TITLE 1.ADMINISTRATION

Part 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION

Chapter 354. MEDICAID HEALTH SERVICES

Subchapter A. PURCHASED HEALTH SERVICES

2. MEDICAID VISION CARE PROGRAM

1 TAC §354.1017

The Texas Health and Human Services Commission (HHSC) proposes an amendment to §354.1017, concerning specifications for eyewear, in its purchased health services rules.

The purpose of the proposed amendment is to make eyewear frames for adult Medicaid beneficiaries available in metal and a combination of metal and zylonite. The proposed amendment also requires that Medicaid providers offer beneficiaries six styles of frames (at least one style of each type of frame material) in a choice of three colors for each frame style. The proposed amendment was suggested during meetings with professional associations of eyewear providers and will bring Medicaid beneficiaries' eyewear choices in line with current market practices.

Tom Suehs, Deputy Commissioner for Financial Services, has determined that during the first five years the proposed amendment is in effect there will be no fiscal implications to state or local governments as a result of enforcing or administering the amendment.

Mr. Suehs also has determined that during the first five years the proposed amendment in effect, the public benefit as a result of adopting the amendment will be more comprehensive vision care benefit for Medicaid clients. Small businesses and micro-businesses will not be required to change their business practices. There are no anticipated economic costs to persons required to comply with the proposed amendment, nor any impact on local employment.

HHSC has determined that this amendment does not restrict or limit owners' rights to their property that would otherwise exist in the absence of governmental action and therefore does not constitute a taking under §2007.043, Government Code.

Written comments on the proposed rules may be submitted to Brenda Salisbery, Program Specialist, Medicaid/CHIP Benefits, Texas Health and Human Services Commission, 1100 W. 49th, Austin, Texas 78756, within 30 days of publication of this proposal in the Texas Register .

The amendment is proposed under the Texas Government Code, §531.033, which provides the Commissioner of HHSC with broad rulemaking authority; Human Resources Code, §32.021, and the Texas Government Code, §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; and the Texas Government Code, §531.021(b), which provides HHSC with the authority to propose and adopt rules governing the determination of Medicaid reimbursements.

No other statutes, articles, or codes are affected by the proposed amendment.

§354.1017.Specifications for Eyewear.

The provider must ensure that eyewear meets the following specifications.

(1) Lenses are clear glass or plastic, meet federal and state specifications, and meet all standards of the American standard prescription requirements for first quality glass and plastic lenses dress eyewear.

(2) Frames are zylonite , metal, or a combination metal/zylonite .

(3) Standard sizes of the frames are dispensed at no cost to the eligible recipient. An eyeglass supplier must show each eligible recipient a choice of six [ :three ] styles of [ zylonite ] frames (at least one style of each type of frame material) appropriate for male and female in a choice of three colors for each frame style .

(4) Frames are only those manufactured in the United States of America, unless foreign-made frames are comparable in quality to and less expensive than American made-frames. Lenses are only those manufactured in the United States of America, unless foreign-made lenses are comparable in quality to and less expensive than American-made lenses.

(5) Frames are serviceable and meet prescription quality standards.

(6) Lenses and frame materials are new.

(7) Bifocal lenses are a minimum kryptoc 22 MM flat top lens or equivalent.

(8) Trifocal lenses are a minimum flat top 7%6125 lens or equivalent.

(9) Supplies are at least equivalent in quality to program eyewear provided under this chapter at no cost to the eligible recipients.

(10) Repair materials for which a charge is made are new and at least equivalent to the original item and meet the specifications for prosthetic eyewear cited in these provisions.

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 April 28, 2003.

TRD-200302649

Steve Aragón

General Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: June 8, 2003

For further information, please call: (512) 424-6576


Chapter 363. COMPREHENSIVE CARE PROGRAM

Subchapter E. EPSDT EYEGLASS PROGRAM

1 TAC §§363.502 - 363.504

The Texas Health and Human Services Commission (HHSC) proposes to amend §§363.502-363.504, concerning early and periodic, screening, diagnosis, and treatment (EPSDT) vision care services. Section 363.502 concerns benefits and limitations of the EPSDT eyewear program; §363.503 concerns eyewear specifications; and §363.504 concerns claims information requirements.

The purpose of the proposed amendment to §363.503 is to make eyewear frames available to Medicaid beneficiaries' ages 6 months to 21 years in metal and in a combination of metal and zylonite. As amended, §363.503 would also make available polycarbonate plastic lens, as prescribed by a vision professional, and require that Medicaid providers offer beneficiaries six styles of frames (at least one style of each type of frame material) in a choice of three colors for each frame style. The proposed amendments to §363.502 and §363.504 delete the requirement that claim forms for plastic lenses include a justification of medical necessity. Amendments to §363.502 and §363.504 also update Texas Administrative Code chapter and section references in the rules. The proposed amendments were suggested during meetings with professional associations of eyewear providers and will bring Medicaid beneficiaries' eyewear choices in line with current market practices.

Tom Suehs, Deputy Commissioner for Financial Services, has determined that during the first five years the proposed amendments are in effect there will be no fiscal implications to state or local governments as a result of enforcing or administering the amendments.

Mr. Suehs also has determined that during the first five years the proposed amendments are in effect, the public benefit as a result of adopting the amendments will be more comprehensive vision care benefits for Medicaid clients. Small businesses and micro-businesses will not be required to change their business practices. There are no anticipated economic costs to persons required to comply with the proposed amendments, nor any impact on local employment.

HHSC has determined that these amendments do not restrict or limit owners' rights to their property that would otherwise exist in the absence of governmental action and therefore does not constitute a taking under §2007.043, Government Code.

Written comments on the proposed rules may be submitted to Brenda Salisbery, Program Specialist, Medicaid/CHIP Benefits, Texas Health and Human Services Commission, 1100 W. 49th, Austin, Texas 78756, within 30 days of publication of this proposal in the Texas Register .

The amendments are proposed under the Texas Government Code, §531.033, which provides the Commissioner of HHSC with broad rulemaking authority; Human Resources Code, §32.021, and the Texas Government Code, §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; and the Texas Government Code, §531.021(b), which provides HHSC with the authority to propose and adopt rules governing the determination of Medicaid reimbursements.

No other statutes, articles, or codes are affected by the proposed amendments.

§363.502.Benefits and Limitations.

In addition to the services specified in §354.1023 [ §29.105 ] of this title (relating to Optometrist Services), the benefits and limitations applicable to optometric services available through the Medicaid EPSDT Program are as follows.

(1) Recipient eligibility. All Medicaid recipients under the age of 21 are eligible for EPSDT optometric services. Services may be continued through the month the eligible recipient becomes 21.

(2) Provider eligibility. All optometric services reimbursable by the program must be provided to eligible recipients by a physician, optometrist, or optician enrolled in the Medicaid Program at the time the service is provided.

(3) Reimbursable services.

(A) Examination. One examination of the eyes by refraction may be provided to each eligible recipient each state fiscal year (September 1-August 31).

(B) Eyewear. Eyewear that is medically necessary to correct vision defects may be provided to an eligible recipient. Eyewear include eyeglasses (lenses and frames), contact lenses, and post cataract surgery prosthetic lenses.

(i) Nonprosthetic eyeglasses or contact lenses are available to an eligible recipient only once every 24 months, unless the recipient's visual acuity has changed by .5 diopters or more, or the eyewear is lost or destroyed. The Texas Health and Human Services Commission or its designee must authorize in writing prescriptions for contact lenses before dispensing. Prior authorization is based on the provider's written documentation that contact lenses are the only means of correcting the vision defect .

[ (I) Prescriptions for contact lenses must be authorized by the department or its designee in writing before dispensing. Prior authorization is based on the provider's written documentation that contact lenses are the only means of correcting the vision defect.]

[ (II) Prescriptions for plastic lenses must include the provider's written justification of the medical necessity for the plastic lenses on the claim form sent to the department or its designee.]

(ii) Prosthetic eyewear is provided to an eligible recipient if prescribed for post cataract surgery, congenital absence of the eye lens, or loss of an eye lens because of trauma.

(I) Reimbursement is made for as many temporary lenses as are medically necessary during post cataract surgery convalescence (four months after the date of surgery).

(II) Only one pair of permanent prosthetic eyewear may be dispensed except to replace lost or destroyed prosthetic eyewear or if required because of a change in visual acuity of .5 diopters or more.

(C) Repairs. Eyeglass repairs are reimbursable if the cost of materials exceeds $2.00. Repairs costing less are not reimbursable and the provider may not bill the recipient for these repairs.

(D) Replacement of lost or destroyed eyewear. Replacement of eyewear is reimbursable. The date nonprosthetic eyewear is replaced begins a new 24-month ineligibility period for new eyewear unless the conditions in subparagraph (B)(i) of this paragraph apply.

(E) Limitations. Eyeglasses for residents of institutions that include this service in their vendor payment are not reimbursed under this program.

§363.503.Specifications for Eyewear.

The provider must ensure that eyewear provided through this program meets the following specifications.

(1) Lenses are clear glass, plastic, or polycarbonate, as prescribed by the vision professional [ unless the provider determines that plastic lenses are medically necessary ]. Lenses meet federal and state specifications and all standards of the American standard prescription requirements for first quality glass , [ and ] plastic , or polycarbonate lenses dress eyewear.

(2) Frames are zylonite , metal, or combination metal/zylonite .

(3) Standard sizes of frames for individuals ages 6 months to 21 years are dispensed at no cost to the eligible recipient. An eyeglass supplier must show the recipient a choice of six [ three ] styles of [ zylonite ] frames (at least one style of each type of frame material) appropriate for male or female, [ children or adults, ] in a choice of three colors for each frame style .

(4) Frames are manufactured in the United States of America, unless foreign-made frames are comparable in quality and less expensive than American-made frames.

(5) Frames are serviceable and meet prescription quality standards.

(6) Lens and frame materials are new.

(7) Bifocal lenses are a minimum kryptoc or 22 MM flat top lens or equivalent.

(8) Trifocal lenses are a minimum flat top 7%6125 lens or equivalent.

(9) Supplies are at least equivalent in quality to program eyeglasses provided under this category at no cost to the eligible recipient.

(10) Repair materials, if claimed for reimbursement, are new, are at least equivalent to the original item, and meet the specifications for eyewear cited in these provisions.

§363.504.Claims Information Requirements.

Providers must meet the criteria established in this subchapter for optometric services and the provisions for participation in the Medicaid Program established under Chapter 354 [ 29 ], Subchapter A , Division 1, of this title (relating to Medicaid Procedures for Providers) and Chapter 354 [ 29 ], Subchapter A, Division 11, [ L ] of this title (relating to General Administration). Besides the claims information requirements established in §354.1001 [ §29.1 ] of this title (relating to Claim Information Requirements), the following information is required for claims for optometric services:

(1) name, address, and Medicaid provider identification number of the ordering provider, as appropriate;

(2) description of lenses and frames provided;

(3) provider's signature on the claim verifying the diopter change required for the dispensing of eyeglasses;

(4) certification by the provider that the dispensed materials used for repairs meet the specifications for eyewear in §363.503 [ §33.403 ] of this title (relating to Specifications for Eyewear);

(5) claims for eyewear with special features, signed by the recipient, acknowledging selection of eyewear that is beyond the specifications for eyewear in §363.503 [ §33.403 ] of this title (relating to Specifications for Eyewear). A signed patient certification satisfies this requirement for claims the provider submitted electronically;

(6) a copy of the invoice for supplies dispensed, attached to a claim for repairs or kept the provider, as authorized by the department or its designee;

(7) if the claim is for replacement of prosthetic eyewear or of nonprosthetic eyewear when the records of the HHSC [ department ] or its designee show that less than 24 months have elapsed since the date of the original nonprosthetic eyewear service, then:

(A) submission of a statement justifying the need for the replacement eyewear (reimbursement is made only if the eyewear was lost or damaged beyond repair or if the recipient's visual acuity has changed significantly, as specified in §363.502(3)(B)(i) or (ii)(II) [ §33.402(3)(B)(i) or (ii)(II) ] of this title (relating to Benefits and Limitations)). If the original eyewear has been lost or damaged beyond repair, the recipient must sign the claim form or a patient certification if the provider submits claims electronically; and

(B) claim form signed by the recipient if the original eyewear was lost or damaged beyond repair; and

[ (8) prescriptions for plastic lenses, which must include a provider's written justification of the medical necessity for the plastic lenses on the claim form.]

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 April 28, 2003.

TRD-200302650

Steve Aragón

General Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: June 8, 2003

For further information, please call: (512) 424-6576


Chapter 392. PROCUREMENTS BY HEALTH AND HUMAN SERVICES COMMISSION

Subchapter B. NEGOTIATION AND MEDIATION OF CERTAIN CONTRACT CLAIMS AGAINST HEALTH AND HUMAN SERVICES COMMISSION

The Health and Human Services Commission (Commission) proposes new Subchapter B to Chapter 392, Procurements by Health and Human Services Commission, §§392.20 - 392.24, 392.26 - 392.35, and 392.37 - 392.46. The proposed chapter establishes provisions for the negotiation and mediation of certain breach of contract claims asserted by contractors against the Commission.

Background and Summary of Factual Basis for the Rules

Texas Government Code §2260.052(c) requires that the units of state government with rulemaking authority adopt rules to establish provisions for negotiation and mediation of certain breach of contract claims asserted by contractors against the State of Texas. Section 2260.052(c) directs the Office of the Attorney General (OAG) and the State Office of Administrative Hearings (SOAH) to provide model rules for negotiation and mediation that units of state government with rulemaking authority may voluntarily adopt or modify as they deem appropriate. The new chapter is a modified version of the model rules provided by the OAG and the SOAH.

Section-by-Section Summary

Division 1 of the subchapter contains general provisions. Section 392.20 sets forth the purpose of the subchapter, to describe the provisions for the negotiation and medication of certain contract claims against the Commission. Section 392.21 describes the applicability of the subchapter, and the types of contract claims to which the subchapter is not applicable. Section 392.22 establishes definitions for the subchapter. Section 392.23 provides that the subchapter's provisions are a prerequisite to suit on certain contract claims against the Commission, unless the Texas Legislature grants a waiver. Section 392.24 provides that the subchapter does not waive the Commission's sovereign immunity to suit. Section 392.25 is reserved for expansion.

Division 2 contains provisions relating to negotiation. Section 392.26 sets forth the requirements for a contractor's notice of claim. Section 392.27 sets forth the requirements for an agency counterclaim. Section 392.28 provides for requests for voluntary disclosure of additional information relating to the contractor claims and agency counterclaims. Section 392.29 establishes a duty to timely negotiate claims. Section 392.30 establishes timelines for negotiating claims and for requesting contested case hearings from SOAH. Section 392.31 relates to the conduct of negotiations. Section 392.32 defines settlement approval procedures. Section 392.33 discusses the content of settlement agreements. Section 392.34 provides that parties will be responsible for their own costs of negotiation, unless their contract provides otherwise. Section 392.35 sets forth the procedures governing the contractor's request for a contested case proceeding in front to SOAH. Section 392.36 is reserved for expansion.

Division 3 contains provisions relating to mediation. Section 392.37 sets forth the timetable for mediation. Section 392.38 defines the mediation process and the conduct of mediation. Section 392.39 discusses the requirements of an agreement to mediate. Section 392.40 establishes the minimum qualifications and immunity of the selected mediator. Section 392.41 discusses the confidentiality of the mediation procedure and states that a final settlement agreement reached in mediation will be governed by the provisions of the Public Information Act. Section 392.41 provides that parties will be responsible for their own mediation costs, unless the parties agree otherwise. Section 392.43 discusses settlement approval procedures by the parties. Section 392.44 discusses the initial settlement agreement reached during mediation. Section 392.45 relates to the final settlement agreement resulting from the mediation process. Section 392.46 relates to referrals of contested cases to SOAH.

Fiscal Note

Tom Seuhs, Chief Financial Officer, has determined that for the first five years that the proposed rules are in effect, there will be no foreseeable economic implications relating to the costs or revenues of the state or local governments. Pursuant to Government Code Chapter 2260, these entities are already required to follow the proposed rules' procedures.

Public Benefit

Steve Aragón, General Counsel, has determined that during the first five years that the proposed rules are in effect, the public will benefit from adoption of the rules in that the rules will establish procedures for filing and resolving claims for certain breach of contract actions against the Commission.

Small and Micro-business Impact Analysis

The proposed rules will not result in additional costs to persons required to comply with the rules and will not negatively affect local employment.

Regulatory Analysis

The Commission has determined that none of the proposed rules is a "major environmental rule" as defined by §2001.0225, Government Code. "Major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risks to human health from environmental exposure and that may adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. None of the proposed rules is specifically intended to protect the environment or reduce risks to human health from environmental exposure.

Takings Impact Assessment

The Commission has evaluated the takings impact of the proposed rules under Texas Government Code §2007.043. The Commission has determined that this action does not restrict or limit an owner's right to their property that would otherwise exist in the absence of governmental action and therefore does not constitute a taking. The proposed rules are administrative and do not impose any new regulatory requirements. The proposed rules are reasonably taken to fulfill requirements of state law.

Public Comment

Public comment may be submitted to: Steve Aragón, General Counsel, Health and Human Services Commission, 4900 North Lamar Boulevard, 4th Floor, Austin, Texas 78751-2316, Steve.Aragon@hhsc.state.tx.us, Phone: (512) 424-6578, Fax: (512) 424-6587.

Comments must be submitted in writing by 5:00 p.m., Central Time, on June 9, 2003.

1. GENERAL

1 TAC §§392.20 - 392.24

Legal Authority

These rules are proposed under authority granted to the Commission by Government Code §531.033, which authorizes the Commissioner of Health and Human Services to adopt rules necessary to implement the Commission's duties; Health and Safety Code §62.051(d), which directs the Commission to adopt rules as necessary to implement the Children's Health Insurance Program; and Government Code §2260.052(c), which requires that units of state government with rulemaking authority adopt such rules.

No other code or statute is affected by these rules.

§392.20.Purpose.

The purpose of this subchapter is to describe the provisions for negotiation and mediation of certain contract claims against the Texas Health and Human Service Commission (HHSC), pursuant to the Government Code §2260.052(c).

§392.21.Applicability.

(a) This subchapter applies to the Texas Health and Human Services Commission (HHSC).

(b) This subchapter does not apply to an action of a unit of state government for which a contractor is entitled to a specific remedy pursuant to state or federal constitution or statute.

(c) This subchapter does not apply to a contract action proposed or taken by a unit of state government for which a contractor receiving Medicaid funds under that contract is entitled by state statute or rule to a hearing conducted in accordance with Government Code Chapter 2001.

(d) This subchapter does not apply to a claim for personal injury or wrongful death arising from a breach of contract.

(e) This subchapter does not apply to contracts:

(1) between a unit of state government and the federal government or its agencies, another state or another nation;

(2) between two or more units of state government;

(3) between a unit of state government and a local governmental body, or a political subdivision of another state;

(4) between a subcontractor and a contractor;

(5) subject to §201.112 of the Transportation Code;

(6) within the exclusive jurisdiction of state or local regulatory bodies;

(7) within the exclusive jurisdiction of federal courts or regulatory bodies;

(8) that are solely and entirely funded by federal grant monies other than for a project defined in §392.22(10) of this subchapter (relating to Definitions); or

(9) that are executed or awarded on or before August 30, 1999.

§392.22.Definitions.

The following words and terms, when used in this subchapter, have the following meaning, unless the context clearly indicates otherwise:

(1) Chief administrative officer--The commissioner, executive director, president or other executive officer responsible for the day to day operations of a unit of state government.

(2) Claim--A demand for damages by the contractor based upon the unit of state government's alleged breach of the contract.

(3) Contract--A written contract between a unit of state government and a contractor by the terms of which the contractor agrees either:

(A) to provide goods or services, by sale or lease, to or for a unit of state government; or

(B) to perform a project as defined by Government Code §2166.001.

(4) Contractor--Independent contractor who has entered into a contract directly with a unit of state government. The term does not include:

(A) The contractor's subcontractor, officer, employee, agent or other person furnishing goods or services to a contractor;

(B) An employee of a unit of state government; or

(C) A student at an institution of higher education.

(5) Counterclaim--A demand by the unit of state government based upon the contractor's claim.

(6) Day--A calendar day. If an action is required to occur on a day falling on a Saturday, Sunday, or holiday, the first working day which is not one of these days should be counted as the required day for purpose of this act.

(7) Event--An act or omission or a series of acts or omissions giving rise to a claim.

(8) Goods--Supplies, materials or equipment.

(9) Parties--The contractor and unit of state government that have entered into a contract in connection with which a claim of breach of contract has been filed under this subchapter.

(10) Project--As defined in Government Code §2166.001, a building construction project that is financed wholly or partly by a specific appropriation, bond issue or federal money, including the construction of:

(A) a building, structure, or appurtenant facility or utility, including the acquisition and installation of original equipment and original furnishing; and

(B) an addition to, or alteration, modification, rehabilitation or repair of an existing building, structure, or appurtenant facility or utility.

(11) Public Information Act--Texas law governing the release of public information by a unit of state government, as codified in Government Code Chapter 552.

(12) SOAH--State Office of Administrative Hearings.

(13) Services--The furnishing of skilled or unskilled labor or consulting or professional work, or a combination thereof, excluding the labor of an employee of a unit of state government.

(14) Unit of state government or unit--The state or an agency, department, commission, bureau, board, office, council, court, or other entity that is in any branch of state government and that is created by the Constitution or statute of the State of Texas, including a university system or institution of higher education. The term does not include a county, municipality, court of a county or municipality, special purpose district, or other political subdivision of the State of Texas.

§392.23.Prerequisites to Suit.

The procedures contained in this subchapter are exclusive and required prerequisites to suit under Chapter 107 of the Civil Practice and Remedies Code and Chapter 2260 of the Government Code, unless the Texas Legislature waives the unit of state government's sovereign immunity to suit for the contractor's claim in accordance with Government Code §2260.007.

§392.24.Sovereign Immunity.

This subchapter does not waive a unit of state government's sovereign immunity to suit or liability.

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 April 25, 2003.

TRD-200302625

Steve Aragón

General Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: June 8, 2003

For further information, please call: (512) 424-6576


2. NEGOTIATION

1 TAC §§392.26 - 392.35

Legal Authority

These rules are proposed under authority granted to the Commission by Government Code §531.033, which authorizes the Commissioner of Health and Human Services to adopt rules necessary to implement the Commission's duties; Health and Safety Code §62.051(d), which directs the Commission to adopt rules as necessary to implement the Children's Health Insurance Program; and Government Code §2260.052(c), which requires that units of state government with rulemaking authority adopt such rules.

No other code or statute is affected by these rules.

§392.26.Notice of Claim of Breach of Contract.

(a) A contractor asserting a claim of breach of contract under the Government Code Chapter 2260 shall file notice of the claim as provided by this section.

(b) The notice of claim shall:

(1) be in writing and signed by the contractor or the contractor's authorized representative;

(2) be delivered by hand, certified mail return receipt requested, or other verifiable delivery service, to the officer(s) of the unit of state government designated in the contract to receive a notice of claim of breach of contract under the Government Code Chapter 2260; if no person is designated in the contract, the notice shall be delivered to the unit's chief administrative officer, and

(3) state in detail:

(A) the nature of the alleged breach of contract, including the date of the event that the contractor asserts as the basis of the claim and each contractual provision allegedly breached;

(B) a description of damages that resulted from the alleged breach, including the amount and method used to calculate those damages; and

(C) the legal theory of recovery, i.e., breach of contract, including the causal relationship between the alleged breach and the damages claimed.

(c) In addition to the mandatory contents of the notice of claim as required by subsection (b) of this section, the contractor may submit supporting documentation or other tangible evidence to facilitate the unit's evaluation of the contractor's claim.

(d) The notice of claim shall be delivered no later than 180 days after the date of the event that the contractor asserts as the basis of the claim.

§392.27.Agency Counterclaim.

(a) A unit of state government asserting a counterclaim under the Government Code Chapter 2260 shall file notice of the counterclaim as provided by this section.

(b) The notice of counterclaim shall:

(1) be in writing;

(2) be delivered by hand, certified mail return receipt requested or other verifiable delivery service to the contractor or representative of the contractor who signed the notice of claim of breach of contract; and

(3) state in detail:

(A) the nature of the counterclaim;

(B) a description of damages or offsets sought, including the amount and method used to calculate those damages or offsets; and

(C) the legal theory supporting the counterclaim.

(c) In addition to the mandatory contents of the notice of counterclaim required by subsection (b) of this section, the unit may submit supporting documentation or other tangible evidence to facilitate the contractor's evaluation of the unit's counterclaim.

(d) The notice of counterclaim shall be delivered to the contractor no later than 90 days after the unit receives the contractor's notice of claim.

(e) Nothing herein precludes the unit from initiating a lawsuit for damages against the contractor in a court of competent jurisdiction.

§392.28.Request for Voluntary Disclosure of Additional Information.

(a) Upon the filing of a claim or counterclaim, parties may request to review and copy information in the possession or custody or subject to the control of the other party that pertains to the contract claimed to have been breached, including, without limitation:

(1) accounting records;

(2) correspondence, including, without limitation, correspondence between the unit of state government and outside consultants it utilized in preparing its solicitation or any part thereof or in administering the contract, and correspondence between the contractor and its subcontractors, materialmen, and vendors;

(3) schedules;

(4) the parties' internal memoranda; and

(5) documents created by the contractor in preparing its offer to the unit and documents created by the unit in analyzing the offers it received in response to a solicitation.

(b) Subsection (a) of this section applies to all information in the parties' possession regardless of the manner in which it is recorded, including, without limitation, paper and electronic media.

(c) The contractor and the unit may seek additional information directly from third parties, including, without limitation, the unit's third-party consultants and the contractor's subcontractors.

(d) Nothing in this section requires any party to disclose the requested information or any matter that asserts is privileged under Texas law.

(e) Material submitted pursuant to this section and claimed to be confidential by the contractor shall be handled pursuant to the requirements of the Public Information Act.

§392.29.Duty to Negotiate.

The parties shall negotiate in accordance with the timetable set forth in §392.30 of this subchapter (relating to Timetable) to attempt to resolve all claims and counterclaims. No party is obligated to settle with the other party as a result of the negotiation.

§392.30.Timetable.

(a) Following receipt of a contractor's notice of claim, the chief administrative officer of the unit of state government or other designated representative shall review the contractor's claim(s) and the unit of state government's counterclaim(s), if any, and initiate negotiations with the contractor to attempt to resolve the claim(s) and counterclaim(s).

(b) Subject to subsection (c) of this section, the parties shall begin negotiations within a reasonable period of time, not to exceed 60 days following the later of:

(1) the date of termination of the contract;

(2) the completion date, or substantial completion date in the case of construction projects, in the original contract; or

(3) the date the unit receives the contractor's notice of claim.

(c) The unit may delay negotiations until after the 180th day after the date of the event giving rise to the claim of breach of contract by:

(1) delivering written notice to the contractor that the commencement of negotiations will be delayed; and

(2) delivering written notice to the contractor when the unit is ready to begin negotiations.

(d) The parties may conduct negotiations according to an agreed schedule as long as they begin negotiations no later than the deadlines set forth in subsections (b) or (c) of this section, whichever is applicable.

(e) Subject to subsection (f) of this section, the parties shall complete the negotiations that are required by this subchapter as a prerequisite to a contractor's request for contested case hearing no later than 270 days after the unit of state government receives the contractor's notice of claim.

(f) The parties may agree in writing to extend the time for negotiations on or before the 270th day after the unit receives the contractor's notice of claim. The agreement shall be signed by representatives of the parties with authority to bind each respective party and shall provide for the extension of the statutory negotiation period until a date certain. The parties may enter into a series of written extension agreements that comply with the requirements of this section.

(g) The contractor may request a contested case hearing before SOAH pursuant to §392.35. of this subchapter (relating to Request for Contested Case Hearing) after the 270th day after the unit receives the contractor's notice of claim, or the expiration of any extension agreed to under subsection (f) of this section.

(h) The parties may agree to mediate the dispute at any time before the 270th day after the unit receives the contractor's notice of claim or before the expiration of any extension agreed to by the parties pursuant to subsection (f) of this section. The mediation shall be governed by Division 3 of this subchapter.

(i) Nothing in this section is intended to prevent the parties from agreeing to commence negotiations earlier than the deadlines established in subsections (b) and (c) of this section, or from continuing or resuming negotiations after the contractor requests a contested case hearing before SOAH.

§392.31.Conduct of Negotiation.

(a) Negotiation is a consensual bargaining process in which the parties attempt to resolve a claim and counterclaim. A negotiation under this division may be conducted by any method, technique, or procedure authorized under the contract or agreed upon by the parties, including, without limitation, negotiation in person, by telephone, by correspondence, by video conference, or by any other method that permits the parties to identify their respective positions, discuss their respective differences, confer with their respective advisers, exchange offers of settlement, and settle.

(b) The parties may conduct negotiations with the assistance of one or more neutral third parties. If the parties choose to mediate their dispute, the mediation shall be conducted in accordance with Division 3 of this subchapter. Parties may choose an assisted negotiation process other than mediation.

(c) To facilitate the meaningful evaluation and negotiation of the claim(s) and any counterclaim(s), the parties may exchange relevant documents that support their respective claims, defenses, counterclaims or positions.

(d) Material submitted pursuant to this section and claimed to be confidential by the contractor shall be handled pursuant to the requirements of the Public Information Act.

§392.32.Settlement Approval Procedures.

The parties' settlement approval procedures shall be disclosed prior to, or at the beginning of, negotiations. To the extent possible, the parties shall select negotiators who are knowledgeable about the subject matter of the dispute, who are in a position to reach agreement, and who can credibly recommend approval of an agreement.

§392.33.Settlement Agreement.

(a) A settlement agreement may resolve an entire claim or any designated and severable portion of a claim.

(b) To be enforceable, a settlement agreement must be in writing and signed by representatives of the contractor and the unit of state government who have authority to bind each respective party.

(c) A partial settlement does not waive a parties' rights under the Government Code Chapter 2260 as to the parts of the claims or counterclaims that are not resolved.

§392.34.Costs of Negotiation.

Unless the parties agree otherwise, each party shall be responsible for its own costs incurred in connection with a negotiation, including, without limitation, the costs of attorneys', consultants' and experts' fees and expenses.

§392.35.Request for Contested Case Hearing.

(a) If a claim for breach of contract is not resolved in its entirety through negotiation, mediation or other assisted negotiation process in accordance with this subchapter on or before the 270th day after the unit of state government receives the notice of claim, or after the expiration of any extension agreed to by the parties pursuant to §392.30(f) of this subchapter (relating to Timetable), the contractor may file a request with the unit of state government for a contested case hearing before SOAH.

(b) A request for a contested case hearing shall state the legal and factual basis for the claim, and shall be delivered to the chief administrative officer of the unit or other officer designated in the contract to receive notice within a reasonable time after the 270th day or the expiration of any written extension agreed to pursuant to §392.30(f) of this subchapter (relating to Timetable).

(c) The unit shall forward the contractor's request for contested case hearing to SOAH within a reasonable period of time, not to exceed thirty days, after receipt of the request.

(d) The parties may agree to submit the case to SOAH before the 270th day after the notice of claim is received by the unit if they have achieved a partial resolution of the claim or if an impasse has been reached in the negotiations and proceeding to a contested case hearing would serve the interests of justice.

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 April 25, 2003.

TRD-200302624

Steve Aragón

General Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: June 8, 2003

For further information, please call: (512) 424-6576


3. MEDIATION

1 TAC §§392.37 - 392.46

Legal Authority

These rules are proposed under authority granted to the Commission by Government Code §531.033, which authorizes the Commissioner of Health and Human Services to adopt rules necessary to implement the Commission's duties; Health and Safety Code §62.051(d), which directs the Commission to adopt rules as necessary to implement the Children's Health Insurance Program; and Government Code §2260.052(c), which requires that units of state government with rulemaking authority adopt such rules.

No other code or statute is affected by these rules.

§392.37.Mediation Timetable.

(a) The contractor and unit of state government may agree to mediate the dispute at any time before the 270th day after the unit receives a notice of claim of breach of contract, or before the expiration of any extension agreed to by the parties in writing.

(b) A contractor and unit may mediate the dispute even after the case has been referred to SOAH for a contested case. SOAH may also refer a contested case for mediation pursuant to its own rules and guidelines, whether or not the parties have previously attempted mediation.

§392.38.Conduct of Mediation.

(a) Mediation is a consensual process in which an impartial third party, the mediator, facilitates communication between the parties to promote reconciliation, settlement, or understanding among them. A mediator may not impose his or her own judgment on the issues for that of the parties. The mediator must be acceptable to both parties.

(b) The mediation is subject to the provisions of the Governmental Dispute Resolution Act, Government Code Chapter 2009. For purposes of this division, "mediation" is assigned the meaning set forth in the Civil Practice and Remedies Code §154.023.

(c) To facilitate a meaningful opportunity for settlement, the parties shall, to the extent possible, select representatives who are knowledgeable about the dispute, who are in a position to reach agreement, or who can credibly recommend approval of an agreement.

§392.39.Agreement to Mediate.

(a) Parties may agree to use mediation as an option to resolve a breach of contract claim at the time they enter into the contract and include a contractual provision to do so. The parties may mediate a breach of contract claim even absent a contractual provision to do so if both parties agree.

(b) Any agreement to mediate should include consideration of the following factors:

(1) The source of the mediator. Potential sources of mediators include governmental officers or employees who are qualified as mediators under Civil Practice and Remedies Code §154.052, private mediators, SOAH, the Center for Public Policy Dispute Resolution at The University of Texas School of Law, an alternative dispute resolution system created under Civil Practice and Remedies Code Chapter 152, or another state or federal agency or through a pooling agreement with several state agencies. Before naming a mediator source in a contract, the parties should contact the mediator source to be sure that it is willing to serve in that capacity. In selecting a mediator, the parties should use the qualifications set forth in §392.40 of this subchapter (relating to Qualifications and Immunity of the Mediator).

(2) The time period for the mediation. The parties should allow enough time in which to make arrangements with the mediator and attending parties to schedule the mediation, to attend and participate in the mediation, and to complete any settlement approval procedures necessary to achieve final settlement. While this time frame can vary according to the needs and schedules of the mediator and parties, it is important that the parties allow adequate time for the process.

(3) The location of the mediation.

(4) Allocation of costs of the mediator.

(5) The identification of representatives who will attend the mediation on behalf of the parties, if possible, by name or position within the governmental unit or contracting entity.

(6) The settlement approval process in the event the parties reach agreement at the mediation.

§392.40.Qualifications and Immunity of the Mediator.

(a) The mediator shall possess the qualifications required under Civil Practice and Remedies Code §154.052, be subject to the standards and duties prescribed by Civil Practice and Remedies Code §154.053, and have the qualified immunity prescribed by Civil Practice and Remedies Code §154.055, if applicable.

(b) The parties should decide whether, and to what extent, knowledge of the subject matter and experience in mediation would be advisable for the mediator.

(c) The parties should obtain from the prospective mediator the ethical standards that will govern the mediation.

§392.41.Confidentiality of Mediation and Final Settlement Agreement.

(a) A mediation conducted under this division is confidential in accordance with Government Code §2009.054.

(b) The confidentiality of a final settlement agreement to which a unit of state government is a signatory that is reached as a result of the mediation is governed by the Public Information Act.

§392.42.Costs of Mediation.

Unless the contractor and unit of state government agree otherwise, each party shall be responsible for its own costs incurred in connection with the mediation, including costs of document reproduction for documents requested by such party, and attorneys', consultants' and experts' fees and expenses. The costs of the mediation process itself shall be divided equally between the parties, or in accordance with the terms of the parties' agreement.

§392.43.Settlement Approval Procedures.

The parties' settlement approval procedures shall be disclosed by the parties prior to the mediation. To the extent possible, the parties shall select representatives who are knowledgeable about the subject matter of the dispute, who are in a position to reach agreement, and who can credibly recommend approval of an agreement.

§392.44.Initial Settlement Agreement.

Any settlement agreement reach during the mediation shall be signed by the representatives of the contractor and the unit of state government, and shall describe any procedures required to be followed by the parties in connection with final approval of the agreement.

§392.45.Final Settlement Agreement.

(a) A final settlement agreement reached during, or as a result of mediation, that resolves an entire claim or any designated and severable portion of a claim shall be in writing and signed by representatives of the contractor and the unit of state government who have authority to bind each respective party.

(b) If the settlement agreement does not resolve all issues raised by the claim and counterclaim, the agreement shall identify the issues that are not resolved.

(c) A partial settlement does not waive a contractor's rights under the Government Code Chapter 2260, as to the parts of the claim that are not resolved.

§392.46.Referral to the State Office of Administrative Hearings.

If mediation does not resolve all issues raised by the claim, the contractor may request that the claim be referred to SOAH by the unit of state government. Nothing in these rules prohibits the contractor and unit from mediating their dispute after the case has been referred for contested case hearing, subject to the rules of SOAH.

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 April 25, 2003.

TRD-200302623

Steve Aragón

General Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: June 8, 2003

For further information, please call: (512) 424-6576