Proposed Rules Title 1

(C) All MSA population data are from the most recent decennial census. The specific weights for certain hospital districts and children's hospitals are as follows:

(i) Children's hospitals are weighted at 1.25.

(ii) MSAs with populations greater than or equal to 121,000 and less than 300,000 are weighted at 1.05 [ ~~2.75~~].

(iii) MSAs with populations greater than or equal to 300,000 and less than 1,000,000 are weighted at 1.30 [ ~~3.0~~].

(iv) MSAs with populations greater than or equal to 1,000,000 and less than 3,000,000 are weighted at 1.55 [~~3.25~~].

(v) MSAs with populations greater than or equal to 3,000,000 are weighted at 2.05 [~~3.75~~].

(vi) HHSC may change the weights as needed in the DSH program to address changes in program size.

[(D) For state fiscal year 2008 (September 1, 2007 through August 31, 2008), and state fiscal year 2009 (September 1, 2008 through August 31, 2009), the monthly disproportionate share payment calculated under subparagraph (C) of this paragraph is subject to a conversion factor that is applied as follows:]

~~[(i) A conversion factor of 1.11 is applied to payments made to hospital districts located in MSAs with populations greater than 3 million.]~~

~~[(ii) A conversion factor of 1.02 is applied to payments made to hospital districts located in MSAs with populations between 1 and 3 million.]~~

~~[(iii) A conversion factor of .96 is applied to payments made to children's hospitals.]~~

~~[(iv) A conversion factor of .92 is applied to payments made to private, urban, general hospitals located in a MSA.]~~

~~[(v) A conversion factor of 1.0 is applied to payments made to all other hospitals.]~~

[(vi) For purposes of this section, a private, urban, general hospital is defined as a hospital that is not operated by a political subdivision of the state, is not licensed under Chapter 577, Health and Safety Code, to provide mental health services or is not exempted from the Medicare and Medicaid prospective payment systems as a children's hospital, and is eligible for additional reimbursement from the disproportionate share hospital fund.]

(D) [~~(E)~~] HHSC [~~The commission~~ ] or its designee determines the hospital specific limit for each disproportionate share hospital. This limit is the sum of a hospital's Medicaid shortfall, as defined in subsection (b)(16) of this section, and its cost of services to uninsured patients, as defined in subsection (b)(5) of this section, multiplied by the appropriate inflation update factor, as provided for in subparagraph (E) of this subsection. If HHSC or its designee determines that a hospital's Medicaid payments exceed its Medicaid costs, HHSC will reduce the hospital's cost of uninsured patients in the year the DSH payment is made by the amount of the overage [~~subsection (g)(2)(E) of this section~~].

(i) The Medicaid shortfall includes total Medicaid [~~billed~~] charges related to adjudicated claims and any Medicaid payment made for the corresponding inpatient and outpatient services delivered to Texas Medicaid clients, as determined from the hospital's fiscal year claims data, regardless of whether the claim was paid. These denied claims include, but are not limited to, patients whose spell of illness claims were exhausted, or payments were denied due to late filing. See subsection (b)(16) of this section for definition of "Medicaid shortfall."

(ii) The total Medicaid [~~billed~~] charges related to adjudicated claims for each hospital are converted to cost, utilizing a calculated cost-to-charge ratio (inpatient and outpatient). HHSC [~~The commission~~] or its designee determines that ratio by using the hospital's CMS Form [~~HCFA~~] 2552, Hospital and Hospital Health Care Complex Cost Report, that was submitted for the fiscal year ending in the previous calendar year. HHSC [~~The commission~~] or its designee uses the latest available Medicaid cost report in the absence of the Medicaid cost report submitted in the fiscal year ending in the previous calendar year. To determine the cost-to-charge ratio (inpatient and outpatient) for each hospital, HHSC [~~the commission~~] or its designee uses the total cost from the CMS Form [ ~~HCFA~~] 2552, Worksheet B, Part I, Column 25, and total charges from the CMS Form [~~HCFA~~] 2552, Worksheet C, Part I, Column 8. The ratio is the total cost divided by the total gross patient charges. The cost-to-charge ratio is an all-payer ratio. HHSC removes from the calculation of the cost-to-charge ratio non-hospital services including, but not limited to, ambulance, rural health clinics, primary home care, home health agencies, hospice, skilled nursing facilities, and residential treatment centers.

(iii) HHSC [~~The commission~~] or its designee determines the cost of services to patients who have no health insurance or source of third party payments for services provided during the fiscal year for each hospital. Hospitals are surveyed each year to determine charges that can be attributed to patients without insurance or other third party resources. Hospitals must not include unreimbursable cost centers listed on the CMS Form 2552, Schedule B, Part I, Column 25, Lines 96 through 100. The charges from reporting hospitals are multiplied by each hospital's cost-to-charge ratio (inpatient and outpatient) to determine the cost. Hospitals that report on their annual DSH application charges for patients without health insurance or other source of third party payments, and payments made by or on behalf of those patients, must include adjustments to charges and payments received during the hospital's fiscal year and for five months after the end of the hospital's fiscal year.

(iv) After HHSC [~~the commission~~] or its designee determines each disproportionate share hospital's cost of services to patients who have no health insurance or source of third party payments for services provided during the year, HHSC [~~the commission~~ ] or its designee subtracts from each hospital's cost of services the amount of payments made by or on behalf of those patients who have no health insurance or source of third party payments for services provided during the year.

(E) [~~(F)~~] HHSC [~~The commission~~ ] or its designee shall trend each hospital's hospital specific limit using ["hospital specific limit" calculated from its historical base period cost report to the state's fiscal year DSH disproportionate share program. For hospitals without a full 12-month fiscal year cost report, the commission or its designee shall convert their costs to annualized hospital specific limits. The commission or its designee shall use] the inflation rates described in subsection (b)(11) [~~(b)(12)~~] of this section. HHSC [~~The commission~~] or its designee shall calculate the number of months from the mid-point of the hospital's cost reporting period to the mid-point of the federal [~~state~~] fiscal year DSH program. HHSC [~~disproportionate share program. The commission~~] or its designee shall then multiply the portion of the hospital's cost report year occurring in the federal [~~state~~] fiscal year by the inflation update factor used for each federal [~~state~~] fiscal year in the calculation of hospital reimbursement rates for each federal [~~state~~ ] fiscal year. The product of these calculations shall be multiplied by each hospital's hospital specific limit [ ~~"hospital specific limit"~~] to obtain each hospital's adjusted hospital specific limit. [ ~~"adjusted hospital specific limit."~~]

(F) [~~(G)~~] HHSC [~~The commission~~ ] or its designee compares the projected payment for each disproportionate share hospital, as determined by subsections (d) and (e) of this section, with its adjusted hospital specific limit, as determined by subparagraphs (D) and (E) [~~and (F)~~] of this paragraph. If the hospital's projected payment is greater than its adjusted hospital specific limit, HHSC [~~the commission~~] or its designee reduces the hospital's payment to its adjusted hospital specific limit.

(G) [~~(H)~~] If there are DSH [~~disproportionate share hospital~~ ] funds left in the available fund for the remaining hospitals, because some hospitals have had their DSH [~~disproportionate share hospital~~] payments reduced to their adjusted hospital specific limits, HHSC [~~the commission~~ ] or its designee distributes the excess funds according to the provisions in this section. For hospitals whose projected DSH [~~disproportionate share hospital~~ ] payments are less than their adjusted hospital specific limits, HHSC [~~the commission~~ ] or its designee does the following:

(i) calculate the difference between its adjusted hospital specific limit and its projected disproportionate share hospital payment;

(ii) add all of the differences from clause (i) of this subparagraph;

(iii) calculate a ratio for each hospital by dividing the difference from clause (i) of this subparagraph by the sum for clause (ii) of this subparagraph; and

(iv) multiply the ratio from clause (iii) of this subparagraph by the remaining available fund. [~~Remaining Available Fund x~~]

(H) [~~(I)~~] Only those hospitals that are below their adjusted hospital specific limits are eligible to participate in this distribution. The DSH [ ~~disproportionate share hospital~~ ] funds remaining in the available fund are distributed to the hospitals that have not already reached their adjusted hospital specific limits. Each hospital's total disproportionate share payment (including the redistribution of excess funds) cannot exceed its adjusted hospital specific limit.

(g) Review of HHSC determination of eligibility and estimated payment amount. HHSC notifies a hospital of its tentative eligibility or ineligibility and estimated payment amount at the beginning of the federal fiscal year. A hospital that does not qualify or that contends the amount of payment is incorrect may request a review by the state in accordance with paragraph (1) of this subsection. Tentative eligibility determinations and estimated payment amounts for all hospitals may change depending on the outcome of the review.

(1) Except as specified in paragraph (4) of this subsection, a request for review must be submitted in writing to HHSC within 15 calendar days of the date of the notification of tentative eligibility or ineligibility. The request must contain specific documentation supporting its contention that HHSC made factual or calculation errors that, if corrected, would result in the hospital's qualifying for payments or receiving a higher payment amount. A hospital must submit additional documentation within 30 calendar days of the date of notification of tentative eligibility or ineligibility. The written request for review and all supporting documentation must be sent to the Director of Hospital Reimbursement, Rate Analysis Department of HHSC.

(2) The review is:

(A) limited to allegations of factual or calculation errors made by HHSC.

(B) supported by documentation submitted by the hospital or used by HHSC in making its original determination.

(3) HHSC makes a determination and notifies the hospital of the results of a review at the time of the first monthly payment. Any adjustments made as a result of a review will not exceed the limits of available DSH funds.

(4) No additional review is conducted after first monthly payments are made unless, at the time of the first monthly payments, HHSC gives a hospital its first notice that the hospital is ineligible for DSH funding. In that case, the hospital may then request a review in accordance with paragraph (1) of this subsection.

(5) A request for review may not be based on a hospital's claim that the data submitted to HHSC by the hospital or a fiscal intermediary is incorrect or incomplete. On or about April 1 of each year, HHSC sends each participating hospital a report of adjudicated data received from fiscal intermediaries reflecting the hospital's Medicaid days, Medicaid charges, and Medicaid payments during the relevant time period. A hospital may communicate directly with the fiscal intermediary to correct any data in that report that the hospital believes is inaccurate. The fiscal intermediary must submit a corrected report to HHSC by July 1 of each year for the corrected report to be considered.

(6) At the request of a hospital, HHSC will conduct administrative reviews in cases where a hospital and a fiscal intermediary cannot resolve differences in adjudicated data. HHSC will make the final determination in these cases.

[(g) Review of agency determination. The commission or its designee notified hospitals of their tentative eligibility or ineligibility and the estimated amount of payment before the beginning of the state fiscal year. Any hospital, including those hospitals that do not qualify or that contend the amount of payment is incorrect, is allowed to request a review by the state. The actual amount of payment also may vary if a successful review request by one or more hospitals necessitates an adjustment in the amount of payments to the other hospitals in the program. Because of the state's ongoing review of data elements used in the formulas before the first monthly payment, it is possible that a hospital may either gain or lose eligibility after receiving tentative notification, which would also affect payment amounts. The hospital's written request for a review must be made to commission or its designee and must be received within 10 business days after the hospital receives notification of its eligibility or ineligibility. The hospital's request must contain specific documentation supporting its contention that factual or calculation errors were made, which, if corrected, would result in the hospital qualifying for payments or receiving payment in a corrected amount. The state will accept documentation from hospitals seeking reviews for 30 business days after the hospital receives notification of its eligibility or ineligibility.]

[(1) The hospital's written request for a review must be made to the director of acute care services and must be received by the director within 10 business days after the hospital receives notification of its eligibility or ineligibility. The hospital's request must contain specific documentation supporting its contention that factual or calculation errors were made, which, if corrected, would result in the hospital qualifying for payments or receiving payment in a corrected amount.]

~~[(2) The review is:]~~

~~[(A) limited to allegations of factual or calculation errors;]~~

~~[(B) limited to a review of documentation submitted by the hospital or used by the single state agency or its designee in making its original determination; and]~~

~~[(C) not conducted as an adversary hearing.]~~

[(3) The commission or its designee conducts the review as quickly as possible and makes its decision before the first monthly payment is made for that fiscal year. Hospitals that have requested a review are notified of the results of the review at the time of the first monthly payment. Any adjustments made as a result of these reviews will not exceed the limits of available funds for implementing the applicable disproportionate share program. Once the first monthly payment is made, no additional review or appeal is available to hospitals, with one exception. If a hospital, receiving a tentative eligibility letter and not requesting a review, then receives a letter stating the hospital is now ineligible for DSH funding, that hospital may now request a review of eligibility determination according to the terms of paragraph (1) of this subsection.]

(h) Disproportionate share funds held in reserve.

(1) Hospitals participating in the disproportionate share program are required to comply at all times with the conditions of participation specified in subsection (c) of this section. If HHSC [~~the commission~~ ] or its designee has reason to believe that a hospital is not complying with the conditions of participation, HHSC [~~the commission~~ ] or its designee notifies the hospital of possible noncompliance. Upon receipt of the notice of possible noncompliance, the hospital has 30 days to demonstrate its compliance with conditions of participation. If the hospital fails to demonstrate its compliance within 30 days, HHSC [~~the commission~~ ] or its designee has the authority to hold that hospital's disproportionate share payments in reserve until the:

(A) hospital can demonstrate its compliance with the conditions of participation;

(B) decision to hold payments in reserve is reviewed and the decision results in favor of the hospital; or

(2) If a hospital's disproportionate share payments are being held in reserve on the date of the last monthly payment in the federal [~~state~~] fiscal year, the amount of the payments is divided proportionately among the hospitals receiving a last monthly payment and is not restored to the hospital. If the hospital demonstrates its compliance with the conditions of participation or if the hospital receives a favorable review decision, the funds are restored to the hospital.

(3) Hospitals that have had disproportionate share payments held in reserve may request a review by HHSC [~~the single state agency~~] or its designee.

(A) The hospital's written request for a review must:

(i) be made to HHSC [~~the commission~~] or its designee;

(ii) be received by HHSC [~~the commission~~] or its designee within 10 days after the hospital's disproportionate share payments are held in reserve; and

(iii) contain specific documentation supporting its contention that it is in compliance with the conditions of participation.

(B) The review is:

(i) limited to allegations of compliance with conditions of participation;

(ii) limited to a review of documentation submitted by the hospital or used by HHSC [~~the commission~~] or its designee in making its original determination; and

(iii) not conducted as an adversary hearing.

(C) HHSC [~~The commission~~] or its designee conducts the review as quickly as possible and notifies hospitals requesting the review of the results. Once the last monthly payment for the relevant state fiscal year is made, no additional review or appeal is available to hospitals.

(4) If a hospital that is already receiving Medicaid disproportionate share funds closes, loses its license, loses its Medicare or Medicaid eligibility, that hospital's disproportionate share funds are reallocated among the remaining disproportionate share hospitals. If the hospital reopens, as the same hospital type, regains similar licensure or Medicare and Medicaid eligibility during the same fiscal year, that hospital receives monthly disproportionate share payments for the remaining months in the federal [ ~~state~~] fiscal year, as determined by the appropriate reimbursement formula and from available funds.

(i) Voluntary withdrawal from the DSH program. If HHSC obtains a federal waiver under Section 1115 of the Social Security Act to implement the Medicaid reform provisions in Chapter 531 of the Texas Government Code, Subchapter N, Texas Health Opportunity Pool Trust Fund:

(1) HHSC will recoup all DSH payments made during the same federal fiscal year to a hospital that voluntarily terminates its participation in the DSH program.

(2) HHSC will not redistribute to other hospitals under this division the amount of any recovered and non-reimbursed projected DSH funds.

(3) A hospital that voluntarily terminates from the DSH program will be ineligible to receive payments under this section for the next three consecutive federal fiscal years after the hospital's termination.

(4) If a hospital receives DSH funding in one federal fiscal year and does not apply for DSH funding in the following federal fiscal year, even though it would have qualified in that year, the amount of that hospital's DSH funding in the previous year will not be redistributed to other hospitals under this division.

(5) If a hospital does not apply for DSH funding in the federal fiscal year following a federal fiscal year in which it received DSH funding, even though it would have qualified for DSH funding in that year, the hospital will be ineligible to receive payments under this section for the next three consecutive federal fiscal years after the year in which it did not apply.

(j) Recovery of DSH funds. If a hospital receives an overpayment of DSH funds, including an overpayment that results from HHSC error or audit, HHSC will recoup such overpayment. Notwithstanding subsection (i) of this section, these funds will be redistributed to DSH providers that are eligible for additional payments subject to their hospital specific limits.

(k) All DSH payments are subject to the availability of appropriated state and federal funds.

[(i) Provision for reduction in federal disproportionate share cap. If the federal government reduces the amount of Medicaid disproportionate share funds allotted to Texas, the state must reduce the net amount allotted to each disproportionate share hospital during the state fiscal year by the same percentage.]

(l) [~~(j)~~] If a hospital is located in a county that is declared a federal natural disaster area, it may request that the state use the hospital's data, excluding data used to calculate the one percent Medicaid minimum utilization rate and the adjusted hospital specific limit, from the most recent year prior to the natural disaster for qualification and reimbursement purposes. This request must be submitted in writing to the state with the hospital's annual DSH application. The state reserves the right to approve or deny the written exception request and will notify the hospital of its decision prior to the beginning of the DSH program year. Hospitals may request an administrative review of the state's decision in this subsection. The review will be conducted under the provisions of subsection (g) of this section.

(m) Audit process. HHSC or its designee will audit periodically DSH providers. HHSC will determine the number of hospitals that will be audited on site and that will undergo desk reviews. HHSC will use statistically valid methods to determine the sample size of information for auditing or desk review.

(n) Failure to provide supporting documentation. HHSC or its designee will exclude data from calculations under this section if a hospital fails to maintain and provide adequate documentation to support that data.

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

Filed with the Office of the Secretary of State on June 23, 2008.

TRD-200803281

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 3, 2008

For further information, please call: (512) 424-6586

1 TAC §355.8067

The Health and Human Services Commission (HHSC) proposes an amendment to §355.8067, concerning the disproportionate share hospital reimbursement methodology for state-owned teaching hospitals.

Background and Justification

The proposed amendments revise the Medicaid disproportionate share hospital (DSH) reimbursement methodology for state-owned teaching hospitals. These changes clarify current practices as well as make changes to the processes used to determine, review, and audit DSH payments.

The proposed amendments to §355.8067 fall into three categories. First, most of the rule changes reflect efforts to more equitably distribute federal DSH funds among Texas hospitals. Since there is a set amount of aggregate DSH money available to Texas hospitals, if one hospital receives more DSH money, other hospitals receive less. HHSC proposes to standardize a number of DSH program elements among hospitals participating in the DSH program to create consistent requirements for all hospitals.

Finally, the changes in subsection (j) relate to Medicaid reform initiatives at Chapter 531 of the Texas Government Code, Subchapter N, Texas Health Opportunity Pool Trust Fund. HHSC submitted a Medicaid reform waiver request to CMS on April 16, 2008, with a comprehensive plan to transform health care in Texas by providing more people with insurance, reducing reliance on expensive emergency room visits for basic care, and making it easier for the working poor to buy into employer-sponsored health coverage. Under the conditions specified in this amendment, if a state-owned teaching hospital withdraws from the DSH program, HHSC will use its DSH funds to help finance the reform.

Section-by-Section Summary

The amendment in subsection (a) clarifies that a hospital must apply for DSH funds annually.

The amendments to subsection (b) set out the conditions for participation in the DSH program. The amendment adds a new requirement that a participating hospital must provide HHSC access to the hospital's records and accounting systems.

The amendments to subsection (c) clarify definitions, including "cost-to-charge ratio," "total Medicaid inpatient days," and "inflation update factor." The amendments also delete the definition of "allowable cost" and add definitions for "adjudicated" and "HHSC." Finally, HHSC proposes changing a number of definitions to specify that HHSC will use adjudicated claims data rather than billed claims data as the basis for DSH qualification and payment computations.

The amendment at subsection (d) changes the amount of funds a hospital may receive under this rule from up to 175 percent to up to 100 percent of its adjusted hospital-specific limit. The state paid state-owned teaching hospitals more than 100 percent of their adjusted hospital-specific limits in fiscal years 2004 and 2005; therefore, this amendment does not have a fiscal impact for fiscal year 2009 or beyond.

Subsection (e) sets out how HHSC determines each hospital's hospital-specific limit. The amendment to subsection (e)(1)(A) specifies that HHSC does not consider non-hospital services in the calculation of the ratio of costs to charges. The amendment to subsection (e)(1)(B) prohibits participating hospitals from including certain unreimbursable cost centers as defined by CMS and details the cut-off date for hospitals to report charges and payments for services to the uninsured. The amendment to subsection (e)(3) describes that when a hospital has a Medicaid profit in its calculation of its Medicaid shortfall, the hospital's cost of uninsured patients will be lowered by the amount of the profit.

The amendment at subsection (g) clarifies that if a hospital is located in a federal natural disaster area, while HHSC may accept older data to meet state DSH requirements, it cannot waive certain federal requirements.

The amendment at subsection (h) explains that DSH payments are subject to the availability of state and federal funds.

The amendment at subsection (i) explains that a hospital may request a review of its ineligibility for DSH or its estimated DSH payment amounts. The amendment also describes the review process, including the grounds for review and the procedure and timelines for requesting a review.

The amendment at subsection (j) outlines that, if a federal waiver is secured to implement the Medicaid reform provisions related to the Texas Health Opportunity Pool Trust Fund, HHSC will not redistribute DSH funds if a hospital voluntarily withdraws from the DSH program or does not re-apply to participate in the program, even though it would have qualified for DSH funding. The amendment also prohibits such hospitals from receiving DSH payments for the next three consecutive federal fiscal years.

The amendment at subsection (k) describes the recoupment and redistribution of DSH funds if an overpayment is made to a hospital.

The amendment at subsection (l) requires HHSC to conduct periodic on-site audits and desk reviews using statistically valid methods.

The amendment at subsection (m) explains that, if a hospital fails to maintain and provide adequate documentation to support its data, HHSC will exclude that data from DSH calculations for that hospital.

Other changes were made throughout the rule to update references, move language and re-order provisions as necessary to reflect changes.

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that for the first five-year period the proposed amendment is in effect, there are no fiscal implications for state government as a result of enforcing or administering the section. The proposed rule will not result in any fiscal implications for local health and human services agencies. Local governments will not incur additional costs.

Small and Micro-Business Impact Analysis

Mr. Suehs has also determined that there will be no effect on small businesses or micro businesses to comply with the rule because they will not be required to alter their business practices as a result of the rule. Therefore, Government Code §2006.002 does not require that HHSC complete an Economic Impact Statement or a Regulatory Flexibility Analysis. There are no anticipated economic costs to persons who are required to comply with the proposed rule. There is no anticipated negative impact on local employment.

Public Benefit

Carolyn Pratt, Director of Rate Analysis, has determined that, for each of the first five years the amendment is in effect, the public benefit expected as a result of enforcing the amendment is the standardization and clarification of the administrative rules governing DSH funding for state-owned teaching hospitals. The proposed changes to the rule also further Medicaid reform efforts.

Regulatory Analysis

Takings Impact Assessment

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

Public Comment

Written comments on the proposal may be submitted to Henry Welles, Rate Analyst in the Rate Analysis Department, Texas Health and Human Services Commission, P.O. Box 85200, MC-H400, Austin, Texas 78708-5200; by fax (512) 491-1983 or by e-mail at Henry.Welles@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Public Hearing

A public hearing is scheduled for July 22, 2008, from 9 a.m. to 12 p.m., in the HHSC Lone Star Conference Room, at 11209 Metric Boulevard, Austin, Texas 78758. Persons requiring further information, special assistance, or accommodations should contact Henry Welles at (512) 491-1368.

Statutory Authority

The amendment is proposed under the Texas Government Code, §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; and 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.

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

§355.8067.Disproportionate Share Hospital Reimbursement Methodology for State-Owned Teaching Hospitals .

(a) A state-owned teaching hospital [~~owned and operated by a state university or other agency of the state~~] is eligible for disproportionate share hospital (DSH) reimbursement. A state-owned teaching hospital is a hospital owned and operated by a state university or other agency of the state. Each year, HHSC will mail a DSH application packet to all active Medicaid hospitals. The application packet may request self-reported data HHSC deems necessary to supplement the AHA/THA/DSHS annual hospital survey and the fiscal intermediary data. A state-owned teaching hospital may apply for DSH funds annually by completing the application packet by the deadline specified by HHSC in the packet's cover letter. A hospital that fails to submit a complete application by the deadline specified by HHSC will not be eligible to receive DSH funds that year.

(b) Conditions of participation. Before the beginning of each federal fiscal year, which begins October 1, HHSC will survey Medicaid hospitals to determine which hospitals meet the state's conditions of participation.

(1) A hospital eligible for DSH reimbursement must allow HHSC or its designee to have access to its hospital records and accounting systems during regular business hours.

(2) [~~(b)~~] Each hospital participating in the DSH program must have a Medicaid inpatient utilization rate of at least one percent [~~defined at a minimum of 1.0%~~].

(3) [~~(c)~~] To qualify for disproportionate share payments, each hospital must have at least two physicians (M.D. or D.O.), with staff privileges at the hospital, who have agreed to provide non-emergency [~~nonemergency~~] obstetrical services to Medicaid clients. The two-physician requirement does not apply to hospitals whose inpatients are predominantly under 18 years old or that did not offer non-emergency [~~nonemergency~~] obstetrical services to the general population as of December 22, 1987.

(c) [~~(d)~~] For purposes of this section, the following words and terms[,] shall have the following meanings, unless the context clearly indicates otherwise.

(1) Total Medicaid inpatient days-- The [~~Total Medicaid inpatient days means the~~ ] total number of [~~billed~~] Title XIX inpatient days based on the latest available state fiscal year adjudicated claims data for patients eligible for Title XIX benefits. The term excludes days for patients who are covered for services that are fully or partially reimbursable by Medicare. The term includes Medicaid-eligible days of care adjudicated by managed care organizations. Total Medicaid inpatient days includes days that were denied payment for reasons other than eligibility. [ Included are inpatient days of care provided to patients eligible for Medicaid at the time the service was provided, regardless of whether the claim was paid. These denied claims include, but are not limited to, claims for patients whose spell of illness limits are exhausted, or claims that were filed late.] The term excludes days attributable to Medicaid patients between the ages of 21 and 65 who live in an institution for mental diseases. The term includes days attributable to individuals eligible for Medicaid in other states. Total Medicaid inpatient days includes days with adjudicated dates between September 1 and August 31 (state fiscal year).

(2) Total inpatient census days--The [~~Total inpatient census days means the~~] total number of a hospital's inpatient census days during its fiscal year ending in the previous calendar year.

(3) Cost of services to uninsured patients--The [ ~~Cost of services to uninsured patients is the~~] inpatient and outpatient charges to patients who have no health insurance or other source of third party payment for services provided during the year, multiplied by the hospital's ratio of costs to charges (inpatient and outpatient), less the amount of payments made by or on behalf of those patients. Uninsured patients are those patients who have no health insurance or other source of third party payments for services provided during the year. Uninsured patients include those patients who do not possess health insurance that would apply to the service for which the individual sought treatment.

(4) Hospital specific limit--The [~~Hospital specific limit is the~~ ]sum of the following two measurements: Medicaid shortfall and costs of services to uninsured patients.

(5) Medicaid shortfall--The [~~Medicaid shortfall is the~~ ] cost of services (inpatient and outpatient) furnished to Medicaid patients, less the amount paid under the non-disproportionate share hospital payment methodology [~~method under this same plan~~].

(6) Cost-to-charge ratio (inpatient and outpatient)-- Total adjudicated charges for each hospital from all payers that are converted to cost by dividing the total cost by the total gross inpatient charges. The cost-to-charge ratio is an all-payer ratio that covers all applicable hospital costs and charges relating to patient care. This ratio does not distinguish between payer types such as Medicare, Medicaid or private pay. [Cost-to-charge ratio is the hospital's overall cost-to-charge ratio, as determined from its Medicare cost report submitted for the fiscal year ending in the previous calendar year. The latest available Medicare cost report is used in the absence of the cost report for the hospital's fiscal year ending in the previous calendar year.]

(7) Adjusted hospital specific limit--A [~~Adjusted hospital specific limit is a~~] hospital specific limit trended forward to account for the inflation update factor since the base year.

(8) Inflation update factor--HHSC or its designee applies a cost of living index to a hospital's unreimbursed Medicaid costs and its cost of treating uninsured patients, based on the Centers for Medicare and Medicaid Services (CMS) Prospective Payment System Hospital Market Basket Index. [~~Inflation update factor is a general increase in prices as determined by the department.~~]

(9) Medicaid inpatient utilization rate--The [ ~~Medicaid inpatient utilization rate is the~~] fraction expressed as a percentage, the numerator of which is the hospital's number of inpatient days attributable to patients who (for these days) were eligible for medical assistance under a state plan, and the denominator of which is the total number of the hospital's inpatient days in that period. The term "inpatient day" includes each day in which an individual (including a newborn) is an inpatient in the hospital, whether or not the individual is in a specialized ward and whether or not the individual remains in the hospital for lack of suitable placement elsewhere.

(10) Payments received from uninsured patients--[~~Payments received from uninsured patients are those~~] Those payments received from or on behalf of uninsured patients as defined in paragraph (3) of this subsection.

(11) Charity charges--The [~~Charity charges are the~~ ] total amount of hospital charges for inpatient and outpatient services attributed to charity care in a cost reporting period.

[(12) Allowable cost--Allowable cost is defined by the department using the rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers when providing services in conformity with applicable state and federal laws, regulations, and quality and safety standards.]

(12) [~~(13)~~] Available fund--The [ ~~available fund for state teaching hospitals is the~~] total amount of funds that may be reimbursed to the state-owned teaching hospitals [~~as determined below~~].

(13) HHSC--The Texas Health and Human Services Commission or its designee.

(14) Adjudicated--A hospital claim that is approved or denied for payment by HHSC or its designee, or another payer in the case of non-HHSC programs.

(d) [~~(e)~~] HHSC [~~The Department~~ ] reimburses state-owned teaching hospitals on a monthly basis from the available fund for state -owned teaching hospitals. Monthly payments equal one-twelfth of annual payments unless it is necessary to adjust the amount because payments are not made for a full 12-month period, to comply with the annual state disproportionate share hospital allotment, or to comply with other state or federal disproportionate share hospital program requirements. Prior to the start of the next federal fiscal year, HHSC [~~the department~~ ] determines the size of the fund to reimburse state-owned teaching hospitals for the next federal fiscal year. The available fund to reimburse the state -owned teaching hospitals equals the total of their disproportionate share hospital payments, as follows: a state-owned teaching hospital that meets the requirements for disproportionate share status receives annually up to 100 [~~175~~] percent of its adjusted hospital specific limit.

(e) [~~(f)~~] HHSC [~~The department or its designee~~] determines the hospital specific limit for each disproportionate share hospital. This limit is the sum of a hospital's Medicaid shortfall, as defined in subsection (c) [~~(d)~~](5) of this section, and its cost of services to uninsured patients as defined in subsection (c) [~~(d)~~](3) of this section, multiplied by the appropriate inflation update factor, as provided for in subsection (f) [~~(g)~~] of this section.

(1) The Medicaid shortfall includes total Medicaid [~~billed~~ ] charges related to adjudicated claims and any Medicaid payments made for the corresponding inpatient and outpatient services delivered to Texas Medicaid clients, as determined from the hospital's fiscal year claims data, regardless of whether the claim was paid. These denied claims include, but are not limited to, patients whose spell of illness claims were exhausted, or payments were denied due to late filing. Refer to subsection (c) [~~(d)~~](5) of this section.

(A) The total [~~billed~~] Medicaid charges related to adjudicated claims for each hospital are converted to cost, utilizing a calculated cost-to-charge ratio (inpatient and outpatient). HHSC [~~The department or its designee~~ ] determines that ratio by using the hospital's CMS [ ~~HCFA~~] 2552-92, Hospital and Hospital Health Care Complex Cost Report, that was submitted for the fiscal year ending in the previous calendar year. HHSC [~~The department~~] or its designee uses the latest available Medicare cost report in the absence of the Medicare cost report submitted in the fiscal year ending in the previous calendar year. To determine the cost-to-charge ratio (inpatient and outpatient) for each hospital, HHSC [~~the department or its designee~~] uses the total cost from the CMS [~~HCFA~~ ] 2552-92, Worksheet B, Part 1, Column 25, and total charges from the CMS [~~HCFA~~] 2552-92, Worksheet C, Part 1, Column 8. The ratio is the total cost divided by the total gross patient charges. The ratio of costs to charges is an all-payer ratio, which does not distinguish between payer types. HHSC removes from the calculation of the cost-to-charge ratio non-hospital services including, but not limited to, ambulance, rural health clinics, primary home care, home health agencies, hospice, and skilled nursing facilities.

(B) HHSC [~~The department or its designee~~] determines the cost of services to patients who have no health insurance or source of third party payments for services provided during the year for each hospital. Hospitals are surveyed each year to determine charges that can be attributed to patients without insurance or other third party resources. Hospitals must not include unreimbursable cost centers listed on the CMS Form 2552, Schedule B, Part I, Column 25, Lines 96 through 100. The charges are multiplied by each hospital's cost-to-charge ratio (inpatient and outpatient) to determine the cost. Hospitals that report annually charges for patients without health insurance or other source of third party payments, and payments made by or on behalf of those patients, must include charge and payment adjustments made during the hospital's fiscal year and for five months after the end of the hospital's fiscal year.

(2) After HHSC [~~the department or its designee~~ ] determines each disproportionate share hospital's cost of services to patients who have no health insurance or source of third party payments for services provided during the year, HHSC [~~the department~~ ] subtracts from each hospital's cost of services the amount of payments made by or on behalf of those patients [~~who have no health insurance or source of third party payments for services provided during the year~~].

(3) If HHSC determines that a hospital's Medicaid payments exceed its Medicaid costs in the hospital's fiscal year, HHSC will reduce the hospital's cost of uninsured patients in the year the DSH payment is made by the amount of the overage.

(f) [~~(g)~~] HHSC [~~The department or its designee~~] trends each hospital's hospital specific limit using [ "hospital specific limit" calculated from its historical base period cost report from subsection (f) of this section to the state's fiscal year disproportionate share program. For hospitals without full 12-month fiscal year cost reports, the department or its designee annualizes the cost to calculate the hospital specific limit. The department or its designee uses] the inflation update factor, as defined in subsection (c) [~~(d)~~](8) of this section, in calculating the adjusted hospital specific limit. HHSC [~~The department or its designee~~] calculates the number of months from the mid-point of the hospital's year [ ~~cost reporting period~~] to the mid-point of the federal DSH [~~state fiscal year disproportionate share~~ ] program fiscal year. HHSC [~~The department or its designee~~] then multiplies the portion of the hospital's [ ~~cost report~~] year occurring in the DSH program [ ~~state~~] fiscal year by the inflation update factor defined in subsection (c)(8) of this section [ used for each state fiscal year in the calculation of hospital reimbursement rates for each state fiscal year. The product of these calculations is multiplied by each hospital's hospital specific limit] to obtain each hospital's adjusted hospital specific limit.

(g) [~~(h)~~] If a hospital is located in a county that is declared a federal natural disaster area, it may request that the state use the hospital's data, excluding data used to calculate the one percent Medicaid minimum utilization rate and the adjusted hospital specific limit in compliance with sections 1923(d)(3) and 1923(g) of the Social Security Act, from the most recent year prior to the natural disaster for qualification and reimbursement purposes. This request must be submitted in writing to the state with the hospital's annual DSH application. The state reserves the right to approve or deny the written exception request and will notify the hospital of its decision prior to the beginning of the DSH program year. Hospitals may request a [~~an administrative~~] review of the state's decision in this subsection. [~~The review will be conducted under the provisions of §355.8065(g) of this title (relating to Additional Reimbursement to Disproportionate Share Hospitals).~~]

(h) All DSH payments are subject to the availability of appropriated state and federal funds.

(i) Review of HHSC determination of eligibility and estimated payment amount. HHSC notifies a hospital of its tentative eligibility or ineligibility and estimated payment amount at the beginning of the federal fiscal year. A hospital that does not qualify or that contends the amount of payment is incorrect may request a review by the state in accordance with paragraph (1) of this subsection. Tentative eligibility determinations and estimated payment amounts for all hospitals may change depending on the outcome of the review.

(1) Except as specified in paragraph (4) of this subsection, a request for review must be submitted in writing to HHSC within 15 calendar days of the date of the notification of tentative eligibility or ineligibility. The request must contain specific documentation supporting its contention that HHSC made factual or calculation errors which, if corrected, would result in the hospital's qualifying for payments or receiving a higher payment amount. A hospital must submit additional documentation within 30 calendar days of the date of notification of tentative eligibility or ineligibility. The written request for review and all supporting documentation must be sent to the Director of Hospital Reimbursement, Rate Analysis Department of HHSC.

(2) The review is:

(A) limited to allegations of factual or calculation errors made by HHSC.

(B) supported by documentation submitted by the hospital or used by HHSC in making its original determination.

(j) Voluntary withdrawal from the DSH program. If HHSC successfully obtains a federal waiver under Section 1115 of the Social Security Act to implement the Medicaid reform provisions in Chapter 531 of the Texas Government Code, Subchapter N, Texas Health Opportunity Pool Trust Fund:

(1) HHSC will recoup all DSH payments made during the same federal fiscal year to a hospital that voluntarily terminates its participation in the DSH program.

(2) HHSC will not redistribute to other hospitals under this division the amount of any recovered and non-reimbursed projected DSH funds.

(k) Recovery of DSH funds. If a hospital receives an overpayment of DSH funds, including an overpayment that results from HHSC error or audit, HHSC will recoup such overpayment. Notwithstanding subsection (j) of this section, these funds will be redistributed to DSH providers that are eligible for additional payments subject to their hospital specific limits.

(l) Audit process. HHSC will periodically audit and desk review data submitted by DSH providers. HHSC will determine the number of hospitals that will be audited on site and that will undergo desk reviews. HHSC will use statistically valid methods to determine the sample size of information for auditing or desk review.

(m) Failure to provide supporting documentation. HHSC will exclude data from calculations under this section if a hospital fails to maintain and provide adequate documentation to support that data.

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

Filed with the Office of the Secretary of State on June 23, 2008.

TRD-200803280

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 3, 2008

For further information, please call: (512) 424-6586

CHAPTER 371. MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD AND ABUSE PROGRAM INTEGRITY

SUBCHAPTER C. UTILIZATION REVIEW

The Health and Human Services Commission proposes the repeal of §371.212, relating to Case Mix Classification System; the repeal of §371.213, relating to Utilization Review and Control Activities Performed by Texas Health and Human Services Commission; and the repeal of §371.214, relating to Texas Index for Level of Effort Assessments. The Health and Human Services Commission also proposes new §371.212, relating to Minimum Data Set Assessments and new §371.214, relating to Resource Utilization Group Classification System. The proposed new rules will replace the existing rules proposed for repeal to reflect Texas's conversion from the Texas Index for Level of Effort (TILE) classification system and provider payment methodology to the federal Resource Utilization Group (RUG) classification system and provider payment methodology.

BACKGROUND AND JUSTIFICATION

The Health and Human Services Commission (HHSC) Office of Inspector General (OIG) routinely reviews a nursing facility's level of care assessments of its Medicaid residents to safeguard against fraud, waste, or abuse. HHSC-OIG's Utilization Review program monitors resident assessment claims to ensure payments for Medicaid services are appropriate. The reviews identify correct and incorrect payments. HHSC recovers incorrect payments and reimburses underpayments to the nursing facility. Currently, the Texas Department of Aging and Disability Services (DADS) makes Medicaid reimbursements to nursing facilities using the TILE classification system and provider payment methodology.

In 1995, the 74th Legislature, Regular Session, passed House Bill 867, amending the Health and Safety Code, Chapter 242, requiring DADS to base Medicaid reimbursements to nursing facilities on the Centers for Medicaid and Medicare Services' Resource RUG classification system and provider payment methodology. Through the TILE to RUG Conversion Project, DADS is in the process of converting its automated systems and amending its administrative rules to comply with the legislative mandate. This proposal makes changes to the HHSC-OIG rules affected by the conversion from the TILE classification system to the RUG classification system. The proposed new rules describe the Minimum Data Set (MDS) RUG classification model and how HHSC-OIG will conduct utilization reviews under the RUG model.

Moving from the TILE classification system to the RUG classification system will increase efficiencies in the assessment process for providers and the accuracy and appropriateness of claims submitted for Medicaid reimbursement. Because nursing facilities already use the RUG classification system forms under the Medicare program, the use of these forms in the Medicaid program will eliminate redundancy and reduce time for nursing facilities. In addition, the State of Texas anticipates that nursing facilities will submit more appropriate claims to reflect a Medicaid recipient's need for services due to the use of 34 payment categories under RUG versus 11 payment categories for TILE. The proposed new rules also establish: (i) a methodology for calculating an underpayment or overpayment to a facility; and (ii) assessment claims criteria to deter a possible pattern or practice relating to administrative or assessment errors. As a result, HHSC-OIG anticipates that improper Medicaid payments will be substantially reduced.

SECTION-BY-SECTION SUMMARY

Proposed new §371.212 describes requirements nursing facilities must follow when completing the Minimum Data Set (MDS) Recipient Assessment Instrument (RAI), including time frames for completing certain assessments and documentation that must be included in the Medicaid recipient's clinical record to support items claimed on the MDS RAI. The requirements are consistent with the Long-Term Care Facility Resident Assessment Instrument User's Manual (MDS RAI User's Manual), Version 2.0, December 2002, published by the Centers for Medicare and Medicaid Services (CMS), which describes processes and clinical items required for MDS resident assessments.

Proposed new §371.214 describes the requirements for signatures on the MDS RAI; documentation that must be included in the Medicaid recipient's clinical record to support an MDS assessment claim; training of nursing facility staff on the MDS; the procedure for making corrections to a submitted MDS assessment claim; the HHSC-OIG process for conducting an onsite utilization review; clinical record access; record affidavit requirements; and the procedures a nursing facility must follow when requesting reconsideration and appeal of utilization review findings.

In addition, the proposed new §371.214 describes HHSC-OIG's sampling methodology. A statistically valid random sample will be drawn from a population of the nursing facility's paid claims associated with RUG classifications for a specific time period. The proposed new section also addresses the onsite utilization review process; the criteria for determining an administrative error; the calculation of a facility's MDS assessment claim error rate based on the sampled RUGs in which reclassifications occurred; the calculation of an MDS assessment claim underpayment or overpayment; the recovery of any identified overpayment(s); and referrals to the HHSC-OIG Medicaid Integrity Program for investigation.

An administrative error occurs when a required signature or paper form is missing and not made available during the onsite review period. An assessment error is a RUG reclassification identified during the utilization review process that results in an underpayment(s) or overpayment(s) associated with that form. HHSC-OIG will reimburse underpayment(s) to the facility. HHSC will calculate any overpayment(s) based on the facility's error rate. To calculate any overpayment, HHSC-OIG will extrapolate to the population and the extrapolation will be applied only to the RUG classifications found in error. For the first year the rules are in effect, HHSC-OIG will extrapolate when a facility's error rate exceeds 25%. For the first six months of the second year the rules are in effect, HHSC-OIG will extrapolate when a facility's error rate exceeds 20%. For the second six months of the second year the rules are in effect, HHSC-OIG will extrapolate when a facility's error rate exceeds 15%. For the third year and subsequent years the rules are in effect, HHSC-OIG will extrapolate for any error rate identified. For all years the rules are in effect, HHSC-OIG will refer a facility to its Medicaid Program Integrity Division if the facility's error rate is greater than 25% or for a suspected program violation. The proposed sampling methodology and recovery methodologies are needed to maintain cost and compliance effectiveness, as well as strengthen HHSC-OIG's ability to identify improper payments and potential fraud, waste, and abuse. In HHSC-OIG's view, this methodology strikes a balance between two competing interests while addressing the concerns of the provider community.

The proposed repeal of §§371.212, 371.213, and 371.214 deletes existing requirements governing a nursing facility's use of the TILE case mix classification system and assessments.

FISCAL NOTE

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that for the first five years the proposed new rules and the repeal are in effect, there will be an increase in cost to the state. These costs relate to the need for additional nurse reviewers to handle the increased frequency and time required to conduct utilization reviews using the longer and more detailed RUG classification system, additional equipment and supplies to support the additional staff, modifications to the automated computer application used by the nurse reviewers, and staff training on the new assessment instrument and automated system.

Mr. Suehs has also determined that the state may avoid future costs as a result of the possible reduction in inappropriate Medicaid reimbursements and/or billing due to increased accuracy and frequency of Medicaid recipient assessments, an improved methodology for calculating an underpayment or overpayment to a facility, and new criteria to deter a possible pattern or practice relating to administrative or assessment errors associated with the RUG classification system and its requirements. Local governments will not incur additional costs and there will be no cost to local health and human service agencies. For state fiscal year (FY) 2008, the increase in cost to the state as a result of the rules is estimated at $534,847, which will be financed with general revenue ($146,212) and federal funds ($388,635). For FY 2009, this cost is estimated at $864,339 with a Method of Finance $222,335 from General Revenue and $642,004 from Federal Funds. For FY 2010-2012, the cost is estimated at $864,339 with a Method of Finance $222,335 from General Revenue and $642,004 from Federal Funds.

SMALL BUSINESS AND MICRO-BUSINESS IMPACT ANALYSIS

HHSC-OIG has determined that there will be no effect on small businesses or micro-businesses required to comply with the new and repealed rules as proposed. There are no anticipated economic costs to persons who are required to comply with the new and repealed rules as proposed. There is no anticipated negative impact on local employment.

PUBLIC BENEFIT AND COSTS

Judy Knobloch, Director, Quality Review, HHSC-OIG has determined that for each year of the first five years the new and repealed rules are in effect, the expected public benefit is more accurate MDS assessments resulting in more appropriate care and services provided to Medicaid nursing facility residents and, in turn, more appropriate submission of claims by nursing facilities for these services. In addition, Judy Knobloch, Director, Quality Review, HHSC-OIG has determined that there will be no economic cost to persons who are required to comply with the new and repealed rules. The new and repealed rules will not affect the local economy.

REGULATORY ANALYSIS

HHSC-OIG has determined that this proposal is not a "major environmental rule" as defined by §2001.0225 of the Texas Government Code. A "major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risk 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 a state or a sector of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure.

TAKINGS IMPACT ASSESSMENT

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

PUBLIC COMMENT

Comments on this proposal must be in writing and submitted to Judy Knobloch, Health and Human Services Commission, Office of Inspector General, Utilization Review Unit, at P.O. Box 85200, Austin, Texas 78708-5200, or FAX at (512) 836-6487. Comments will be accepted no later than 30 days after the date of this issue of the Texas Register . If the last day to submit comments falls on a Sunday, HHSC-OIG will accept only comments that are: (1) postmarked or shipped before the last day of the comment period; (2) hand-delivered to HHSC-OIG UR at 11101 Metric Boulevard, Building I, Austin, Texas, before 5:00 p.m. on the last working day of the comment period; or (3) faxed by midnight on the last day of the comment period. On faxed comments, please state in the subject line, "Comments on Proposed Rules Concerning MDS Assessments.

PUBLIC HEARING

Note: Prior to publication in the Texas Register , a public hearing will be scheduled to occur during the public comment period on a date to be determined.

1 TAC §§371.212 - 371.214

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

STATUTORY AUTHORITY

The repeals are proposed under Texas Government Code, §531.0055, which provides the HHSC executive commissioner the authority to adopt rules for the operation and provision of services by the health and human services agencies; the Human Resources Code, §32.021, which authorizes HHSC's executive commissioner to adopt necessary rules for the proper and efficient operation of the Medicaid program; and the Texas Government Code, §531.021(a), which provides HHSC with the authority to administer the Medicaid program in Texas; §531.102 which provides HHSC-OIG with the authority to obtain any information or technology necessary to enable it to meet its responsibilities; and §531.102(e) which provides HHSC-OIG the authority to set specific claims criteria that, when met, require the office to begin an investigation.

This proposal affects the Human Resources Code, Chapter 32, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by this proposal.

§371.212.Case Mix Classification System.

§371.213.Utilization Review and Control Activities Performed by Texas Health and Human Services Commission (Commission).

§371.214.Texas Index for Level of Effort (TILE) Assessments.

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

Filed with the Office of the Secretary of State on June 23, 2008.

TRD-200803253

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 3, 2008

For further information, please call: (512) 424-6900

1 TAC §371.212, §371.214

The new sections are proposed under Texas Government Code, §531.0055, which provides the HHSC executive commissioner the authority to adopt rules for the operation and provision of services by the health and human services agencies; the Human Resources Code, §32.021, which authorizes HHSC's executive commissioner to adopt necessary rules for the proper and efficient operation of the Medicaid program; and the Texas Government Code, §531.021(a), which provides HHSC with the authority to administer the Medicaid program in Texas; §531.102 which provides HHSC-OIG with the authority to obtain any information or technology necessary to enable it to meet its responsibilities; and §531.102(e) which provides HHSC-OIG the authority to set specific claims criteria that, when met, require the office to begin an investigation.

This proposal affects the Human Resources Code, Chapter 32, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by this proposal.

§371.212.Minimum Data Set Assessments.

(a) Under 40 TAC §19.801 (relating to Resident Assessment), a nursing facility must conduct initially and periodically thereafter a comprehensive, accurate, standardized, reproducible assessment of each nursing facility recipient's functional capacity that describes the recipient's ability to perform daily life functions and significant impairments in functional capacity. The nursing facility must conduct the assessment using a Minimum Data Set (MDS) Resident Assessment Instrument (RAI) based on the MDS RAI Resource Utilization Group (RUG-III) 34-group case mix classification system selected by the state and established by the Centers for Medicare and Medicaid Services (CMS).

(1) Requirements for completing the MDS are derived from the RAI, including the MDS, specified by the Department of Aging and Disability Services (DADS). The nursing facility must adhere to any updates released by CMS in addition to the state specific mandates. To the extent such CMS updates conflict with DADS specific mandates, the CMS updates shall control.

(2) Completion of the MDS does not remove the nursing facility's responsibility to document in a clinical record a detailed assessment of all relevant issues that affect the recipient. All clinical record documentation must chronicle, support, and be consistent with the findings of, rather than conflict with, each MDS assessment. Documentation in the clinical record must contain pertinent facts, findings, and observations about an individual's health history including past and present illnesses, treatments, and outcomes to support the care the recipients are receiving. Inconsistent and unsupported findings will not be validated and may result in an adjustment in the RUG-III classification.

(3) All coded items on MDS assessments submitted for Medicaid reimbursement must be supported by documentation in the recipient's clinical record. Sources of information (e.g., other health care professionals, family members) utilized for the MDS assessment must be identified and must be supported by the clinical record.

(4) Nursing facility resident records must be maintained in accordance with:

(A) 40 TAC §19.1910 (relating to Clinical Records);

(B) 40 TAC §19.1912 (relating to Additional Clinical Record Service Requirements);

(D) 40 TAC §19.1924 (relating to Financial Records), including supporting documents and other records necessary to fully document the services and supplies provided and delivered to the resident, the medical necessity of those services and supplies, and records or documents necessary to determine whether payment for those items or services was due and was properly made;

(E) Section 354.1004 of this title (relating to Retention of Records) which requires a facility to maintain all records necessary to fully disclose the services provided and to retain these records for a period of five years from the date of the service, or until all audit questions are resolved, whichever is longer;

(F) the Health Insurance and Health Insurance Portability and Accountability Act of 1996 (HIPAA), 42 United States Code §§1320d-1320d-8;

(G) 45 Code of Federal Regulations Parts 160 and 164 (relating to Health Insurance Reform: Security Standards); and

(H) accepted professional health information management standards and practices.

(5) Documentation must have the recipient's name, and the signatures, dates of signatures, and titles of individuals providing care for the recipient. Documents, such as grids and flow sheets that include entries by multiple staff members at different times must include complete dates with initials or signatures to clearly identify who provided the care. For purposes of this subchapter, a signature may be an original handwritten, electronic, photocopier, or facsimile transmitted signature or an electronic signature submitted in compliance with HHSC policy unless the authenticity of the signature is in doubt.

(b) An admission comprehensive assessment must be completed by day 14 and include the Basic Assessment Tracking form and MDS Sections AA, AB-AD, A-R, Sections V and W, and the Long-Term Care Medicaid Information Section. The annual assessment must be completed no later than the 366th day from the last comprehensive assessment and no later than 92 days from the previous assessment.

(1) The MDS Long-Term Care Medicaid Information Section and Section W must be completed on all MDS assessments submitted for Medicaid.

(2) An admission assessment or quarterly assessment will establish RUG-III classification. Medical necessity is evaluated each time an MDS assessment is completed, until permanent medical necessity (PMN) is established by the Texas Medicaid claims administrator (MCA), as set out in 40 TAC §19.2403 (relating to Medical Necessity Determination).

(3) A significant-change assessment must be completed as soon as needed to provide appropriate care to the resident, but in no case later than 14 calendar days after the determination was made that a significant change occurred. The nursing facility must document the significant change in condition. The documentation must include a completed comprehensive MDS assessment with Resident Assessment Protocols (RAPS). A significant change assessment resets the schedule for the next annual assessment.

(4) A quarterly assessment following an admission assessment, an annual assessment, or a significant change-in-status assessment must be completed within 92 days of the previous assessment.

(5) An MDS assessment is considered complete on the date the registered nurse (RN) assessment coordinator signs and dates the MDS assessment as complete. That date may not be prior to dates for all sections completed.

(6) The MDS assessment is considered timely if it is submitted in accordance with the federal MDS submission schedule and is received by the state MCA within 31 days after the completion date.

(7) Each MDS assessment submitted must indicate the reason for the assessment.

(8) Assessment time frames are based on the assessment reference date (ARD), which is the specific end-point for a common observation period (look back period) in the MDS assessment process.

(c) All MDS items shall be coded in accordance with 42 Code of Federal Regulations §483.20 (relating to Resident Assessment); the Centers for Medicare and Medicaid Services Long-Term Care Facility Resident Assessment Instrument User's Manual (RAI User's Manual); and state specific requirements. Coding for items described in this subsection must be based on observations over the look back period specified. If the observation did not occur during the look back period, it is not coded on the MDS.

(1) Cognitive Patterns. The look back period for items described in this paragraph is seven days.

(A) Comatose Code One is claimed only when the recipient's clinical record includes a documented neurological diagnosis of coma or persistent vegetative state. The clinical record must include physician documentation of a diagnosis of coma or persistent vegetative state.

(B) Short-Term Memory Code One is claimed when it is determined that the recipient lacks the functional capacity to recall recent events. Documentation in the clinical record must support the resident's capacity to remember short-term events.

(C) For Cognitive Skills for Daily Decision Making, code the correct response between zero and three that supports the recipient's level of ability based on the clinical record. The recipient's clinical record must include documentation describing the recipient's actual performance in making everyday decisions about tasks or activities of daily living.

(2) Communication/Hearing Patterns. For Making Self Understood, code the correct response between zero and three that supports the recipient's level of ability to make himself or herself understood. The recipient's clinical record must support the resident's level of ability to express or communicate requests, needs, opinions, urgent problems, and social conversation, whether in speech, writing, sign language, or a combination of these. The look back period is seven days.

(3) Mood and Behavior Patterns.

(A) For Indicators of Depression, Anxiety and Sad mood, code between zero and two based on documented interactions and observations of the recipient. The recipient's clinical record must support the frequency of the indicators of depression, anxiety, and/or sad mood. The look back period is 30 days.

(B) For Behavioral Symptoms, code between zero and three the frequency of behavioral symptoms manifested by the resident across all three shifts as it occurred during the look back period. The look back period is seven days. Record the frequency of behavioral symptoms manifested by the resident across all three shifts.

(4) Physical Functioning and Structural Problems. The look back period for items described in this paragraph is seven days.

(A) For Self Performance, code between zero and four or eight for self performance by the recipient in bed mobility, transfer, eating, and toilet use during the look back period. The clinical record must capture the total picture of the recipient's actual self care performance for each activity of daily living (ADL) over the seven day period, 24 hours a day.

(B) For ADL Support Provided, code from zero and three or eight to support assistance provided by staff in bed mobility, transfer, and toilet use. The clinical record must reflect the support provided by staff, for each ADL, over a 24-hour period, during the look back period.

(5) Continence Appliances and Programs. The look back period for items described in this paragraph is 14 days.

(A) For Scheduled Toileting Plan, check if recipient is on any scheduled toileting program. The documentation must include a plan for bowel and/or bladder elimination whereby staff members at scheduled times each day either take the recipient to the toilet, give the recipient a urinal, or remind the recipient to go to the toilet. This includes bowel habit training and/or prompted voiding, but does not include changing wet garments. A "program" refers to a specific approach that is organized, planned, documented, monitored and evaluated. The recipient's toileting schedule must be in a place where it is clearly communicated, available to and easily accessible to all staff. The care plan must indicate the recipient is on a routine toileting schedule.

(B) For Bladder Retraining Program, check if recipient is on any bladder retraining program that is a retraining program to teach the recipient to consciously delay urinating or to resist the urge to urinate. The care plan must include individualized goals and approaches that is organized, planned, documented, monitored, and evaluated.

(6) Disease Diagnosis. The disease conditions described in this paragraph require a physician-documented diagnosis in the clinical record. The look back period is seven days.

(A) For Diseases, code diabetes, aphasia, cerebral palsy, hemiplegia/hemiparesis, multiple sclerosis and/or quadriplegia if there is a documented physician diagnosis in the clinical record. Include active diagnoses only; do not include conditions that have been resolved or have not affected the recipient's functioning, medical treatment, or care plan.

(B) For Infections, code pneumonia and/or septicemia, if the infection was present with a documented relationship to the recipient's current functioning, medical treatment, or care plan. A physician documented diagnosis in the clinical record is required to code this item.

(7) Health Conditions. The look back period for items described in this paragraph is seven days. As applicable, review the clinical records (including the current nursing care plan) and consult with facility staff members and resident's family if the resident is unable to respond.

(A) For Problem Conditions, code documented problems or symptoms that affect or could affect the recipient's health or functional status and to identify risk factors for illness, accident, and functional decline, as they occurred during the look back period.

(B) For Dehydrated; Output Exceeds Intake Code only if the recipient has at least two of the following indicators:

(i) Receives less than 1500ml fluids daily;

(ii) One or more clinical signs or symptoms of dehydration; or

(iii) Fluid loss exceeds daily intake.

(C) For Delusions, the recipient's clinical record must support that the recipient holds fixed, false beliefs not shared by others based on observation during the look back period.

(D) For Fever, include documentation that the recorded temperature of 2.4 degrees Fahrenheit or greater than the documented established baseline for that recipient was observed during the look back period.

(E) For Hallucinations, the recipient's clinical record must support the recipient's false sensory perceptions that occur in the absence of any real stimuli as observed and documented during the look back period.

(F) For Internal bleeding, the clinical record must support frank or occult bleeding in the clinical record based on observations during the look back period, excluding simple nosebleeds that are easily controlled.

(G) For Vomiting, the clinical record must support that regurgitation of stomach contents occurred during the look back period.

(8) Oral/Nutritional Status. For Weight Change, code zero or one for weight loss. Code one if there is documented evidence of weight loss of 5% as observed during a 30-day look back period, or 10% or more as observed during a 180-day look back period. Do not round the actual weight. If a recipient cannot be weighed, the facility must use the standard no-information code.

(9) Nutritional Approaches. The look back period for items described in this paragraph is seven days.

(A) For Parenteral/Intravenous, check if there is documentation that the recipient received parenteral and/or intravenous fluids administered for nutrition or hydration during the look back period. This item can only be coded if there is supporting documentation that reflects an identified need for additional fluid intake for nutrition and/or hydration.

(B) For Feeding Tube, check if there is documentation that supports the presence of any type of tube that can deliver food, nutritional substances, fluids, and/or medications directly into the gastrointestinal system.

(i) For Total Calories, code between zero and four for the documented proportion of total calories actually received by the recipient via parenteral or tube feeding as observed during the look back period.

(ii) Average Fluid Intake: Code between zero and five for the average documented fluid intake by intravenous or tube feeding received by the recipient each day as observed in the look back period. The actual amount of fluid the recipient received each day by this mode must be recorded.

(10) Skin Condition. The look back period for items described in this paragraph is seven days.

(A) For Ulcers, code between zero and nine, corresponding to the number of skin ulcers at each stage, due to circulatory problems or pressure, as observed during the look back period. A description of the wound must be documented in the clinical record during the look back period.

(B) For Type of Ulcer, code between zero and four to indicate the highest staged pressure ulcer present as observed during the look back period. The staging of the pressure ulcer(s) must be coded as assessed, described and documented during the look back period.

(11) Other Skin Problems or Lesions present. The look back period for items described in this paragraph is seven days.

(A) For Burns (Second or Third Degree), check for the presence of burns, from any cause (e.g., heat, chemicals) and document in the clinical record. This category does not include first-degree burns.

(B) For Open Lesions/Sores, check if documentation supports the presence of open skin lesion(s) that are not coded elsewhere. Do not code skin tears or cuts. A description of the lesions/sores must be documented in the clinical record during the look back period.

(C) For Surgical Wounds, check if documentation supports the presence of healing and non-healing, open or closed surgical incisions, skin grafts or drainage sites, on any part of the body. This category does not include healed surgical sites, stomas, or lacerations that required suturing or butterfly closure. Peripherally inserted central venous catheters (PICC) sites, central line sites, and peripheral intravenous sites are not coded as surgical wounds. A description of the wound must be documented in the clinical record during the look back period.

(12) Skin Treatments. Check all of the following provided and documented as observed during a look back period of seven days.

(A) Pressure relieving device(s) for chair, to include pressure relieving, pressure reducing, and pressure redistributing devices utilized in the recipient's chair or wheelchair, excluding egg crate cushions;

(B) Pressure relieving device(s) for bed, to include pressure relieving, pressure reducing and pressure redistributing devices, utilized in the recipient's bed, excluding egg crate mattresses;

(C) Turning/repositioning program, to include a continuous, consistent program for changing the recipient's position and realigning the body. There must be a specific approach that is organized, planned, documented, monitored, and evaluated;

(D) Nutrition or hydration intervention to manage skin problems, to include dietary measures received by the recipient and ordered for the purpose of preventing or treating specific skin conditions;

(E) Ulcer care, to include any intervention for treating ulcers due to circulatory problems and/or pressure and/or open lesions;

(F) Surgical wound care, to include any intervention for treating or protecting any type of surgical wound;

(G) Application of dressings (with or without topical medications) other than to feet; and

(H) Applications of ointments/medications (other than to feet), to include ointments or medications used to treat a skin condition.

(13) Foot Problems and Care. Check for the presence of foot problems and care to the feet supported by documentation in the clinical record. The foot problem(s) and the care provided, including signs and symptoms of infection, description of the open lesion(s), and application of dressing, must be documented as observed during a seven-day look back period.

(14) Activity Pursuit Patterns. Check all appropriate periods when recipient was awake all or most of the time with no more than a total of a one-hour nap during any such period. The clinical record must support the period(s) of a typical day when the recipient was awake all or most of the time as observed during a seven-day look back period.

(15) Medications. For injections, code from zero to seven the number of days that the recipient received any type of medication, antigen, or vaccine, by subcutaneous, intramuscular or intradermal injection. Do not include medications ordered but not given. This category does not include intravenous (IV) fluids or IV medications. The look back period for this item is seven days.

(16) Special Treatments and Procedures.

(A) For Special Treatments, check any treatments provided during the look back period. The clinical record must have documentation of administration of any treatment(s) the recipient received during the look back period, as it occurred. Do not code services that were provided solely in conjunction with a surgical or diagnostic procedure and the immediate post-operative or post-procedure recovery period. If the treatment was administered outside the facility during the look back period, documentation of the treatment administered must be documented and included in the clinical record. The look back period is 14 days.

(B) For Therapies, code the total number of days and the total number of minutes (for at least 15 minutes a day) that therapy was administered to a resident during the look back period. Code the total number of actual minutes the particular therapy was provided. Record therapies that occurred after admission/readmission to the nursing facility, were ordered by a physician, and were performed by a qualified therapist, who meets state credentialing requirements (i.e., qualified therapists or their assistants as contemplated by RAI Chapter P.3.b) or, in some instances, under such person's direct supervision. Include only medically necessary therapies furnished after admission to the nursing facility. The time should include the actual treatment time, not the time waiting or writing reports. The therapist's initial evaluation time may not be counted, but subsequent evaluations conducted as part of the treatment process may be counted. Therapy evaluations, treatments, sessions, and minutes must be documented in the clinical record, each day, as they occur. The look back period is seven days.

(C) For Nursing Rehabilitation/Restorative Care, code between zero and seven the number of days on which the technique, procedure, or activity was practiced for a total of at least 15 minutes during each 24-hour period during the look back period. This includes nursing interventions that assist or promote the recipient's ability to attain his or her maximum functional potential, but does not include procedures or techniques carried out by or under the direction of a qualified therapist(s), as identified in the Special Treatments, Procedures, and Programs section of the MDS. The nursing rehabilitation and/or restorative care must meet all of the following additional criteria. The look back period for items described in this subparagraph is seven days.

(i) Measurable objectives and interventions must be documented in the care plan and in the clinical record as observed during the look back period.

(ii) Evidence of periodic evaluation by licensed nurse must be present in the clinical record.

(iii) Nurse assistants/aides must be trained in the techniques that promote recipient involvement in the activity.

(iv) The activities must be carried out or supervised by identified members of the nursing staff. There must be documentation, including minutes, in the clinical record for the nursing rehabilitation and/or restorative care program as observed during the look back period. This does not include groups with more than four recipients per identified supervising helper or caregiver. There must be documented evidence that services provided in a group setting were provided to a group of four or less.

(D) For Physician visits, code the number of days the physician examined the recipient over a 14-day look back period (or since admission if less than 14 days ago). Documentation of the physician's evaluation must be included in the clinical record.

(E) For Physician Orders, code the numbers of days on which physician orders were changed. Include written, telephone, fax, or consultation orders for new or altered treatment. Do not include order renewals without change. If no order changes exist, code zero.

§371.214.Resource Utilization Group Classification System.

(a) The Resource Utilization Group (RUG-III) 34-group classification system has seven major classification groups. The groups represent the recipient's relative direct care resource requirements.

(b) The Activities of Daily Living (ADL) score is based on the recipient's care needs that are provided by the nursing facility staff. The ADL score is used to determine a recipient's placement in a RUG-III category and is based on the recipient's care needs provided by the nursing facility staff. The score is incorporated into acuity measurements established under the RUG-III recipient classification methodology. The clinical record must support items claimed for Medicaid reimbursement on the Minimum Data Set (MDS).

(c) The state-specific Long-Term Care Medicaid Information Section is a part of the MDS assessment Resident Assessment Instrument (RAI) in Texas and must be completed for Medicaid reimbursement. The Long-Term Care Medicaid Information Section must include the last name and license number of the registered nurse (RN) assessment coordinator.

(d) The Basic Tracking Form must include:

(1) The signature and title of each licensed nurse or health care professional completing any section of the MDS assessment for Medicaid reimbursement; and

(2) The section(s) and completion date(s) corresponding to the signature of the nurse or health care professional.

(e) Each individual signing the signature section on the Basic Tracking Form is certifying that the information entered on the MDS assessment is accurate. A facility that submits false or inaccurate information is subject to sanctions under §371.1643 of this title (relating to Use of Sanctions).

(f) If the nursing facility recipient is a hospice recipient, the nursing facility must comply with the requirements of 40 TAC §19.1926 (relating to Medicaid Hospice Services) and maintain in the recipient's clinical record, copies of the completed Texas Medicaid Hospice Program Recipient Election/Cancellation/Discharge Notice (Form 3071), and the DADS Medicaid/Medicare Hospice Program Physician Certification of Terminal Illness (Form 3074).

(1) The nursing facility must acknowledge a recipient's admission to hospice services on the Special Treatments, Procedures, and Programs section when completing an MDS full, comprehensive, or quarterly assessment.

(2) An MDS assessment indicating that a recipient has elected hospice services will not be processed until the Texas Medicaid Hospice Program Recipient Election/Cancellation/Discharge Notice (Form 3071), and the DADS Medicaid/Medicare Hospice Program Physician Certification of Terminal Illness (Form 3074) are received by the Texas Medicaid Claims Administrator (MCA).

(3) When a recipient is admitted to hospice and there has not been a significant change in condition, a significant change in status assessment does not have to be completed. The recipient's next scheduled assessment may be used.

(g) Each nurse's license number submitted on the MDS assessment, Long-Term Care Medicaid Information Section, will be validated with the Texas Board of Nursing or will be validated as applicable as a nurse compact license with the licensing state. An MDS assessment will be rejected for Medicaid reimbursement if an invalid or delinquent license number is submitted on the MDS assessment, Long-Term Care Medicaid Information Section.

(h) Nursing facility staff must complete the HHSC-approved MDS training in accordance with this paragraph.

(1) The nursing facility RN Assessment Coordinator must complete the HHSC-approved online MDS training course prior to completing an MDS assessment for Medicaid payment. All other staff completing the MDS assessment for Medicaid payment are encouraged to take the MDS Training prior to completing the MDS assessment.

(2) The nursing facility RN Assessment Coordinator must repeat the MDS online training every two years. A certificate of completion will be issued at the conclusion of the training.

(3) If the nursing facility RN Assessment Coordinator does not complete the MDS training every two years as required by HHSC, the license number of the RN Assessment Coordinator will not be accepted into the state database and the MDS assessment will be rejected by the Medicaid claims administrator.

(i) An admission assessment or quarterly assessment establishes a RUG-III group.

(1) A significant change in status assessment, which requires a comprehensive MDS with Resident Assessment Protocols (RAPs), must be completed by the end of the 14th calendar day following determination that a significant change has occurred.

(2) A significant change in status assessment resets the schedule for the next annual assessment.

(j) Permanent medical necessity is determined by the Texas Department of Aging and Disability Services (DADS) in accordance with 40 TAC §19.2403 (relating Medical Necessity Determination.

(k) When correcting errors in an MDS assessment, the nursing facility staff must use the MDS Correction Policy in Chapter 5 of the Minimum Data Set, Resident Assessment Instrument User's Manual, published by the Centers for Medicare and Medicaid Services (CMS).

(1) Documentation must be maintained in the clinical record to support the corrected MDS assessment form and be available for review by HHSC-OIG staff during MDS utilization reviews.

(2) The Correction Request Form attestation of accuracy of signatures must contain the RN assessment coordinator's and DON's signatures, and the date the correction was completed.

(3) A correction to a RUG reclassification error identified during an onsite review is considered an assessment error as described in subsection (r)(2) of this section. This does not negate the facility's responsibility to make quality of care corrections pursuant to the CMS MDS Correction Policy referenced in this section.

(l) The MDS assessment establishes the rate(s) at which the Texas Medicaid program pays a nursing facility, or hospice provider for the facility's hospice residents, to support the care the nursing facility's residents receive and any information on the MDS RAI shall be considered part of each corresponding claim for Medicaid reimbursement.

(m) Prior to entering a nursing facility for review, HHSC-OIG identifies a population of paid claims from which a sample will be drawn.

(1) The population is defined as claims associated with RUG classifications:

(A) paid to the nursing facility, or hospice provider for the facility's hospice residents, for a specified time period; and

(B) that meet certain criteria, such as dollar or claim volume, as determined by HHSC-OIG.

(2) HHSC-OIG will identify the population of paid claims, along with their related RUG classifications and MDS assessment claim forms, from which a statistically valid random sample will be drawn for review. The sample generated will be a statistically valid random sample generated at a minimum confidence level of 90% and a maximum precision of 10%. Related extrapolations will be done at the lower limit of the applicable confidence interval.

(n) Utilization reviews will be conducted in accordance with this subsection.

(1) An HHSC-OIG nurse reviewer will conduct an unannounced onsite MDS utilization review of a nursing facility at least every 15 months. The frequency of onsite reviews will be determined by the accuracy of the MDS assessment(s) and the facility's error rate.

(2) The onsite review period begins when an HHSC-OIG nurse reviewer presents an entrance letter to the facility, and ends when the HHSC-OIG nurse reviewer informs the facility that the onsite review is completed. The onsite review period is subject to the provisions in subparagraphs (A) through (D) of this paragraph. The onsite review period does not include the exit conference, which is described in paragraph (3) of this subsection.

(A) The nursing facility shall provide the HHSC-OIG nurse reviewer initial access to clinical records and resources the HHSC-OIG nurse reviewer determines are necessary to initiate the onsite review process within two hours of entrance to the nursing facility. Although the facility is not required to produce all records within two hours, documentation to be reviewed must continue to be made available to the HHSC-OIG nurse reviewer during the onsite review period. If the facility indicates that necessary records or resources are located off-site or otherwise unavailable for immediate retrieval, and the facility can substantiate this fact, HHSC-OIG will grant an extension to the two-hour initial production of records requirement.

(B) The nursing facility, upon HHSC-OIG nurse reviewer request, must provide the signed and notarized Records Affidavit described in subsection (q)(4) of this section for each MDS assessment for which copies of clinical record documentation are provided to the nurse reviewer, attesting that the facility used its best efforts to obtain all relevant records, and that the documentation provided to the HHSC-OIG nurse reviewer is as complete a compilation as was possible during the onsite review period. If the nursing facility refuses to provide the required Records Affidavit, the nursing facility must state the refusal in writing and attach the statement to the records provided to the nurse reviewer.

(C) The nursing facility must ensure an assigned staff member knowledgeable of the MDS and clinical record is available at the facility to the HHSC-OIG nurse reviewer during the entire onsite review.

(D) When the HHSC-OIG nurse reviewer identifies an item coded on the assessment that can not be substantiated or does not accurately reflect the recipient's status during the applicable look back period, the HHSC-OIG nurse reviewer will notify the assigned nursing facility staff and request supporting documentation.

(i) The nursing facility must provide the requested supporting documentation to validate the coded items to the HHSC-OIG during the onsite review period and prior to the exit conference.

(I) If the onsite review period is more than one day, the nursing facility must provide the requested information during regular business hours to the HHSC-OIG reviewer by the end of the day the documentation was requested. Provided, however, that the facility shall be allowed a minimum of six business hours in which to provide requested information.

(II) Nothing in this provision shall be construed to affect the timing of an exit conference or require the reviewer to incorporate an overnight stay near the facility. It shall be the facility's responsibility to submit the supplemental records to the reviewer's place of business. The reviewer's exit conference conclusions and error rates may change after reviewing the supplemental records. Any such changes will be communicated to the provider within one business day.

(III) If a facility cannot produce or make available the requested information, the facility must provide a written statement explaining why the information cannot be provided as requested. The submission of a written statement does not negate HHSC-OIG's authority to take enforcement action under subchapter G of this chapter.

(ii) Lack of documentation to validate the items claimed on the MDS as described in this paragraph may be the basis for an error and RUG III group reclassification.

(iii) Lack of documentation, inconsistent documentation that misrepresents the patient's actual condition at the time it is documented, or altered documentation, which does not follow generally accepted error correction guidelines such as the MDS Correction Policy in Chapter 5 of the Minimum Data Set, may be the basis for an error and adjustment in the RUG-III group. The error or adjustment will be made based on a review of the clinical record documentation provided for the look-back period of the MDS assessment.

(3) The HHSC-OIG nurse reviewer will hold an exit conference with nursing facility staff.

(A) The exit conference will be held with the nursing facility staff at the conclusion of the onsite review period. Hospice staff is encouraged to attend to discuss the review findings of the MDS assessments for hospice recipients for whom the representative provided hospice services.

(B) The HHSC-OIG nurse reviewer will provide the nursing facility representative(s) in a leadership position(s) (e.g., the administrator, DON, charge nurse) formal written notification of all MDS validation findings during the exit process.

(i) If a hospice representative is present at the exit conference, written notification will be provided only on recipients to whom they provided services.

(ii) If the hospice representative is not present during the exit conference, HHSC-OIG will provide formal written notification of all RUG-III changes within 15 calendar days of the exit conference.

(iii) If the nursing facility disagrees with the HHSC RUG-III determination or assessment of errors, the nursing facility may submit a request for reconsideration as provided in subsection (q) of this section.

(o) The HHSC-(OIG) may sanction any provider or person as defined in §371.1601 of this title (relating to Definitions), including a managed care organization or subcontractor, pursuant to Subchapter G of this chapter that:

(1) fails to grant immediate access upon reasonable request to:

(A) the HHSC-OIG;

(B) the Attorney General's Medicaid Fraud Control Unit or Civil Fraud Division;

(C) any state or federal agency authorized to conduct compliance, regulatory, or program integrity functions on the provider, person, or the services rendered by the provider or person; or

(D) any agent or consultant of any agency or division within an agency described in subparagraph (A) of this paragraph;

(2) fails to allow the HHSC-OIG or any other federal or state agency, division, agent, or consultant, as described in paragraph (1) of this subsection to conduct any duties that are necessary to the performance of their statutory functions; or

(3) fails to provide to the HHSC-OIG or any other federal or state agency, division, agent, or consultant, as described in paragraph (1) of this subsection, upon request and as requested, for the purpose of reviewing, examining, and securing custody of records, access to, disclosure of, and custody of:

(A) copies or originals of any records, documents, or other requested items, as determined necessary by the HHSC-OIG or those specified in paragraph (1) of this subsection to perform statutory functions;

(B) any records the provider or person is required to maintain;

(C) any records necessary to verify items or services furnished and delivered under Medicaid, any other health and human services program, or any state health care program to determine whether payment for those items or services is due or was properly made; or

(D) information that includes, without limitation:

(i) clinical patient records;

(ii) other records pertaining to the patient;

(iii) any other records of services provided to Medicaid or other health and human services program recipients and payments made for those services;

(iv) documents related to diagnosis, treatment, service, lab results, charting, billing records, invoices, documentation of delivery of items, equipment, or supplies, and radiographs, and all requirements of §371.1617(a)(2) of this title (relating to Program Violations);

(v) business and accounting records with backup support documentation, statistical documentation, computer records and data, patient sign-in sheets, and schedules; or

(vi) any records necessary to fulfill its duty under the Improper Payments Information Act of 2002, Public Law 107-300, 116 Stat. 2350 (November 26, 2002) requiring state agencies take action to reduce improper payments. The term "improper payment" means any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements, including any payment to an ineligible recipient, any payment for an ineligible service, any duplicate payment, any payment for services not received, or any payment that does not account for credit for applicable discounts.

(p) A facility that uses an electronic clinical record system and electronic submissions shall comply with this subsection.

(1) A nursing facility that elects to submit electronic or digital signatures on MDS assessments is required to have a policy in effect on the date of transmission that ensures they have proper security measures to protect against the use of an electronic or digital signature by anyone other than the individual to whom the electronic or digital signature belongs. The policy must also ensure that clinical records are made available to the HHSC-OIG and others who are authorized by law.

(2) In order to receive Medicaid reimbursement, a nursing facility that utilizes a clinical record system which is entirely electronic must maintain a hard copy of all MDS assessments in the recipient's clinical record. The hard copy of an MDS assessment must include the signatures, title, and date of all individuals completing the MDS.

(q) The HHSC-OIG will conduct a reconsideration review upon receipt of a written request for reconsideration.

(1) The reconsideration request must be sent in the form of a letter. The letter must describe in detail the reason a reconsideration review is requested for each specified assessment error. A copy of each signed affidavit executed during the onsite review for which reconsideration is requested must be attached to the letter. The reconsideration request must be submitted in the order outlined in the reconsideration request requirements provided to the nursing facility staff during the exit conference, and must include all of the information required for a reconsideration request.

(2) The reconsideration request must be mailed to the HHSC-OIG Utilization Review (UR) unit at the address indicated on the exit documentation provided to facility staff at the exit conference.

(A) The reconsideration request must be postmarked on or before the 15th calendar day after the date of the exit conference, provided, however, that if the 15th calendar day falls on a Sunday or national holiday as defined in Texas Government Code Annotated §662.003(a), the request must be postmarked on the next following business day.

(B) A reconsideration request that does not meet the requirements of this paragraph will not be granted.

(3) An MDS assessment error that is not identified in the request will not be reconsidered.

(4) A nursing facility may submit additional clinical records along with a timely request for reconsideration review. Any such additional records must be accompanied by a notarized Fact and Records Affidavit that properly authenticates the documents as true and correct duplicates of business records pursuant to TEX. R. EVID. 803(6) and TEX. R. EVID, 902(10). Additionally, the Fact Affidavit must specify: why the records were not produced during the onsite review, when the records were obtained, where the records were located, who located the records, and the circumstances under which the records were obtained. If recipient medical record documentation that was not provided during the onsite review is submitted for reconsideration, the weight to be given any supplemental documentation shall remain within the discretion of the reviewer.

(5) If the reconsideration review establishes that the HHSC-OIG has changed an MDS RUG-III group in error, HHSC-OIG will direct the Texas Medicaid claims administrator to correct the error retroactively.

(6) If the provider disagrees with the reconsideration determination, the provider may request a formal appeal as described in chapter 357, subchapter I of this title (relating to Hearings Under the Administrative Procedure Act).

(7) The RUG-III group and the associated per diem rate specified in the reconsideration determination remain in effect during the formal appeal process.

(r) The HHSC-OIG will recover overpayments based on onsite review findings associated with an administrative or assessment error in accordance with this subsection.

(1) An administrative error occurs if a requirement in subsections (c) and (d) of this section are not met, or the Long-Term Care Medicaid Information Section or Basic Tracking Form is not made available to the HHSC-OIG during regular business hours of the onsite review period and prior to the exit conference.

(A) If the onsite review period is more than one day, the nursing facility must provide the requested information to the HHSC-OIG reviewer by the end of the day information is requested, during regular business hours.

(B) If a facility cannot produce or make available the requested information, the facility must provide a written statement explaining why the information cannot be provided as requested. The submission of a written statement does not negate HHSC-OIG's authority to take enforcement action under subchapter G of this chapter (relating to Legal Action Relating to Providers of medical Assistance).

(2) An assessment error is a RUG reclassification resulting in an overpayment or underpayment of an MDS assessment claim(s) identified during a utilization review of a facility.

(A) During the MDS assessment utilization review of a facility, HHSC-OIG will identify each assessment error (e.g. overpayment amount or underpayment amount of an MDS assessment claim) from the population as that term is described in subsection (m) of this section.

(B) Following the onsite review of the sampled MDS assessment claim forms, an assessment error rate will be calculated as follows:

Figure: 1 TAC §371.214(r)(2)(B)

(i) The HHSC-OIG will recover from the facility any overpayment(s) associated with an MDS assessment claim. The recovered amount is a debt owed by the facility to the Texas Medicaid program. The facility will be reimbursed for any underpayment(s) identified.

(ii) To calculate any overpayment, HHSC-OIG will extrapolate to the population and the extrapolation will be applied only to the RUG classifications found in error. An adjustment equal to the net value of the identified overpayment(s) and underpayment(s) will be made. Any net overpayments will constitute a debt owed by the facility/provider, as applicable, to the Texas Medicaid program. Net underpayments will be reimbursed to the facility/provider, as applicable.

(I) For Utilization Reviews conducted on September 1, 2008 through August 31, 2009, HHSC-OIG Utilization Review will extrapolate to the population only when the error rate exceeds 25%.

(II) For Utilization Reviews conducted on September 1, 2009 through February 28, 2010, HHSC-OIG Utilization Review will extrapolate to the population only when the error rate exceeds 20%.

(III) For Utilization Reviews conducted on March 1, 2010 through August 31, 2010, HHSC-OIG Utilization Review will extrapolate to the population only when the error rate exceeds 15%.

(IV) For Utilization Reviews conducted on or after September 1, 2010, HHSC-OIG Utilization Review will extrapolate to the population in all cases of overpayment as set forth in clause (ii) of this subparagraph and the extrapolation will be applied only to the RUG classifications found in error.

(iii) An error rate greater than 25% or suspected program violation described in §371.1617 of this chapter (relating to Program Violations), will result in a referral for investigation to the HHSC-OIG Medicaid Program Integrity (MPI) Division. This referral will be made part of the state's method for identification, investigation and referral for fraud under chapter 357, subchapter M, of this title (relating to Fraud or Abuse Involving Medical Providers) and chapter 371, subchapter G of this title (relating to Legal Action Relating to Providers of Medical Assistance).

(D) An assessment error is subject to reconsideration in accordance with subsection (q) of this section.

(i) If the facility timely requests reconsideration of the onsite review results, the assessment error rate will be based on the results of the reconsideration.

(ii) If the facility does not timely request reconsideration of the onsite review, the assessment error rate will be based on the results of the onsite review.

(s) Suspected fraudulent documentation, such as medical or clinical records that appear to have been altered, falsified, or fabricated, will result in a referral for investigation to the HHSC-OIG Medicaid Program Integrity (MPI) Division. This referral will be made part of the state's method for identification, investigation and referral for fraud under chapter 357, subchapter M, of this title (relating to Fraud or Abuse Involving Medical Providers).

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

Filed with the Office of the Secretary of State on June 23, 2008.

TRD-200803276

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 3, 2008

For further information, please call: (512) 424-6900