TITLE 40.SOCIAL SERVICES AND ASSISTANCE

Part 1. TEXAS DEPARTMENT OF HUMAN SERVICES

Chapter 12. SPECIAL NUTRITION PROGRAMS

Subchapter A. CHILD AND ADULT CARE FOOD PROGRAM

40 TAC §12.24

The Texas Department of Human Services (DHS) proposes to amend §12.24, concerning sanctions and penalties, in its Special Nutrition Programs chapter. The purpose of the amendment is to modify current rules for taking adverse action against Child and Adult Care Food Program (CACFP) day care home sponsors. The amendment requires DHS to give CACFP day care home contractors advance notification that DHS intends to terminate their contract when DHS determines during the first follow-up review that the contractor has not corrected all instances of program noncompliance identified in the initial review. The amendment also removes the provision for DHS to suspend contractors' administrative payments and deny payment of contractors' outstanding claims when DHS determines during the first follow-up review that the contractor has not corrected all instances of program noncompliance identified in the initial review. Additionally, the amendment makes technical and other non-substantive improvements to the rule language.

James R. Hine, Commissioner, has determined that, for the first five-year period the proposed section will be in effect, there will be no fiscal implications for state or local government as a result of enforcing or administering the section.

Mr. Hine also has determined that, for each year of the first five years the section is in effect, the public benefit anticipated as a result of enforcing the section will be improved administration of the CACFP. Specifically, the rights of contractors subject to adverse action will be improved by giving the contractors advance notice when their contracts are subject to termination and allowing them due process. There will be no effect on small or micro businesses as a result of enforcing or administering the section, because the providers affected by this amendment are nonprofit or governmental entities and therefore not small or micro businesses. The economic effects are identical for all businesses, regardless of size. There is no anticipated economic cost to persons who are required to comply with the proposed section. There is no anticipated effect on local employment in geographic areas affected by this section.

Questions about the content of this proposal may be directed to Karen Van Reenen at (512) 420-2581 in DHS's Special Nutrition Programs. Written comments on the proposal may be submitted to Supervisor, Rules and Handbooks Unit-235, Texas Department of Human Services E-205, P.O. Box 149030, Austin, Texas 78714-9030, within 30 days of publication in the Texas Register .

Under §2007.003(b) of the Texas Government Code, DHS has determined that Chapter 2007 of the Government Code does not apply to these rules. Accordingly, DHS is not required to complete a takings impact assessment regarding these rules.

The amendment is proposed under the Human Resources Code, Title 2, Chapters 22 and 33, which authorizes DHS to administer public and nutritional assistance programs.

The amendment implements the Human Resources Code, §§22.001-22.036 and §§33.001-33.027.

§12.24.Sanctions and Penalties.

(a)-(b) (No change.)

[(c) If DHS has evidence that a contractor has submitted false information, DHS will immediately suspend all program payments, including advance payments, until DHS can determine whether the contractor knowingly submitted false information. If DHS determines, after a review of information provided by the contractor or other sources, that the contractor has knowingly submitted false information, DHS will immediately declare the contractor seriously deficient; terminate the contractor's agreement, in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations); suspend payment of any unpaid claim for reimbursement; and notify the contractor's eligible providers that they may transfer to another approved sponsor.]

(c) [ (d) ] If a contractor fails to attend training designated by DHS as mandatory, DHS requires [ will require ] the contractor to take corrective action to comply with program requirements. Failure by the contractor to accomplish the corrective action by the date established by DHS will result in adverse action up to, and including, termination of the contractor's agreement, in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations) and recommendation for placement on the United States Department of Agriculture's (USDA's) National Disqualified List. If the contractor is a sponsoring organization, DHS will notify the contractor's eligible providers or centers that they may transfer to another approved sponsor.

(d) [ (e) ] DHS imposes sanctions against contractors that sponsor day care homes who fail to comply with program requirements for monitoring[ , ] and who fail to train providers . When [ when ] program violations related to monitoring or training of providers identified during an administrative review exceed a tolerance level of one provider or 10% of the providers sampled, whichever amount is greater , [ . ] DHS imposes sanctions according to the following procedure:

(1) If DHS determines during an initial review of the sponsor for the contract year that the sponsor has not complied with the requirements in this subsection, DHS will deny administrative reimbursements for the test month of the review for any provider who was not monitored or trained according to program requirements, and require the contractor to submit a plan describing how the program noncompliance will be corrected.

(2) DHS will conduct a follow-up review not later than 90 days after notifying the contractor of the review findings to determine if the sponsor is in compliance with the requirements in this subsection. If DHS determines during the follow-up review that the sponsor has not corrected all instances of program noncompliance identified in the initial review, DHS imposes [ will impose ] sanctions , including denial of administrative reimbursements for the months subsequent to the month of the initial review through the month of the follow-up review for any provider who was not monitored or trained according to program requirements, establishing a cap on the number of day care home providers the contractor may sponsor, not to exceed the number of day care homes sponsored at the time of the review, and rescinding and/or denying approval for advance payments[ , and suspending all administrative reimbursements. DHS will continue to reimburse sponsors to pay providers for meals served to children ]. DHS also notifies the contractor that, if the contractor fails to demonstrate at the second follow-up review that all serious deficiencies identified by DHS have been or will be corrected, then DHS will:

(A) terminate the contractor's agreement, in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations);

(B) declare the organization seriously deficient in its administration of the program;

(C) release the contractor's eligible providers to transfer to another approved sponsor; and

(D) debar individuals responsible for the deficiencies.

(3) DHS will conduct a second follow-up review not later than 45 days after notifying the contractor of the findings of the initial follow-up review to determine if the sponsor is in compliance with the requirements in this subsection. If the contractor fails to demonstrate at the second follow-up review that all serious deficiencies identified by DHS have been or will be corrected, DHS will notify the contractor that as a result of failure to correct all instances of noncompliance with the requirements for monitoring and training providers: [ in this subsection will result in the termination of ]

(A) the contractor's agreement is terminated , in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations) ; [ , ]

(B) [ declaration that ] the organization is seriously deficient in its administration of the program ; [ , ]

(C) [ forfeiture of any outstanding claims for reimbursement, release of ] the contractor's eligible providers will be released to transfer to another approved sponsor ; [ , ] and

(D) [ that ] individuals responsible for the deficiencies are [ will be ] debarred.

(e) [ (f) ] DHS imposes sanctions against contractors that sponsor day care homes who fail to ensure that claims are submitted only for eligible meals served to eligible children according to the following procedure:

(1) If DHS determines during an initial review of the sponsor for the contract year that the sponsor has failed to ensure that claims are submitted only for eligible meals served to eligible children, DHS imposes [ will impose ] sanctions , including denial of administrative reimbursements for any day care home provider who does not have eligibility or enrollment forms containing required information and requiring the contractor to submit an amended claim for reimbursement to remove all ineligible meals for the test month, and a plan describing how the program noncompliance will be corrected.

(2) If 10% or more of the meals sampled and claimed for reimbursement for the test month of the initial review fail to meet program requirements, DHS conducts [ will conduct ] a follow-up review not later than 90 days after notifying the contractor of the review findings to determine if the sponsor is in compliance with requirements for ensuring claims are submitted only for eligible meals served to eligible children.

(A) If DHS determines during the follow-up review that 10% or more of the meals sampled and claimed for reimbursement for the test month of the follow-up review fail to meet program requirements, DHS imposes [ will impose ] additional sanctions to include the months subsequent to the month of the initial review through the month of the follow-up review , including denial of administrative reimbursements for any day care home provider who does not have eligibility or enrollment forms containing required information, establishing a cap on the number of day care home providers the contractor may sponsor, not to exceed the number of day care homes sponsored at the time of the review, and rescinding and/or denying approval for advance payments[ , and suspending all administrative reimbursements. DHS will continue to reimburse sponsors for meals served to children ]. DHS also notifies the contractor that, if the contractor fails to demonstrate at the second follow-up review that all serious deficiencies identified by DHS have been or will be corrected, then DHS will:

(i) terminate the contractor's agreement, in whole or in part, in accordance with §12.25 of the title (relating to Denials and Terminations);

(ii) declare the organization seriously deficient in its administration of the program;

(iii) release the contractor's eligible providers to transfer to another sponsor; and

(iv) debar the individuals responsible for the deficiencies.

(B) If less than 10% of all meals claimed for the test month of the follow-up review are ineligible, the sponsor may not claim reimbursement for any ineligible meals for the test month, may not receive administrative reimbursement for any day care home provider who does not have eligibility or enrollment forms containing the required information, and must submit a plan describing how the program noncompliance will be corrected.

(3) If more than 10% of the meals sampled for the test month of the follow-up review fail to meet program requirements, DHS conducts [ will conduct ] a second follow-up review not later than 45 days after notifying the contractor of the findings of the initial follow-up review to determine if the sponsor is in compliance with requirements for ensuring claims are submitted only for eligible meals served to eligible children. If the contractor fails to demonstrate at the second follow-up review that all serious deficiencies identified by DHS have been or will be corrected, DHS notifies [ will notify ] the contractor that as a result of failure to correct all instances of noncompliance with requirements for ensuring claims are submitted only for eligible meals served to eligible children : [ will result in the termination of ]

(A) the contractor's agreement is terminated , in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations) ; [ , ]

(B) [ declaration that ] the organization is seriously deficient in its administration of the program ; [ , ]

(C) [ forfeiture of any outstanding claims for reimbursement, release of ] the contractor's eligible providers will be released to transfer to another approved sponsor ; [ , ] and

(D) [ that ] individuals responsible for the deficiencies are [ will be ] debarred.

(f) [ (g) ] DHS imposes sanctions against contractors that sponsor day care homes who fail to disburse program funds to providers in accordance with program requirements when program violations related to the disbursement of program funds to providers identified during an administrative review exceed a tolerance level of one provider or 10% of the providers sampled, whichever amount is greater. DHS imposes sanctions according to the following procedure:

(1) If DHS determines during an initial review of the sponsor for the contract year that the sponsor has not complied with the requirements identified in this subsection, DHS imposes [ will impose ] sanctions for the test month of the review , including requiring the contractor to submit an amended claim to remove, for the purpose of determining administrative reimbursement, all providers who have not been issued program funds according to program requirements (day care home provider's meal reimbursement will not be recouped) from its reimbursement claim for the test month. DHS will require the contractor to submit a plan describing how the program noncompliance will be corrected.

(2) DHS will conduct a follow-up review not later than 90 days after notifying the contractor of the review findings to determine if the sponsor is in compliance with the requirements identified in this subsection. If DHS determines during the follow-up review that the sponsor has not corrected all instances of program noncompliance identified in the initial review, DHS will extend the sanctions to include the months subsequent to the month of the initial review through the month of the follow-up review and establish a cap on the number of day care home providers the contractor may sponsor, not to exceed the number of day care homes sponsored at the time of the review, and rescinding and/or denying approval for advance payments. DHS also notifies the contractor that, if the contractor fails to demonstrate at the second follow-up review that all serious deficiencies identified by DHS have been or will be corrected, then DHS will:

(A) terminate the contractor's agreement, in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations);

(B) declare the organization seriously deficient in its administration of the program;

(C) release the contractor's eligible providers to transfer to another approved sponsor; and

(D) debar individuals responsible for the deficiencies.

(3) DHS will conduct a second follow-up review not later than 45 days after notifying the contractor of the findings of the initial follow-up review to determine if the sponsor is in compliance with the requirements [ identified ] in this subsection [ (h) of this section ]. If the contractor fails to demonstrate at the second follow-up review that all serious deficiencies identified by DHS have been or will be corrected, DHS notifies [ will notify ] the contractor that as a result of failure to correct all instances of noncompliance relating to the disbursement of provider funds : [ will result in the termination of ]

(A) the contractor's agreement is terminated , in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations) ; [ , ]

(B) [ declaration that ] the organization is seriously deficient in its administration of the program ; [ , ]

(C) [ forfeiture of any outstanding claims for reimbursement, release of ] the contractor's eligible providers will be released to transfer to another approved sponsor ; [ , ] and

(D) [ that ] individuals responsible for the deficiencies are [ will be ] debarred.

(g) [ (h) ] If, during a review or an audit, DHS cites a day home sponsoring organization for deficiencies in administrative or financial capabilities because of an excessive number of day home providers, DHS places a cap on the number of day home providers the organization may sponsor. DHS identifies the number of day home providers the sponsoring organization can properly administer and immediately notifies the sponsor. The sponsor has 10 days to submit a plan to DHS to reduce the number of day home providers to the level of the approved cap.

(h) [ (i) ] DHS approves no additional day home providers for day home sponsoring organizations identified through audit or review as deficient in program operations until the sponsoring organization submits to DHS an acceptable plan to correct the deficiency.

[(j) DHS suspends payments to day home sponsoring organizations submitting repeated amended claims until the sponsoring organization demonstrates that it can produce a final claim on time each month, unless the sponsoring organization can demonstrate good cause beyond its control for submitting the amended claims. DHS ensures that no future adjustments in claims are paid beyond the claiming time frames, except when justified by on-site DHS/USDA reviews or independent audits.]

(i) [ (k) ] DHS imposes fiscal sanctions specified in this subsection on contractors who are required to obtain an audit in accordance with the Single Audit Act, as amended, and who fail to comply with the requirements of said Act. The contractor has the right to appeal this action as specified in Chapter 79 of this title (relating to Legal Services).

(1) DHS takes fiscal sanctions against a contractor according to the procedures specified in paragraphs (1)-(4) of this subsection.

(A) DHS notifies each contractor upon approval of the application for program participation of the date by which an acceptable audit must be received by DHS, and that failure to comply will result in the termination of the contractor's agreement, in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations), and recovery of overpayments as identified through audit findings.

(B) DHS provides the contractor two advance notices reminding the contractor of the specific date that the audit is due.

(i) DHS issues the first notice by regular mail six months after the end of the contractor's fiscal year for which the audit is due.

(ii) DHS issues the second notice by certified and regular mail eight months after the end of the contractor's fiscal year for which the audit is due. DHS notifies the contractor that:

(I) DHS must receive the audit on or before the due date specified in the notice;

(II) if DHS does not receive the audit on or before the specified due date, DHS will terminate the contractor's agreement, in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations); and

(III) the contractor has the right to appeal this decision.

(C) If DHS does not receive the audit on or before the specified due date, DHS notifies the contractor by certified and regular mail of its intent to terminate the contractor's agreement, in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations).

(2) If DHS determines [ has determined ] there are extenuating circumstances, DHS may conduct an audit, either directly or through the engagement of a third party. All costs associated with such an audit must be paid by the contractor.

(3) If a contractor submits an audit that [ which ] does not meet the requirements of the Single Audit Act, as amended, then DHS notifies the contractor in writing that the audit is unacceptable, how it is unacceptable, and that the contractor has 30 calendar days from the date on the notification to submit an acceptable audit to DHS. If DHS does not receive the required audit by the specified time frame and has not granted an extension of the due date, DHS notifies the contractor by certified and regular mail that:

(A) the contractor failed to provide an acceptable audit within the specified time frames;

(B) DHS must receive an acceptable audit by the due date specified in this notification;

(C) if DHS does not receive an acceptable audit by the specified due date, DHS intends to terminate their agreement, in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations); and

(D) the contractor has the right to appeal this decision. DHS may extend the time within which a contractor must submit an audit if DHS determines such an extension is justified.

(4) If DHS does not receive the required audit by the specified due date and has not granted an extension of the due date, DHS notifies the contractor by certified and regular mail that:

(A) the contractor failed to provide an acceptable audit by the specified due date; and

(B) DHS intends to terminate their agreement, in whole or in part, in accordance with §12.25 of this title (relating to Denials and Terminations).

(5) Once a contractor's participation in the CACFP has been terminated for failure to submit an acceptable audit, the contractor must provide an acceptable audit for any outstanding audit year(s) and comply with the requirements of the Single Audit Act, as amended, in order to be eligible to participate in the Special Nutrition Programs.

(j) [ (l) ] If a sponsoring organization of day homes determines during a monitoring review, or by other means, that a provider has failed to comply with program requirements, the sponsor must execute a corrective action plan to achieve compliance. If a sponsoring organization conducts two or more unannounced monitoring reviews in any 12-month period during which the sponsor cannot confirm that children are enrolled for child care and participating in the program, the sponsor must execute a corrective action plan to ensure they are able to effectively monitor the provider's participation in the program. Exception: A sponsor may suspend the participation of a day care home provider without a corrective action plan if the safety of the children in care is at risk. The corrective action plan must notify the provider that failure to correct serious deficiencies will result in the termination of the provider's agreement and placement of the provider on USDA's National Disqualified List and specify:

(1) the serious deficiencies;

(2) the actions to be taken by the sponsor and the provider to achieve compliance; and

(3) the date by which corrective action must be completed.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2002.

TRD-200203918

Paul Leche

General Counsel, Legal Services

Texas Department of Human Services

Earliest possible date of adoption: August 4, 2002

For further information, please call: (512) 438-3734

Chapter 19. NURSING FACILITY REQUIREMENTS FOR LICENSURE AND MEDICAID CERTIFICATION

The Texas Department of Human Services (DHS) proposes to amend §19.210, concerning temporary change of ownership, §19.211, concerning relocation, §19.2301, concerning conditions for participation as a Medicaid-certified facility; to repeal §19.2322, concerning allocation, reallocation, and decertification requirements, §19.2324, concerning selection and contracting procedures for adding Medicaid beds in high-occupancy areas, and §19.2325, concerning selection and contracting procedures for rural counties; and new §19.2322, concerning Medicaid bed allocation requirements, and §19.2324, concerning selection and contracting procedures for adding Medicaid beds in high-occupancy areas, in its Nursing Facility Requirements for Licensure and Medicaid Certification chapter. The purpose of the amendments, repeals, and new sections is to clarify definitions; allow DHS to make exceptions to the quality-of-care screen when necessary to benefit Medicaid recipients; require bed allocation exemptions to comply with Centers for Medicare & Medicaid Services (CMS) restrictions; restrict the transferability of waivers; relax spend-down provisions; require applicants for certain waivers to submit a demographic study that presents objective evidence to justify the waiver request; move the rural county waiver requirements from §19.2325 to the bed allocation rules waiver section and delete §19.2325; standardize time limits and extensions; require applicants granted waivers or exemptions to submit progress reports on construction; require property owners of closed facilities to identify their plans for future use of allocated Medicaid beds; establish informal review procedures; and simplify the requirements that pertain to high-occupancy counties by deleting the requirements for proof of ownership of land, a letter of finance, liquidated damages, and a third posting of notice of an open solicitation period for additional Medicaid beds.

James R. Hine, Commissioner, has determined that for the first five-year period the proposed sections will be in effect, there will be no fiscal implications for state or local government as a result of enforcing or administering the sections.

Mr. Hine also has determined that for each year of the first five years the sections are in effect, the public benefit anticipated as a result of enforcing the sections will be rule language that is easier for the general public to understand. The proposal also promotes competition, which may result in an improved quality of care, and allows private-pay residents who spend- down their resources to have greater access to Medicaid beds. The proposal adds flexibility to the quality-of-care screen in order to benefit Medicaid recipients. There will be no effect on small or micro businesses as a result of enforcing or administering the sections, because while the proposed sections change departmental procedure, they do not require anything of facilities, unless they choose to seek additional Medicaid beds. Large, small, or micro facilities seeking a community needs, under-served minority, or Alzheimer's waiver will have to pay for an independent, professional demographic study to justify their request for a waiver. Such studies will cost the same amount regardless of the facility size. There is no way to reduce the cost for smaller businesses. There is no anticipated economic cost to persons who are required to comply with the proposed sections. There is no anticipated effect on local employment in geographic areas affected by these sections.

Questions about the content of this proposal may be directed to Susan Syler at (512) 438- 3111 in DHS's Long Term Care-Policy section. Written comments on the proposal may be submitted to Supervisor, Rules and Handbooks Unit-212, Texas Department of Human Services E-205, P.O. Box 149030, Austin, Texas 78714-9030, within 30 days of publication in the Texas Register .

Under §2007.003(b) of the Texas Government Code, DHS has determined that Chapter 2007 of the Government Code does not apply to these rules. Accordingly, DHS is not required to complete a takings impact assessment regarding these rules.

Subchapter C. NURSING FACILITY LICENSURE APPLICATION PROCESS

40 TAC §19.210, §19.211

The amendments are proposed under the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes DHS to administer public and medical assistance programs; and under Texas Government Code, §531.021, which provides the Texas Health and Human Services Commission with the authority to administer federal medical assistance funds.

The amendments implement the Human Resources Code, §§22.001-22.036 and §§32.001-32.052.

§19.210.Temporary Change of Ownership.

(a) (No change.)

(b) A nursing facility license holder with an excellent operating record may be eligible to acquire a license on an expedited basis to operate another existing nursing facility. A license holder that appears on the expedited change of ownership list may be granted expedited approval in obtaining a temporary change of ownership license to operate another existing nursing facility in Texas.

(1) (No change.)

(2) In order to establish and maintain the excellent performing nursing facility license holder list, DHS uses the criteria found in §19.2322(e) [ §19.2322(d) ] of this title (relating to Medicaid Bed Allocation Requirements [ Allocation, Reallocation, and Decertification Requirements ]). An excellent performing nursing facility license holder meeting these criteria appears on the list and is eligible for an expedited change of ownership license to operate another existing institution in Texas.

(3)-(9) (No change.)

(c)-(g) (No change.)

§19.211.Relocation.

(a)-(e) (No change.)

(f) This section applies to relocation of a currently licensed facility, and does not govern the relocation of Medicaid-certified beds. See §19.2322 of this title (relating to Medicaid Bed Allocation Requirements [ Allocation, Reallocation, and Decertification Requirements ]) for guidelines on relocation of Medicaid-certified beds.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2002.

TRD-200203910

Paul Leche

General Counsel, Legal Services

Texas Department of Human Services

Earliest possible date of adoption: August 4, 2002

For further information, please call: (512) 438-3734

Subchapter X. REQUIREMENTS FOR MEDICAID-CERTIFIED FACILITIES

40 TAC §§19.2301, 19.2322, 19.2324

The amendment and new sections are proposed under the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes DHS to administer public and medical assistance programs; and under Texas Government Code, §531.021, which provides the Texas Health and Human Services Commission with the authority to administer federal medical assistance funds.

The amendment and new sections implement the Human Resources Code, §§22.001- 22.036 and §§32.001-32.052.

§19.2301.Conditions for Participation as a Medicaid-Certified Facility.

(a) The facility must meet the following conditions to be approved by the Texas Department of Human Services (DHS) for participation in the Title XIX Texas Medical Assistance program and receive state and federal reimbursement for services to Title XIX residents:

(1)-(2) (No change.)

(3) the beds for which the facility wishes to contract meet the requirements of §19.2322 of this title (relating to Medicaid Bed Allocation Requirements [ Additional Participation Requirements ]).

(b) Only a facility with a fully executed [ fully-executed ] current contract with DHS may receive state and federal reimbursement for services to Title XIX recipients.

§19.2322.Medicaid Bed Allocation Requirements.

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

(1) Applicant--The entity requesting a bed allocation waiver or exemption.

(2) Assignment of rights--The conveyance of all rights to a specific number of allocated Medicaid beds from a nursing facility or entity to another entity for purposes of constructing a new nursing facility or for any other use as authorized by these rules.

(3) Bed allocation--The process by which the Texas Department of Human Services (DHS) controls the number of nursing facility beds that are eligible to become Medicaid-certified in each nursing facility.

(4) Bed certification--The process by which DHS certifies compliance with state and federal Medicaid requirements for a specified number of Medicaid beds within a nursing facility.

(5) Licensee--The entity, which includes controlling persons, that is:

(A) an applicant for licensure by DHS under Chapter 242 of the Texas Health and Safety Code and Medicaid certification;

(B) licensed by DHS under Chapter 242 of the Texas Health and Safety Code; or

(C) licensed under Chapter 242 of the Texas Health and Safety Code and holds the contract to provide Medicaid services.

(6) Lien holder--The entity that holds a lien against the physical plant.

(7) Multiple-facility owner--An entity that owns, controls, or operates under lease two or more nursing facilities within or across state lines.

(8) Occupancy rate--The number of residents occupying certified Medicaid beds divided by the number of certified Medicaid beds in a nursing facility.

(9) Physical plant--The land and attached structures to which beds are allocated or for which an application for bed allocation has been submitted.

(10) Property owner--The person or entity that owns a physical plant.

(11) Transfer of beds--The conveyance of a specific number of allocated Medicaid beds from a nursing facility or entity to an existing licensed nursing facility. The nursing facility may use the transferred Medicaid beds to increase the number of Medicaid-certified beds currently licensed or to increase the number of Medicaid certified beds when additional licensed beds are added to the nursing facility in the future.

(b) Purpose. The purpose of this section is to control the number of Medicaid beds for which DHS contracts, to improve the quality of resident care by selective and limited allocation of Medicaid beds, and to promote competition.

(c) Bed allocation general requirements. The allocation of Medicaid beds represents an opportunity for the property owner or the lessee of a nursing facility to obtain a Medicaid nursing facility contract for a specific number of Medicaid-certified beds.

(1) Medicaid beds are allocated to a nursing facility and remain at the physical plant to which they originally were allocated, unless beds are assigned or transferred in accordance with these requirements.

(2) When Medicaid beds are allocated to a nursing facility as a result of actions by the licensee, the beds remain allocated to the physical plant, even when the licensee ceases operating the nursing facility, unless the beds are subsequently assigned or transferred in accordance with these requirements.

(3) Notwithstanding any language in subsections (f) and (g) of this section and the fact that applicants for bed allocation waivers and exemptions may be licensees or property owners, beds are allocated to the physical plant and the rights to all allocated Medicaid beds belong to the property owner, subject to any and all valid physical plant liens.

(d) Control of beds. Except as specified in this section, DHS does not accept applications for a Medicaid contract for nursing facility beds from any nursing facility that was not granted:

(1) a valid certificate of need (CON) by the Texas Health Facilities Commission before September 1, 1985;

(2) a waiver by DHS before January 1, 1993; or

(3) other valid order that had the effect of authorizing the operation of the nursing facility at the bed capacity for which participation is sought.

(e) Quality of care. Unless specifically exempted from this requirement, applicants for Medicaid bed allocation waivers or exemptions and any controlling persons must demonstrate a history of providing quality care.

(1) In determining if an applicant or a controlling person has a history of providing quality care, DHS may consider the provisions detailed in §19.214(a) of this title (relating to Criteria for Denying a License or Renewal of a License).

(A) Additionally, DHS will determine an applicant to have demonstrated a history of quality of care if, within the preceding 24 months, an applicant has not received any of the following sanctions:

(i) termination of Medicaid and/or Medicare certification;

(ii) termination of Medicaid contract;

(iii) denial, suspension or revocation of nursing facility license;

(iv) cumulative Medicaid and/or Medicare civil monetary penalties totaling more than $5,000 per facility;

(v) civil penalties pursuant to §242.065 of the Texas Health and Safety Code; or

(vi) denial of payment for new admissions; and

(B) DHS finds no clear pattern of substantial or repeated licensing and Medicaid sanctions, including administrative penalties and/or other sanctions.

(2) Nursing facilities that have received any of the sanctions listed under paragraph (1) of this subsection within the previous 24 months are not eligible for an allocation of additional Medicaid beds. In the case of sanctions that are appealed, either administratively or judicially, an application will be suspended until the appeal has been resolved. Sanctions that have been administratively withdrawn or were subsequently reversed upon administrative or judicial appeal will not be considered.

(3) When the applicant for an allocation of additional Medicaid beds is a multiple-facility owner or a multiple-facility owner owns an applicant nursing facility, the multiple-facility owner must demonstrate an overall record of providing quality care in addition to the applicant facility's meeting the quality-of-care requirements in this subsection.

(4) When a licensee has operated a nursing facility for less than 24 months, the nursing facility must establish at least a 12-month compliance record in which the nursing facility has not received any of the sanctions listed under paragraph (1) of this subsection.

(5) When the applicant has no history of operating nursing facilities, DHS will review the compliance record of health-care facilities operated, managed or otherwise controlled by controlling parties of the applicant. If the controlling parties or the applicant has never operated, managed or otherwise controlled any health-care facilities, a compliance review will not be required.

(6) The commissioner, or the commissioner's designee, may make an exception to any of the requirements in this subsection if it is determined the needs of Medicaid recipients in a local community will be served best by granting a Medicaid bed allocation waiver or exemption. In determining whether to make an exception to the quality-of-care requirements, the commissioner or the commissioner's designee may consider the following:

(A) the overall compliance record of the waiver or exemption applicant;

(B) the current availability of Medicaid beds in facilities providing a high quality of care in the local community;

(C) the level of support for the waiver or exemption from the local community;

(D) how a waiver or exemption will improve the overall quality of care for nursing facility residents; and

(E) the age and condition of nursing facility physical plants in the local community.

(f) Exemptions. Under the following circumstances, DHS may grant an exemption of the policy stated in subsection (d) of this section. All exemption actions must comply with the requirements in this subsection and with requirements of the Center for Medicare & Medicaid Services (CMS) regarding bed additions and reductions. When a bed allocation exemption is approved, the licensee must comply with the requirements contained in §19.201 of this title (relating to Criteria for Licensing) at the time of licensure and/or Medicaid certification of the new beds or nursing facility.

(1) Replacement Medicaid nursing facilities and beds. Currently allocated Medicaid beds may be replaced through the construction of one or more new nursing facilities.

(A) The applicant must either own the physical plant to which the beds are allocated or possess a valid assignment of rights to the Medicaid beds.

(B) Assignment of the Medicaid beds to the replacement nursing facility must be approved by all lien holders of the physical plant to which the beds are allocated.

(C) Replacement nursing facility applicants, including those who obtained the rights to the beds through a valid assignment of rights, must comply with the history of quality-of-care requirements in subsection (e) of this section, unless the applicant for a replacement nursing facility is the current property owner.

(D) Replacement facilities will be granted an increase of up to 25% of the currently allocated Medicaid beds, if the applicant complies with the history of quality-of-care requirements in subsection (e) of this section. The additional allocation of beds may not be transferred or assigned until they are certified at the replacement facility.

(E) The replacement nursing facility must be located in the same county in which the Medicaid beds currently are allocated.

(2) Transfer of Medicaid beds. Allocated Medicaid beds currently certified or certified previously may be transferred to another physical plant.

(A) The applicant must own the physical plant to which the beds are allocated or must present DHS with one of the following:

(i) a valid Medicaid bed transfer agreement that specifies the number of additional Medicaid beds to be allocated to the receiving nursing facility; or

(ii) a valid assignment of rights to currently allocated Medicaid beds that specifies the number of additional Medicaid beds to be allocated to the receiving nursing facility.

(B) If the Medicaid beds currently are allocated to a specific physical plant, the current property owner and all current lien holders must approve the transfer agreement.

(C) The receiving licensee must comply with the history of quality-of-care requirements in subsection (e) of this section.

(D) Both facilities must be located in the same county.

(3) High-occupancy facilities. Medicaid-certified nursing facilities with high occupancy rates may periodically receive bed allocation increases.

(A) The occupancy rate of the Medicaid beds of the applicant nursing facility must be at least 90% for nine of the previous 12 months.

(B) The application for additional Medicaid beds may be no greater than 10% (rounded to the nearest whole number) of the current number of Medicaid-certified nursing facility beds.

(C) The applicant nursing facility must comply with the history of quality-of-care requirements in subsection (e) of this section.

(D) The applicant nursing facility may reapply for additional Medicaid beds no sooner than nine months from the date of the previous allocation increase.

(E) Medicaid beds allocated to a nursing facility under this requirement may only be certified at the applicant facility. The additional allocation of beds may not be transferred or assigned until they are certified at the applicant facility.

(4) Non-certified nursing facilities. Licensed nursing facilities that do not have Medicaid-certified beds may receive an initial allocation of Medicaid beds.

(A) The application for Medicaid beds may be no greater than 10% (rounded to the nearest whole number) of the current licensed nursing facility beds.

(B) The applicant licensee must comply with the history of quality-of-care requirements in subsection (e) of this section.

(C) After the applicant receives an allocation of Medicaid beds, the licensee may reapply in accordance with provisions of paragraph (3) of this subsection.

(D) Facilities that have Medicaid beds allocated under provisions of the Alzheimer's waiver may apply for general Medicaid beds in accordance with paragraph (3) or (4) of this subsection. The beds allocated under the Alzheimer's waiver provisions will be excluded from this computation; for example, a 120-bed nursing facility with 60 Alzheimer waiver beds would be eligible for 10% of the 60 remaining beds or 6 additional Medicaid beds.

(5) Low-capacity facilities. For purposes of efficiency, nursing facilities with a Medicaid bed capacity of less than 60 may receive additional Medicaid beds to increase their capacity up to a total of 60 Medicaid beds.

(A) The nursing facility must be licensed for less than 60 beds and have a current certification of less than 60 Medicaid beds.

(B) The nursing facility must have been Medicaid-certified before June 1, 1998.

(C) The applicant licensee must comply with the history of quality-of-care requirements in subsection (e) of this section.

(D) Facilities that have a Medicaid capacity of less than 60 beds due to the loss of Medicaid beds under provisions in subsection (h) of this section are not eligible for this exemption.

(6) Spend-down Medicaid beds. Licensed nursing facilities may receive temporary spend-down Medicaid beds for residents who have "spent down" to become eligible for Medicaid, but for whom no Medicaid bed is available. Approval of spend-down Medicaid beds allows a nursing facility to exceed temporarily its allocated Medicaid bed capacity.

(A) The applicant nursing facility must have a Medicaid contract. If the nursing facility is not currently Medicaid-certified, the licensee must be approved for Medicaid certification and obtain a Medicaid contract.

(B) All Medicaid or dually certified beds must be occupied by Medicaid or Medicare recipients at the time of application.

(C) The application for a spend-down Medicaid bed must include documentation that the person for whom the spend-down bed is requested:

(i) was not eligible for Medicaid at the time of the resident's most recent admission to the nursing facility; and

(ii) was a resident of the nursing facility for at least the immediate three months before becoming eligible for Medicaid, excluding hospitalizations.

(D) The nursing facility is eligible to receive Medicaid benefits effective the date the resident meets Medicaid eligibility requirements.

(E) The nursing facility must assign a permanent Medicaid bed to the resident as soon as one becomes available.

(F) Facilities with multiple residents in spend-down beds must assign permanent Medicaid beds to those residents in the same order the residents were admitted to spend-down beds.

(G) The assignment of residents in spend-down beds to permanent Medicaid beds must precede the admission of new residents to permanent beds.

(H) The nursing facility must notify DHS immediately upon the death or permanent discharge of the resident or transfer of the resident to a permanent Medicaid bed. Failure of the nursing facility to notify DHS of these occurrences in a timely manner is basis for denying applications for spend-down Medicaid beds.

(I) The nursing facility is not required to comply with quality-of-care requirements in subsection (e) of this section.

(g) Waivers. The commissioner or the commissioner's designee may grant a waiver of the policy stated in subsection (d) of this section under certain conditions. Applicants must meet the following conditions to be eligible for the specific waivers in subsection (h) of this section.

(1) The applicant must meet the quality-of-care requirement stated in subsection (e) of this section.

(2) Every waiver application must include identification of all controlling parties of the applicant entity.

(3) At the time of licensure and/or Medicaid certification of the allocated beds, the licensee must comply with the requirements contained in §19.201 of this title.

(4) Approved waivers may be assigned by the applicant to another entity under the following circumstances.

(A) Waivers may be assigned to another entity controlled by the majority owners of the waiver.

(B) Waivers may be assigned to the entity that owns the facility at the time of certification. Assignment of the waiver under these circumstances will be approved by DHS only if the entity that owns the facility at the time of certification complies with subsection (e) of this section and the waiver applicant is the licensee of the new facility. Control of the allocated beds after initial Medicaid certification is subject to subsection (c) of this section.

(C) Assignment of waivers under circumstances listed in subparagraphs (A) and (B) of this paragraph must be reported to DHS.

(5) Any additional controlling parties of the new entity must be reported to DHS. The validity of the waiver will be contingent on the new controlling parties' compliance with the quality-of-care requirements in subsection (e) of this section.

(6) Waiver applicants who submit false information will not be eligible for a waiver. Waivers issued based on false information provided by the applicant are void.

(7) Waiver applications will be considered in the order in which they are received.

(h) Specific waivers. Waivers may be granted if it is determined that Medicaid beds are necessary for the following circumstances.

(1) Community needs waiver. A community needs waiver is designed to meet the needs of communities that do not have reasonable access to quality nursing facility care.

(A) The applicant must submit a study, prepared by an independent professional experienced at preparing demographic studies, that documents:

(i) an immediate need for additional Medicaid beds in the community;

(ii) Medicaid residents in the community do not have reasonable access to quality nursing facility care; and

(iii) substantial community support for the new nursing facility or beds.

(B) Applicants must disclose if they have served as a trustee of a nursing facility within the previous 24 months.

(2) Criminal justice waiver. The criminal justice waiver is designed to meet the needs of the Texas Department of Criminal Justice (TDCJ). The applicant must document that:

(A) the waiver is needed to meet the identified and determined nursing facility needs of TDCJ; and

(B) the new nursing facility is approved by TDCJ to serve persons under their supervision who have been released on parole, mandatory supervision, or special needs parole under the Code of Criminal Procedure, Article 42.18.

(3) Under-served minority waiver. The under-served minority waiver is designed to meet the needs of minority communities that do not have adequate nursing facility care. For purposes of this waiver, the term minority means black, Hispanic, Asian or Pacific Islander, American Indian, or Alaskan native. The applicant must submit a study, prepared by an independent professional experienced at preparing demographic studies, that documents:

(A) the new nursing facility or beds will serve a ZIP code that has a minority population greater than 50% according to the most recent U.S. census; and

(B) minority residents in the ZIP code in which the nursing facility or beds will be located do not have reasonable access to quality nursing facility care.

(4) Alzheimer's waiver. The Alzheimer's waiver is designed to meet the needs of communities that do not have reasonable access to Alzheimer's nursing facility services.

(A) The applicant must document that:

(i) the nursing facility is affiliated with a medical school operated by the state;

(ii) the nursing facility will participate in ongoing research programs for the care and treatment of persons with Alzheimer's disease;

(iii) the nursing facility will be designed to separate and treat residents with Alzheimer's disease by stage and functional level;

(iv) the nursing facility will obtain and maintain voluntary certification as an Alzheimer's nursing facility in accordance with §§19.2204, 19.2206, 19.2208 of this title (relating to Voluntary Certification of Facilities for Care of Persons with Alzheimer's Disease; General Requirements for a Certified Facility; and Standards for Certified Alzheimer's Facilities); and

(v) only residents with Alzheimer's disease or related dementia will be admitted to the Alzheimer's Medicaid beds.

(B) The applicant must submit a study, prepared by an independent professional experienced at preparing demographic studies, that documents the need for the number of Medicaid Alzheimer's beds requested.

(5) Teaching nursing facility waiver. A teaching nursing facility waiver is designed to meet the statewide needs for providing training and practical experience for health-care professionals. The applicant must submit documentation that the nursing facility:

(A) is affiliated with a state-supported medical school;

(B) is located on land owned or controlled by the state-supported medical school; and

(C) serves as a teaching nursing facility for physicians and related health-care professionals.

(6) Rural county waiver. A rural county waiver is designed to meet the needs of rural areas of the state that do not have reasonable access to quality nursing facility care. For purposes of this waiver, a rural county is one that has a population of 100,000 or less according to the most recent census, and has no more than two Medicaid-certified nursing facilities. DHS will approve no more than 120 additional Medicaid beds per county per year and no more than 500 additional Medicaid beds statewide in a calendar year under this waiver provision. The waivers will be considered on a first-come, first-served basis. Requests received in a year in which the 500-bed limit has been met will be carried over to the next year. The waiver must be requested by the county commissioner's court.

(A) The commissioner's court must notify DHS of its intent to consider a rural county waiver and obtain verification from DHS that the county complies with the definition of rural county.

(B) The commissioner's court must publish a notice in the Texas Register and in a newspaper of general circulation in the county. The notice must seek:

(i) comments on whether a new Medicaid nursing facility should be requested; and

(ii) proposals from persons or entities interested in providing additional Medicaid-certified beds in the county, including persons or entities currently operating Medicaid-certified facilities with high occupancy rates. Persons or entities that submit false information will be eliminated from the process.

(C) The commissioner's court must determine whether to proceed with the waiver request after considering all comments and proposals received in response to the notices provided under subparagraph (B) of this paragraph. In determining whether to proceed with the waiver request, the commissioner's court must consider:

(i) the demographic and economic needs of the county;

(ii) the quality of existing Medicaid nursing facilities in the county;

(iii) the quality of the proposals submitted, including a review of the past history of care provided, if any, by the person or entity submitting the proposal; and

(iv) the degree of community support for additional Medicaid nursing facility services.

(D) The commissioner's court must document the comments received, proposals offered and factors considered in subparagraph (C) of this paragraph.

(E) The commissioner's court, if it decides to proceed with the waiver request, must submit a recommendation that DHS issue a waiver to a person or entity who submitted a proposal for new or additional Medicaid beds. The recommendation must include:

(i) the name, address, and telephone number of the person or entity recommended for contracting for the Medicaid beds;

(ii) the location, if the commissioner's court desires to identify one, of the recommended nursing facility;

(iii) the number of beds recommended; and

(iv) the information listed in subparagraph (D) of this paragraph used to make the recommendation.

(7) State veterans homes. State veterans homes, authorized and built under the auspices of the State Veterans Land Board, must meet all requirements for Medicaid participation.

(i) Time Limits and Extensions.

(1) With the exception of transferred Medicaid beds and temporary Medicaid beds, all beds approved under the exemption provisions of subsection (f) of this section must be constructed, licensed, and certified within 24 months of the exemption approval.

(2) Medicaid beds transferred in accordance with subsection (f)(2) of this section must be certified within six months of the exemption approval.

(3) Time limits applicable to temporary Medicaid beds are specified in subsection (f)(6) of this section.

(4) All facilities and beds approved in accordance with waiver provisions of subsection (h) of this section must be constructed, licensed, and certified within 24 months of the waiver approval.

(5) With the exception of transferred Medicaid beds and temporary Medicaid beds, applicants for exemptions and waivers must submit a progress report every 12 months after approval of the exemption or waiver. The exemption or waiver may be declared void if the applicant fails or refuses to provide the progress report as required or if the progress report contains false information.

(6) At the discretion of the commissioner or the commissioner's designee, deadlines specified in this section may be extended. The applicant must submit evidence of good-faith efforts to meet the deadline and/or evidence that delays were beyond the applicant's control.

(7) Applicants who receive an extension of their waiver of exemption must submit a progress report every six months after approval of the extension until the nursing facility beds are certified. The exemption or waiver may be declared void if the applicant fails or refuses to provide the progress report as required or if the progress report contains false information.

(8) Failure to meet the requirements of this section is grounds for loss of the Medicaid bed allocation.

(j) Loss of Medicaid Beds.

(1) Loss of Medicaid beds based on sanctions.

(A) A Medicaid nursing facility operated by the person or entity who also owns the property will lose the allocation of all Medicaid beds assigned to the nursing facility property if the nursing facility's license is denied or revoked.

(B) A Medicaid nursing facility operated by one person or entity and owned by another person or entity will lose the allocation of Medicaid beds if two or more of the following actions occur within a 42-month period:

(i) licensure denial;

(ii) licensure revocation; or

(iii) Medicaid termination.

(C) DHS may waive this loss of allocation of Medicaid beds in order to facilitate a change of ownership or other actions that would protect the health and safety of residents or assure reasonable access to quality nursing facility care.

(2) Voluntary decertification of Medicaid beds.

(A) Facilities may request to voluntarily decertify Medicaid beds.

(B) The licensee must submit written approval of the Medicaid bed reduction signed by the property owner and all physical plant lien holders.

(C) Medicaid beds voluntarily decertified will result in reduction of allocated Medicaid beds equal to the number of beds decertified.

(D) Facilities that voluntarily decertify Medicaid beds are eligible to receive an increased allocation of Medicaid beds if the facility qualifies for a bed allocation waiver or exemption.

(3) Nursing facility ceases to operate.

(A) The property owner of a nursing facility that closes or ceases to participate in the Medicaid program must inform DHS in writing of the intended future use of the Medicaid beds within 90 days of inquiry from DHS.

(B) Unless the Medicaid beds will be used for a replacement nursing facility, the allocated beds must be re-certified within 12 months of the date the Medicaid contract was terminated.

(C) Time limits in subparagraphs (A) and (B) of this paragraph may be extended in accordance with subsection (i)(6) of this section.

(D) Failure to meet the requirements of this paragraph is grounds for loss of the Medicaid bed allocation.

(k) Informal review procedures.

(1) Applicants may request an informal review of DHS actions regarding bed allocations. The request must be submitted within 30 days of notification of the action.

(2) The request for the informal review and all documentation or evidence that forms the basis for the informal review must be submitted in writing.

(3) The commissioner or the commissioner's designee will conduct the informal review.

(l) Loss of Medicaid beds based on low occupancy.

(1) DHS may review Medicaid bed occupancy rates annually for the purpose of de-allocating and decertifying unused Medicaid beds. The Medicaid bed occupancy reports for the most recent six-month period that DHS has validated will be used to determine the bed occupancy rate of each nursing facility.

(2) Medicaid beds will be de-allocated and decertified in facilities that have an average occupancy rate below 70%. The number of beds to be decertified is calculated by subtracting the preceding six-month average occupancy rate of Medicaid-certified beds from 70% of the number of allocated certified beds and dividing the difference by 2, rounding the final figure down if necessary. For example, for a facility with 100 Medicaid-certified beds and a 50% occupancy rate, the difference between 70% (70 beds) and 50% (50 beds) is 20 beds, divided by 2, is 10 beds to be decertified.

(3) Medicaid beds in a nursing facility that has obtained a replacement nursing facility exemption are not subject to the de-allocation and decertification process.

(4) Medicaid beds in a new or replacement physical plant or a newly constructed wing of an existing physical plant will be exempt from this de-allocation and decertification process until the new physical plant or new wing has been certified for two years.

(5) Medicaid beds that have been subject to a change of ownership within the past 24 months are exempt from the de-allocation and decertification process.

(6) Medicaid beds allocated to a closed nursing facility are exempt from this de-allocation and decertification process.

(7) Nursing facilities that lose Medicaid beds through this process are eligible to receive an additional allocation of Medicaid beds at a later date if the facility qualifies for a bed allocation waiver or exemption.

(8) The de-allocation and decertification of unused beds does not affect the licensed capacity of the nursing facility.

(m) Medicaid occupancy reports.

(1) Medicaid nursing facilities must submit occupancy reports to DHS each month.

(A) The occupancy data must be reported on a form prescribed by DHS. The form must be completed in accordance with instructions and the occupancy data must be accurate and verifiable. The completed report must be submitted to DHS no later than the fifth day of the month following the reporting period.

(B) The Medicaid occupancy rate will be determined by calculating the monthly average of the number of persons who occupy Medicaid beds.

(C) All persons residing in Medicaid-certified beds, including Medicaid recipients, Medicare recipients, private-pay residents or residents with other sources of payment, will be included in the calculation.

(D) Failure or refusal to submit accurate occupancy reports in a timely manner may result in the nursing facility's vendor payment being held in abeyance until the report is submitted.

(2) DHS will determine nursing facility and county occupancy rates based on the data submitted by the nursing facilities.

(A) The occupancy data will be used to determine eligibility for and/or compliance with waiver and exemption requirements. The occupancy data also will be used to determine if Medicaid beds should be decertified based on low occupancy.

(B) The occupancy data will be made available to nursing facilities, licensees, property owners, waiver or exemption applicants and others in accordance with public disclosure requirements.

(C) Inaccurate or falsified occupancy data is grounds to disqualify facilities from eligibility for bed allocation exemptions and waivers. DHS may refuse to accept corrections to bed occupancy data submitted more than six months after the due date of the occupancy report.

(n) School-age residents. Any bed allocation waiver or exemption applicant that serves or plans to serve school-age residents must provide written notice to the affected local education agency (LEA) of its intent to establish or expand a nursing facility within the LEA's boundary.

§19.2324.Selection and Contracting Procedures for Adding Medicaid Beds in High-Occupancy Areas.

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

(1) County occupancy rate--The number of residents occupying certified Medicaid beds in a county divided by the number of Medicaid beds allocated in the county. This calculation includes Medicaid beds that currently are certified and Medicaid beds that have been allocated but are not currently certified. In the four most populous counties, the occupancy rate will be calculated for each county-commissioner precinct.

(2) Open solicitation period--A time period in which licensees, property owners and other entities may apply for an allocation of Medicaid beds in high-occupancy counties or precincts.

(b) Primary selection process.

(1) DHS will monitor monthly Medicaid occupancy rates. When DHS determines that the occupancy rate for any county, or any precinct in the four most populous counties, equals or exceeds 90% for six consecutive months, a public notice will be placed in the Texas Register and the Electronic State Business Daily (ESBD) to announce an open solicitation period.

(2) The public notice will announce that DHS will allocate additional Medicaid beds to eligible nursing facilities. The notice will specify that the solicitation is limited to currently licensed nursing facility beds that may be converted to Medicaid-certified beds and that the number of beds allocated will be limited to the number necessary to reduce the county or precinct occupancy rate to 85%.

(3) The public notice will identify the county and/or precinct, the six-month occupancy average for the county or precinct and the beginning and end dates of the open solicitation period. The notice also will include the DHS address to which the application for additional Medicaid beds must be submitted and will specify that the application must be received by DHS before the close of business on the end date of the solicitation period.

(4) Current licensees and/or property owners of licensed facilities that choose to apply for the allocation of additional Medicaid beds must demonstrate a history of quality care as specified in §19.2322(e) of this title (relating to Medicaid Bed Allocation Requirements).

(5) Applicants must provide the name and address of the nursing facility, the name, address, and telephone number of the contact person, the number of licensed beds available and the number of additional Medicaid beds requested.

(6) At the end of the solicitation period, DHS will determine if any applicant is eligible for additional Medicaid beds and if the number of eligible licensed beds is adequate to reduce the county or precinct occupancy rate to below 90%. DHS will allocate the number of Medicaid beds necessary to reduce the occupancy rate to below 90%. If eligible nursing facilities have additional licensed beds available for conversion to Medicaid beds, DHS will allocate additional beds, but not more than the number of beds necessary to reduce the occupancy rate to 85%.

(7) If more than one nursing facility is eligible for additional Medicaid beds, the beds will be allocated equally to each facility.

(8) The additional allocation of Medicaid beds may not be transferred or assigned until they are certified at the applicant facility.

(9) Medicaid beds allocated under this provision must be certified within six months of allocation and must comply with time limit and extension requirements specified in §19.2322(i) of this title.

(c) Secondary selection process.

(1) When the primary selection process does not result in the allocation of additional Medicaid beds necessary to reduce the occupancy rate to below 90%, DHS will place a second notice in the Texas Register and the ESBD. The second notice will announce that additional Medicaid beds may be allocated to eligible applicants that desire to construct a new nursing facility or to construct an addition to an existing nursing facility. In counties with 1,500 or more Medicaid beds, the notice will specify that the allocation is limited to no more than 120 beds. In counties with fewer than 1,500 Medicaid beds, the notice will specify that the allocation is limited to no more than 90 beds.

(2) The second notice will identify the county and/or precinct, the six-month occupancy average for the county or precinct and the beginning and end dates of the solicitation period. The notice also will include the DHS address to which the application for additional Medicaid beds must be submitted and will specify that the application must be received by DHS before the close of business on the end date of the solicitation period.

(3) Applicants for the secondary waiver process must demonstrate a history of quality care as specified in §19.2322(e) of this title.

(4) Applicants must provide the name and address of the applicant entity, the name, address, and telephone number of the contact person, the name and address of all controlling parties of the applicant entity and the number of Medicaid beds requested.

(5) At the end of the secondary solicitation period, DHS will determine if any applicant is eligible for additional Medicaid beds. If multiple applicants are eligible, the applicant that will receive the allocation of beds will be chosen by a lottery selection. Applicants who submit false information are not eligible for the allocation of Medicaid beds. Medicaid beds allocated based on false information are not eligible for Medicaid certification and the allocation is revoked.

(6) Medicaid beds allocated under this provision may only be transferred to another entity controlled by the same majority owners. Transfers under these circumstances must be reported to DHS.

(7) If no application for the secondary waiver process is received or if no applicant meets the requirements in this section, no further solicitations will occur.

(8) In counties with no licensed nursing facilities, DHS will implement the secondary selection process when it is determined that the county population exceeds 5,000. Since those counties contain no licensed beds eligible for the primary selection process, DHS will omit that part of the process.

(9) Medicaid beds allocated under this provision must be constructed, licensed and certified within 24 months of allocation and must comply with time limit and extension requirements specified in §19.2322(i) of this title.

(d) Informal review procedures.

(1) Applicants may request an informal review of DHS actions in this section. The request must be submitted within 30 days of notice of the action.

(2) The request for the informal review and all documentation or evidence that forms the basis for the informal review must be submitted in writing.

(3) The commissioner or the commissioner's designee will conduct the informal review.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2002.

TRD-200203911

Paul Leche

General Counsel, Legal Services

Texas Department of Human Services

Earliest possible date of adoption: August 4, 2002

For further information, please call: (512) 438-3734

40 TAC §§19.2322, 19.2324, 19.2325

(Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Department of Human Services or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The repeals are proposed under the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes DHS to administer public and medical assistance programs; and under Texas Government Code, §531.021, which provides the Texas Health and Human Services Commission with the authority to administer federal medical assistance funds.

The repeals implement the Human Resources Code, §§22.001-22.036 and §§32.001-32.052.

§19.2322.Allocation, Reallocation, and Decertification Requirements.

§19.2324.Selection and Contracting Procedures for Adding Beds in High-Occupancy Areas.

§19.2325.Selection and Contracting Procedures for Rural Counties.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2002.

TRD-200203912

Paul Leche

General Counsel, Legal Services

Texas Department of Human Services

Earliest possible date of adoption: August 4, 2002

For further information, please call: (512) 438-3734