PART 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION
CHAPTER 352. QUALITY ASSURANCE FEE
The Texas Health and Human Services Commission (HHSC) adopts the repeal of §352.10, concerning Quality Assurance Fee for the Home and Community-based Services and Community Living Assistance and Support Services, without changes to the proposal as published in the May 2, 2008, issue of the Texas Register (33 TexReg 3505).
Background and Justification
Senate Bill (S.B.) 1830, 79th Legislature, Regular Session, 2005, required the Executive Commissioner of HHSC to impose a quality assurance fee (QAF) on persons providing services under the home and community-based services (HCS) waiver and community living assistance and support services (CLASS) waiver. However, Section 1 of S.B. 1830 included a requirement that if HHSC determined that the imposition of the QAF would not entitle Texas to receive additional federal Medicaid matching funds, the QAF would be discontinued.
Section 352.10, regarding the Quality Assurance Fee for the Home and Community-based Services and Community Living Assistance and Support Services, was adopted effective February 27, 2006 (31 TexReg 1017). The QAF was not implemented, however, pending confirmation from the Centers for Medicare and Medicaid Services (CMS) that the imposition of this QAF would entitle Texas to additional Medicaid matching funds under 42 C.F.R. §§433.55 - 433.68.
On the basis of its discussions with CMS and the explanatory preamble to the CMS final rule on Health Care-Related Taxes, HHSC has determined that this QAF would not qualify for matching funds under §§433.55 - 433.68 of Title 42 of the Code of Federal Regulations. S.B. 1830 was predicated on the idea that HCS providers were a permissible class of health care items or services for a QAF under 42 C.F.R. §433.56(4). However, in the preamble referenced above, CMS stated that only one state (Rhode Island) meets the existing requirements of §433.56(4) and that it was not proposing any changes to §433.56(4). The preamble to the CMS final rule appeared in the Federal Register on February 22, 2008 (73 FedReg 9685). Although the implementation of the final rule has been postponed until April 2009 under a moratorium included in the federal Fiscal Year 2008 Supplemental Appropriations Act (H.R. 2642), the comments in the explanatory preamble to the final rule indicated that this QAF would not qualify for federal matching funds under the current federal rule or under the amended rule currently under moratorium. Based on its discussion with CMS and the comments included in the preamble to the final CMS rule, HHSC is repealing §352.10.
Comments
The 30-day comment period ended June 1, 2008. During this period, HHSC did not receive any comments regarding the proposed repeal of §352.10.
The repeal is adopted under the Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; the 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.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on July 28, 2008.
TRD-200803797
Steve Aragón
Chief Counsel
Texas Health and Human Services Commission
Effective date: August 17, 2008
Proposal publication date: May 2, 2008
For further information, please call: (512) 424-6900
Subchapter A. COST DETERMINATION PROCESS
The Health and Human Services Commission (HHSC) adopts an amendment to §355.114, concerning Consumer Directed Services Payment Option, without changes to the proposed text as published in the May 16, 2008, issue of the Texas Register (33 TexReg 3853) and will not be republished.
The amendment adds new subsection (c) to the rule.
Background and Justification
The amendment to §355.114 describes the reimbursement methodology for Support Consultation services. This rule does not apply to DADS' program rules.
The Department of Aging and Disability Services (DADS) implemented the Consumer Directed Services (CDS) option in September 2001, in response to Senate Bill 1586, 76th Legislature, Regular Session, 1999. The CDS option allows consumers or their legal guardians to be employers of record for the service providers. Thus, as participants in CDS, consumers have greater control and responsibility for their care and are able to self-direct their services. Consumers who participate in CDS choose a CDS Agency (CDSA) to provide financial management services such as payroll processing, assistance with developing a budget, and guidance to the consumer acting as an employer.
The CDS option is available in the following programs:
Community Based Alternatives (CBA),
Community Living Assistance and Support Services (CLASS),
Deaf-Blind-Multiple Disability Waiver (DBMD),
Primary Home Care (PHC),
Consumer Managed Personal Assistance Services (CMPAS),
Medically-Dependent Children's Program (MDCP),
Home and Community Based Services (HCS), and
Texas Home Living (TxHmL).
The Texas Department of Aging and Disability Services (DADS) is adding Support Consultation services to the CDS option. Support Consultation services help a consumer meet the required employer responsibilities associated with CDS participation. Support Consultation services provide a higher level of assistance and training to the consumer than the CDSA, including skills training, assistance with completing required documents, and coaching on various employer tasks. A Support Advisor provides the Support Consultation services.
Support Consultation services became available in the HCS and TxHmL waivers effective February 1, 2008. It is scheduled to be implemented in PHC and the other waiver programs over the next year, pending CMS approval.
Comments
The 30-day comment period ended June 15, 2008. During this period, HHSC received no comments regarding the proposed amendments to this rule.
The amendment is adopted under the Human Resources Code, §32.021, which provides HHSC with the authority to adopt rules necessary to administer the federal medical assistance (Medicaid) program in Texas; Texas Government Code, §531.033, which authorizes the Executive Commissioner of HHSC to adopt rules necessary to carry out the commission's duties; and the Texas Government Code §531.021(a), which authorizes the Executive Commissioner to adopt rules for the operation and provision of health and human services by the health and human services agencies and to adopt or approve rates of payment required by law to be adopted or approved by a health and human services agency.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on July 28, 2008.
TRD-200803798
Steve Aragón
Chief Counsel
Texas Health and Human Services Commission
Effective date: August 17, 2008
Proposal publication date: May 16, 2008
For further information, please call: (512) 424-6900
DIVISION 4. MEDICAID HOSPITAL SERVICES
The Texas Health and Human Services Commission (HHSC) adopts new §355.8052, concerning Inpatient Hospital Reimbursement, with changes to the proposed text as published in the May 30, 2008, issue of the Texas Register (33 TexReg 4269). The text of the rule will be republished. Section 355.8052 will supersede the Medicaid inpatient hospital reimbursement methodology within 1 TAC §355.8063 for hospitals other than children's hospitals, state-owned teaching hospitals, and freestanding psychiatric hospitals.
HHSC has undertaken a rewrite of 1 TAC §355.8063, Reimbursement Methodology for Inpatient Hospital Services. As part of the rewrite, HHSC is creating separate rules for different hospital provider types based on specific reimbursement methodologies. New §355.8052 describes the prospective payment system methodology used to reimburse hospitals other than children's hospitals, state-owned teaching hospitals, and freestanding psychiatric hospitals. HHSC also is updating language in the new rule (taken largely from §355.8063) to more clearly explain the complex processes used in hospital reimbursement.
In addition, House Bill 1 directed HHSC to rebase inpatient hospital rates, for which the Legislature appropriated $150 million general revenue for fiscal year 2009 (2008-2009 General Appropriations Act, Article II, Special Provisions, Section 57(c), 80th Legislature, Regular Session, 2007). HHSC is adding language to the new rule to accomplish the rebasing.
The new rule will become effective for claims approved for payment for admissions on or after September 1, 2008. The methodology in §355.8063 will continue to apply to claims approved for payment through state fiscal year 2008.
The language in the new rule differs from the language in §355.8063 in several ways. The significant changes are that §355.8052:
Includes a six-month cut off date after a base year for adjudicated claims that constitute the base year data set used in the rebasing process.
Updates the factors HHSC will use to inflate rebasing claims data.
Lists additional rebasing data elements that are not subject to appeal.
Removes the requirement that HHSC must rebase or inflate standard dollar amounts on a set schedule.
Adds definitions to improve clarity.
Groups rule subject matter by the flow of the reimbursement process for ease of understanding.
Limits the final payment division standard dollar amounts to available funds.
In response to comments received from interested parties and for the purpose of clarity, HHSC has changed some of the proposed language in the text of the rule as adopted. The changes, however, do not introduce new subject matters or affect persons in addition to those subject to the proposal as published. In subsection (c)(4)(B), the definition of "Base Year Claims" was changed to clarify language regarding the grace period. In addition, subsection (d)(2) was changed in response to comments received at the May 8, 2008, Medical Care Advisory Committee meeting, described more fully below. This subsection describing adjustments to PDSDAs was changed to allow HHSC to prevent any hospital's rate from dropping below the lesser of their current rate or their fully rebased PDSDA.
Fiscal Note
HHSC updated the estimated fiscal impact of the new rule after the proposed rule was published in the Texas Register . Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that during the first five-year period the adopted rule is in effect, the updated fiscal impact to state government will be $119,199,989 each year for state fiscal years 2009 through 2013 in state general revenue as a result of rebasing certain hospitals' inpatient payment rates. The adopted rule will not result in any fiscal implications for local health and human services agencies. Local governments will not incur additional costs.
Comments
HHSC received written comments during the 30-day comment period from the Texas Association of Public and Nonprofit Hospitals (TAPNH), Scott and White, and the Texas Hospital Association (THA). A summary of the comments and responses follows.
Comment: A few comments were received at the Medical Care Advisory Committee (MCAC) meeting held on May 8, 2008. Committee members and hospital representatives requested an analysis showing the hospital-specific impact of rebasing hospital rates under the DRG prospective payment methodology. The uncertainty of the impact to each hospital was a concern; some hospitals were unsure as to whether to support the adoption of this rule because they could not predict whether their rate would go up or down in the rebasing project under this methodology. THA and Scott and White also submitted written comments noting that HHSC had not prepared a hospital-specific impact analysis of the proposed rule despite MCAC committee members' requests that HHSC do so.
Response: The request for a hospital-specific impact analysis arose in connection with this rule as well as proposed amendments to the disproportionate share hospital (DSH) rules and funding for the Texas Health Opportunity Pool. A report of the hospital-specific impact for inpatient hospital rebasing could not be determined at the time of the publication of this rule or the DSH rules. The calculation of each hospital's rebased rate is influenced by a number of factors and events that will occur after implementation of this rule, including appeals requested by hospitals regarding TEFRA targets and HHSC's determination of each hospital's interim rate. In response, however, HHSC has addressed the source of the concerns in this rule. HHSC adds new language in this adopted rule that will prevent any hospital's rate from dropping below the lesser of their current rate or their fully rebased PDSDA. This change, in subsection (d)(2), was made in order to preserve the Medicaid provider base, ensure access to Medicaid hospital services, and minimize the effects of any PDSDA decreases.
Comment: TAPNH expressed general support of HHSC's efforts to restructure and clarify the Medicaid reimbursement methodologies for inpatient hospital services.
Response: HHSC appreciates the support of this proposed change and believes that the new rule structure and clarity will be beneficial to HHSC and the provider community. The rule language was not changed in response to the comment.
Comment: TAPNH, THA and Scott and White opposed the proposed change to use the Centers for Medicare and Medicaid Services (CMS) Prospective Payment System (PPS) Market Basket index exclusively for the inflationary rates for inpatient hospital reimbursement. The request was to continue the use of the greater of the PPS Market Basket index or the Texas specific Medical Care component of the Consumer Price Index. Also, each commenter requested that HHSC clarify that the PPS Market Basket would not reflect any decreases to that figure required by Congress.
Response: Although HHSC has employed the greater of the two indexes in the past for hospital reimbursement, the use of the greater of the two did not consistently apply one index factor, which may result in overlap of trending factors influencing the rates higher or lower for a given period of time. The decision to use the CMS PPS Market Basket index was related to the substantial influence CMS holds on the Medicaid program and this index was readily accepted by CMS as the trend factor for inpatient inflationary cost. HHSC will use the CMS PPS Market Basket index published by CMS for the inpatient cost of living increase calculations as published and will not adjust for Congress' required reductions unless these reductions are included during the calculation of the CMS PPS Market Basket index prior to publication. The rule language was not changed in response to the comment.
Comment: TAPNH requested additional clarity be provided in §355.8052(c)(4)(B) regarding the "base year" used to determine the reimbursement rates. TAPNH stated that it is unclear whether the phrase "or another period designated by HHSC and communicated in writing to all hospitals" applies to the base year or "the six-month grace period that immediately follows the base year?" TAPNH requested that HHSC be more specific on the timeframe referenced.
Response: HHSC's intent was to have the ability to adjust the number of months included in the grace period immediately following the 12-month base year. In response to this comment, HHSC clarified §355.8052(c)(4)(B) by adding the word "grace" in defining the other period designated by HHSC.
Comment: THA and Scott and White requested that HHSC amend the definition of "Base Year Claims" at §355.8052(c)(4)(B) to extend the six-month grace period for claims adjudication to a nine-month grace period. The longer grace period would allow more of the costly and complicated hospital claims for services provided during the 12-month base year to be adjudicated and paid, and thus could allow them be included in the base-year claims database.
Response: HHSC received this comment during the MCAC meeting and agreed to take the request under advisement for future rule changes. This change was not made to the rule due to time constraints that prevent changing the scope of base year claims for the FY 2009 rebasing. The rule language was not changed in response to the comment.
Comment: THA and Scott and White requested that HHSC amend the definition of "TEFRA target cap" at subsection (c)(32) and the calculation of the TEFRA cost for rebasing at subsection (d)(10)(B), to establish a process for recalculating all hospitals' TEFRA target caps prior to this rebasing period and on a regular basis moving forward. The comments noted that the TEFRA target caps have not been updated in nearly two decades and should be addressed for this rebasing, while recognizing there may be practical limitations on what can be accomplished for this rebasing.
Response: HHSC agrees to take this request under advisement for future rule changes. Due to time constraints required to reset TEFRA target caps for all providers, it is not be possible to accomplish for this rebasing. A provider is given the opportunity and responsibility to request a TEFRA target appeal when the provider believes their business needs have changed related to increased costs or new services that were not included in their TEFRA base year. Allowing the provider the opportunity and responsibility to request a TEFRA appeal to reset the TEFRA base year has resulted in a number of TEFRA target caps being updated since the original base year of 1982. HHSC allows any hospital the option to update their base year to 1992, which some providers have elected not to do because the inflation factor that is applied to the base year results in a higher TEFRA target cap than electing to move the TEFRA base year forward. The rule language was not changed in response to the comment.
Comment: THA and Scott and White requested that HHSC amend subsection (d)(2) to allow PDSDAs to be increased to use available funds.
Response: HHSC received the request to allow PDSDAs to be increased to use available funds during the MCAC meeting and included this change in the proposed rule. Subsequent changes were made to subsection (d)(2) as described above, and that section still allows for PDSDAs to be adjusted as the comments suggest.
Comment: THA and Scott and White requested that HHSC apply adjustments under subsection (d)(2) prospectively only and provide notice of a change in PDSDA not later than 60 days before the effective date of the change.
Response: HHSC discussed this issue with stakeholders and concluded the fiscal year 2009 rebasing would be best applied retroactively to September 1, 2008, to avoid concerns related to changes in DSH and UPL payments. The rule language was changed to reflect that any adjustment to PDSDAs will be made in accordance with §355.201 of this title.
Legal Authority
The new rule is adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; Texas Human Resources Code §32.021, and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; and Texas Government Code §531.021(b), which provides HHSC with the authority to propose and adopt rules governing the determination of Medicaid reimbursements.
§355.8052.Inpatient Hospital Reimbursement.
(a) Application and general reimbursement method.
(1) The prospective payment system described in this section applies to inpatient hospital payments for admissions beginning in Fiscal Year (FY) 2009.
(2) HHSC calculates reimbursement for a covered inpatient hospital service, determined in subsection (g) of this section, by multiplying the hospital's payment division standard dollar amount, determined in subsection (d) of this section, by the relative weight for the appropriate diagnosis-related group, determined in subsection (e) of this section.
(3) HHSC will send a hospital an initial notification letter describing the hospital-specific and payment division standard dollar amounts, determined in subsection (d) of this section. HHSC will send a hospital a final notification letter reporting the payment division standard dollar amount, adjusted as described in subsection (d)(2) of this section, to be used in calculating the hospital's reimbursements to be paid for admissions beginning in FY 2009.
(4) HHSC will rebase hospital-specific and payment division standard dollar amounts in subsequent years when funds are appropriated for that purpose.
(b) Exceptions. The prospective payment system described in this section does not apply to the following types of hospitals for covered inpatient hospital services:
(1) In-state and out-of-state children's hospitals. In-state and out-of-state children's hospitals are reimbursed using the methodology described in §355.8054 of this chapter (relating to Children's Hospital Reimbursement Methodology).
(2) State-owned teaching hospitals. A state-owned teaching hospital is reimbursed in accordance with the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) principles using the methodology described in §355.8056 of this chapter (relating to State-Owned Teaching Hospital Reimbursement Methodology).
(3) Freestanding psychiatric hospitals. A freestanding psychiatric hospital is reimbursed under the methodology described in §355.8063 of this chapter (relating to Reimbursement Methodology for Inpatient Hospital Services).
(c) Definitions. When used in this section, and §355.8054 and §355.8056 of this chapter, the following words and terms will have the following meanings, unless the context clearly indicates otherwise.
(1) Adjudicated--The approval or denial of an inpatient hospital claim by HHSC.
(2) Average base year cost per claim--One factor used in arriving at the hospital-specific standard dollar amount; the arithmetic mean of base year costs per claim for a hospital, obtained by dividing the sum of all base year costs per claim for that hospital by the number of base year claims in the set.
(3) Base year--A period of 12 consecutive months selected by HHSC.
(4) Base year claims--All Medicaid inpatient hospital claims for reimbursement filed by a hospital that:
(A) Have a date of admission occurring within the base year;
(B) Are adjudicated and approved for payment during the base year and the six-month grace period that immediately follows the base year or another grace period designated by HHSC and communicated in writing to all hospitals;
(C) Are not claims for patients who are covered by Medicare; and
(D) Are not Medicaid spend-down claims.
(5) Base year cost per claim--One factor used in arriving at the hospital-specific standard dollar amount; the cost for a claim that would have been made to a hospital if HHSC reimbursed the hospital under methods and procedures used in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), described in subsection (d)(3)(A) of this section.
(6) Case mix index--The average relative weight of a hospital's base year claims, obtained by summing the hospital's relative weights for all base year claims divided by the total number of that hospital's base year claims.
(7) Cost-of-Living Index--An adjustment applied to hospital-specific standard dollar amounts based on the Market Basket Index to account for changes in cost of living.
(8) Cost outlier payment adjustment--A payment adjustment for a claim with extraordinarily high costs.
(9) Cost outlier threshold--One factor used in determining the cost outlier payment adjustment.
(10) Data entry error--An error resulting from mis-keyed or mistyped data that is different from the intended entry. This type of error does not include the omission of claims approved for payment after the base year and grace period.
(11) Day outlier threshold--One factor used in determining the day outlier payment adjustment.
(12) Day outlier payment adjustment--A payment adjustment for a claim with an extended length of stay.
(13) Diagnosis-related group (DRG)--The classification of medical diagnoses as defined in the Medicare DRG system or as otherwise specified by HHSC.
(14) Final settlement--Reconciliation of cost in the Medicare/Medicaid hospital fiscal year end cost report performed by HHSC within six months after HHSC receives the cost report audited by a Medicare intermediary, or in the case of children's hospitals, audited by HHSC.
(15) HHSC--The Texas Health and Human Services Commission or its designee.
(16) Hospital--specific standard dollar amount (HSDA)--One factor used in arriving at the payment division standard dollar amount (PDSDA); the average base year cost per claim for a hospital, adjusted by the case mix index and cost-of-living index.
(17) In-state children's hospital--A hospital located within Texas that is recognized by Medicare as a children's hospital and is exempted by Medicare from the Medicare prospective payment system.
(18) Interim payment--An initial payment made to a hospital that is later settled to Medicaid-allowable costs, for hospitals reimbursed under methods and procedures in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA).
(19) Interim rate--The ratio of Medicaid allowed inpatient costs to Medicaid allowed inpatient charges filed on a hospital's Medicare/Medicaid cost report, or inpatient cost-to-charge ratio, expressed as a percentage. The interim rate established at tentative settlement includes incentive and penalty payments associated with TEFRA target caps to the extent that they continue to be permitted by federal law and regulation.
(20) Market Basket Index--The Centers for Medicare and Medicaid Services (CMS) projection of the annual percentage increase in hospital inpatient operating costs, as defined in 42 C.F.R. §413.40.
(21) Mathematical error--An error that results from the erroneous application of variables, quotients, or functions within a methodology formula resulting in a different result than intended methodology results. This type of error does not include the omission of claims approved for payment after the base year and grace period.
(22) Mean length of stay (MLOS)--One factor used in determining the payment amount calculated for each diagnosis related group; for each diagnosis related group, the average number of days that a patient stays in the hospital.
(23) Military hospital--A hospital operated by the armed forces of the United States.
(24) New hospital--A hospital that was newly constructed and enrolled as a Medicaid provider after the end of the base year.
(25) Newly enrolled hospital--A hospital that was assigned a new Texas Provider Identification number (TPI) and was enrolled as a Medicaid provider after the end of the base year.
(26) Out-of-state children's hospital--A hospital located outside of Texas that is recognized by Medicare as a children's hospital and is exempted by Medicare from the Medicare prospective payment system.
(27) Payment division--A group of hospitals whose calculated hospital-specific standard dollar amounts fall within a $100 range, where the $100 increments begin at zero.
(28) Payment division standard dollar amount (PDSDA)--The weighted average dollar amount per claim calculated for all hospitals in a payment division.
(29) Relative weight--The weighting factor HHSC assigns to a diagnosis related group representing the time and resources associated with providing services for that diagnosis related group.
(30) State-owned teaching hospital--The following hospitals: University of Texas Medical Branch (UTMB); University of Texas Health Center Tyler; and M.D. Anderson Hospital.
(31) TEFRA cost for rebasing--One factor used in arriving at the hospital-specific standard dollar amount; Medicaid allowable charges for base year claims adjusted to cost by the interim rate derived from tentative or final settlement of cost reports that cover time periods in the base year.
(32) TEFRA target cap--A limit set under the Social Security Act §1886(b) (42 U.S.C. §1395ww(b)) and applied to the cost settlement for a hospital reimbursed under methods and procedures in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). TEFRA target cap is not applied to patients under age 21, and incentive and penalty payments associated with this limit are not applicable to patients under age 21.
(33) Tentative settlement--Reconciliation of cost in the Medicare/Medicaid hospital fiscal year-end cost report performed by HHSC within six months after HHSC receives an acceptable cost report filed by a hospital.
(34) Universal Mean--Average base year cost per claim for all hospitals.
(35) Weighted hospital-specific standard dollar amount (HSDA)--One factor used in arriving at the payment division standard dollar amount; the product obtained by multiplying a hospital's hospital-specific standard dollar amount by the number of its base year claims.
(d) Payment Division Standard Dollar Amount (PDSDA).
(1) HHSC recalculates PDSDAs for payments in FY 2009 using FY 2006 base year claims. HHSC will not include claims that are adjudicated and approved for payment after the base year and subsequent six-month grace period. The six-month grace period is intended to allow inclusion of as many base year claims as possible, given practical time constraints.
(2) Adjustment of PDSDAs.
(A) HHSC may adjust PDSDAs in accordance with §355.201 of this title if HHSC determines that a recalculated PDSDA may have a significant and measurable effect on provider participation or have a significant and measurable effect on a provider's ability to deliver services.
(B) For rates taking effect on September 1, 2008, HHSC will:
(i) Adjust PDSDAs pro rata among hospitals to available funds;
(ii) Exempt a hospital from the adjustment in clause (i) of this subparagraph if such adjustment would result in a lower rate than the hospital received as of August 31, 2008, in order to preserve the Medicaid provider base, ensure access to Medicaid hospital services, and minimize the effects of PDSDA decreases;
(iii) Apply a rate in place of the PDSDA, for a hospital that is exempted under clause (ii) of this subparagraph, that is the lesser of:
(I) the rate the hospital received as of August 31, 2008; or
(II) the fully rebased PDSDA before applying the adjustment described in clause (i) of this subparagraph;
(iv) Apply the PDSDA described in clause (i) of this subparagraph for all hospitals that are not exempted under clause (ii) of this subparagraph, without any recalculation within the payment divisions; and
(v) Not apply to any hospital a rate lower than the minimum PDSDA described in paragraph (7) of this subsection.
(3) Hospital-specific standard dollar amount (HSDA). Using base year claims, HHSC calculates an HSDA for each hospital as follows:
(A) Determines for each claim, the base year cost per claim, which is the greater of:
(i) the amount of TEFRA cost for rebasing, which is calculated under paragraph (10) of this subsection; or
(ii) payments from other insurance;
(B) Sums the dollar amount for each hospital's base year costs per claim determined in subparagraph (A) of this paragraph;
(C) Calculates the average base year cost per claim by dividing the result in subparagraph (B) of this paragraph by the total number of base year claims for the hospital;
(D) Calculates the case mix index by summing the hospital's relative weights for all base year claims divided by the total number of that hospital's base year claims;
(E) Divides the average base year cost per claim determined in subparagraph (C) of this paragraph by the hospital's case mix index determined in subparagraph (D) of this paragraph; and
(F) Multiplies the result in subparagraph (E) of this paragraph by the cost-of-living index described in paragraph (4) of this subsection to adjust costs from the base year to the rate year, which results in the HSDA.
(4) Cost-of-Living Index. HHSC updates HSDAs by applying a cost-of-living index to the HSDA established for the base year. HHSC uses the CMS Prospective Payment System Hospital Market Basket Index based on a federal fiscal year adjusted to a state fiscal year.
(5) Payment Divisions. HHSC groups hospital HSDAs into payment divisions by one-hundred-dollar ($100) increments beginning at zero. For example, all hospitals with HSDAs between $1,600.00 and $1,699.99 are grouped together.
(6) Payment Division Standard Dollar Amount (PDSDA).
(A) HHSC computes a PDSDA for all hospitals within a payment division as follows:
(i) multiplies each hospital's HSDA by the hospital's total number of base year claims, resulting in a weighted HSDA;
(ii) sums the weighted HSDAs determined in clause (i) of this subparagraph for all hospitals within a payment division; and
(iii) divides the result in clause (ii) of this subparagraph by the total number of base year claims for all hospitals within a payment division, which results in the PDSDA.
(B) The PDSDA calculation does not include data from the following types of hospitals:
(i) out-of-state hospitals;
(ii) military hospitals;
(iii) new or newly enrolled hospitals;
(iv) in-state and out-of-state children's hospitals;
(v) inpatient psychiatric hospitals; and
(vi) state-owned teaching hospitals.
(C) If a payment division has fewer than 20 total base year claims, HHSC considers that payment division to be statistically invalid. Hospitals within that payment division are assigned a PDSDA equal to the mathematically closest valid PDSDA.
(7) Minimum PDSDA. The minimum PDSDA of $1,600.00 is applied to any hospital with an HSDA equal to or less than $1,600.00.
(8) PDSDA calculation for specific types of hospitals.
(A) The following types of hospitals are assigned the Universal Mean plus the cost-of-living update as specified in paragraph (4) of this subsection, as their PDSDA:
(i) military hospitals;
(ii) out-of-state hospitals; and
(iii) newly enrolled hospitals.
(B) New Hospitals.
(i) For new hospitals, HHSC will assign a PDSDA that is three percentile points higher than the Universal Mean in an array of base year costs per claim, plus the cost-of-living update as specified in paragraph (4) of this subsection. This rate applies for five years from enrollment as a new Medicaid hospital or until HHSC recalculates PDSDAs, whichever is earlier. After five years from enrollment, if HHSC has not recalculated PDSDAs, the hospital's PDSDA will be the Universal Mean.
(ii) A replacement facility constructed for a hospital that is currently enrolled as a Medicaid provider is reimbursed by using either the PDSDA of the existing provider or the PDSDA for new hospitals, whichever is greater.
(9) Merged hospitals.
(A) When two or more Medicaid participating hospitals merge during or after the base year but before the date of HHSC's final PDSDA notification letter, HHSC combines the amounts determined in paragraph (3)(A) of this subsection for all hospitals involved in the merger and calculates the HSDA and PDSDA for the merged entity as described for all other hospitals in this subsection.
(B) When two or more Medicaid participating hospitals merge after the base year and after the date of HHSC's final PDSDA notification letter, HHSC combines the original base year costs per claim determined in paragraph (3)(A) of this subsection from the most recent rebasing period for all hospitals involved in the merger. HHSC calculates a new HSDA for the merged entity and assigns a PDSDA equal to the mathematically closest valid PDSDA.
(C) Acquisitions and buyouts do not result in a recalculation of the PDSDA of an acquired hospital unless acquisitions or buyouts result in the purchased or acquired hospital becoming part of another Medicaid participating provider. The acquired hospital will continue being reimbursed based on the PDSDA applied before the acquisition or buyout.
(10) TEFRA Cost for Rebasing. HHSC adjusts base year claims to arrive at a result based on cost reimbursement principles described in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), and calculates TEFRA cost for rebasing as follows:
(A) HHSC adjusts each hospital's base year claims using the interim rate computed as a result of tentative or final cost reports covering the base year. The adjustments are applied to claims in months within the base year that coincide with months within the hospital's cost reporting periods.
(B) The TEFRA cost for rebasing is calculated by multiplying the Medicaid allowed charges for each base year claim by the interim rate described in subparagraph (A) of this paragraph.
(C) HHSC uses the tentative or final cost report settlement that is complete and available on the date HHSC sends the initial PDSDA notification letter to the hospital. The results of a tentative or final cost report settlement completed after the date HHSC sends the initial PDSDA notification letter to the hospital are not considered for purposes of this subsection.
(D) If there is no tentative or final cost report settlement available, the TEFRA cost for rebasing is calculated using an assigned interim rate of 50 percent.
(11) Correction of payment division error and reprocessing of claims.
(A) HHSC will place a hospital in the correct payment division if HHSC determines that the hospital was incorrectly assigned to a payment division due to a mathematical error or data entry error by HHSC.
(B) HHSC will reprocess all claims adjudicated during that state fiscal year that were paid to the hospital using the incorrect PDSDA by applying the corrected PDSDA to the claims. No corrections are made for claims adjudicated in previous state fiscal years.
(e) Diagnosis Related Groups (DRGs) Statistical Calculations. HHSC adopts the classification of diagnoses defined in the Medicare DRG prospective payment system unless a revision is required based on Texas claims data or other factors, as determined by HHSC. HHSC recalibrates the relative weights, mean length of stay, and day outlier threshold whenever the PDSDAs are recalculated.
(1) Recalibration of relative weights. HHSC calculates a relative weight for each DRG as follows:
(A) Base year claims are grouped by DRG;
(B) For each DRG, HHSC:
(i) sums the base year costs per claim as determined in subsection (d)(3)(A) of this section;
(ii) divides the result in clause (i) of this subparagraph by the number of claims in the DRG; and
(iii) divides the result in clause (ii) of this subparagraph by the Universal Mean, resulting in the relative weight for the DRG.
(2) Recalibration of mean length of stay (MLOS). HHSC calculates a mean length of stay (MLOS) for each DRG as follows:
(A) Base year claims are grouped by DRG;
(B) For each DRG, HHSC:
(i) sums the number of days billed for all base year claims;
(ii) divides the result in clause (i) of this subparagraph by the number of claims in the DRG, resulting in the MLOS for the DRG.
(3) Recalibration of day outlier thresholds. HHSC calculates a day outlier threshold for each DRG as follows:
(A) Calculates for all claims the standard deviations from the MLOS in paragraph (2) of this subsection;
(B) Removes each claim with a length of stay (number of days billed by a hospital) greater than or equal to three standard deviations above or below the MLOS. The remaining claims are those with a length of stay less than three standard deviations above or below the MLOS;
(C) Sums the number of days billed by all hospitals for a DRG for the remaining claims in subparagraph (B) of this paragraph;
(D) Divides the result in subparagraph (C) of this paragraph by the number of remaining claims in subparagraph (B) of this paragraph;
(E) Calculates one standard deviation for the result in subparagraph (D) of this paragraph; and
(F) Multiplies the result in subparagraph (E) of this paragraph by two and adds that to the result in subparagraph (D) of this paragraph; resulting in the day outlier threshold for the DRG.
(4) If a DRG has fewer than ten base year claims, HHSC will assign the corresponding Medicare relative weight and Medicare mean length of stay and will calculate the day outlier threshold based on the Medicare mean length of stay and standard deviation.
(5) If one of the DRGs specific to an organ transplant has less than five base year claims, HHSC will assign the corresponding Medicare relative weight and Medicare mean length of stay and will calculate the day outlier threshold based on the Medicare mean length of stay and standard deviation. In addition, HHSC adds a relative weight to account for the cost of procuring the organ to the Medicare relative weight for the DRG. HHSC uses the organ procurement costs published by the Acquisition of Organ Procurement Organization (AOPO). To calculate the relative weight for procurement, HHSC divides the average cost of organ procurement by the universal mean for all claims.
(f) Request for Review. Except as otherwise provided in this subsection, HHSC uses the following process for reviews and appeals.
(1) If a hospital believes that HHSC made a mathematical error or data entry error in calculating the hospital's PDSDA, the hospital may request a review of the disputed calculation.
(A) A review of the calculation of a hospital's PDSDA will not be granted if the disputed calculation is the result of the hospital's submission of incorrect data or the result of the use of an interim rate derived from a cost reporting period occurring before the base year.
(B) The hospital must submit to HHSC a written request for review and appropriate specific documentation supporting its contention that there has been a mathematical or data entry error. The written request for review must be printed on the hospital's letterhead. HHSC Rate Analysis must receive a written request for an informal review by hand delivery, United States (U.S.) mail, or special mail delivery no later than 45 calendar days from the date of the initial PDSDA notification letter. If the 45th calendar day is a weekend day, national holiday, or state holiday, then the first business day following the 45th calendar day is the final day the receipt of the written request will be accepted. HHSC will not grant extensions of the 45-day deadline.
(C) If the hospital disagrees with the outcome of the review, the hospital may formally appeal in accordance with §§357.481 - 357.490 of this title (relating to Hearings Under the Administrative Procedure Act).
(2) A hospital may not appeal the elements of the prospective payment methodology used by HHSC, including:
(A) the payment division methodologies, including the HSDA and PDSDA calculations;
(B) the DRGs assigned through claims adjudication;
(C) the DRGs assigned to base year claims as a result of HHSC updating to a new version of the Medicare DRGs;
(D) the relative weights assigned to the DRGs;
(E) the adequacy of payments;
(F) the exclusion of claims that were not adjudicated and paid within the base year or six-month grace period; and
(G) the interim rate, computed as a result of tentative or final cost reports covering the base year that are completed after the date HHSC sends the initial PDSDA notification letter to the hospital.
(g) Reimbursements
(1) Calculating the payment amount. HHSC reimburses a hospital a prospective payment for covered inpatient hospital services by multiplying the PDSDA for the hospital's payment division by the relative weight for the DRG assigned to the adjudicated claim. The resulting amount is the payment amount to the hospital.
(2) The prospective payment as described in paragraph (1) of this subsection is considered full payment for covered inpatient hospital services. A hospital's request for payment in an amount higher than the prospective payment will be denied. The PDSDA result in subsection (d) of this section includes but is not limited to the following:
(A) capital costs;
(B) cost of indirect medical education;
(C) cost of malpractice insurance; and
(D) return on equity.
(3) Day and cost outlier adjustments. HHSC pays a day outlier or a cost outlier for medically necessary inpatient services provided to clients under age 21 in all Medicaid participating hospitals that are reimbursed under the prospective payment system. If a patient age 20 is admitted to and remains in a hospital past his or her twenty-first (21st) birthday, inpatient days and hospital charges after the patient reaches age 21 are included in calculating the amount of any day outlier or cost outlier payment adjustment.
(A) Day outlier payment adjustment. HHSC or its designee calculates a day outlier payment adjustment for each claim as follows:
(i) determines whether the number of medically necessary days allowed for a claim exceeds:
(I) the MLOS by more than two days; and
(II) the DRG day outlier threshold as calculated in subsection (e)(3)(F) of this section;
(ii) if clause (i) of this subparagraph is true, subtracts the DRG day outlier threshold from the number of medically necessary days allowed for the claim;
(iii) multiplies the DRG relative weight by the PDSDA;
(iv) divides the result in clause (iii) of this subparagraph by the DRG MLOS described in subsection (e)(2) of this section, to arrive at the DRG per diem amount;
(v) multiplies the number of days in clause (ii) of this subparagraph by the result in clause (iv) of this subparagraph;
(vi) multiplies the result in clause (v) of this subparagraph by 70 percent.
(B) Cost outlier payment adjustment. HHSC makes a cost outlier payment adjustment for an extraordinarily high-cost claim as follows:
(i) to establish a cost outlier, the cost outlier threshold must be determined by first selecting the lesser of the Universal Mean of base year claims multiplied by 11.14 or the hospital's PDSDA multiplied by 11.14;
(ii) the full DRG prospective payment amount is multiplied by 1.5;
(iii) the cost outlier threshold is the greater of clause (i) or (ii) of this subparagraph;
(iv) the cost outlier threshold is subtracted from the amount of reimbursement for the claim established under cost reimbursement principles described in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA); and
(v) the result in clause (iv) of this subparagraph is multiplied by 70 percent to determine the amount of the cost outlier payment.
(C) If an admission qualifies for both a day outlier and a cost outlier payment adjustment, HHSC pays the higher outlier payment.
(4) A hospital may submit a claim to HHSC before a patient is discharged, but only the first claim for that patient will be reimbursed the prospective payment described in paragraph (1) of this subsection. Subsequent claims for that stay are paid zero dollars. When the patient is discharged and the hospital submits a final claim to ensure accurate calculation for potential outlier payments for clients younger than 21 years of age, HHSC recoups the first prospective payment and issues a final payment in accordance with paragraphs (1) and (3) of this subsection.
(5) Patient transfers and split billing. If a patient is transferred, HHSC establishes payment amounts as specified in subparagraphs (A) - (D) of this paragraph. HHSC manually reviews transfers for medical necessity and payment.
(A) If the patient is transferred from a hospital to a nursing facility, HHSC pays the transferring hospital the total payment amount of the patient's DRG.
(B) If the patient is transferred from one hospital (transferring hospital) to another hospital (discharging hospital), HHSC pays the discharging hospital the total payment amount of the patient's DRG. HHSC calculates a DRG per diem and a payment amount for the transferring hospital as follows:
(i) multiplies the DRG relative weight by the PDSDA;
(ii) divides the result in clause (i) of this subparagraph by the DRG MLOS described in subsection (e)(2) of this section, to arrive at the DRG per diem amount; and
(iii) to arrive at the transferring hospital's payment amount:
(I) multiplies the result in clause (ii) of this subparagraph by the lesser of the DRG MLOS, the transferring hospital's number of medically necessary days allowed for the claim, or 30 days; or
(II) for a patient under age 21, multiplies the result in clause (ii) of this subparagraph by the lesser of the DRG MLOS or the transferring hospital's number of medically necessary days allowed for the claim.
(C) HHSC makes payments to multiple hospitals transferring the same patient by applying the per diem formula in subparagraph (B) of this paragraph to all the transferring hospitals and the total DRG payment amount to the discharging hospital.
(D) HHSC performs a post-payment review to determine if the hospital that provided the most significant amount of care received the total DRG payment. If the review reveals that the hospital that provided the most significant amount of care did not receive the total DRG payment, an adjustment is initiated to reverse the payment amounts. The transferring hospital is paid the total DRG payment amount and the discharging hospital is paid the DRG per diem.
(h) Cost reports. Each hospital must submit an initial cost report at periodic intervals as prescribed by Medicare or as otherwise prescribed by HHSC.
(1) Each hospital must send a copy of all cost reports audited and amended by a Medicare intermediary to HHSC within 30 days after the hospital's receipt of the cost report. Failure to submit copies or respond to inquiries on the status of the Medicare cost report will result in provider vendor hold.
(2) HHSC uses data from these reports in rebasing years, in making adjustments as described in subsection (d) of this section, and in completing cost settlements for children's hospitals and state-owned teaching hospitals as outlined in §355.8054 and §355.8056 of this chapter.
(3) Except as otherwise specified in subsection (i) of this section, there are no cost settlements for inpatient services under the prospective payment system in this section.
(4) The cost settlement process is limited by the TEFRA target cap.
(i) Hospitals in counties with 50,000 or fewer persons and certain other hospitals.
(1) Hospitals are reimbursed under this subsection if, as of the most recent decentennial census, the hospital is:
(A) located in a county with 50,000 or fewer persons;
(B) a Medicare-designated Rural Referral Center (RRC) or Sole Community Hospital (SCH) not located in a metropolitan statistical area (MSA), as defined by the U.S. Office of Management and Budget; or
(C) a Medicare-designated Critical Access Hospital (CAH).
(2) A hospital that qualifies under this subsection is reimbursed for a cost reporting period the greater of:
(A) All Medicaid payments based on the prospective payment system; or
(B) The cost-reimbursement methodology described in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) without the imposition of the TEFRA target cap described in subsection (h)(4) of this section.
(3) The amounts in this subsection are calculated using the most recent data for Medicaid Fee-for-Service (FFS) and Primary Care Case Management (PCCM) inpatient services.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on July 28, 2008.
TRD-200803917
Steve Aragón
Chief Counsel
Texas Health and Human Services Commission
Effective date: August 17, 2008
Proposal publication date: May 30, 2008
For further information, please call: (512) 424-6900