PART 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 355. REIMBURSEMENT RATES

SUBCHAPTER J. PURCHASED HEALTH SERVICES

DIVISION 4. MEDICAID HOSPITAL SERVICES

1 TAC §§355.8061, 355.8063, 355.8068

The Texas Health and Human Services Commission (HHSC) proposes to amend §355.8061, Payment for Hospital Services, and §355.8063, Reimbursement Methodology for Inpatient Hospital Services. HHSC proposes to add new §355.8068, Supplemental Payments to Certain Urban Hospitals, to consolidate and update the inpatient and outpatient supplemental payment rule language for eligible publicly-owned or -affiliated urban hospitals.

Background and Justification

HHSC is combining the Medicaid inpatient and outpatient hospital supplemental payment methodologies from existing rules into one new comprehensive rule that will fully describe supplemental payments made to eligible publicly-owned or -affiliated urban hospitals. HHSC is updating the language in the new rule to better explain the complex processes used in urban hospital supplemental payments.

The proposed new rule also expands the number of publicly-owned or -affiliated urban hospitals that are eligible to receive Medicaid supplemental payments. Currently, 11 hospitals already receive Medicaid supplemental payments. New §355.8068 makes six additional public hospitals in counties with populations greater than 100,000 eligible for these payments.

HHSC will not make supplemental payments to any new hospital eligible under this rule on or after September 1, 2009, until the State Plan Amendment has been approved by the Centers for Medicare and Medicaid Services (CMS).

Section-by-Section Summary

The language in §355.8061(a)(4) subparagraphs (A) and (E) relating to outpatient supplemental payments for eligible publicly-owned or -affiliated urban hospitals is deleted. New language is added to subparagraph (A) to direct the reader to new proposed §355.8068 for information on supplemental payments to these hospitals. Other changes are made to §355.8061 to update references and clarify rule language.

The language in §355.8063(t)(1), (2), and (3) relating to inpatient supplemental payments for eligible publicly-owned or -affiliated urban hospitals is deleted. New language is added to paragraph (1) to direct the reader to proposed new §355.8068 for information on supplemental payments to these hospitals. Other changes are made to §355.8063(t) to update references and clarify rule language.

Proposed §355.8068(a) states that Medicaid supplemental payments will be available for inpatient and outpatient services provided by eligible publicly-owned or -affiliated urban hospitals that serve high volumes of Medicaid and uninsured patients.

Proposed §355.8068(b) provides definitions for "Disproportionate Share Hospital (DSH)," "DSH Limit," "DSH Room," "DSH Reporting Period," "Medicaid Allowable Outpatient Hospital Costs," "Public Funds," and "Publicly-Owned or -Affiliated Hospital."

Proposed §355.8068(c) specifies the counties in which publicly-owned or -affiliated urban hospitals may be eligible for inpatient and outpatient supplemental payments. The list of counties is the same as the list that was previously in §355.8063(t)(1) and §355.8061(a)(4)(A) with the following changes. Public hospitals in three additional counties are added to the list: Brazoria, Fort Bend and Wichita counties. Randall County is removed from the list because the hospital that is affiliated with the Amarillo Hospital District is located in Potter County rather than Randall County, which is covered by the rule. Proposed §355.8068(c) also specifies that no more than two publicly-owned or -affiliated hospitals in each of the listed urban counties may be eligible for supplemental payments, compared to the limit of one hospital per county that previously was in §355.8063(t)(3).

Proposed §355.8068(d) lists the effective dates in which eligible hospitals in specific counties began receiving supplemental payments.

Proposed §355.8068(e) states that the source of state matching funds for the supplemental payments will be intergovernmental transfers.

Proposed §355.8068(f) identifies the fiscal restrictions on inpatient supplemental payments and reviews the methodology for calculating quarterly inpatient supplemental payments to DSH and non-DSH hospitals. This subsection also states that all supplemental payments are subject to reductions due to the aggregate Medicaid upper payment limits.

Proposed §355.8068(g) identifies the fiscal restrictions on outpatient supplemental payments and reviews the methodology for calculating quarterly outpatient supplemental payments to DSH and non-DSH hospitals. This section also states that all supplemental payments are subject to reductions due to the aggregate Medicaid upper payment limits.

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that during the first five-year period the proposed rules are in effect there will be no fiscal impact to state government as a result of adding new hospitals to the UPL program for publicly-owned or -affiliated urban hospitals because the non-federal share of these supplemental payments is derived from intergovernmental transfers. The addition of the six new hospitals described above to the urban hospital UPL program will have a neutral fiscal impact.

No net additional supplemental payments will be made to publicly-owned or -affiliated urban hospitals because these urban hospitals in Texas are currently being paid at the aggregate cap calculated in 2009 for urban and rural public hospitals. Instead, funds will be redistributed among all the participating hospitals. The existing qualified public hospitals may have their future funds reduced as a result of this redistribution. If the aggregate cap for public hospitals increases in FY 2010, public hospitals in the state may receive additional federal funds. 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 proposal, as they will not be required to alter their business practices as a result of the rules. There are no anticipated economic costs to persons who are required to comply with the proposed rules. There is no anticipated negative impact on local employment.

Public Benefit

Carolyn Pratt, Director of Rate Analysis, has determined that for each year of the first five years the proposed rules are in effect, the public will benefit from the adoption of the rules. The anticipated public benefit, as a result of enforcing the rules, will be to allow the distribution of Medicaid supplemental payment funds to some of the smaller urban public hospitals that provide necessary Medicaid services. HHSC believes the public also will benefit from the consolidation of the inpatient and outpatient supplemental payment rules for publicly-owned or -affiliated urban hospitals into a single rule.

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 Jill Seime, Senior 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 Jill.Seime@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Statutory Authority

The amendments and new rule are proposed under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; and 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.

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

§355.8061.Payment for Hospital Services.

(a) The Health and Human Services Commission (HHSC [ commission]) or its designated agent shall reimburse hospitals approved for participation in the Texas Medical Assistance Program for covered Title XIX hospital services provided to eligible Medicaid recipients. The Texas Title XIX State Plan for Medical Assistance provides for reimbursement of covered hospital services to be determined as specified in paragraphs (1) - (4) of this subsection.

(1) The amount payable for inpatient hospital services shall be determined as specified in §355.8052 of this title (relating to Inpatient Hospital Reimbursement Methodology); §355.8054 of this title (relating to Children's Hospital Reimbursement Methodology); §355.8056 of this title (relating to State-Owned Teaching Hospital Reimbursement Methodology), and §355.8063 of this title (relating to Reimbursement Methodology for Inpatient Hospital Services).

(2) The amount payable for outpatient hospital services shall be determined under similar methods and procedures used in the Social Security Act, Title XVIII, as amended, effective October 1, 1982 through July 31, 2000, by Public Law 97-248, except as may be otherwise specified by HHSC [the Health and Human Services Commission]. For the period of September 1, 1999 through and including September 30, 2001, payments to all providers were at 80.3% of allowed costs. For the period beginning October 1, 2001, Medicaid reimbursement for outpatient hospital services for high-volume providers, as defined by the commission, shall be at 84.48% of allowable cost. For the remaining providers, reimbursement for outpatient hospital services shall be at 80.3% of allowable cost. For the purpose of establishing the proposed discount factor, a high-volume provider is defined as one, which is paid at least $200,000 during calendar year 2004. Any subsequent changes to the discount will require HHSC to hold a public hearing on proposed reimbursements before [the] HHSC approves any changes. The purpose of the hearing is to give interested parties an opportunity to comment on the proposed reimbursements. Notice of the hearing will be provided to the public. The notice of the public hearing will identify the name, address, and telephone number to contact for the materials pertinent to the proposed reimbursements. At least ten working days before the public hearing takes place, material pertinent to the proposed change will be made available to the public. This material will be furnished to anyone who requests it. After the public hearing, if negative comments are received, a summary of the comments made during the public hearing will be presented to [the] HHSC. Reimbursement for outpatient hospital surgery is limited to the lesser of the amount reimbursed to ambulatory surgical centers (ASCs) for similar services, the hospital's actual charge, the hospital's customary charge, or the allowable cost determined by the commission or its designee.

(3) Variances shall be accounted for in the Texas State Plan for Medical Assistance or as otherwise specified by the commission.

(4) Except as otherwise provided in this chapter [ Notwithstanding other provisions of this chapter] and subject to the availability of funds, supplemental payments will be made each state fiscal year in accordance with this paragraph to eligible hospitals that serve high volumes of Medicaid and uninsured patients.

(A) Effective September 1, 2009, supplemental payments to certain eligible publicly-owned or -affiliated urban hospitals are determined and paid in accordance with §355.8068 of this title (relating to Supplemental Payments to Certain Urban Hospitals). [Supplemental payments are available under this paragraph for outpatient hospital services provided by a non-state owned or operated, publicly-owned hospital or hospital affiliated with a hospital district in Bexar, Dallas, Ector, El Paso, Harris, Lubbock, Nueces, Tarrant, and Travis counties on or after July 6, 2001. Supplemental payments will be made for outpatient services on or after June 11, 2005, for Midland, Potter, and Randall Counties.]

(B) Notwithstanding the provisions of subparagraph (A) of this paragraph, all hospitals that are eligible to receive funding under §355.8063(t)(2)[(4)] of this title shall also be eligible to receive funding under this paragraph. Supplemental payments will be made for outpatient services on or after June 11, 2005, for hospitals in Hidalgo, Maverick, Montgomery, Travis, Bexar, and Webb counties. Supplemental payments will be made for outpatient services on or after November 12, 2005, for eligible hospitals in all other counties in the State of Texas.

(C) Notwithstanding the provisions of subparagraphs (A) and (B) of this paragraph, all hospitals that are eligible to receive funding under §355.8069 of this title (relating to Supplemental Payments to Certain Rural Public Hospitals) shall also be eligible to receive funding under this paragraph. Supplemental payments are available under this section for outpatient hospital services provided by certain rural public hospitals on or after September 1, 2007.

(D) State funding for supplemental payments authorized under this paragraph will be limited to and obtained through intergovernmental transfers of local or hospital district funds. State funding for supplemental payments authorized under subparagraph (B) of this paragraph will be limited to and obtained through intergovernmental transfers of local governmental entity or hospital district funds or transfer of State General Revenue. The supplemental payments described in this subsection will be made in accordance with the applicable regulations regarding the Medicaid upper payment limit provisions codified at 42 CFR [C.F.R.] §447.321.

[(E) The non-state owned or operated, publicly-owned hospital or hospital affiliated with a hospital district in a county listed in subparagraph (A) of this paragraph that incurs the greatest amount of cost for providing services to Medicaid and uninsured patients will be eligible to receive supplemental payments. Any hospital eligible under subparagraph (B) of this paragraph will be eligible to receive supplemental payments. The supplemental payments authorized under this subsection are subject to the following limits:]

[(i) In each state fiscal year the amount of inpatient supplemental payments and outpatient supplement payments may not exceed the hospital's "hospital specific limit," as determined under §355.8065(f)(2)(E) of this title (relating to Reimbursement to Disproportionate Share Hospitals (DSH)) for DSH hospitals; and]

[(ii) The amount of outpatient supplemental payments and fee-for-service Medicaid outpatient payments the hospital receives in a state fiscal year may not exceed Medicaid billed charges for outpatient services provided by the hospital to fee-for-service Medicaid recipients in accordance with 42 C.F.R. §447.325.]

(E) [(F)] An eligible hospital will receive quarterly supplemental payments. The quarterly payments will be limited to one-fourth of the difference between the hospital's Medicaid fee-for-service outpatient Medicaid payments received and 100% of Medicaid allowable outpatient hospital cost. Medicaid payments and cost will be based on a twelve consecutive-month period of fee-for-service claims data selected by HHSC.

(F) [(G)] For purposes of calculating the "hospital specific limit" under this paragraph, the "cost of services to uninsured patients" and "Medicaid shortfall," as defined by §355.8065(b)(5) and (16) of this title, will be adjusted as follows:

(i) The [the] amount of Medicaid payments (including inpatient and outpatient supplemental payments) that exceed Medicaid cost will be subtracted from the "Medicaid Shortfall."

(ii) The amount of the "Medicaid shortfall," as adjusted in accordance with clause (i) of this subparagraph, will be subtracted from the "cost of services to uninsured patients" to ensure that, during any state fiscal year, a hospital does not receive more in total Medicaid payments (inpatient and outpatient payments, graduate medical education payments, supplemental payments and disproportionate share hospital payments) than its cost of serving Medicaid patients and patients without health insurance.

(5) Notwithstanding other provisions of this section [ attachment], supplemental payments will be made each state fiscal year in accordance with this subsection to state government-owned or operated hospitals for outpatient services provided to Medicaid patients.

(A) Supplemental payments are available under this subsection for outpatient hospital services provided by state government-owned or operated hospitals on or after December 13, 2003. To qualify for a supplemental payment, the hospital must be owned or operated by the state of Texas.

(B) The aggregate supplemental payment amount will be the annual difference between the aggregate upper payment limit and the outpatient fee-for-service Medicaid payments made to the state government-owned or operated hospitals under this section [attachment ]. The aggregate upper payment limit will be calculated, based on Medicare payment principles and in accordance with the federal upper limit regulations at 42 CFR §447.321, using the most recent cost report data available.

(C) The amount of the supplemental payment made to each state government-owned or operated hospital will be determined by:

(i) dividing each hospital's fee-for-service Medicaid payments by the sum of the Medicaid fee-for-service payments of all state government-owned of operated hospitals; and

(ii) multiplying the percentage calculated in clause (i) of this subparagraph by the aggregate supplemental payment calculated in subparagraph (B) of this paragraph.

(D) Supplemental payments determined under this subsection will be calculated annually and paid quarterly.

(E) Supplemental payments made under this subsection when combined with other outpatient payments made under this section [attachment ] shall not exceed the maximum amounts allowable under applicable federal regulations at 42 CFR §447.325.

(b) Title XIX providers may not carry forward those unreimbursed costs attributed to either the lower costs or charge limitations authorized by 42 CFR [Code of Federal Regulations] §405.455 et seq., effective for all accounting periods beginning on or after January 1, 1982.

(c) The direct and indirect costs of caring for charity patients shall have no relationship to eligible recipients of the Texas Medical Assistance program and are not allowable costs under the Texas Title XIX Medical Assistance program. Obligations by hospitals to provide free care, under the Hill-Burton Act or any other arrangement as a condition to secure federal grants or loans, are not recognized as a cost under the Texas Medical Assistance program.

(d) The contents of subsections (a) - (c) of this section do not describe the amount, duration, or scope of services provided to eligible recipients under the Texas Medical Assistance Program.

§355.8063.Reimbursement Methodology for Inpatient Hospital Services.

(a) - (s) (No change.)

(t) Non-State Owned Hospital Supplemental Inpatient Payments. Except as otherwise provided in this chapter [ Notwithstanding other provisions of this chapter ], supplemental payments will be made each state fiscal year in accordance with this subsection to eligible hospitals that serve high volumes of Medicaid and uninsured patients.

(1) Effective September 1, 2009, supplemental payments to certain eligible publicly-owned or -affiliated urban hospitals are determined and paid in accordance with §355.8068 of this title (relating to Supplemental Payments to Certain Urban Hospitals).

[(1) Supplemental payments are available under this subsection for inpatient hospital services provided by a publicly-owned hospital or hospital affiliated with a hospital district in Bexar, Dallas, Ector, El Paso, Harris, Lubbock, Nueces, Midland, Potter, Randall, Tarrant, and Travis counties. Supplemental payments will be made for inpatient services on or after July 6, 2001, for Bexar, Dallas, Ector, El Paso, Harris, Lubbock, Nueces, Tarrant, and Travis counties. Supplemental payments will be made for inpatient services on or after February 7, 2004, for Midland County. Supplemental payments will be made for inpatient services on or after May 29, 2004 for Potter and Randall counties.]

[(2) State funding for supplemental payments authorized under this paragraph will be limited to and obtained through intergovernmental transfers of local or hospital district funds. The supplemental payments described in this paragraph will be made in accordance with the applicable regulations regarding the Medicaid upper limit provisions codified at 42 C.F.R. §447.272.]

[(3) In each county listed in paragraph (1) of this subsection, the publicly-owned hospital or hospital affiliated with a hospital district that incurs the greatest amount of cost for providing services to Medicaid and uninsured patients, will be eligible to receive supplemental high volume payments. The supplemental payments authorized under this paragraph are subject to the following limits:]

[(A) In each state fiscal year the amount of any inpatient supplemental payments and outpatient supplemental payments may not exceed the hospital's "hospital specific limit," as determined under §355.8065(f)(2)(E) of this chapter (relating to Reimbursement to Disproportionate Share Hospitals (DSH)) for DSH hospitals; and]

[(B) The amount of inpatient supplemental payments and fee-for-service Medicaid inpatient payments the hospital receives in a state fiscal year may not exceed Medicaid inpatient billed charges for inpatient services provided by the hospital to fee-for-service Medicaid recipients in accordance with 42 CFR §447.271.]

(2) [(4)] Notwithstanding the provisions of paragraph (1) [paragraphs (1) - (3)] of this subsection, a privately-operated hospital that executes an indigent care affiliation agreement (as defined in this subsection) with a hospital district or state or local governmental entity is eligible to receive supplemental payments under this paragraph. The purpose of the affiliation is to pay for unreimbursed care to the Medicaid population to ensure the continued viability of the communities' Medicaid providers.

(A) Supplemental payments will be made for inpatient services on or after June 11, 2005, for eligible hospitals in Hidalgo, Maverick, Montgomery, Travis, Bexar, and Webb counties. Supplemental payments will be made for inpatient services on or after November 12, 2005, for eligible hospitals in all other counties in the State of Texas.

(B) A hospital that is eligible to receive supplemental payments under this paragraph must provide a copy of the fully executed indigent care affiliation agreement to HHSC prior to payment of any supplemental funds under this paragraph.

(C) An eligible hospital must certify, on a form prescribed by HHSC and prior to payment of any supplemental funds under this paragraph, the following:

(i) No part of any supplemental payment paid to the hospital under this paragraph will be returned or reimbursed to the hospital district or state or local governmental entity;

(ii) No part of any supplemental payment paid to the hospital under this paragraph will be used to pay a contingent fee, consulting fee, or legal fee associated with the hospital's receipt of the supplemental funds; and

(iii) The person signing the certification on behalf of the hospital is legally authorized to bind the hospital and to certify the matters described in the certification.

(D) A hospital district or state or local governmental entity must certify, on a form prescribed by HHSC and prior to payment of any supplemental funds under this paragraph, the following:

(i) The hospital district or state or local governmental entity has not received and has no agreement to receive, any portion of the funds paid to an eligible hospital that has executed an affiliation agreement with the hospital district or state or local governmental entity;

(ii) The hospital district or state or local governmental entity has not entered into a contingent fee arrangement related to the hospital district's or state or local governmental entity's participation in the supplemental payment program authorized under this paragraph;

(iii) The hospital district or state or local governmental entity is authorized to participate in the supplemental payment program authorized under this paragraph pursuant to a vote of the hospital district's or state or local governmental entity's governing body in a public meeting preceded by public notice published in accordance with the hospital district's or state or local governmental entity's usual and customary practices or the Texas Open Meetings Act, as applicable;

(iv) All affiliation agreements, consulting agreements, or legal services agreements executed by the hospital district or state or local governmental entity related to the hospital district's or state or local governmental entity's participation in the supplemental payment program authorized under this paragraph are available for public inspection upon request.

(E) Beginning August 31, 2008, each participating hospital and hospital district or state or local governmental entity must submit a fully executed indigent care affiliation agreement as well as certification forms on or before August 31st of each fiscal year to be eligible to receive supplemental payments under this paragraph during the following fiscal year.

(F) If the federal Centers for Medicare and Medicaid Services (CMS), the United States Department of Health and Human Services, or other responsible legal authority recoups federal financial participation related to an eligible hospital's receipt and/or use of supplemental payments authorized under this paragraph, HHSC may recoup an amount equivalent to the amount of supplemental payments recouped by CMS. Supplemental payments under this paragraph may be subject to any adjustments for payments made in error, including, without limitation, adjustments under §371.1703 of this title (relating to recovery of overpayments), 42 CFR [C.F.R.] part 455, and chapter 403, Texas Government Code. HHSC will send a notice of recoupment to the hospital and will recoup from any current or future Medicaid payments as follows:

(i) HHSC will recoup from the hospital against which the disallowance was directed;

(ii) If, within 30 days of the hospital's receipt of HHSC's written notice of recoupment, the hospital has not paid the full amount of the recoupment or entered into an agreement, in writing, with HHSC, HHSC may withhold any or all Medicaid payments from the hospital until such time as HHSC has recovered an amount equal to the hospital's disallowance. If HHSC determines that recovery through a withhold is not feasible, HHSC may recover the amount of the CMS recoupment from the other affiliated hospitals that are a party to the same indigent care affiliation under this paragraph through a withhold of any or all Medicaid payments until such time as HHSC has recovered an amount equal to the hospital's disallowance unless the recoupment is prohibited by law.

(G) Funding of supplemental payments under this paragraph shall be disbursed as follows:

(i) Supplemental payments available under this paragraph shall be payable to a hospital affiliated with a hospital district or state or local governmental entity in proportion to the amount transferred by the hospital district or state or local governmental entity affiliated with the private hospital, subject to legislative appropriation. Such supplemental payments will be based on calculations made by HHSC and will be made quarterly, beginning April 1, 2007.

(ii) If a hospital district or state or local governmental entity does not transfer to HHSC sufficient funding for the time period specified to generate the full amount allowable under this paragraph, each hospital affiliated with that hospital district or state or local governmental entity will receive a portion of the supplemental payment under paragraph (3) [(5)] of this subsection based on that hospital's percentage of the full entitlement for all hospitals affiliated with that hospital district or state or local governmental entity.

(iii) HHSC will issue one supplemental payment for a hospital for inpatient services the hospital provided on or before August 31, 2006, if the hospital meets the criteria of subparagraphs (A) - (C) of this paragraph no later than May 31, 2007, and if a sufficient amount of funds (as determined by HHSC) are transferred to HHSC to support the one-time supplemental payment no later than December 1, 2007. A hospital district or state or local governmental entity must notify HHSC in a manner prescribed by HHSC of the date it intends to transfer funds related to the supplement payment authorized under this subparagraph. The supplemental payment will be processed for each participating hospital based on the amount of funds transferred to HHSC up to the calculated maximum payment for the applicable retroactive time period. A hospital that satisfies the criteria of subparagraphs (A) - (C) of this paragraph after May 31, 2007, will not be eligible for the supplemental payment authorized under this subparagraph but will be eligible to receive regular supplemental payments under paragraph (3) [(5)] of this subsection. If the full amount of the calculated intergovernmental transfer (IGT) transfer is not made by the transfer deadlines specified by HHSC, the supplemental payment for that time period will be calculated based on the amount of the funds transferred. Regular quarterly supplemental payments for state fiscal year 2007 for which IGT funds are received will be made, beginning in April 2007, to each participating hospital for which a copy of the fully executed indigent care affiliation agreement, as well as any required certification forms, have been timely received.

(iv) Annual retroactive supplemental payments will be processed once for each state fiscal year, beginning with state fiscal year 2007, in September of the following calendar year (September 2008 for state fiscal year 2007) provided HHSC determines there is sufficient room available for funding under the applicable aggregate upper payment limit for private hospitals. Hospital districts or state or local governmental entities must notify HHSC Rate Analysis in a manner prescribed by HHSC if they intend to transfer funds related to the annual retroactive payments. If HHSC determines that the retroactive funding claimed pursuant to this clause will exceed the applicable aggregate upper payment limit for private hospitals, HHSC will reduce the amount of the transfer for the retroactive payment under this clause proportionately for each participating private hospital in an amount sufficient to ensure compliance with the applicable aggregate upper payment limit. If the retroactive supplemental payment calculation results in the verification that a specific hospital or hospitals were overpaid for the retroactive time period, HHSC will initiate the same process as outlined in subparagraph (F)(i) - (ii) of this paragraph to recover the amount of the overpayment.

(H) State funding for supplemental payments authorized under this paragraph will be limited to and obtained through intergovernmental transfers of local governmental entity or hospital district funds or transfer of State General Revenue. The supplemental payments described in this subsection will be made in accordance with the applicable regulations regarding the Medicaid upper limit provisions codified at 42 CFR [C.F.R.] §447.272.

(3) [(5)] An eligible hospital under this subsection will receive quarterly supplemental payments. The quarterly payments will be limited to one-fourth of the lesser of:

(A) The difference between the hospital's Medicaid inpatient billed charges and Medicaid payments the hospital receives for services provided to fee-for-service Medicaid recipients. Medicaid billed charges and payments will be based on a twelve consecutive-month period of fee-for-service claims data selected by HHSC; or

(B) The difference between the hospital's "hospital specific limit," as determined under §355.8065(f)(2)(E) of this chapter (relating to Reimbursement to Disproportionate Share Hospitals (DSH)) for DSH hospitals and the hospital's DSH payments as determined by the most recently finalized DSH reporting period.

(4) [(6)] For purposes of calculating the "hospital specific limit" in paragraph (3) [(5)](B) of this subsection, the "cost of services to uninsured patients, " as defined by §355.8065(b)(5) of this chapter and "Medicaid shortfall," as defined by §355.8065(b)(16) of this chapter, will be adjusted as follows:

(A) The amount of Medicaid payments (including inpatient and outpatient supplemental payments) that exceed Medicaid cost will be subtracted from the "Medicaid shortfall."

(B) The amount of the "Medicaid shortfall," as adjusted in accordance with subparagraph (A) of this paragraph, will be subtracted from the "cost of services to uninsured patients" to ensure that, during any state fiscal year, a hospital does not receive more in total Medicaid payments (inpatient and outpatient rate payments, graduate medical education payments, supplemental payments and disproportionate share hospital payments) than its cost of serving Medicaid patients and patients with no health insurance.

(u) - (w) (No change.)

§355.8068.Supplemental Payments to Certain Urban Hospitals.

(a) Introduction. Notwithstanding other provisions of this subchapter, supplemental payments are available under this section for inpatient and outpatient hospital services provided by eligible publicly-owned or -affiliated urban hospitals that serve high volumes of Medicaid and uninsured patients.

(b) Definitions. When used in this section, the following terms have the following meanings, unless the context clearly indicates otherwise.

(1) Disproportionate Share Hospital--Hospitals participating in the Texas Medical Assistance (Medicaid) program that meet the conditions of participation and that serve a disproportionate share of low-income patients are eligible for additional reimbursement from the disproportionate share hospital (DSH) fund.

(2) Disproportionate Share Hospital (DSH) Limit--DSH Limit has the meaning assigned to the term "hospital specific limit" by §355.8065 of this title (relating to Additional Reimbursement to Disproportionate Share Hospitals).

(3) DSH Room--The difference between a hospital's DSH Limit and the total Medicaid DSH payments to the hospital for the fiscal year.

(4) DSH Reporting Period--Disproportionate Share Payments associated with the most recent state fiscal period between September 1 and August 31.

(5) Medicaid Allowable Outpatient Hospital Costs--Costs remaining when total billed outpatient hospital charges are reduced by a hospital outpatient reduction factor in accordance with §355.8061(a)(2) of this title (relating to Payment for Hospital Services).

(6) Public Funds--Funds derived from taxes, assessments, levies, investments, and other public revenues within the sole and unrestricted control of the governmental entity that owns or that is affiliated with the hospital. Public funds do not include gifts, grants, trusts, or donations, the use of which is conditioned on supplying a benefit solely to the donor or grantor of the funds, such as the private operator of a hospital district's facility.

(7) Publicly-Owned or -Affiliated Hospital--A hospital owned by or affiliated with a city, county, hospital authority or hospital district.

(c) Eligible hospitals. Supplemental payments are available under this section for inpatient and outpatient hospital services provided by publicly-owned hospitals in Bexar, Brazoria, Dallas, Ector, El Paso, Fort Bend, Harris, Lubbock, Nueces, Midland, Tarrant, Travis, and Wichita counties; and a hospital located in Potter County that is affiliated with the Amarillo Hospital District. The publicly-owned or -affiliated hospital or hospitals in each listed county that incur the greatest cost(s) for providing services to Medicaid and uninsured patients may be eligible to receive supplemental payments. No more than two hospitals in any county may be eligible.

(d) Dates of eligibility. Supplemental payments will be made for inpatient and outpatient services on or after July 6, 2001, for hospitals in Bexar, Dallas, Ector, El Paso, Harris, Lubbock, Nueces, Tarrant, and Travis counties. Supplemental payments will be made for inpatient services on or after February 7, 2004, for hospitals in Midland County. Supplemental payments will be made for inpatient services on or after May 29, 2004, for a hospital in Potter County affiliated with the Amarillo Hospital District. Supplemental payments will be made for outpatient services on or after June 11, 2005, for hospitals in Midland County and a hospital in Potter County affiliated with the Amarillo Hospital District. Supplemental payments will be made for inpatient and outpatient services provided on or after September 1, 2009, for hospitals in Brazoria, Fort Bend, and Wichita counties, as well as any hospital in Dallas County or Harris County that was not eligible as of February 7, 2004, subject to the limits in subsection (c) of this section.

(e) Source of funding. State funding for supplemental payments authorized under this section will be limited to and obtained through intergovernmental transfers of public funds.

(f) Inpatient Supplemental Payments. Hospital inpatient supplemental payments are calculated as follows:

(1) Supplemental payment limits. The supplemental payments authorized under this subsection are subject to the following limits:

(A) For Disproportionate Share Hospitals, in each state fiscal year the amount of any inpatient supplemental payments and outpatient supplemental payments may not exceed the hospital's DSH Limit; and

(B) For all eligible hospitals, the amount of inpatient supplemental payments and fee-for-service Medicaid inpatient payments the hospital receives in a state fiscal year may not exceed Medicaid inpatient billed charges for services provided by the hospital to fee-for-service Medicaid recipients in accordance with 42 Code of Federal Regulations (CFR) §447.271.

(2) Payment frequency and methodology. An eligible hospital under this subsection will receive quarterly supplemental payments.

(A) For Disproportionate Share Hospitals, the quarterly payments will be limited to the lesser of:

(i) One-fourth of the difference between all payments received for a hospital's eligible paid inpatient Medicaid claims and the corresponding billed charges for those claims for services provided to fee-for-service Medicaid recipients during a twelve-month period designated by the Health and Human Services Commission (HHSC); or

(ii) One-fourth of the DSH Room as calculated for the most recently finalized DSH reporting period.

(B) For non-Disproportionate Share Hospitals, the quarterly payments will be limited to one-fourth of the difference between all payments received for a hospital's eligible paid inpatient Medicaid claims and the corresponding billed charges for those claims for services provided to fee-for-service Medicaid recipients during a twelve-month period designated by HHSC.

(3) Aggregate Medicaid upper payment limit. The supplemental payments described in this subsection will be made in accordance with the applicable regulations regarding the Medicaid upper payment limit provisions codified at 42 CFR §447.272.

(g) Outpatient Supplemental Payments. Hospital outpatient supplemental payments are calculated as follows:

(1) Supplemental payment limits. The supplemental payments authorized under this subsection are subject to the following limits:

(A) For Disproportionate Share Hospitals, in each state fiscal year the amount of any inpatient supplemental payments and outpatient supplemental payments may not exceed the hospital's DSH Limit; and

(B) For all eligible hospitals, the amount of outpatient supplemental payments and fee-for-service Medicaid outpatient payments the hospital receives in a state fiscal year may not exceed Medicaid billed charges for outpatient services provided by the hospital to fee-for-service Medicaid recipients in accordance with 42 CFR §447.325.

(2) Payment frequency and methodology. An eligible hospital may receive quarterly supplemental payments. The quarterly payments will be limited to one-fourth of the difference between the hospital's Medicaid fee-for-service outpatient payments received and 100% of Medicaid allowable outpatient hospital costs during a twelve-month period designated by HHSC.

(3) Aggregate Medicaid Upper Payment Limit. The supplemental payments described in this subsection will be made in accordance with the applicable regulations regarding the Medicaid upper payment limit provisions codified at 42 CFR §447.321.

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 8, 2009.

TRD-200902276

Steve Aragón

General Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: July 19, 2009

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