Proposed Rules Title 1

TITLE 1. ADMINISTRATION

Part 3. OFFICE OF THE ATTORNEY GENERAL

Chapter 69. CENTRAL PURCHASING

Subchapter A. PROCEDURES FOR VENDOR PROTESTS OF PROCUREMENTS

1 TAC §69.1

The Office of the Attorney General (OAG) proposes an amendment to §69.1 concerning purpose and definitions. The proposal would update references to the former Texas Building and Procurement Commission by replacing them with references to the Comptroller of Public Accounts. These amendments are necessary due to enactment of House Bill 3560 during the 80th legislative session, which transferred the procurement functions of the former Texas Building and Procurement Commission under Government Code, Chapter 2155, Chapter 2156, Chapter 2157 and Chapter 2158 to the Comptroller of Public Accounts, effective September 1, 2007.

Dave Liebich, Assistant Division Director, Budget and Purchasing Division, has determined that for each of the first five years following the amendment of §69.1, the public benefit expected as a result of the amended rule is that any actual or prospective bidder, offeror, proposer, or contractor can refer to the rule to obtain accurate information regarding the procedures that are available for protests of procurements by the OAG.

Mr. Liebich has also determined that during the first five-year period following the amendment of §69.1, there will be no foreseeable fiscal implications for state or local government as a result of the amendment. Further, he has determined that for each of the first five years following the amendment of §69.1, there will be no economic cost to persons required to comply with the section, and therefore there is no need to consider less costly alternatives to the amendment. Finally, Mr. Liebich has determined that the amendment of §69.1 will have no adverse effect on small business or micro-business or local employment.

Written comments on the proposal may be submitted for 30 days following the publication of this notice to Dave Liebich, Assistant Division Director, Budget and Purchasing Division, Office of the Attorney General, P.O. Box 12548, Austin, Texas 78711-2548, (512) 475-4509, dave.liebich@oag.state.tx.us.

The amendment to this rule is proposed in accordance with Government Code §2155.076, which requires state agencies to adopt procedures for resolving vendor protests.

The proposed amendment to this rule does not affect any other statutes.

§69.1.Purpose and Definitions.

(a) The purpose of this subchapter is to provide an internal protest procedure to be used by any actual or prospective bidder, offeror, proposer, or contractor who is aggrieved in connection with the solicitation, evaluation, or award of a contract by the Office of the Attorney General from a delegated procurement. The following procedures are available for persons or firms not awarded the contract pursuant to authority delegated to the Office of the Attorney General by the Comptroller of Public Accounts [~~Texas Building and Procurement Commission~~] or by Government Code, Chapters 2155 - 2158. These procedures are consistent with the rules of the Comptroller of Public Accounts [~~Texas Building and Procurement Commission's rules~~ ] insofar as such rules are applicable to an internal agency review.

(b) The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise:

(1) Attorney General--the Office of the Attorney General;

(2) Manager--the Central Purchasing Manager of the Attorney General;

(3) First Assistant--the First Assistant Attorney General;

(4) Interested party--a vendor who has submitted a bid or proposal, as applicable, for the delegated procurement involved;

(5) Delegated procurement or procurement--a procurement delegated to the Attorney General pursuant to the procedures of Government Code, Chapter 2155, Chapter 2156, Chapter 2157, or Chapter 2158; and

(6) Receive/receipt--actual receipt.

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 May 9, 2008.

TRD-200802428

Stacey Napier

Deputy Attorney General

Office of the Attorney General

Earliest possible date of adoption: June 22, 2008

For information regarding this publication, contact Cindy Hodges, Agency Liaison, at (512) 936-1841.

Subchapter B. HISTORICALLY UNDERUTILIZED BUSINESS PROGRAM

1 TAC §69.25

The Office of the Attorney General (OAG) proposes an amendment to §69.25 concerning Historically Underutilized Business Program. The proposal would update references to the former Texas Building and Procurement Commission by replacing them with references to the Comptroller of Public Accounts. These amendments are necessary due to enactment of House Bill 3560 during the 80th legislative session, which transferred the authority for administration of Government Code Chapter 2161, regarding Historically Underutilized Businesses, from the former Texas Building and Procurement Commission to the Comptroller of Public Accounts, effective September 1, 2007.

Dave Liebich, Assistant Division Director, Budget and Purchasing Division, has determined that for each of the first five years following the amendment of §69.25, the public benefit expected as a result of the amended rule is that it will provide accurate information to the public regarding the OAG's participation in the Historically Underutilized Business Program.

Mr. Liebich has also determined that during the first five-year period following the amendment of §69.25, there will be no foreseeable fiscal implications for state or local government as a result of the amendment. Further, he has determined that for each of the first five years following the amendment of §69.25, there will be no economic cost to persons required to comply with the section. Therefore there is no need to consider less costly alternatives to the amendment. Finally, Mr. Liebich has determined that the amendment of §69.25 will have no adverse effect on small business or micro-business or local employment.

The proposed amendment to this rule is authorized in accordance with Government Code §2161.003, which requires state agencies to adopt the rules of the Comptroller of Public Accounts regarding Historically Underutilized Businesses under Government Code §2161.002 as its own.

The proposed amendment to this rule does not affect any other statutes.

§69.25.Historically Underutilized Business Program.

In accordance with Texas Government Code, §2161.003, the [~~The~~] OAG adopts by reference the Comptroller of Public Accounts' [ ~~Texas Building and Procurement Commission's (TBPC)~~ ] rules found at 34 TAC, Part 1 Comptroller of Public Accounts, Chapter 20 Texas Purchasing and Support Services, Subchapter B Historically Underutilized Business Program, §§20.11 - 20.28 [1 TAC, Title 1 Administration, Part 5 Texas Building and Procurement Commission , Chapter 111 Executive Administration Division, Subchapter B Historically Underutilized Business Program, §§111.11-111.28 ], relating to Historically Underutilized Business Program, with the following addition: For the purpose of Subchapter B, §69.25, "Commission" refers to the Comptroller of Public Accounts [ ~~Texas Building and Procurement Commission~~].

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 May 9, 2008.

TRD-200802429

Stacey Napier

Deputy Attorney General

Office of the Attorney General

Earliest possible date of adoption: June 22, 2008

For information regarding this publication, contact Cindy Hodges, Agency Liaison, at (512) 936-1841.

Part 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION

Chapter 354. MEDICAID HEALTH SERVICES

Subchapter A. PURCHASED HEALTH SERVICES

Division 11. GENERAL ADMINISTRATION

1 TAC §354.1189

The Texas Health and Human Services Commission (HHSC) proposes new §354.1189, concerning Acute Care Billing Coordination System.

Background and Justification

Section 2 of Senate Bill 10 (S.B. 10), 80th Legislature, Regular Session, 2007, amends Government Code, Chapter 531, Subchapter B, to add §531.02413, Billing Coordination System. Section 531.02413 requires HHSC to implement, if cost effective and feasible, an acute care Medicaid billing coordination system for the fee-for-service and primary care case management delivery models. When an acute care claim is billed to Medicaid, the billing coordination system would identify within 24 hours whether another entity has primary payor responsibility for paying the claim and submit the claim to that entity.

The proposed new rule provides for implementation of §531.02413. Based on responses to an RFI issued last fall, HHSC is coordinating with the Texas Medicaid & Healthcare Partnership to implement the billing coordination system.

Section-by-Section Summary

Proposed new §354.1189, requires HHSC to implement, if cost effective and feasible, an acute care Medicaid billing coordination system that would identify whether another entity has primary payor responsibility for Medicaid enrollees.

Proposed §354.1189(1) requires any entity that has a permit, license, or certificate of authority issued by a state regulatory agency to allow HHSC's contractor to access the entity's databases for the purposes of S.B. 10.

Proposed §354.1189(2) requires that HHSC refer any entity that violates this rule to the state regulatory agency issuing the permit, license, or certificate of authority for possible administrative sanction.

Proposed §354.1189(3) prohibits the expenditure of public funds, after September 1, 2008, on entities not in compliance with this section unless a memorandum of understanding is entered into between the entity and HHSC.

Proposed §354.1189(4) requires that information obtained under this section be secure and that the confidentiality of the client's health records be maintained in compliance with security and privacy rules adopted by the U.S. Department of Health and Human Services under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), 45 C.F.R. §§164.302 - 164.318 and §§164.500 - 164.534.

Proposed §354.1189(5) specifies that the administrator of the acute care Medicaid billing coordination system shall be determined by HHSC and that the administrator shall be responsible for meeting all requirements of the acute care Medicaid billing coordination system.

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that the fiscal impact over the next five years to state government cannot be determined. S.B. 10 requires HHSC to make a determination that the provision is cost-effective prior to implementation. Cost-effective generally means that the savings or revenues realized from the provision offset any cost incurred. This provision could result in additional savings to the state once implemented, but those savings cannot be determined at this time. The proposed new 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 proposed new rule because they will not be required to alter their business practices as a result of the rule. There are no anticipated economic costs to persons who are required to comply with the proposed new rule. There is no anticipated negative impact on local employment.

Public Benefit

Mr. Chris Traylor, Associate Commissioner for Medicaid and CHIP, has determined that for each year of the first five years the proposed new rule is in effect, the public will benefit from the adoption of the section. The anticipated public benefit, as a result of enforcing the section, is that a process will be established that identifies whether another entity has primary responsibility for paying a claim that has been submitted to Medicaid for reimbursement and then ensures that the identified claim will be submitted to the appropriate entity for payment. As a result of this process, it is expected that Medicaid payments will be reduced, because the process will identify all other primary payors.

Regulatory Analysis

HHSC 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 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 §2007.043 of the Government Code.

Public Comment

Written comments on the proposal may be submitted to Clarice Cefai, Senior Policy Analyst, Medicaid/CHIP Division, Health and Human Services Commission at 4900 N. Lamar Boulevard, P.O. Box 13247, Austin, Texas 78711; by fax to (512) 249-3707; or by e-mail to Clarice.Cefai@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Public Hearing

A public hearing is scheduled for Thursday, June 19, 2008 at 10:00 a.m. to 12:00 p.m. in the John H. Winters Building, Public Hearing Room 125, located at 701 W. 51st Street, Austin, Texas 78751. Persons requiring further information, special assistance, or accommodations should contact Rene Williams at (512) 491-1162.

Statutory Authority

The new rule is proposed under the Texas Government Code, §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; Texas 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 new rule affects Texas Human Resources Code, Chapter 32, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by this proposal.

§354.1189.Acute Care Billing Coordination System.

This rule implements Government Code §531.02413, under which the Health and Human Services Commission (HHSC) will develop and implement an acute care Medicaid billing coordination system for the fee-for-service and primary care case management delivery models that identifies whether another entity has primary payor responsibility.

(1) An entity holding a permit, license, or certificate of authority issued by a state regulatory agency must allow HHSC or its designee to access databases that enable it to carry out the purposes of this section.

(2) HHSC will refer any entity that violates this rule to the regulatory agency issuing the permit, license, or certificate of authority for possible administrative sanction.

(3) After September 1, 2008, no public funds will be expended on entities not in compliance with this section unless a memorandum of understanding is entered into between the entity and the Commission.

(4) The administrator of the acute care Medicaid billing system must ensure the security of information obtained under this section and maintain the confidentiality of the client's health records in compliance with security and privacy rules adopted by the U.S. Department of Health and Human Services under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), 45 C.F.R. §§164.302 - 164.318 and §§164.500 - 164.534.

(5) The administrator of the acute care Medicaid billing coordination system will be determined by HHSC. The administrator will be responsible for meeting all requirements of the acute care Medicaid billing coordination system.

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 May 12, 2008.

TRD-200802441

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: June 22, 2008

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

1 TAC §354.1190

The Texas Health and Human Services Commission (HHSC) proposes new §354.1190, Medicaid Provider Database, in Chapter 354, Subchapter A, Division 11.

Background and Justification

Pursuant to H.B. 2042, 80th Legislature, Regular Session, 2007, HHSC proposes new §354.1190 to administer an electronic, searchable Internet-based database of all participating providers in the Texas Medicaid program. H.B. 2042 required HHSC to develop an electronic database of physicians, hospitals, and other health care providers participating in the state Medicaid program. HHSC had already developed a provider database that satisfies the requirements of H.B. 2042 pursuant to one of the requirements of the Frew Corrective Action Order. HHSC implemented this database on December 1, 2007.

This database will help Medicaid providers and recipients to determine which physicians and other providers participate in Medicaid, and of those who are, which are accepting new patients.

The online provider lookup is located on the Texas Medicaid and Healthcare Partnership (TMHP) web site at www.tmhp.com. HHSC has encouraged providers to update their information in numerous publications: Texas Medicaid Bulletin, No. 210, November/December 2007; Texas Medicaid Bulletin, No. 212, January/February 2008, pp. 6-7; Banner message 10/15/07: #8; Banner message 10/22/07: #10; Banner message 10/29/07: #16. In addition, a Web article appeared on the TMHP web site in October 2007.

Section-by-Section Summary

HHSC proposes new §354.1190, Medicaid Provider Database, to administer an electronic, searchable, Internet-based database of all participating providers in the Medicaid program. Participating providers include physicians and other health care providers who contract or otherwise agree with a managed care organization to provide Medicaid services. The new rule outlines all the characteristics of the database required by H.B. 2042, as follows:

The database must include each participating provider's name, specialty, location, office hours (including any office hours outside of regular business hours), and telephone number. The database also must include whether the provider is accepting new recipients, and if applicable, the managed care organization(s) or managed care plan(s) under which new recipients are being accepted, whether the provider has any practice limitations, including specific age range limitations, and if the provider speaks any languages other than English. The database must include a list of the Medicaid services offered by the provider and any waiver program or other program within the Medicaid program in which the provider is a participant, including the Texas Health Steps Program (THSteps).

In establishing the database, HHSC must ensure that the database allows a person to search a managed care organization by name and by participating provider within each of the managed care plans offered by that managed care organization. The database must also allow a participating provider to electronically access and change or update the information. The database must be available and accessible to each participating provider and each recipient.

HHSC must ensure that the database is updated continually and at least once a month. There may be no fees associated with accessing the information or for making information available on the provider database either directly or indirectly for either the provider or the recipient.

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that during the first 5-year period the new rule is in effect there will be no significant cost to state government. HHSC is required to establish a similar provider database under the Frew Corrective Action Order. That database was made available to the public December 2007. HHSC estimates that future enhancements to the database will not result in a significant cost to state government. The proposed new 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 proposed new rule, as they will not be required to alter their business practices as a result of the rule. 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

Chris Traylor, Associate Commissioner for Medicaid and CHIP, has determined that for each year of the first five years the proposed new rule is in effect, the public will benefit from the adoption of the rule. The anticipated public benefit of enforcing the proposed new rule will be improved access to and quality of health care services.

Regulatory Analysis

HHSC has determined that this proposal is not a "major environmental rule" as defined by §2001.0225 of the Texas Government Code. "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

Under §2007.003(b) of the Government Code, HHSC has determined that Chapter 2007 of the Government Code does not apply to these rules. The changes these rules make do not implicate a recognized interest in private real property. Accordingly, HHSC is not required to complete a takings impact assessment regarding these rules.

Public Comment

Written comments on the proposed new rule may be submitted to JoAnne Talavera, Senior Policy Analyst, Medicaid/CHIP Division, Texas Health and Human Services Commission, P.O. Box 13247, H390, Austin, Texas 78711; by fax to (512) 249-3725; or by e-mail to joanne.talavera@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Public Hearing

A public hearing is scheduled for June 26, 2008, from 1:30 p.m. to 3:30 p.m. in the John H. Winters Building, Public Hearing Room 125, located at 701 W. 51st Street, Austin, Texas 78751. Persons requiring further information, special assistance, or accommodations should contact Rene Williams at (512) 491-1162.

Statutory Authority

The new rule 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 new rule 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.

§354.1190.Medicaid Provider Database.

(a) The Medicaid Provider Database is an electronic, searchable, Internet-based database of all participating providers in the Medicaid program.

(1) Definitions

(A) "Executive commissioner" means the executive commissioner of the Health and Human Services Commission.

(B) "Health care provider" means a person, other than a physician, who:

(i) is licensed or otherwise authorized to provide a health care service in this state including:

(I) a pharmacist, dentist, optometrist, mental health counselor, social worker, advanced practice nurse, physician assistant, or durable medical equipment supplier; or

(II) a pharmacy, hospital, or other institution organization;

(ii) is wholly owned or controlled by:

(I) a health care provider or a group of health care providers described by clause (i) of this subparagraph;

(II) one or more hospitals and physicians, including a physician-hospital organization;

(iii) is a professional association of physicians organized under the Texas Professional Association Law, as described by §1.008, Business Organizations Code;

(iv) is an approved nonprofit health corporation certified under Chapter 162, Occupations Code;

(v) is a medical and dental unit, as defined by §61.003, Education code, a medical school, as defined by §61.501, Education Code, or a health science center described by Subchapter K, Chapter 74, Education Code, that employs or contracts with physicians to teach or provide medical services, or employs physicians and contracts with physicians in a practice plan; or

(vi) is another person wholly owned by physicians.

(D) "Participating provider" means a physician or health care provider who provides Medicaid services, including a physician or health care provider who contracts or otherwise agrees with a managed care organization to provide Medicaid services.

(E) "Physician" means an individual licensed to practice medicine in this state.

(F) "Recipient" means a recipient of medical assistance.

(2) Required Elements.

(A) The database includes each participating provider's:

(i) name;

(ii) Specialty;

(iii) Location;

(iv) Office hours (including any office hours outside of regular business hours);

(v) Telephone number;

(vi) a list of the Medicaid services offered by the provider; and

(vii) any waiver program or other program within the Medicaid program in which the provider is a participant, including the Texas Health Steps Program (THSteps).

(B) The database includes whether the provider:

(i) is accepting new recipients, and if applicable, the managed care organization(s) or managed care plan(s) under which new recipients are being accepted;

(ii) has any practice limitations, including specific age range limitations; and

(iii) speaks any languages other than English.

(b) The database allows a person to search a managed care organization by name and by participating provider within each of the managed care plans offered by that managed care organization. The database also allows a participating provider to electronically assess and change or update his/her information.

(d) The database will be updated continually and at least once a month.

(e) There are no fees associated with accessing the information or for making information available on the provider database either directly or indirectly for either the provider or the recipient.

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 May 8, 2008.

TRD-200802426

Steve Aragón

General Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: June 22, 2008

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

Chapter 355. REIMBURSEMENT RATES

Subchapter C. REIMBURSEMENT METHODOLOGY FOR NURSING FACILITIES

1 TAC §§355.307, 355.308, 355.311

The Texas Health and Human Services Commission (HHSC) proposes to amend §355.307, Reimbursement Setting Methodology, §355.308, Direct Care Staff Rate Component and §355.311, Medicaid Reimbursement Rates for State Veterans Homes.

Background and Justification

These rules establish the reimbursement methodology for the Nursing Facility (NF) program, including Medicaid reimbursement rates for state veteran's homes. HHSC, under its authority and responsibility to administer and implement rates, is updating these rules to replace the Texas Index for Level of Effort (TILE) case mix system with the Resource Utilization Groups (RUG) case mix system for purposes of NF reimbursement; establish a one-year hold-harmless transition from TILE to RUG; and remove outdated language.

The TILE system is based on data from 1987 and does not reflect changes in practice patterns and resident characteristics over the past 20 years. The RUG system is a case mix classification system that uses data from the federal minimum data set (MDS) form. The RUG system is periodically updated by the federal government. At present, RUG is based on data from 1995 and 1997, and the federal Centers for Medicare and Medicaid Services (CMS) is in the midst of a data collection that will further update the RUG model in the next few years.

House Bill 867, 74th Legislature, Regular Session, 1995, mandated the use of a single resident assessment instrument in NFs. Currently, Texas uses both the federally required MDS and the Texas Care Form 3652 for assessments. The Department of Aging and Disability Services (DADS) will eliminate the Texas CARE form 3652 and use the federal MDS in determination of Medical Necessity and reimbursement effective September 1, 2008. As a result, HHSC must convert the Texas Medicaid reimbursement methodology for NFs from the existing TILE case mix system to the RUG system using the MDS.

In addition, the amendments will allow payment rates for the pediatric care facility class to be determined annually on the state's fiscal year rather then biennially coincident with the state's biennium; and remove outdated language. The effect of this change will be to allow annual reviews of the costs of pediatric care facilities, which will allow rate adjustments to be made in a more timely fashion. Because there is currently only one facility in Texas that specializes in services for children and because children are such a fragile population, annual reviews of the facility's costs are required to ensure that the program is properly funded and to mitigate the inherent operating risks in such a program.

Section-by-Section Summary

The proposed amendments to §355.307 are as follows:

Revise subsection (a) to indicate that NF rates are determined for 34 case mix classes of service plus two default classifications.

Delete subsection (b)(1)(A)(i) and (ii) which are obsolete and incorporate non-obsolete language in clause (iii) into subparagraph (A).

Delete subsection (b)(1)(B)(i) and (ii) which are obsolete and incorporate non-obsolete language in clause (iii) into subparagraph (B).

Delete subsection (b)(1)(C)(i) and (ii) which are obsolete, incorporate non-obsolete language in clause (iii) into subparagraph (C) and renumber subsequent subclauses and items within subparagraph (C).

Revise subsection (b)(2) to replace references to TILE with references to RUG-III; define RUG as the Resource Utilization Group (RUG-III) 34 group classification system, Version 5.20, index maximizing, as established by the state and CMS; and replace references to case mix indices with references to CMS standard nursing time measurements for Registered Nurses (RNs), Licensed Vocational Nurses (LVNs) and aides (Medication Aides and Certified Nurse Aides).

Revise subsection (b)(3) to refer to RUG-III groups rather then 11 TILE groups.

Add a new subsection (b)(3)(A) to state that, for each RUG-III group, a total LVN-equivalent minute statistic is calculated by converting the CMS standard nursing time measurements for RNs, LVNs and aides into Texas-specific LVN-equivalent minutes as per §355.308(j), relating to Direct Care Staff Rate Component, and summing the converted figures; and renumber the subsequent subparagraphs.

Modify renumbered subsection (b)(3)(B) to refer to the determination of the statewide weighted average RUG-III total adjusted minutes rather than to the determination of the statewide average case mix.

Add a new subsection (b)(3)(B)(i) to state that the statewide weighted average RUG-III total adjusted minutes used in determination of rates effective September 1, 2008, will be based on statewide recipient days of service by case mix group from December 1, 2007, through February 29, 2008.

Add a new subsection (b)(3)(B)(ii) to state that the statewide weighted average RUG-III total adjusted minutes used in determination of rates effective September 1, 2009, will be based on statewide recipient days of service by case mix group from September 1, 2008, through February 28, 2009.

Add a new subsection (b)(3)(B)(iii) which states that the statewide weighted average RUG-III total adjusted minutes used in determination of rates effective September 1, 2010, and thereafter will be based on statewide recipient days of service by case mix group during the cost reporting period covered by the rate base.

Modify renumbered subsection (b)(3)(C) to state that the standardized statewide case mix index for each RUG-III group is determined by dividing each of the total LVN-equivalent minute statistics from subsection (b)(3)(A) by the statewide average total adjusted minutes from subsection (b)(3)(B).

Modify renumbered subsection (b)(3)(D) to delete clauses (i) and (ii), which are obsolete, and incorporate non-obsolete language in clause (iii) into subparagraph (D).

Modify renumbered subsection (b)(3)(D) to replace references to TILE with references to RUG-III and to update a reference to renumbered subsection (b)(3)(C).

Modify renumbered subsection (b)(3)(E) to replace references to TILE with references to RUG-III and to update references to renumbered subsection (b)(3)(D).

Modify renumbered subsection (b)(3)(F) to update references to renumbered subsection (b)(3)(E).

Modify renumbered subsection (b)(3)(F)(ii) to indicate that the ventilator-dependent resource differential case mix index for the other recipient care rate component is calculated by subtracting the standardized statewide case mix index for the SE1 RUG-III case mix group from 3.61.

Modify renumbered subsection (b)(3)(F)(ii) to indicate that the ventilator-dependent resource differential case mix index for the direct care staff base rate component is calculated by dividing the resource differential index for the other recipient care rate component by 0.9908.

Add a new subsection (b)(3)(F)(iii) which states that the ventilator per diem rate supplement is calculated by multiplying the resource differential indices for the other recipient care rate component and the direct care staff base rate component by the per diem average other recipient care rate component and direct care staff base rate component, respectively, and summing the products; and renumber the subsequent clauses.

Modify renumbered subsection (b)(3)(G) to update references to renumbered subsection (b)(3)(E).

Modify renumbered subsection (b)(3)(H) to update references to renumbered subsection (b)(3)(F) and (G).

Delete subsection (b)(4) as obsolete.

Modify subsection (c)(3)(A) to allow payment rates for the pediatric care facility class to be determined annually, coincident with the state's fiscal year, within available funds. Currently, the frequency of payment rate determination for this class is governed by §355.101(c)(1), relating to Reimbursement Rates Cost Determination Process Introduction, which requires that payment rates be determined coincident with the state's biennium.

Modify subsection (c)(3)(C) to replace references to TILE with references to RUG.

Delete subsection (f) as obsolete.

Add a new subsection (f) which describes the TILE to RUG-III hold harmless transition for state fiscal year 2009.

The proposed amendments to §355.308 are as follows:

Modify subsection (j)(1)(A)(ii) to replace references to TILE with references to RUG-III and to clarify that when referring to residents who qualify for supplemental reimbursement for ventilator care or pediatric tracheostomy care, the clause is referring to Medicaid residents.

Modify subsection (j)(1)(B) to replace references to TILE with references to RUG-III.

Modify subsection (j)(1)(C) to replace references to TILE with references to RUG-III.

Modify subsection (j)(1)(E) to replace references to TILE with references to RUG-III: replace a reference to TILE group 207 with a reference to RUG-III group PE1; and delete obsolete language.

Modify subsection (j)(1)(F) to replace references to TILE with references to RUG-III.

Modify subsection (j)(3)(A) to clarify that the subparagraph refers to Medicaid units of service rather then all units of service.

Modify subsection (k)(4) to indicate that it refers to rates effective September 1, 2009, and thereafter; to replace references to TILE with references to RUG-III; and to indicate that the direct care staff per diem base rate for each RUG-III group is equal to the average direct care staff base rate component times the RUG-III index for the group divided by 0.9908.

Modify subsection (k)(5) to delete obsolete language.

Modify subsection (bb) to replace references to TILE with references to RUG-III.

The proposed amendment to §355.111 modifies subsection (e) to replace references to a resident's TILE with references to a resident's case mix classification.

Fiscal Note

Gordon E. Taylor, Chief Financial Officer for the Department of Aging and Disability Services, has determined that during the first five-year period the amended rule is in effect there will be a fiscal impact to state government of $54,677,783 for state fiscal year (SFY) 2009, $47,738,239 for SFY 2010, $47,913,960 for SFY 2011, $48,089,679 for SFY 2012, and $48,089,678 for SFY 2013. Of this fiscal impact, $7,220,803 for SFY 2009 is due to the TILE to RUG-III hold harmless transition. The remainder of the fiscal impact for SFY 2009 and all of the fiscal impact for SFY 2010 through 2013 is due to a SFY 2009 increase in nursing facility payment rates for those cost centers that vary according to case mix classification. The proposed rule will not result in any fiscal implications for local health and human services agencies. There are no fiscal implications for local governments as a result of enforcing or administering the section.

Small Business and Micro-business Impact Analysis

HHSC has determined that there is no adverse economic effect on small businesses or micro-businesses as a result of enforcing or administering the amendments. The implementation of the proposed rule amendment does not require any changes in practice or any additional cost to the contracted provider.

HHSC does not anticipate that there will be any economic cost to persons who are required to comply with these amendments. The amendments will not affect local employment.

Public Benefit

Carolyn Pratt, Director of Rate Analysis, has determined that, for each of the first five years the amendments are in effect, the expected public benefit is that nursing facility case mix reimbursements will be based on a case mix classification system that reflects more current practice patterns which will, in turn, lead to a more equitable distribution of nursing facility payments across different types of residents. As well, payment rates for pediatric care facilities will more closely track the operating expenses of such facilities, thereby reducing the risk of rates overpaying these facilities in some years and underpaying them in other years; and obsolete rule language will be eliminated.

Takings Impact Assessment

Regulatory Analysis

Public Hearing

The Texas Health and Human Services Commission (HHSC) will conduct a public hearing on June 10, 2008, at 9:00 a.m. to receive public comment on these proposed amendments.

The public hearing will be held in the Lone Star Conference Room of the Health and Human Services Commission, Braker Center, Building H, located at 11209 Metric Boulevard, Austin, Texas. Entry is through Security at the main entrance of the building, which faces Metric Boulevard. Persons requiring American with Disabilities Act (ADA) accommodation or auxiliary aids or services should contact Kimbra Rawlings by calling (512) 491-1174, at least 72 hours prior to the hearing so appropriate arrangements can be made.

Public Comment

Questions about the content of this proposal may be directed to Pam McDonald in the HHSC Rate Analysis Department by telephone at (512) 491-1373. Written comments on the proposal may be submitted to Ms. McDonald by facsimile at (512) 491-1998, by e-mail to pam.mcdonald@hhsc.state.tx.us, or by mail to HHSC Rate Analysis, Mail Code H-400, P.O. Box 85200, Austin, Texas 78708-5200, within 30 days of publication of this proposal in the Texas Register.

Statutory Authority

The amendments are proposed under Texas Government Code §531.033, which authorizes the Executive Commissioner of HHSC to adopt rules necessary to carry out the commission's duties; Texas Human Resources Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; and Texas Government Code §531.021(b), which establishes HHSC as the agency responsible for adopting reasonable rules governing the determination of fees, charges, and rates for medical assistance payments under the Human Resources Code, Chapter 32.

The amendments affect Texas Government Code Chapter 531and Texas Human Resources Code Chapter 32. No other statutes, articles, or codes are affected by this proposal.

§355.307.Reimbursement Setting Methodology.

(a) Case mix classes. The Texas Health and Human Services Commission (HHSC) reimbursement rates for nursing facilities (NFs) vary according to the assessed characteristics of the recipient. Rates are determined for 34 [11 ] case mix classes of service, plus a 35th [~~12th~~ ], temporary classification assigned by default when assessment data are incomplete or in error and a 36th classification assigned by default when an assessment is missing.

(b) Reimbursement determination. HHSC applies the general principles of cost determination as specified in §355.101 of this title (relating to Introduction).

(1) Rate Components. Under the case mix methodology, reimbursements are comprised of five cost-related components: the direct care staff component; the other recipient care component; the dietary component; the general/administration component; and the fixed capital asset component. The direct care staff component is calculated as specified in §355.308 of this title (relating to Direct Care Staff Rate Component).

(A) The dietary rate component is constant across all case mix classes[.]

[~~(ii) For rates effective September 1, 2000, multiply the dietary per diem rate from clause (i) of this subparagraph by 1.016.~~]

[~~(iii) For rates effective September 1, 2001, and thereafter, the dietary component~~] and is calculated at the median cost (weighted by Medicaid days of service in the rate base) in the array of projected allowable per diem costs for all contracted nursing facilities included in the rate base, multiplied by 1.07.

(B) The general/administration rate component is constant across all case mix classes[.]

[(i) For rates effective May 1, 2000, the general/administration rate component is equal to the difference between the general, administration, and dietary rate component in effect January 1, 2000, and the dietary rate component as calculated in subparagraph (A)(i) of this paragraph.]

[~~(ii) For rates effective September 1, 2000, multiply the general/administration per diem rate from clause (i) of this subparagraph by 1.016.~~]

[~~(iii) For rates effective September 1, 2001, and thereafter, the general/administration component~~] and is calculated at the median cost (weighted by Medicaid days of service in the rate base) in the array of projected allowable per diem costs for all contracted nursing facilities included in the rate base, multiplied by 1.07.

[~~(i) For rates effective May 1, 2000, the fixed capital asset component is equal to the fixed capital asset component in effect January 1, 2000.~~]

[~~(ii) For rates effective September 1, 2000, the fixed capital asset component is equal to the fixed capital asset component from clause (i) of this subparagraph multiplied by 1.016.~~]

[~~(iii) For rates effective September 1, 2001 and thereafter, the fixed capital asset component~~] and is calculated as follows:

(i) [~~(I)~~] Determine the 80th percentile in the array of allowable appraised property values per licensed bed, including land and improvements Appraised values for this purpose are determined as follows:

(I) [~~(-a-)~~] For proprietary facilities, tax exempt facilities provided an appraisal from their local property taxing authority, and tax exempt facilities not provided an appraisal from their local property taxing authority because of an "exempt" status whose independent appraisal is in the first year of its five-year interval as described in §355.306(g)(2)(B)(ii) of this title (relating to Cost Finding Methodology), allowable appraised values are determined as described in §355.306(g) of this title (relating to Cost Finding Methodology).

(II) [~~(-b-)~~] For tax exempt facilities not provided an appraisal from their local property taxing authority because of an "exempt" status whose independent appraisal is not in the first year of its five-year interval as described in §355.306(g)(2)(B)(ii) of this title (relating to Cost Finding Methodology), allowable appraised values are determined by indexing the facility's allowable appraised value as determined in §355.306(g) of this title (relating to Cost Finding Methodology) to the median increase in appraised values among contracted facilities in the state as a whole from the reporting period coinciding with the first year of the facility's five-year interval to the reporting period upon which reimbursements are to be based.

(III) [~~(-c-)~~] Those facilities that do not report an allowable appraised value as described in §355.306(g) of this title (relating to Cost Finding Methodology) are not included in the array for purposes of calculating the use fee.

(ii) [~~(II)~~] Project the 80th percentile of appraised property values per bed by one-half the forecasted increase in the personal consumption expenditures (PCE) chain-type price index from the cost reporting year to the rate year.

(iii) [~~(III)~~] Calculate an annual use fee per bed as the projected 80th percentile of appraised property values per bed times an annual use rate of 14%.

(iv) [~~(IV)~~] Calculate a per diem use fee per bed by dividing the annual use fee per bed by annual days of service per bed at the higher of 85% occupancy, or the statewide average occupancy rate during the cost reporting period.

(v) [~~(V)~~] The use fee is limited to the lesser of the fee as calculated in clauses (i) - (iv) [~~subclauses (I) - (IV)~~] of this subparagraph [~~clause~~ ], or the fee as calculated by inflating the fee from the previous rate period by the forecasted rate of change in the PCE chain-type price index.

(2) Case mix classification system. All Medicaid recipients are classified according to the Resource Utilization Group (RUG-III) 34 group [ ~~Texas Index for Level of Effort (TILE)~~] classification system , Version 520, index maximizing, as established by the state and the Centers for Medicare and Medicaid Services (CMS). [ described in §371.212 of this title (relating to Case Mix Classification System). The TILE classification system includes four clinical categories, which are further subdivided on the basis of an activity of daily living (ADL) scale, resulting in a total of 11 TILE case mix groups. A 12th group is used by default when a recipient's case-mix group membership is indeterminate because of assessment errors or omissions. ] Each of the [12 ] case-mix groups, including the default groups [~~group~~], is assigned CMS standard nursing time measurements for Registered Nurses (RNs), Licensed Vocational Nurses (LVNs) and aides (Medication Aides and Certified Nurse Aides) [~~a case-mix index of effort~~]. These measurements indicate the [~~This index indicates the relative~~ ] amount of staff time required on average to deliver care to residents [~~recipients~~] in that group. [ The case-mix index for each of the 11 TILE groups is determined through statistical and clinical analyses of recipient resource utilization data previously collected in Texas NFs. The lowest index for the 11 TILE groups is used as the case-mix index for the default group.]

(3) Per diem rate methodology. Staff determine per diem rate recommendations for each of the RUG-III [~~11 TILE~~] groups and for the default groups [~~group~~] according to the following procedures:

(A) For each RUG-III group, calculate a total LVN-equivalent minute statistic by converting the CMS standard nursing time measurements for RNs, LVNs and aides into Texas-specific LVN-equivalent minutes as per §355.308(j) of this title (relating to Direct Care Staff Rate Component) and summing the converted figures.

(B) [~~(A)~~] [~~Determine the statewide average case mix index for all Medicaid recipients, except those in the default group.~~] Weight the total LVN-equivalent minute statistics [~~indexes~~ ] from subparagraph (A) [~~paragraph (2)~~ ] of this paragraph for each RUG-III group except the default groups as follows and determine the statewide weighted average total adjusted minutes: [subsection, which are based on a sample of nursing facilities, by the estimated statewide recipient days of service by case mix group during the cost reporting period covered by the rate base and determine the weighted average. The statewide average index is based on the most recent and complete data available indicating recipient days of service by case mix group that correspond to the period covered by the cost reports included in the rate base.]

(i) For rates effective September 1, 2008, the total LVN-equivalent minute statistics for each RUG-III group will be weighted by the estimated statewide recipient days of service by case mix group during the period beginning the first day of December, 2007 and ending the last day of February, 2008.

(ii) For rates effective September 1, 2009, the total LVN-equivalent minute statistics for each RUG-III group will be weighted by the estimated statewide recipient days of service by case mix group during the period beginning the first day of September, 2008 and ending the last day of February, 2009.

(iii) For rates effective September 1, 2010 and thereafter, the total LVN-equivalent minute statistics for each RUG-III group will be weighted by the estimated statewide recipient days of service by case mix group during the cost reporting period covered by the rate base.

(C) [~~(B)~~] Determine the standardized statewide case mix index for each of the RUG-III [~~11 TILE~~ ] groups by dividing each of the total LVN-equivalent minute statistics [~~indexes~~] described under subparagraph (A) [~~paragraph (2)~~] of this paragraph [ ~~subsection~~] by the statewide weighted average total adjusted minutes [~~case mix index~~ ] described under subparagraph (B) [~~(A)~~ ] of this paragraph.

(D) [~~(C)~~] The other recipient care rate component varies according to case mix class of service[ .]

[(i) For rates effective May 1, 2000, using the inflation factors used in determination of the nursing facility rates in effect January 1, 2000, project the costs in the 1998 Texas Nursing Facility Cost Report data base to the rate period beginning January 1, 2000, and ending August 31, 2000. Using these projected costs, determine the sum of other recipient care costs in all nursing facilities included in the 1998 data base. Then divide the total by the sum of recipient days of service in all facilities in the 1998 data base. Multiply the resulting weighted, average per diem cost of other recipient care by 1.07. The result is the average other recipient care rate component. To calculate the other recipient care per diem rate component for each of the 11 TILE case mix groups and for the default group, multiply each of the standardized statewide case mix indexes used in determination of the nursing facility rates in effect January 1, 2000, by the average other recipient care rate component.]

[(ii) For rates effective September 1, 2000, multiply the average other recipient care per diem rate from clause (i) of this subparagraph by 1.016. To calculate the other recipient care per diem rate component for each of the 11 TILE case mix groups and for the default group, multiply each of the standardized statewide case mix indexes used in determination of the nursing facility rates in effect January 1, 2000, by the average other recipient care rate component.]

[~~(iii) For rates effective September 1, 2001, and thereafter, the average other recipient care rate component~~ ] and is calculated as follows. Adjust the raw sum of other recipient care costs in all nursing facilities included in the rate base in order to account for disallowed costs and inflation, as specified in §355.306 of this title (relating to Cost Finding Methodology). Then divide the adjusted total by the sum of recipient days of service in all facilities in the current rate base. Multiply the resulting weighted, average per diem cost of other recipient care by 1.07. The result is the average other recipient care rate component. To calculate the other recipient care per diem rate component for each of the RUG-III [~~11 TILE~~] case mix groups and for the default groups, multiply each of the standardized statewide case mix indexes from subparagraph (C) [~~(B)~~] of this paragraph by the average other recipient care rate component.

(E) [~~(D)~~] Total case mix per diem rates vary according to case mix class of service and according to participant status in Direct Care Staff Rate enhancements described in §355.308 of this title (relating to Direct Care Staff Rate Component).

(i) For each participating facility, for each of the RUG-III [~~11 TILE~~ ] case mix groups and for the default groups [~~group~~ ], the recommended total per diem rate is the sum of the following five rate components:

(I) the dietary rate component from paragraph (1)(A) of this subsection;

(II) the general/administration rate component from paragraph (1)(B) of this subsection;

(III) the fixed capital asset use fee component from paragraph (1)(C) of this subsection;

(IV) the case mix group's other recipient care per diem rate component by case mix group from subparagraph (D) [~~(C)~~] of this paragraph; and

(V) the case mix group's total direct care staff rate component for that participating facility as determined in §355.308(l) of this title (relating to Direct Care Staff Rate Component).

(ii) For nonparticipating facilities, for each of the RUG-III [~~11 TILE~~ ] case mix groups and for the default groups [~~group~~ ], the recommended total per diem rate is the sum of the following five rate components:

(I) the dietary rate component from paragraph (1)(A) of this subsection;

(II) the general/administration rate component from paragraph (1)(B) of this subsection;

(III) the fixed capital asset use fee component from paragraph (1)(C) of this subsection;

(IV) the case mix group's other recipient care per diem rate component by case mix group from subparagraph (D) [~~(C)~~] of this paragraph; and

(V) the case mix group's total direct care staff base rate component as determined in §355.308(k) of this title (relating to Direct Care Staff Rate Component).

(F) [~~(E)~~] Qualifying ventilator-dependent residents may receive a supplement to the per diem rate specified in subparagraph (E) [~~(D)~~] of this paragraph.

(i) To qualify for supplemental reimbursement, a resident must require artificial ventilation for at least six consecutive hours daily and the use must be prescribed by a licensed physician.

(ii) A ventilator-dependent resource differential case mix index for the other recipient care rate component is calculated by subtracting the standardized statewide case mix index for the SE1 RUG-III case mix group from subparagraph (C) of this paragraph from 3.61. A ventilator-dependent resource differential case mix index for the direct care staff base rate component is calculated by dividing the resource differential case mix index for the other recipient care rate component by 0.9908 [, based on time-study research data. This resource differential index reflects the difference between direct nursing services for ventilator-dependent residents and services for residents in the most severe heavy-care TILE group].

(iii) The per diem rate supplement is calculated by multiplying the resource differential case mix index for the other recipient care rate component times the per diem average other recipient care rate component, as described in subparagraph (D) [~~(C)~~] of this paragraph and multiplying the resource differential case mix index for the direct care staff base rate component by the average direct care staff base rate component as described in §355.308(k) of this title (relating to Direct Care Staff Rate) and summing the products.

(iv) [~~(iii)~~] The supplemental reimbursement for residents requiring continuous artificial ventilation is 100% of the per diem ventilator rate supplement.

(v) [~~(iv)~~] The supplemental reimbursement for residents not requiring continuous artificial ventilation daily but requiring artificial ventilation for at least six consecutive hours daily is 40% of the per diem ventilator rate supplement.

(G) [~~(F)~~] Qualifying children with tracheostomies requiring daily care may receive a supplement to the per diem rate specified in subparagraph (E) [~~(D)~~]of this paragraph.

(i) To qualify for supplemental reimbursement, a resident must be less than 22 years of age; require daily cleansing, dressing, and suctioning of a tracheostomy; and be unable to do self care. The daily care of the tracheostomy must be prescribed by a licensed physician.

(ii) The supplemental reimbursement for children receiving daily tracheostomy care is 60% of the per diem ventilator rate supplement as specified in subparagraph (F) [~~(E)~~] of this paragraph.

(H) [~~(G)~~] Children with qualifying conditions as specified in subparagraphs [~~(E) and~~] (F) and (G) of this paragraph may receive only one of the supplemental reimbursements. Therefore, children with tracheostomies who are also ventilator-dependent are not eligible to receive both supplemental reimbursements.

[~~(4) Case mix classification effective periods. The effective periods of case mix classifications are defined as follows.~~]

[~~(A) A recipient's case mix classification and associated per diem rate payment remain in effect until the recipient's next required assessment, unless one of the following events takes place:~~]

[~~(i) a provider submits an off-cycle assessment as specified in 1 TAC §371.2412(a)(5) (relating to Texas Index for Level of Effort (TILE) Assessments);~~]

[~~(ii) an HHSC nurse reviewer revises the recipient's assessment and TILE classification under the provisions of 1 TAC §371.2412(b) (Texas Index for Level of Effort (TILE) Assessments); or~~]

[~~(iii) the recipient is discharged from the Medicaid nursing facility vendor payment system for more than 30 days prior to receiving a permanent medical necessity determination.~~ ]

[(B) The case mix classification and associated per diem payment rate of a recipient in the default group are changed retroactively when the provider furnishes HHSC with corrected data that permit classification in one of the 11 TILE case mix groups.]

(c) Special reimbursement class. HHSC may define special reimbursement classes, including experimental reimbursement classes of service to be used in research and demonstration projects on new reimbursement methods and reimbursement classes of service, to address the cost differences of a select group of recipients. Special classes may be implemented on a statewide basis, may be limited to a specific region of the state, or may be limited to a selected group of providers.

(1) Pediatric Care Facility Class. The purpose of this special class is to recognize, through the adoption of a facility-specific payment rate, the cost differences that exist in a nursing facility or distinct unit of a nursing facility that serves predominantly children.

(2) Definitions.

(A) Pediatric care facility--A pediatric care facility is an entire facility that has maintained an average daily census of 80% or more children for the six-month period prior to its entry into the pediatric care facility class based on the entire licensed facility. A pediatric care facility can also be a distinct unit of a facility that has maintained an average daily census of 85% or more children for the six-month period prior to its entry into the pediatric care facility class based on the distinct unit of the facility. To remain a pediatric care facility, the pediatric care facility must maintain an average daily census of 80% or more children if the pediatric care facility is an entire facility and 85% or more children if the pediatric care facility is a distinct unit of the facility. The contracted provider must request in writing by certified mail or by special mail delivery where the delivery can be verified to become a member of the pediatric care facility special reimbursement class. The request must be sent to the Texas Health and Human Services Commission.

(B) Distinct unit--A portion of a nursing facility that is physically separate from (beds are not commingled with) other units of the facility. The distinct unit can be an entire wing, a separate building, an entire floor, or an entire hallway. The distinct unit consists of all beds within the designated area. A distinct unit must consist of 28 or more Medicaid-contracted beds.

(C) Children--For the purposes of this pediatric care facility class, children are defined as being at or below 22 years of age.

(3) Payment rate determination. Payment rates will be determined in the following manner:

(A) Cost reports and payment rate determination for pediatric care facilities are governed by the requirements specified in Subchapter A of this chapter (relating to Cost Determination Process) except that payment rates are determined annually, coincident with the state's fiscal year, within available funds. A nursing facility that contains a pediatric care facility distinct unit must complete two cost reports: one report for the pediatric care facility distinct unit and one report for the remainder of the facility.

(B) Payment rates for this class of service will be determined on a facility-specific basis for the pediatric care facility. The total allowable costs from the most recent cost report deemed acceptable are adjusted for inflation from the cost report period to the rate period. The adjusted cost is divided by the greater of total patient days of service reported on the cost report or the days of service at 85% of contracted capacity of the pediatric care facility. The resulting cost per day is multiplied by a factor of 1.03 to determine the final facility-specific rate. If no acceptable cost report is available, the provider will be required to submit a cost report covering the time period specified by HHSC.

(C) The facility-specific payment rate from paragraph (3)(B) of this subsection will be paid for all Medicaid residents of a qualifying pediatric care facility regardless of the RUG [~~TILE~~] level of the resident.

(D) Residents of the pediatric care facility will not be eligible to receive the ventilator-dependent or the children-with-tracheostomies supplemental reimbursements.

(E) Pediatric care facilities are not eligible to participate in §355.308 of this title (relating to Enhanced Direct Care Staff Rate).

(d) Nurse aide training and competency evaluation costs.

(1) DADS reimburses nursing facilities for the actual costs of training and testing nurse aides as required under the Omnibus Budget Reconciliation Act of 1987 (OBRA '87). Payments are based on cost reimbursement vouchers that are to be submitted quarterly. Allowable costs are limited to those costs incurred for training provided after October 1, 1990, for:

(A) actual training course expenses up to a set amount determined by DADS per nurse aide;

(B) competency evaluation; or

(2) Nurse aide salaries while in training are factored into the vendor rate and are not to be included on the reimbursement voucher.

(3) Training program costs that exceed the DADS cost ceiling must have prior approval from DADS before costs can be reimbursed. A written request to Provider Billing Services must include:

(A) name and vendor number of facility.

(B) description of training program for which the facility is seeking reimbursement approval, to include:

(i) name, telephone number and address of the nurse aide training and competency evaluation program (NATCEP);

(ii) whether the NATCEP program is facility or non-facility-based; and

(iii) name of the NATCEP program director.

(i) a completed nurse aide unit cost calculation form for a facility-based NATCEP; or

(ii) a breakdown of the nurse aide unit cost by the instructor fees and training materials for a non-facility-based NATCEP.

(D) an explanation of why the nursing facility cannot utilize a training program at or below the reimbursement ceiling and what steps the facility has taken to explore more cost efficient training courses. The explanation must include:

(i) the availability of NATCEPs, such as the location or the frequency of training offered, in the geographic region of the facility;

(ii) the name and address of each NATCEP that the facility has explored as a provider of nurse aide training; and

(iii) the cost per nurse aide for each NATCEP identified in clause (i) of this subparagraph, as specified in subparagraph (C)(i) or (ii) of this paragraph.

(4) All prior approval requests as outlined in paragraph (3) of this subsection must be submitted to DADS, Provider Billing Services that:

(A) may request additional information in order to evaluate a reimbursement request; and

(B) will make the final decision on a reimbursement request.

(5) All nurse aide training courses must be approved by DADS before costs associated with them can be reimbursed.

(6) Nursing facilities are responsible for tracking and documenting nurse aide training costs for each nurse aide trained. All documentation is subject to DADS audits. If substantiating documentation for amounts billed to DADS cannot be verified, DADS will immediately recoup funds paid to the facility.

(7) Individuals who have successfully completed a nurse aide training and competency evaluation program (NATCEP) may be directly reimbursed for costs incurred in completing a NATCEP. The individual must meet all of the conditions specified in subparagraphs (A) - (E) of this paragraph.

(A) The individual must not have been employed at the time of completing the NATCEP.

(B) The individual must have been employed by, or received an offer of employment from, a nursing facility not later than 12 months after successfully completing the NATCEP.

(D) The nursing facility must not have claimed reimbursement for training expenses for the individual.

(E) The individual must be listed on the current Nurse Aide Registry.

(8) Individuals must submit cost reimbursement vouchers to DADS with proof that the individual has been employed by a facility for no less than six months.

(9) Individuals who leave nursing facility employment before accruing the required six months of employment, as specified in paragraph (7)(C) of this subsection, may receive 50% reimbursement as long as the individual was employed for no less than three months.

(10) Reimbursement to individuals may not exceed the reimbursement ceiling as detailed in paragraph (1)(A) of this subsection.

(e) Oxygen costs. Oxygen costs incurred on or after January 1, 1995, will not be reimbursed on cost reimbursement vouchers. Those oxygen costs must be reported as expenses on the cost report.

(f) TILE to RUG-III Hold Harmless Transition. For rates effective September 1, 2008, payment rates for the direct care staff component and the other recipient care component only will be updated within available funds.

(1) To calculate the updated direct care staff per diem rate component for each of the RUG-III case mix groups and for the default groups, divide each of the standardized statewide case mix indexes from subsection (b)(3)(C) of this section by 0.9908, which is the weighted average TILE case mix index for the 1998 cost reporting period, multiply each quotient by the statewide average TILE case mix index for the period beginning the first day of December, 2007 and ending the last day of February, 2008 as represented in the Texas Department of Aging and Disability Services (DADS) Claims Management System (CMS) on or around June 1, 2008 and multiply each product by the average updated direct care staff rate component.

(2) To calculate the updated other recipient care per diem rate component for each of the RUG-III case mix groups and for the default groups, divide each of the standardized statewide case mix indexes from subsection (b)(3)(C) of this section by 1.0267, which is the weighted average TILE case mix index for the 2005 cost reporting period, multiply each quotient by the statewide average TILE case mix index for the period beginning the first day of December, 2007 and ending the last day of February, 2008 as represented in the Texas Department of Aging and Disability Services (DADS) Claims Management System (CMS) on or around June 1, 2008 and multiply each product by the average updated other recipient care rate component.

(3) For state fiscal year 2009 only, for each Medicaid-contracted nursing facility, HHSC will:

(A) Calculate the sum of the weighted average TILE direct care staff base rate (with no enhancements) and other recipient care rate based on the TILE rates for these cost areas in effect on August 31, 2008 and the facility's approved to be paid days of service by TILE from January 1, 2008 through June 30, 2008 as represented in the Texas Department of Aging and Disability Services (DADS) Claims Management System (CMS) on or around November 3, 2008.

(B) Calculate the sum of the weighted average RUG-III direct care staff base rate (with no enhancements) and other recipient care rate based on the RUG rates for these cost areas in effect on September 1, 2008 and the facility's approved to be paid days of service by RUG-III for those recipients paid under RUG-III from September 1, 2008 through February 28, 2009 as represented in the DADS CMS on or around July 1, 2009.

(C) Compare the sum from subparagraph (A) of this paragraph to the sum from subparagraph (B) of this paragraph. If the sum from subparagraph (A) is greater then the sum from subparagraph (B), DADS will pay the facility the difference between the sum from subparagraph (A) and the sum from subparagraph (B) times the facility's approved to be paid days of service for those recipients paid under RUG-III from September 1, 2008 through February 28, 2009 as represented in the DADS CMS on or around July 1, 2009.

(D) Calculate the sum of the weighted average RUG-III direct care staff base rate (with no enhancements) and other recipient care rate based on the RUG rates for these cost areas in effect on September 1, 2008 and the facility's approved to be paid days of service by RUG-III for those recipients paid under RUG-III from March 1, 2009 through August 31, 2009 as represented in the DADS CMS on or around January 4, 2010.

(E) Compare the sum from subparagraph (A) of this paragraph to the sum from subparagraph (D) of this paragraph. If sum from subparagraph (A) is greater then the sum from subparagraph (D), DADS will pay the facility the difference between the sum from subparagraph (A) and the sum from subparagraph (D) times the facility's approved to be paid days of service for those recipients paid under RUG-III from March 1, 2009 through August 31, 2009 as represented in the DADS CMS on or around January 4, 2010.

(4) "On or around" as used in this subsection means the date that the state pulls the information as described in the subsection as close to the dates specified in subsection as feasible and determined by the state. Once the state does the data pull, no other pulls will be made for the purpose of calculating the values described in this subsection. This means that once the paid days of service for a paragraph have been determined for purposes of calculating the TILE to RUG-III hold harmless transition, they will not be updated for late Minimum Data Set (MDS) submissions, Utilization Review RUG-III changes, retroactive eligibility or any other reason.

[(f) For rates effective September 1, 2003 and September 1, 2004, the rates for the dietary rate component from subsection (b)(1)(A) of this section, the general/administration rate component from subsection (b)(1)(B) of this section, fixed capital asset component from subsection (b)(1)(C) of this section, the other recipient care rate component from subsection (b)(3)(C) of this section, the supplement to per diem rates for qualified ventilator-dependent residents from subsection (b)(3)(E) of this section, the supplement to per diem rates for qualified children with tracheostomies from subsection (b)(3)(F) of this section and the pediatric care facility rate from subsection (c) of this section will be equal to the rates in effect August 31, 2003 adjusted as necessary to remain within appropriations. Adjustments necessary to remain within appropriations will apply equally in percentage terms across each component of the nursing facility rate and each add-on.]

§355.308.Direct Care Staff Rate Component.

(a) - (i) (No change.)

(j) Determination of staffing requirements for participants. Facilities choosing to participate in the enhanced direct care staff rate agree to maintain certain direct care staffing levels above the minimum staffing levels described in paragraph (1) of this subsection. In order to permit facilities the flexibility to substitute RN, LVN and aide (Medication Aide and nurse aide) staff resources and, at the same time, comply with an overall nursing staff requirement, total nursing staff requirements are expressed in terms of LVN equivalent minutes. Conversion factors to convert RN and aide minutes into LVN equivalent minutes are based upon most recently available, reliable relative compensation levels for the different staff types.

(1) Minimum staffing levels. HHSC determines, for each participating facility, minimum LVN equivalent staffing levels as follows.

(A) Determine minimum required LVN equivalent minutes per resident day of service for various types of residents using time study data, cost report information, and other appropriate data sources.

(i) Determine LVN equivalent minutes associated with Medicare residents based on the data sources from this subparagraph adjusted for estimated acuity differences between Medicare and Medicaid residents.

(ii) Determine minimum required LVN equivalent minutes per resident day of service associated with each Resource Utilization Group (RUG-III) [ ~~Texas Index for Level of Effort (TILE)~~] case mix group and additional minimum required minutes for Medicaid residents reimbursed under the RUG-III [~~TILE~~] system who also qualify for supplemental reimbursement for ventilator care or pediatric tracheostomy care as described in §355.307 of this title (relating to Reimbursement Setting Methodology) based on the data sources from this subparagraph adjusted for acuity differences between Medicare and Medicaid residents and other factors.

(B) Based on most recently available, reliable utilization data, determine for each facility the total days of service by RUG-III [~~TILE~~] group, days of service provided to Medicaid [~~TILE~~ ] residents qualifying for Medicaid supplemental reimbursement for ventilator or tracheostomy care, total days of service for Medicare Part A residents in Medicaid-contracted beds, and total days of service for all other residents in Medicaid-contracted beds.

(C) Multiply the minimum required LVN equivalent minutes for each RUG-III [~~TILE~~ ] group and supplemental [~~TILE~~ ] reimbursement group from subparagraph (A) of this paragraph by the facility's Medicaid days of service in each RUG-III [~~TILE~~] group and supplemental [ ~~TILE~~] reimbursement group from subparagraph (B) of this paragraph and sum the products.

(D) Multiply the minimum required LVN equivalent minutes for Medicare residents by the facility's Medicare Part A days of service in Medicaid-contracted beds.

(E) Divide [~~Effective for reporting periods beginning on or after September 1, 2001, divide~~] the sum from subparagraph (C) of this paragraph by the facility's total Medicaid days of service, with a day of service for a Medicaid RUG-III [~~TILE~~] recipient who also qualifies for a supplemental [~~TILE~~ ] reimbursement counted as one day of service, compare this result to the minimum required LVN-equivalent minutes for a RUG-III PE1 [~~TILE 207~~ ] and multiply the lower of the two figures by the facility's other resident days of service in Medicaid-contracted beds.

(F) Sum the results of subparagraphs (C), (D) and (E) of this paragraph, divide the sum by the facility's total days of service in Medicaid-contracted beds, with a day of service for a Medicaid [~~TILE~~] recipient who also qualifies for a supplemental [~~TILE~~] reimbursement counted as one day of service. The results of these calculations are the minimum LVN equivalent minutes per resident day a participating facility must provide.

(2) Enhanced staffing levels. Facilities desiring to participate in the enhanced direct care staff rate are required to staff above the minimum requirements from paragraph (1) of this subsection. These facilities may request LVN-equivalent staffing enhancements from an array of LVN-equivalent enhanced staffing options and associated add-on payments during open enrollment under subsection (d) of this section.

(3) Granting of staffing enhancements. HHSC divides all requested enhancements, after applying any enrollment limitations from subsection (i) of this section, into two groups: pre-existing enhancements that facilities request to carry over from the prior year and newly-requested enhancements. Newly-requested enhancements may be enhancements requested by facilities that were nonparticipants in the prior year or by facilities that were participants in the prior year desiring to be granted additional enhancements. Using the process described herein, HHSC first determines the distribution of carry-over enhancements. If HHSC determines that funds are not available to carry over some or all pre-existing enhancements, facilities will be notified as per subsection (ee) of this section. If funds are available after the distribution of carry-over enhancements, HHSC then determines the distribution of newly requested enhancements. HHSC may not distribute newly requested enhancements to facilities owing funds identified for recoupment from subsections (n) and/or (o) of this section.

(A) HHSC determines projected Medicaid units of service for facilities requesting each enhancement option, and multiplies this number by the rate add-on associated with that enhancement option as determined in subsection (l) of this section.

(B) HHSC compares the sum of the products from subparagraph (A) of this paragraph to available funds.

(i) If the product is less than or equal to available funds, all requested enhancements are granted.

(ii) If the product is greater than available funds, enhancements are granted beginning with the lowest level of enhancement and granting each successive level of enhancement until requested enhancements are granted within available funds. Based upon an examination of existing staffing levels and staffing needs, HHSC may grant certain enhancement options priority for distribution.

(4) Notification of granting of enhancements. Participating facilities are notified, in a manner determined by HHSC, as to the disposition of their request for staffing enhancements.

(k) Determination of direct care staff base rate.

(1) Determine the sum of recipient care costs from the direct care staff cost center in subsection (a) of this section in all nursing facilities included in the Texas Nursing Facility Cost Report database used to determine the nursing facility rates in effect on January 1, 2000 (hereinafter referred to as the initial database).

(2) Adjust the sum from paragraph (1) of this subsection as specified in §355.108 of this title (relating to Determination of Inflation Indices) to inflate the costs to the prospective rate year.

(3) Divide the result from paragraph (2) of this subsection by the sum of recipient days of service in all facilities in the initial database and multiply the result by 1.07. The result is the average direct care staff base rate component for all facilities.

(4) For rates effective September 1, 2009 and thereafter, to [To ] calculate the direct care staff per diem base rate component for all facilities for each of the RUG-III [~~11 TILE~~ ] case mix groups and for the default groups, divide each RUG-III index from §355.307(3)(C) of this title (relating to Reimbursement Methodology) by 0.9908, which is the weighted average Texas Index for Level of Effort (TILE) case mix index associated with the initial database, and then multiply each of the resulting quotients by the average direct care staff base rate component from paragraph (3) of this subsection. [ ~~group, multiply each of the standardized statewide case mix indices associated with the initial database by the average direct care staff base rate component from paragraph (3) of this subsection.~~]

(5) The direct care staff per diem base rates will remain constant except for adjustments for inflation from paragraph (2) of this subsection. HHSC may also recommend adjustments to the rates in accordance with §355.109 of this title (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs). [For rates effective September 1, 2003 and September 1, 2004, the direct care staff per diem base rate will be equal to the direct care staff rate for participating facilities associated with maintaining LVN equivalent minutes at the minimum levels required for participation in effect August 31, 2003 adjusted as necessary to remain within appropriations. Adjustments necessary to remain within appropriations will apply equally in percentage terms across each component of the nursing facility rate and each add-on.]

(l) - (aa) (No change.)

(bb) Medicaid Swing Bed Program for Rural Hospitals. When a rural hospital participating in the Medicaid swing bed program furnishes NF nursing care to a Medicaid recipient under 40 TAC §19.2326 (relating to Medicaid Swing Bed Program for Rural Hospitals), HHSC or its designee makes payment to the hospital using the same procedures, the same case-mix methodology, and the same RUG-III [~~TILE~~ ] rates that HHSC authorizes for reimbursing NFs receiving the direct care staff base rate with no enhancement levels. These hospitals are not subject to the staffing and spending requirements detailed in this section.

(cc) - (ee) (No change.)

§355.311.Medicaid Reimbursement Rates for State Veterans Homes.

(a) - (d) (No change.)

(e) The facility-specific payment rate, as determined in subsection (d) of this section, will be paid for all Medicaid eligible residents of a state veterans home regardless of the case mix classification [ ~~Texas Index for Level of Effort (TILE) level~~] of the resident.

(f) - (j) (No change.)

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 May 12, 2008.

TRD-200802442

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: June 22, 2008

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