviews and Formal Appeals) [of this chapter]. If there is a conflict between an applicable section of [Chapter 355,] Subchapter A of this chapter [title] (relating [related] to Cost Determination Process) and the provisions of this section, the provisions of this section will prevail.

(k) In addition to the requirements of this section, the LEA must comply with all provisions outlined in §354.1341 [of this title] and §354.1342 of this title.

(l) Administrative contract violations. HHSC may take the following actions against an LEA for administrative contract violations.

(1) Time study. For failure to participate in or meet all time study requirements, HHSC will recoup all interim payments made during the cost reporting period and will not allow the LEA to submit a cost report for that reporting period.

(2) Interim claims. The LEA is ineligible to submit a cost report if they fail to submit interim claims in the manner and format prescribed by HHSC, or its designee, including the requirements in subsection (e)(2) of this section. If a service category, student, employee, or related cost is claimed in the cost report without having been appropriately claimed in compliance with program requirements, that specific service category, student, employee, or related cost will be disallowed from the cost report.

(3) Cost reports.

(A) For failure to submit a cost report by the due date, HHSC will recoup all interim payments made during the cost reporting period.

(B) HHSC will remove all unallowable costs and reserve the right to update a certified cost report if inaccurate information is identified or reported by the LEA.

(4) Other administrative contract violations. For all other administrative contract violations, HHSC will recoup all interim payments made during the cost reporting period.

(5) Appeals. An LEA may request a hearing to appeal HHSC's action concerning an administrative contract violation. Formal appeals are conducted in accordance with the provisions of Chapter 357, Subchapter I of this title (relating to Hearings under the Administrative Procedure Act). If there is a conflict between an applicable section of Chapter 357 of this title (relating to Hearings) and the provisions of this chapter, the provisions of this chapter will prevail.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 29, 2026.

TRD-202600363

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: March 15, 2026

For further information, please call: (512) 730-7475

DIVISION 31. AMBULANCE SERVICES

1 TAC §355.8600

STATUTORY AUTHORITY

The amendment is authorized by Texas Government Code §524.0151, which provides that the executive commissioner of HHSC shall adopt rules for the operation and provision of services by the health and human services system; Texas Government Code §524.0005, which provides the executive commissioner of HHSC with broad rulemaking authority; Texas Human Resources Code §32.021 and Texas Government Code §532.0051, which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; and Texas Government Code §532.0057(a), which establishes HHSC as the agency responsible for adopting reasonable rules governing the determination of fees, charges, and rates for Medicaid payments under Texas Human Resources Code Chapter 32.

The amendments affect Texas Government Code §§524.0151, 524.0005, 532.0051, and 532.0057(a). It also affects Texas Human Resources Code Chapter 32.

§355.8600. Reimbursement Methodology for Ambulance Services.

(a) Authority. Payments are made to private and governmental providers of ground and air ambulance services as specified in the ambulance program rules in Chapter 354, Subchapter A, Division 9 of this title (relating to Ambulance Services). The reimbursement determination authority is specified in §355.101 of this chapter (relating to Introduction).

(b) Definitions. The following words and terms, when used in this section, have the following meanings unless the context clearly indicates otherwise.

(1) Allowable costs--Expenses that are reasonable and necessary for the normal conduct of operations relating to the provision of ground and air ambulance services.

(2) Average Commercial Rate--The average amount payable by commercial payers for the same service.

(3) Centers for Medicare and Medicaid Services (CMS)--The federal agency within the United States Department of Health and Human Services responsible for overseeing and directing Medicare and Medicaid, or its successor.

(4) Governmental ambulance provider--An ambulance service that uses paid government employees to provide ambulance services. These services must receive direct funding from a government body that has the power to collect taxes or access tax revenue. This type of provider can be a local government, hospital authority, hospital district, city, county, or the state. A private ambulance provider that has a contract with a government entity is not a governmental ambulance provider under this section.

[(4) Governmental ambulance provider--An ambulance provider that uses paid government employees to provide ambulance services. The ambulance services must be directly funded by a unit of government that has taxing authority or has direct access to tax revenues, such as a local government, hospital authority, hospital district, city, county, or state. A private ambulance provider under contract with a governmental entity to provide ambulance services is not considered a governmental ambulance provider for the purposes of this section.]

(5) Medicaid shortfall--The unreimbursed cost to an ambulance provider of providing Medicaid ambulance services to Medicaid clients.

(6) Private ambulance provider--An ambulance provider that uses paid employees associated and financed through a private entity to provide ambulance services and may be under contract with a local, state, or federal government.

(7) Uncompensated care costs--The sum of the Medicaid shortfall and the uninsured costs.

(8) Uninsured costs--The unreimbursed cost to an ambulance provider of providing ambulance services that meet the definition of "medical assistance" in Social Security Act §1905(a) to uninsured patients as defined by CMS.

(9) Unit of service--A unit of service based on one or more allowable ambulance services provided to a client by all modes of approved transportation.

(c) Reimbursement methodologies.

(1) Fee-for-service ambulance fee. Fee-for-service reimbursement is based on the lesser of a provider's billed charges or the maximum fee established by the Texas Health and Human Services Commission (HHSC). HHSC establishes fees by reviewing the Medicare fee schedule and analyzing any other available ambulance-related data. Fee-for-service rates apply to both private and governmental ambulance providers.

(2) Supplemental payment and enhanced supplemental payment for governmental ambulance providers. For services provided through September 30, 2019, a governmental ambulance provider may be eligible to receive a supplemental payment in addition to the fee-for-service payment described in paragraph (1) of this subsection. For services provided beginning October 1, 2019, eligibility for governmental ambulance providers to receive a supplemental payment, and the methodology for calculating the payment amount, are described in §355.8210 of this subchapter (relating to Waiver Payments to Governmental Ambulance Providers for Uncompensated Charity Care).

(A) Eligibility for supplemental payments. A governmental ambulance provider must submit an eligibility request in the manner specified by HHSC. [a written request for determination of eligibility for supplemental payment in a manner designated by HHSC.] The [If eligible, a governmental ambulance] provider may [begin to] claim uncompensated care costs for [related to] services provided on or after the first day of the month after the eligibility request is approved. [after the request for determination of eligibility is approved.] HHSC will only review eligibility [considers] requests [for determination of eligibility] from governmental ambulance providers [as] defined in subsection (b) of this section. HHSC will respond to every request and state whether the provider is eligible [all written requests for consideration, indicating the requestor's eligibility] to receive supplemental payments. An acceptable request must include:

(i) an overview of the governmental agency;

(ii) a complete organizational chart of the governmental agency;

(iii) a complete organizational chart of the ambulance department within the governmental agency providing ambulance services;

(iv) an identification of the specific geographic service area covered by the ambulance department, by ZIP code;

(v) copies of all job descriptions for staff types or job categories of staff who work for the ambulance department and an estimated percentage of time spent working for the ambulance department and other departments of the governmental agency;

(vi) a primary contact person for the governmental agency who can respond to questions about the ambulance department; and

(vii) a signed letter documenting the governmental ambulance provider's voluntary contribution of non-federal funds.

(B) Eligibility for enhanced supplemental payments. A governmental ambulance provider must submit an application for enhanced supplemental payments to HHSC using a form designated by HHSC that includes the cost and payment data for paid Medicaid and commercial claims for all procedure codes specified in the application. If HHSC approves the application, a governmental ambulance provider may begin to claim enhanced supplemental payments based on the average commercial rate related only to ground ambulance services reimbursed by Texas Medicaid on a fee-for-service basis, provided on or after the first day of the month after the application is approved. HHSC will respond to all applications, indicating approval or disapproval of the applicant's eligibility to receive enhanced supplemental payments. An acceptable application must include:

(i) proof of enrollment as a Medicaid provider in the State of Texas at the beginning of the current demonstration year as defined in §355.8210 of this subchapter;

(ii) a primary contact person for the government agency who can respond to questions about the ambulance department;

(iii) a statement from the provider expressing its intent to participate in the program; and

(iv) a cost report that includes the cost and payment data for paid Medicaid and commercial claims for all procedure codes specified by HHSC.

(C) Cost reports. Governmental ambulance providers that are eligible for supplemental or enhanced supplemental payments must submit an annual cost report for ground and air ambulance services delivered to Medicaid and, effective March 1, 2012, uninsured clients on a cost report form specified by HHSC. Providers certify through the cost report process their total actual federal and non-federal costs and expenditures for the cost reporting period. Cost reports must be completed for a full year based on the federal fiscal year. HHSC may require newly eligible providers to submit a partial-year cost report for their first year of eligibility. The beginning date for the partial-year cost report is the provider's first day of eligibility for supplemental or enhanced supplemental payments, as determined by HHSC. The ending date of the partial-year cost report is the last day of the federal fiscal year that encompasses the cost report beginning date.

(i) Due date. The cost report is due on or before the date set by HHSC, and it [March 31 of the year following the cost reporting period ending date, September 30, and] must be certified in the [a] manner specified by HHSC. If the due date is [March 31 falls] on a federal or state holiday or a weekend, the report is due on the next business day. [the due date is the first business day after March 31.] A provider may request [in writing, by regular mail or special mail delivery,] an extension of up to 30 days. [after the due date to submit a cost report.] HHSC will review [respond to] all extension requests and let the provider know if the request is approved. [written requests for extensions, indicating whether the extension is granted.] HHSC must receive the [a] request before the original due date; any request received after that date will be denied. [for extension before the cost report due date. A request for extension received after the due date is considered denied.] A provider that does not submit its cost report by the due date or by the approved extended due date is not eligible for supplemental or enhanced supplemental payments for that federal fiscal year. [A provider whose cost report is not received by the due date or the extended due date is ineligible for supplemental or enhanced supplemental payments for the federal fiscal year.]

(ii) Purpose. A cost report shows [documents] the provider's actual Medicaid-allowable [allowable Medicaid] and uncompensated care costs for delivering ambulance services under [in accordance with the applicable] state and federal regulations. The [Because the cost] report is used to determine supplemental and enhanced supplemental payments. Because of this, [payments,] a provider must submit a complete and acceptable cost report to qualify [be eligible] for these payments. [a supplemental or enhanced supplemental payment.]

(iii) Allocating allowable costs. A provider's total allowable reported costs for ambulance services are allocated to Medicaid and uninsured patients based on the ratio of charges for Medicaid and uninsured patients to the charges for all patients. Only allocable expenditures related to Medicaid, Medicaid managed care, and uncompensated care, as defined and approved in the Texas Healthcare Transformation and Quality Improvement 1115 Waiver Program (1115 Waiver), will be included for supplemental payment.

(D) Calculation of supplemental payments and enhanced supplemental payments.

(i) For services provided from October 1, 2011, through February 29, 2012, a governmental ambulance provider may be eligible to receive a supplemental payment. The supplemental payment equals the [equal to its] Medicaid shortfall for the cost reporting period multiplied by the Federal Medical Assistance Percentage [federal Medical assistance percentage] (FMAP) in effect during the cost reporting period.

(ii) For services provided on or after March 1, 2012, and subject to approval by CMS, a governmental ambulance provider may be eligible to receive a supplemental payment equal to its uncompensated care costs for the cost reporting period multiplied by the FMAP in effect during the cost reporting period.

(iii) Supplemental payments based on uncompensated care costs are limited by the maximum aggregate amount of the estimated uncompensated care costs for all eligible governmental ambulance providers as determined by §355.8201 of this chapter (relating to Waiver Payments to Hospitals for Uncompensated Care).

(iv) If the actual aggregate uncompensated care costs for all eligible governmental ambulance providers are [is] greater than the maximum aggregate amount of the estimated uncompensated care costs for all eligible governmental ambulance providers as described in clause (iii) of this subparagraph, then HHSC will reduce the supplemental payments for all participating governmental ambulance providers proportionately.

(v) The supplemental payment is contingent upon the governmental ambulance provider's certificate of public expenditures submitted with each cost report.

(vi) If the federal government disallows federal financial participation related to the receipt or use of supplemental payments under this section, HHSC will recoup an amount equal to the federal share of supplemental payments overpaid or disallowed.

(E) Enhanced supplemental payment.

(i) For ground services reimbursed on a fee-for-service basis provided on or after October 1, 2019, a governmental ambulance provider may be eligible to receive an enhanced supplemental payment equal to the difference between the average commercial rate and the sum of its reimbursed costs for the cost reporting period.

(I) HHSC will determine the paid Medicaid claims fees and enhanced supplemental payment amounts for all procedure codes specified in the application for each eligible publicly owned fee-for-service ground emergency ambulance service provider.

(II) HHSC will calculate an overall average commercial rate for the ambulance service providers based on the cost and payment data provided from each eligible ambulance provider.

(III) HHSC will apply the overall average commercial rate to an ambulance provider's total Medicaid utilization to determine the ambulance provider's total commercial reimbursement.

(IV) HHSC will subtract the ambulance provider's total Medicaid reimbursement from the ambulance provider's total commercial reimbursement calculated for each of the eligible services.

(V) HHSC will calculate each ambulance provider's maximum payment limit by summing each of the differences calculated in subclause (IV) of this clause for each of the provider's eligible services.

(VI) HHSC will re-determine the average commercial rate at least annually.

(VII) The enhanced supplemental payment is contingent upon the governmental ambulance provider's data submitted with each cost report. HHSC will determine payment amounts on a quarterly basis, with a reimbursement of up to 100 percent for each ambulance provider's average commercial rate.

(ii) If CMS disallows federal financial participation related to a provider's receipt or use of enhanced supplemental payments under this section, HHSC will recoup from the provider an amount equal to the disallowance. If HHSC identifies an overpayment to a provider related to the receipt or use of enhanced supplemental payments under this section, HHSC will recoup from the provider an amount equal to the overpayment.

(d) General information. In addition to the requirements of this section, cost reporting guidelines are governed by: §355.101 of this chapter (relating to Introduction); §355.102 of this chapter (relating to General Principles of Allowable and Unallowable Costs); §355.103 of this chapter (relating to Specifications for Allowable and Unallowable Costs); §355.104 of this chapter (relating to Revenues); §355.105 of this chapter (relating to General Reporting and Documentation Requirements, Methods, and Procedures); §355.106 of this chapter (relating to Basic Objectives and Criteria for Audit and Desk Review of Cost Reports); §355.107 of this chapter (relating to Notification of Exclusions and Adjustments); §355.108 of this chapter (relating to Determination of Inflation Indices); §355.109 of this chapter (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs); and §355.110 of this chapter (relating to Informal Reviews and Formal Appeals). If conflicts arise between this section and other sections governing cost reporting, the provisions of this section prevail.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 29, 2026.

TRD-202600364

Karen Ray

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: March 15, 2026

For further information, please call: (512) 730-7475