Proposed Rules Title 1

TITLE 1. ADMINISTRATION

Part 1. OFFICE OF THE GOVERNOR

Chapter 4. TEXAS MILITARY PREPAREDNESS COMMISSION

Subchapter B. DEFENSE ECONOMIC ADJUSTMENT ASSISTANCE GRANT PROGRAM

1 TAC §§4.30 - 4.40

The Office of the Governor, Texas Military Preparedness Commission (Office) proposes new Chapter 4, Subchapter B, §§4.30 - 4.40, setting forth rules of the Defense Economic Adjustment Assistance Grant Program (Program).

The new rules are proposed because Senate Bill 1956 of the 80th Legislature updated Texas Government Code, Chapter 486 to reflect the current status of the Program under the Office. The new rules will replace previous rules proposed for repeal in this issue of the Texas Register. The new rules are necessary to accurately reflect current law and to reflect current program practices.

Proposed §4.30 sets forth the background and definitions of the program.

Proposed §4.31 sets forth the time limit in which grant funds must be expended.

Proposed §4.32 sets forth the eligibility requirement for an entity to apply for funds.

Proposed §4.33 provides the types of acceptable source documentation.

Proposed §4.34 sets forth maximum and minimum grant award amounts.

Proposed §4.35 sets forth the documentation requirements for the application.

Proposed §4.36 sets forth the processing and review of applications.

Proposed §4.37 sets forth the availability of funds.

Proposed §4.38 sets forth the Awardee responsibilities.

Proposed §4.39 sets forth the Commission's responsibilities.

Proposed §4.40 sets forth the reporting responsibilities of the grant recipient.

Al Casals, Executive Director of the Office, has determined that for the first five-year period that the proposed rules are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the new rules.

Mr. Casals has also determined that each year of the first five years that the rules are in effect, the public will benefit from a better understanding of the management of the Office and the Program. There will be no effect on small businesses. There is no anticipated economic cost to persons and no private property rights are affected by the new rules.

Comments on the proposed rules may be submitted within 30 days of the publication of this notice to Michael D. Bryant, Assistant General Counsel, 1100 San Jacinto, or P.O. Box 12428, Austin, Texas 78711-2428. Comments may be faxed to Mr. Bryant at (512) 463-1932 or submitted electronically to michael.bryant@governor.state.tx.us within 30 days.

The new rules are proposed under Texas Government Code §486.002(d) which authorizes the Office to adopt rules necessary for the Program and Texas Government Code, Chapter 2001, Subchapter B, which prescribes the process for rulemaking by state agencies.

Texas Government Code, Chapter 486, creating the Defense Economic Adjustment Assistance Grant Program, is affected by the proposed rules.

§4.30.Introduction and Purpose.

(a) Background. The Texas Defense Economic Adjustment Assistance Grant Program was authorized by the 75th Legislature to provide state funds to assist communities that have been adversely impacted by decreased defense expenditures and defense worker employment. Subsequently, the 79th Legislature amended the program to include defense communities that have been positively impacted. The program provides affected municipalities, counties, public junior college districts, a campus or extension center of the Texas State Technical College System, or regional planning commission access to state funding. The funds may be used for the purpose of acquiring federal grant assistance or for sharing in the costs of property purchases from the United States Department of Defense or its designated agent, new construction, rehabilitation, or renovation of facilities or infrastructure, the purchase of capital equipment or project related insurance. If the grantee is a public junior college or technical college, grant proceeds may be used to purchase or lease equipment to train defense workers whose jobs have been threatened or lost.

(b) The primary goal of the program is to increase employment opportunities for dislocated defense workers and residents of adversely or positively affected defense communities and reuse vacated property as efficiently as possible.

(c) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Awardee--The local governmental entity whose application is approved by the governing board.

(2) Defense worker--

(A) an employee of the United States Department of Defense, including a member of the armed forces and a government civilian worker;

(B) an employee of a government agency or private business, or entity providing a Department of Defense related function, who is employed on a defense facility;

(C) an employee of a business that provides direct services or products to the Department of Defense and whose job is directly dependent on defense expenditures;

(D) an employee of a local, state or federal agency that provides direct services through contract or memorandum of agreement or an employee of a private business that provides direct services, supplies or equipment under a government contract or purchase agreement to the Department of Defense; or

(E) an employee or private contractor employed by the United States Department of Energy working on a defense or Department of Energy facility in support of a Department of Defense related project.

(3) Defense worker job--

(A) a Department of Defense authorized permanent position, such as a position contained on the appropriate unit manning documents; or

(B) a position held or occupied by one or more defense workers for more than 12 months.

(4) Commission--Texas Military Preparedness Commission.

(5) Executive Director--The executive director of the Texas Military Preparedness Commission or his designee.

(6) Financial partners--Federal and state agencies, private and public non-profit foundations, local taxing authorities, and private investors who agree to provide money for a project eligible for funding under this grant.

(7) Fiscal year--The State of Texas fiscal year, September 1 through August 31.

(8) Governing board--The Commissioners of the Texas Military Preparedness Commission.

(9) Local governmental entity--A municipality, county, public junior college district, campus or extension center of the Texas State Technical College System, or regional planning commission.

(10) Panel--The Defense Economic Adjustment Assistance Panel, a group of at least three and not more than five professional full-time employees from within the Governor's Office, who evaluate grant applications and make grant award recommendations to the governing body of the Texas Military Preparedness Commission.

(11) Public junior college--A public junior college district within the State of Texas, all or part of which is located in an adversely or positively affected defense community.

§4.31.Program Coverage.

State funds provided under the Defense Economic Adjustment Assistance Grant Program must be expended not later than the end of the second full fiscal year after the fiscal year in which the grant was awarded.

§4.32.Eligibility for Funds.

(a) A local governmental entity is eligible for a grant under this program if the Commission determines that it represents an adversely or positively affected defense community that requires assistance because of a significant loss or gain of defense worker jobs attributed to the following event(s):

(1) the proposed or actual establishment, realignment, or closure of a defense facility;

(2) the cancellation or termination of a United States Department of Defense contract or the failure of the Department of Defense to proceed with an approved major weapons system program;

(3) a publicly announced planned major reduction in Department of Defense spending that would directly and adversely affect the community;

(4) the closure or a significant reduction of the operations of a defense facility as the result of a merger, acquisition, or consolidation of a defense contractor operating the facility; or

(5) the gain of new or expanded military missions and defense workers, including military and civilian personnel, as a result of a Base Realignment and Closure.

(b) The loss of defense worker jobs is considered significant if, within the jurisdiction of the local governmental entity applying for the grant, a direct loss of defense worker jobs meets or exceeds the following:

(1) 2,500 defense worker jobs in any area of the municipality or county that is located in an urbanized area of a metropolitan statistical area as defined by the United States Census Bureau;

(2) 1,000 defense worker jobs in any area of the municipality or county that is not located in an urbanized area of a metropolitan statistical area as defined by the United States Census Bureau; or

(3) a defense worker job loss of one percent of the jobs in the municipality or county. The percentage of job loss is arrived at by dividing the number of defense worker jobs lost or projected to be lost by the total civilian employment in the municipality or county.

(c) The local governmental entity making application for the grant must provide adequate documentation of defense worker job loss during the period between the beginning of the federal fiscal year during which the event described in subsection (a) of this section occurred and the date that the event is substantially complete. In order to establish eligibility, this documentation must include:

(1) defense worker baseline data representing the number of defense workers employed during the fiscal year of the event described above;

(2) number of defense worker jobs lost during the period between the fiscal year that the event was announced and the date the event is substantially complete; and

(3) total number of people currently employed within the jurisdiction making application.

§4.33.Documentation.

Information from Department of Defense manpower or personnel records, socio-economic impact studies and Environmental Impact Statements, United States Census Bureau, Department of Labor, or Texas Workforce Commission reports or statistics are considered possible acceptable source documents. Other data provided by the local governmental entity and approved by the Commission may also serve as appropriate documented evidence of defense worker job loss or gain.

§4.34.Maximum and Minimum Awards.

(a) Amount. The minimum amount of award will be $50,000. The maximum amount of award will be $2 million.

(b) Percentage. The state may provide up to:

(1) 50% of the amount of matching money or investment that the local governmental entity is required to provide for acquiring federal grants;

(2) 50% of the local governmental entity's investment for qualifying redevelopment projects; or

(3) in cases where the local governmental entity demonstrates to the Commission that resources are not available because of a limited local governmental entity budget, 80% of the amount of matching money or investment required.

(1) Local governmental entities are encouraged to acquire financial assistance for eligible development projects from a variety of sources, including federal, state, local and private/public foundations. The Chief Financial Officer of the local governmental entity or the local governing body making application will provide certification demonstrating reasonable local community efforts to acquire funding from other sources when the state is the only other financial partner.

(2) Provision has been made to assist local communities unable, due to limited budget or resources, to provide 50% of the amount of matching money or investment required. Under these circumstances a local governmental entity may be eligible to receive a grant of 80% of the amount of matching money or project investment required. In making application under this provision, the Chief Financial Officer or the local governing body making application will certify that local community budget and resources are not adequate or available and provide specific information on local efforts to secure adequate funding. Justification should include an overview of the status of development sales tax efforts and bond authority.

§4.35.Application for Funds.

(a) The Commission may develop a formal application form to be included in the formal application process to assist in the evaluation of the grant submission. The application may require certain attachments and certifications.

(b) At a minimum the application for funds will include:

(1) a summary overview of the use of the funds:

(A) a general description of the project to be financed;

(B) an analysis of the importance of the project in the overall reuse or redevelopment plan of the defense site and the surrounding community;

(C) the total amount of state grant assistance required and partners involved in financing the project, along with their respective shares; and

(D) the total number of jobs to be created or retained as a result of the project.

(2) a brief summary of the event(s) that qualify the local government, under the eligibility criteria described above, to apply for the grant program; and

(3) an impact statement detailing the adverse or positive effect caused by the event(s) described in §4.32(a) of this title (relating to Eligibility for Funds) on the local governmental entity to include:

(A) a brief analysis of the loss or gain of defense worker jobs and the impact of job loss or gain on total employment within the governmental entity, to include total number of defense worker jobs lost or gained or predicted to be lost or gained and current and projected changes in the unemployment rate;

(B) an analysis of the impact of the event on the economy of the community or region; and

(4) a detailed description of the projected use of funds to allow determination of project eligibility for funding to include, as appropriate:

(A) a preapplication for federal funds, if state funds are to be part of a local share. It is not necessary to receive final approval for federal grants to apply for state funds under this program;

(B) a description of property to be purchased from the Department of Defense or its agent;

(D) a description of capital equipment to be purchased or a description of equipment to be purchased or leased for training purposes; and

(E) a description of insurance to be purchased, including type and coverage limits.

(5) a financial plan for the project detailing the following:

(A) breakdown of project costs;

(B) funding sources for the project and percentage contribution; and

(C) certification for state funding where the state is the sole partner in financing a project or in cases where the local governmental entity is requesting state participation in excess of a 50% share.

(6) a summary of the extent to which the local governmental entity has used its existing resources to promote local economic development, including:

(A) brief description of past general local economic development efforts which may include:

(i) adoption of an economic development sales tax;

(ii) establishment and financing of a local industrial development corporation; and

(iii) use of the Texas Capital Fund, Texas Leverage Fund and local economic development bond initiatives.

(B) a summary of current efforts to support redevelopment necessary to promote private investment and create or retain jobs in the area, including:

(i) financing of capital improvement projects and equipment;

(ii) support of site operations and maintenance;

(iii) availability of tax incentives and/or establishment of a defense readjustment zone or enterprise zone; and

(iv) local funding constraints.

(7) the amount money previously received under this program and number of applications submitted;

(8) the anticipated number of permanent jobs and the economic benefit to the community if the application is successful and the project is funded. If the application includes renovation or construction, interim jobs should be included and referred to as interim jobs; and

(9) name and contact information for person responsible for the grant application.

§4.36.Processing and Review of Applications.

(a) The local governing body will submit applications for the program to the Executive Director of the Texas Military Preparedness Commission.

(b) The Texas Military Preparedness Commission will:

(1) publicize the program to potential applicants and provide grant solicitation information; and

(2) evaluate each application for completeness. The Texas Military Preparedness Commission will work closely with the applicant to ensure all relevant information is included in the application.

(1) appoint a review panel consisting of three to five members to evaluate applications; and

(2) appoint a review panel chairman.

(d) The review panel will:

(1) review applications, score, and make recommendations to the governing board;

(2) develop procedures to ensure that one adversely affected defense community is not favored over another in recommending funding;

(3) provide evaluations and recommendations for grant awards for all grant applications received based on the following criteria:

(A) the significance of the adverse or positive effect within the local governmental entity, including the number of jobs lost or gained in relation to the workforce in the local governmental entity's jurisdiction and the effect on the area's current and/or projected economy and tax revenue;

(B) the extent to which the local governmental entity has used its existing resources to promote local economic development;

(D) the anticipated number of jobs to be created in relation to the amount of the grant sought; and

(E) the extent to which the grant will affect the region in which the local governmental entity is located.

(e) The governing board of the Commission will approve or disapprove the award of the grant. Award of the grant may be contingent on the receipt of federal grants or other partnership monies necessary to complete the project.

§4.37.Availability of Funds.

(a) Funds commitment. Once approved by the governing board for award, program money becomes committed to the awardee subject to the availability of funds.

(1) When the Commission determines that a qualified Defense Economic Adjustment Assistance Grant Program awardee proposal has been rejected by the federal agency or other financial partners, the commitment of funding previously committed will be withdrawn and the funding amount re-allocated to other applicants. The awardee will be given 30 days to renegotiate financial arrangements prior to withdrawal of the state program commitment.

(2) When the Commission has determined that an awardee has secured final approval from federal agencies and other financial partners, program funds will be committed to the awardee, subject to availability of funds.

(3) If the only partner in the project is the local governmental entity, funds will be committed to the entity upon final approval and encumbrance of funds by the awardee.

(b) Non-availability of funds. The Commission expects that availability of program funds will decrease significantly as a state funding biennium progresses. When all monies appropriated by the Texas Legislature to the Commission for a funding biennium have been committed to qualified awardees, remaining applicants shall be notified that funds are no longer available.

§4.38.Awardee Responsibilities.

In order to receive disbursement of grant program funds that have been committed to them, awardees will be required by contract with the Commission to:

(1) have a system established in writing to ensure that appropriate officials provide necessary internal reviews and approvals for the expenditure of funds and for monitoring project performance and adherence to federal award and/or state terms and conditions;

(2) have financial management systems that meet the requirements of the Commission;

(3) retain financial management records, supporting documents, statistical records, and other materials pertinent to the award for a period of three or more years following submission of the final project report and make these records available to the Commission upon request;

(4) be responsible for performing the duties and tasks described under all project grant agreements with federal and other financial partners;

(5) provide the Commission with copies of all project documentation required by federal or other financial partners;

(6) provide project demonstrations, site inspections, photo or other additional documentation, including written materials to substantiate benefit to the Texas economy, as requested by the Commission;

(7) honor intellectual property rights of project participants as outlined in any agreements made to facilitate fulfillment of award activities;

(8) agree that the award may be suspended or terminated if the awardee fails to comply with Commission terms and conditions of the award or if the financial partnership is suspended or terminated;

(9) agree that no person shall be excluded from participation in, be denied benefits of, or be otherwise subjected to discrimination under the Defense Economic Adjustment Assistance Grant Program based on grounds of race, color, national origin, religious affiliation, handicap, or sex;

(10) agree that the Commission shall not be held liable in the event of damages to persons or property which may occur in the course of activities conducted as a result of the award or its cancellation or withdrawal; or

(11) agree to such other terms and conditions as the Commission may require.

§4.39.Commission Responsibilities.

In carrying out its duties and responsibilities under the Act, the Commission shall:

(1) solicit grant applications and publicize application deadlines;

(2) establish and conduct the evaluation and award process in a responsive manner to maximize the opportunity to acquire federal and other funding;

(3) develop contracts with awardees that include sufficient performance measures, audit requirements, and reporting requirements to ensure prudence and due diligence in the expenditure of state funds; and

(4) minimize reporting requirements that may be repetitive of reporting required by federal grant agencies or unnecessary for the effective monitoring of the program.

§4.40.Reporting Responsibilities.

(a) Disbursement of funds will be conditioned on the receipt of documentary evidence of completion of project phases as set forth in the grant contract. The evidence required will be tailored to the project and included in the contract. As a general rule, funds are disbursed as follows:

(1) fifty percent of the total contract amount upon presentation of required documentation of

(A) receipt of federal or other funds;

(B) permit approval;

(D) other relevant evidence of satisfactory planning and commencement of the project set forth in the contract.

(2) forty percent of the total contract amount upon presentation of required documentation of fifty percent completion of the project; and

(3) ten percent of the total contract amount upon presentation of required documentation of completion of the project.

(b) After completion of the project, the awardee will provide the following milestones and updates, including photographs where appropriate:

(1) base line and semi-annual data on the impact of the project on the local economy over a two year period beginning with the completion of the project;

(2) base-line and semi-annual data on any jobs generated by the project and data on the employment of dislocated defense and economically disadvantaged workers for a period of two years beginning with the completion of the project;

(3) satisfactory documentation of required job creation as required by the contract, which may include but is not limited to payroll records; and

(4) other relevant documentation of job creation and economic impact set forth in the contract.

(c) Throughout the project period, the awardee must provide copies of all reports required by federal agencies pursuant to the terms of individual federal grants received, within 30 days of their submission to the granting agencies.

(d) Failure to submit reports in a timely and satisfactory manner may result in the withholding of funds due or requested by the awardee. Failure to document post-completion requirements may result in the return of funds to the Commission as set forth in the contract.

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 20, 2007.

TRD-200702556

Al Casals

Executive Director, Texas Military Preparedness Commission

Office of the Governor

Earliest possible date of adoption: August 5, 2007

For further information, please call: (512) 475-1475

Part 3. OFFICE OF THE ATTORNEY GENERAL

Chapter 61. CRIME VICTIMS' COMPENSATION

Subchapter A. SCOPE AND CONSTRUCTION OF RULES AND GENERAL PROVISIONS

1 TAC §61.3

The Office of the Attorney General (OAG) proposes an amendment to Subchapter A (Scope and Construction of Rules and General Provisions), §61.3, concerning Closing Claims. The proposed amendment will better serve victims of crime by improving the administration of the Texas Crime Victims' Compensation Program.

According to Article I, Section 31 of the Texas Constitution, the Texas Compensation to Victims of Crime Fund may be expended as provided by law only for delivering or funding victim-related compensation, services, or assistance. Article 56.33 of the Texas Code of Criminal Procedure provides that the OAG shall adopt rules governing the administration of the Victims of Crime Fund, including rules relating to the method of filing claims, proof of entitlement to compensation, and review of health care services by the Crime Victims' Compensation Program (CVC).

The proposed amendment accurately implements, interprets, and prescribes the law and minimum standards of practices, procedures, and policies of the OAG relating to the administration of the Texas Compensation to Victims of Crime Fund as required by the Administrative Procedures Act, Texas Government Code, Chapter 2001.

The proposed amendment to §61.3 authorizes the OAG to close claims in which a victim or claimant fails to report collateral sources or if a victim dies and there is no claimant on the application.

Herman Millholland, Chief, Crime Victim Services Division of the Office of the Attorney General, has determined that for each year of the first five years that the proposed amendment will be in effect, there will be no additional estimated costs to the state and to local governments expected as a result of enforcing or administering the proposed amendment. Mr. Millholland has determined that for each year of the first five years that the proposed amendment will be in effect, there will be no additional estimated reductions in costs to the state and to local governments as a result of enforcing or administering the proposed amendment. Mr. Millholland has determined that for each year of the first five years that the proposed amendment will be in effect, there will be no additional estimated loss or increase in revenues to the state or to local governments as a result of enforcing or administering the proposed amendment. Mr. Millholland has determined that for each year of the first five years that the proposed amendment will be in effect, that enforcing or administering the amended rule does not have foreseeable implications relating to cost or revenues of the state or local governments.

Mr. Millholland has determined that for each year of the first five years that the proposed amendment will be in effect, the anticipated public benefit is clarification and modification of existing policies, with the additional public benefit of having a more effective and efficient administration of a state grant fund program for victim-related services and assistance to certain crime victims. Mr. Millholland has determined that for each year of the first five years that the proposed amendment will be in effect, the probable economic cost to persons and small businesses required to comply with the proposed amendment is minimal because the proposed amendment does not significantly change the requirements for submitting applications to the OAG for Crime Victims' Compensation.

Mr. Millholland determined that for each of the first five years the amendment is in effect the public benefit anticipated as a result of the amendment will be a savings estimated at $1.2 million per year.

Comments may be submitted no later than 30 days from the date of publication to Rita Baranowski, Assistant Attorney General, Crime Victim Services Division, Office of the Attorney General, P.O. Box 12198, Mail Code 005, Austin, Texas 78711-2548, or by telephone (512) 936-1240, or by e-mail to Rita.Baranowski@oag.state.tx.us.

The amendment is proposed under Texas Code of Criminal Procedure, Article 56.33, which authorizes the OAG to amend rules pertaining to its administration.

The amendment affects Texas Code of Criminal Procedure, Chapter 56.

§61.3.Closing Claims.

(a) A claim for an award may be closed at the discretion of the OAG if any of the following conditions occurs:

(1) The victim has been awarded the statutory maximum amount of compensation allowed under Tex. Code Crim. Proc. Art. 56.42, in accordance with the law in effect at the date of the criminally injurious conduct ; [ : ]

(2) - (7) (No change.)

(8) The victim or claimant fails to respond within a 30-day period to a request made by the OAG for information; [ or ]

(9) The OAG is unable, within 30 days of receiving an application, to obtain information substantiating that a crime occurred ; [ . ]

(10) The victim or claimant fails to report a collateral source or any other source of income; or

(11) If a victim is approved for compensation benefits and subsequently dies without a claimant on the application, the claim will be closed. Payment may only be made on crime related bills submitted to the OAG prior to the victim's death which meet all payment requirements. Upon the victim's death, the individual who is legally charged with administering the victim's estate may request to become a claimant and the claim may remain open or be reopened for payment of crime related expenses.

(b) (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 June 25, 2007.

TRD-200702627

Stacey Napier

Deputy Attorney General

Office of the Attorney General

Earliest possible date of adoption: August 5, 2007

For information regarding this publication, contact Lauri Saathoff, Agency Liaison, at (512) 463-2096.

Subchapter B. DEFINITIONS

1 TAC §61.101

The Office of the Attorney General (OAG) proposes an amendment to Subchapter B (Definitions), §61.101, concerning Definitions. The proposed amendment will better serve victims of crime by improving the administration of the Texas Crime Victims' Compensation Program.

The proposed amendment to §61.101 clarifies that CVC can pay one time only for medically prescribed assistive or adaptive items.

The amendment is proposed under Texas Code of Criminal Procedure, Article 56.33, which authorizes the OAG to amend rules pertaining to its administration.

The amendment affects Texas Code of Criminal Procedure, Chapter 56.

§61.101.Definitions.

(a) The following words and terms, when used in this chapter, shall have the following meanings:

(1) - (4) (No change.)

(5) Medical--As used in Tex. Code Crim. Proc. Art. 56.32(a)(9)(A), the term includes the costs of medical treatment, costs of counseling, the one time only repair or replacement of medical or dental devices in use by the victim prior to the crime if damaged or stolen as a result of the criminally injurious conduct, one time only medically prescribed assistive or adaptive items, or any other medical cost deemed appropriate by the OAG.

(6) - (10) (No change.)

(b) (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 June 25, 2007.

TRD-200702628

Stacey Napier

Deputy Attorney General

Office of the Attorney General

Earliest possible date of adoption: August 5, 2007

For information regarding this publication, contact Lauri Saathoff, Agency Liaison, at (512) 463-2096.

Subchapter E. PECUNIARY LOSS

1 TAC §§61.402, 61.405 - 61.407, 61.414, 61.415

The Office of the Attorney General (OAG) proposes amendments to Subchapter E, §§61.402, 61.405 - 61.407, and new §61.414 and §61.415, concerning Pecuniary Loss. The proposed amendments and new sections will better serve victims of crime by improving the administration of the Texas Crime Victims' Compensation Program.

The proposed amendments and new sections accurately implement, interpret, and prescribe the law and minimum standards of practices, procedures, and policies of the OAG relating to the administration of the Texas Compensation to Victims of Crime Fund as required by the Administrative Procedures Act, Texas Government Code, Chapter 2001.

The proposed amendment to §61.402 adds the requirement that after six months of receiving crime related mental healthcare, a treatment recommendation associated with continued prescribed medication must be submitted; and adds limit to providing care for incapacitated adults or minor children not to exceed 180 consecutive days, if the attending physician provides a letter stating the care is medically necessary.

The proposed amendment to §61.405 clarifies that a victim, and the victim's minor children and dependents are eligible for care benefits, and clarifies that the transportation of a deceased victim is excluded from the limit on burial costs when the remains are transported more than 50 miles from either the place of death to the funeral home, or from the funeral home to the place of burial.

The proposed amendment to §61.406 establishes that earned wages may be considered a collateral source during the period of time within which a victim or claimant receives lost wage compensation benefits from CVC.

The proposed amendment to §61.407 clarifies that "extraordinary pecuniary loss" means crime related expenses that exceed, or the OAG anticipates expenses to exceed, the maximum amount allowed under Tex. Code Crim. Proc. Art. 56.42(a); provides that once the OAG determines that a victim is catastrophically injured, the OAG may approve payment of expenses from either the victim's basic or catastrophic compensation benefits as determined appropriate by the OAG; and requires that the legal owner of a home to submit verification of ownership and written permission to modify a dwelling for which a victim or claimant seeks accessibility.

New §61.414 establishes the process for applying for compensation benefits when a Texas resident is injured in another state or country with a compensation program, and how to apply for federal and state compensation when a Texas resident is injured as a result of international terrorism.

New §61.415 establishes the method by which CVC requests a refund of overpayments resulting from the victim or claimant failing to report collateral sources, and when a victim dies subsequent to being approved for benefits, and there is no claimant on the application.

Herman Millholland, Chief, Crime Victim Services Division of the Office of the Attorney General, has determined that for each year of the first five years that the proposed amendments and new sections will be in effect, there will be no additional estimated costs to the state and to local governments expected as a result of enforcing or administering the proposed amendments and new sections. Mr. Millholland has determined that for each year of the first five years that the proposed amendments and new sections will be in effect, there will be no additional estimated reductions in costs to the state and to local governments as a result of enforcing or administering the proposed amendments and new sections. Mr. Millholland has determined that for each year of the first five years that the proposed amendments and new sections will be in effect, there will be no additional estimated loss or increase in revenues to the state or to local governments as a result of enforcing or administering the proposed amendments and new sections. Mr. Millholland has determined that for each year of the first five years that the proposed amendments and new sections will be in effect, that enforcing or administering the amended rules do not have foreseeable implications relating to cost or revenues of the state or local governments.

Mr. Millholland has determined that for each year of the first five years that the proposed amendments and new sections will be in effect, the anticipated public benefit is clarification and modification of existing policies, with the additional public benefit of having a more effective and efficient administration of a state grant fund program for victim-related services and assistance to certain crime victims. Mr. Millholland has determined that for each year of the first five years that the proposed amendments and new sections will be in effect, the probable economic cost to persons and small businesses required to comply with the proposed amendments and new sections is minimal because the proposed amendments and new sections do not significantly change the requirements for submitting applications to the OAG for Crime Victims' Compensation.

Mr. Millholland determined that for each of the first five years the amendments and new sections are in effect the public benefit anticipated as a result of the amendments and new sections will be a savings estimated at $1.2 million per year.

The amendments and new sections are proposed under Texas Code of Criminal Procedure, Article 56.33, which authorizes the OAG to amend rules pertaining to its administration.

The amendments and new sections affect Texas Code of Criminal Procedure, Chapter 56.

§61.402.Loss of Earnings.

(a) - (b) (No change.)

(c) If a victim lost past earnings as a result of mental trauma directly caused by the criminally injurious conduct, the mental health professional that regularly treats the victim may submit a written statement to the OAG verifying loss of past earnings for the victim for a maximum period of six months. In order to continue receiving benefits after six months, a victim may be required to submit [ ~~must submit~~ ] to an independent medical evaluation and a disability determination by an M.D. or a D.O. with a psychiatric specialty. Treatment recommendations from the eligible provider of the medical examination may be requested by the OAG. The evaluation will be scheduled and paid for by the OAG.

(d) (No change.)

(e) Loss of earnings may be paid to a claimant if the claimant can substantiate in a manner that is acceptable to the OAG that his or her presence is necessary for the following activities relevant to the criminally injurious conduct:

(1) - (2) (No change.)

(3) providing care for an incapacitated adult victim [ ~~adults~~ ] or minor child victim not to exceed 180 consecutive days, [ ~~children~~ ] if the attending physician provides a letter stating the care is medically necessary.

(f) - (m) (No change.)

§61.405.Other Limits on Compensation.

(a) (No change.)

(b) Under Tex. Code Crim. Proc. Art. 56.32(a)(9)(c), the cost of care for a victim, a dependent of a victim or a minor child of a victim may be awarded if the criminally injurious conduct occurred on or after September 1, 1997, and the care is a new expense resulting from the crime. This benefit is subject to the following provisions:

(1) The victim or claimant must submit a written request for the care and an explanation of how the crime created the new care expense. Care must be provided by a certified, registered, or licensed care provider.

(2) The OAG will provide reimbursement for the care at a maximum rate of $100 per week for the victim, [ ~~per~~ ] dependent , and [ or ] minor child or the actual cost of [ ~~child~~ ] care, whichever is less. A minor child for purposes of this benefit may be limited to children 14 years of age or younger. The age requirement may be removed by the OAG upon review of extenuating circumstances.

(3) The OAG may limit [ ~~child~~ ] care [ ~~benefits~~ ] for the [ ~~dependent(s) of a~~ ] surviving victim , and the children and dependent(s) of the victim to a maximum of 90 consecutive days. Under extenuating circumstances, [ ~~child~~ ] care [ ~~benefits~~ ] may be extended upon review by the OAG.

(4) Care for the children and dependent(s) [ ~~Child care benefits for the dependent(s)~~ ] of a deceased victim may be paid on an ongoing basis up to a maximum of $100 per week based on the pecuniary loss. This benefit is subject to the award cap determined by the date of the criminally injurious conduct, up to the maximum amount of the claim or until the claimant or dependent(s) no longer qualifies for this benefit by age, marital status, or emancipation.

(c) Funeral and burial expenses provided by Tex. Code Crim. Proc. Art. 56.32(a)(9)(D) are limited to $4,500. The reasonable cost of transporting [ ~~Transportation of~~ ] the deceased victim 50 miles or more to the funeral service location, and 50 miles or more to the place of burial, is an allowable funeral and burial expense which may be [ is ] excluded from the $4,500 limit.

(d) - (e) (No change.)

§61.406.Collateral Sources.

(a) If the victim or claimant fails to use, or apply for, a collateral source that is readily available to the victim or claimant for all or a portion of a pecuniary loss, the OAG may deny or reduce an award to the extent of the unused collateral source. Purely donative contributions to the victim or claimant are not considered a collateral source.

(b) A collateral source is a benefit or advantage as defined in the Tex. Code Crim. Proc. Art. 56.32(a)(3) for pecuniary loss related to the crime, and includes the following:

(1) A settlement or other recovery from the offender or any third party.

(2) Wages and other income received during a time period within which a victim or claimant receives or seeks lost earnings benefits.

§61.407.Additional Compensation for Catastrophic Injury.

(a) Pursuant to Tex. Code Crim. Proc. Art. 56.42(b), the OAG may award an additional benefit amount to be used for extraordinary pecuniary losses if personal injury to a victim is catastrophic and results in a total and permanent disability to the victim. For purposes of this benefit, extraordinary pecuniary loss means crime related expenses that exceed, or the OAG anticipates expenses to exceed, the maximum amount allowed under Tex. Code Crim. Proc. Art. 56.42(a).

(b) Once the OAG determines that a victim is catastrophically injured, the OAG may approve payment of expenses from either the victim's basic or catastrophic compensation benefits as determined appropriate by the OAG. The additional catastrophic injury benefit amount is available for the reasonable and necessary costs incurred as a result of catastrophic injury occurring on or after September 1, 1995, as follows:

(1) - (3) (No change.)

(c) The additional catastrophic injury benefit shall be used only to replace lost wages and the following reasonable and necessary expenses incurred on the dates as follows:

(1) "Making a home accessible" means reasonable and necessary [ ~~structural alterations or~~ ] modifications to a residence that are necessary to maintain an independent lifestyle. This includes modifying a kitchen, bedroom, or bathroom to accommodate the victim's disability resulting from the criminal injury. The legal owner of the residence must submit to the OAG verification of ownership and written permission to modify the dwelling. (Available to victims with catastrophic injuries resulting from criminally injurious conduct that occurred on or after September 1, 1995).

(2) "Making an automobile accessible" means equipping a personal vehicle [ ~~an automobile~~ ] with reasonable and necessary equipment to allow the victim to control or to enter the vehicle [ ~~automobile with the disability that resulted from the criminal injury~~ ]. Modification of a vehicle is limited to one time per two year period. Eligibility for this benefit may be based on the OAG's assessment of the extent of the disability and the availability of collateral sources. (Available to victims with catastrophic injuries resulting from criminally injurious conduct that occurred on or after September 1, 1995).

(3) - (6) (No change.)

(7) Rehabilitation technology are those therapeutic measures, deemed appropriate by the OAG, that help the victim attain maximum function and an optimal level of independence in the activities of daily living. (Available to victims with catastrophic injuries resulting from criminally injurious conduct that occurred on or after September 1, 2001).

(8) Long-term medical expenses incurred as a result of medically indicated treatment for the catastrophic injury includes, but is not limited to [ ~~include long term medical care~~ ], medications, supplies, surgery, and surgery related expenses necessary to sustain the highest possible quality of life following a catastrophic injury. (Available to victims with catastrophic injuries resulting from criminally injurious conduct that occurred on or after September 1, 2001).

(d) Pursuant to Tex. Code Crim. Proc. Art. 56.42(b) only the victim may be eligible to be awarded compensation for catastrophic injury.

§61.414.Personal Injury Outside of Texas.

(a) Tex. Code Crim. Proc. Art. 56.32(a)(3)(D) defines a collateral source as a benefit available from another state's or another country's crime victims' compensation program. If a Texas resident suffers personal injury or death as a result of criminally injurious conduct that occurs in another state or country that has a crime victims' compensation program, the victim or claimant must first apply for compensation benefits from that state or country. The other state or country must make a compensation eligibility determination prior to the OAG reviewing an application for compensation. If a compensation claim is approved by the other state or country, the victim or claimant must exhaust that collateral source before the OAG makes a compensation award determination.

(b) Tex. Code Crim. Proc. Art. 56.32(a)(3)(B) defines a collateral source as a benefit available from a federal agency. If a Texas resident applies for compensation for personal injury or death as a result of international terrorism, the victim or claimant must first apply with the federal International Terrorism Victim Expenses Reimbursement Program (ITVERP). ITVERP must make a compensation eligibility determination prior to the OAG reviewing an application for compensation. If a compensation claim is approved by ITVERP, the victim or claimant must exhaust that collateral source before the OAG makes a compensation award determination.

§61.415.Refunds.

(a) When compensation benefits are paid as a result of fraud or error, the OAG may request a full or partial refund of paid benefits as follows:

(1) if a victim or claimant knowingly submits false information or documentation, the OAG shall request a refund of payments made in reliance on the false information or documentation;

(2) if the OAG erroneously overpays a victim or claimant, future awards may be offset by the amount paid in error, or the OAG may request a refund;

(3) if new evidence shows that a victim or claimant is ineligible to receive compensation payments, future awards may be offset by the amount paid in error, or the OAG may request a refund;

(4) if the victim or claimant has received the maximum amount of compensation benefits such that there are not future benefits from which to offset an erroneous payment, the OAG shall request a refund of the amount paid in error;

(5) if a provider of service is overpaid for any reason, the OAG shall request an immediate refund.

(6) If a claim is approved for compensation benefits and the victim or claimant subsequently fails to comply with the requirements of Tex. Code Crim. Proc. Chapter 56, Subchapter B, the OAG may deny further benefits and request a refund of compensation benefits awarded.

(b) The OAG may consider the victim's or claimant's financial circumstances and allow the requested refund to be paid in installments.

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 25, 2007.

TRD-200702629

Stacey Napier

Deputy Attorney General

Office of the Attorney General

Earliest possible date of adoption: August 5, 2007

For information regarding this publication, contact Lauri Saathoff, Agency Liaison, at (512) 463-2096.

Subchapter F. MEDICAL CARE

1 TAC §61.503

The Office of the Attorney General (OAG) proposes an amendment to Subchapter F (Medical Care), §61.503, concerning Mental Health Counseling Expenses. The proposed amendment will better serve victims of crime by improving the administration of the Texas Crime Victims' Compensation Program.

The proposed amendment to §61.503 requires that bills for mental health treatment must be submitted within 3 years, and clarifies that catastrophic injury benefits are only available to victims.

The amendment is proposed under Texas Code of Criminal Procedure, Article 56.33, which authorizes the OAG to amend rules pertaining to its administration.

The amendment affects Texas Code of Criminal Procedure, Chapter 56.

§61.503.Mental Health Counseling Expenses.

(a) - (e) (No change.)

(f) Reimbursement for related mental health treatment for victims or claimants must be submitted to the OAG within three years of the date of service.

(g) Pursuant to Tex. Code Crim. Proc. Art. 56.42(b) only the victim may be awarded compensation for catastrophic injury.

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 25, 2007.

TRD-200702630

Stacey Napier

Deputy Attorney General

Office of the Attorney General

Earliest possible date of adoption: August 5, 2007

For information regarding this publication, contact Lauri Saathoff, Agency Liaison, at (512) 463-2096.

Subchapter G. RELOCATION AND HOUSING RENTAL EXPENSES BENEFITS

1 TAC §61.601, §61.602

The Office of the Attorney General (OAG) proposes amendments to Subchapter G, §61.601 and §61.602, concerning Relocation and Housing Rental Expenses Benefits. The proposed amendments will better serve victims of crime by improving the administration of the Texas Crime Victims' Compensation Program.

The proposed amendments accurately implement, interpret, and prescribe the law and minimum standards of practices, procedures, and policies of the OAG relating to the administration of the Texas Compensation to Victims of Crime Fund as required by the Administrative Procedures Act, Texas Government Code, Chapter 2001.

The proposed amendment to §61.601 adds new definition of "Family violence center," "Family violence nonresidential center," and "Family violence shelter center."

The proposed amendment to §61.602 requires a victim or claimant seeking relocation expenses to complete a form signed by a representative from law enforcement, the county or district attorney, or a family violence center, changes housing rental payments from a single payment totaling $1800 to three months of the actual housing rental amount, not to exceed $1800, denies relocation and housing rental benefits if the offender moves into the dwelling with the victim or claimant, requires a permanent address and alternate phone number from the victim or claimant and requires that a request for rent and relocation expenses must be submitted to the OAG within three years of the date of crime. Establishes that rent payments shall be limited to the victim's proportionate share of rent based on the number of adult tenants listed on the leasing agreement.

Herman Millholland, Chief, Crime Victim Services Division of the Office of the Attorney General, has determined that for each year of the first five years that the proposed amendments will be in effect, there will be no additional estimated costs to the state and to local governments expected as a result of enforcing or administering the proposed amendments. Mr. Millholland has determined that for each year of the first five years that the proposed amendments will be in effect, there will be no additional estimated reductions in costs to the state and to local governments as a result of enforcing or administering the proposed amendments. Mr. Millholland has determined that for each year of the first five years that the proposed amendments will be in effect, there will be no additional estimated loss or increase in revenues to the state or to local governments as a result of enforcing or administering the proposed amendments. Mr. Millholland has determined that for each year of the first five years that the proposed amendments will be in effect, that enforcing or administering the amended rules do not have foreseeable implications relating to cost or revenues of the state or local governments.

Mr. Millholland has determined that for each year of the first five years that the proposed amendments will be in effect, the anticipated public benefit is clarification and modification of existing policies, with the additional public benefit of having a more effective and efficient administration of a state grant fund program for victim-related services and assistance to certain crime victims. Mr. Millholland has determined that for each year of the first five years that the proposed amendments will be in effect, the probable economic cost to persons and small businesses required to comply with the proposed amendments is minimal because the proposed amendments do not significantly change the requirements for submitting applications to the OAG for Crime Victims' Compensation.

Mr. Millholland determined that for each of the first five years the amendments are in effect the public benefit anticipated as a result of the amendments will be a savings estimated at $1.2 million per year.

The amendments are proposed under Texas Code of Criminal Procedure, Article 56.33, which authorizes the OAG to amend rules pertaining to its administration.

The amendments affect Texas Code of Criminal Procedure, Chapter 56.

§61.601.Definitions Pertaining to Relocation and Housing Rental Expenses Benefits

For the limited purpose of awarding benefits for relocation and housing rental expenses pursuant to Tex. Code Crim. Proc. Art. 56.42(d)(1) and (2), the following terms shall have the following meanings:

(1) Deposits--Expenses for rental deposits are limited to property deposits. [ Family violence--As defined in Tex. Fam. Code §71.004(1), the term "family violence" refers to an act by a member of a family or household against another member of the family or household that is intended to result in physical harm, bodily injury, assault, or sexual assault, or that is a threat that reasonably places the member in fear of imminent physical harm, bodily injury, assault, or sexual assault, but does not include defensive measures to protect oneself. ]

(2) - (3) (No change.)

(4) Family violence--As defined in Tex. Fam. Code §71.004(1), the term "family violence" refers to an act by a member of a family or household against another member of the family or household that is intended to result in physical harm, bodily injury, assault, or sexual assault, or that is a threat that reasonably places the member in fear of imminent physical harm, bodily injury, assault, or sexual assault, but does not include defensive measures to protect oneself. [ ~~Household--As defined in Tex. Fam. Code §71.005, the term "household" means a unit composed of persons living together in the same dwelling, without regard to whether they are related to each other.~~ ]

(5) Family violence center--As defined in Tex. Human Resources Code §51.002, includes a family violence shelter center and a family violence nonresidential center. [ ~~Member of a household--As defined by the Tex. Fam. Code, §71.006, the term "member of a household" includes a person who previously lived in the household.~~ ]

(6) Family violence nonresidential center--As defined in Tex. Human Resources Code §51.002, means a program that is operated by a public or private nonprofit organization, and provides comprehensive nonresidential services to victims of family violence. [ ~~Place of Residence--The term means a victim's dwelling, the property under the dwelling, and all other areas and structures on the property under the control of the owner of the property.~~ ]

(7) Family violence shelter center--As defined in Tex. Human Resources Code §51.002, means a program that is operated by a public or private nonprofit organization, and provides comprehensive residential and nonresidential services to victims of family violence. [ ~~Deposits--Expenses for rental deposits are limited to property deposits.~~ ]

(8) Household--As defined in Tex. Fam. Code §71.005, the term "household" means a unit composed of persons living together in the same dwelling, without regard to whether they are related to each other. [ ~~Utility connections--Expenses for utility connections are limited to expenses for gas, electricity, water, and one telephone line connection.~~ ]

(9) Member of a household--As defined by the Tex. Fam. Code, §71.006, the term "member of a household" includes a person who previously lived in the household.

(10) Place of Residence--The term means a victim's dwelling, the property under the dwelling, and all other areas and structures on the property under the control of the owner of the property.

(11) Utility connections--Expenses for utility connections are limited to expenses for gas, electricity, water, and one telephone line connection.

§61.602.Eligibility and Reimbursement for Relocation and Housing Rental Expenses Benefits.

(a) Pursuant to Tex. Code Crim. Proc. Art. 56.42(d), the OAG shall determine eligibility for reimbursement of the reasonable and necessary costs for relocation and housing rental expenses. A request for relocation and housing rental expenses must be submitted within three years of the date of crime.

(b) - (d) (No change.)

(e) Before the OAG will make an award pursuant to Tex. Code Crim. Proc. Art. 56.42(d), the OAG will verify that the victim requesting this benefit was the victim of domestic violence or family violence by reviewing:

(1) the victim's or claimant's affidavit seeking a protective order and the court order signed by the issuing judge, pursuant to Tex. Fam. Code Chapters 71, 81, and 82; or the offense report submitted by a law enforcement agency; [ ~~and~~ ]

(2) proof of the relationship between the victim and the offender in a manner deemed appropriate by the OAG ; and [ . ]

(3) a completed OAG Rent and Relocation Verification Form signed by a representative from a law enforcement agency, the office of a county or district attorney, a representative from a family violence center, a family violence nonresidential center, a family violence shelter center, or any agency deemed appropriate by the OAG.

(f) Before the OAG will make an award pursuant to Tex. Code Crim. Proc. Art. 56.42(d), the OAG will verify that the victim was sexually assaulted [ ~~requesting this benefit was the victim of a sexual assault~~ ] in the victim's residence by reviewing the offense report submitted by a law enforcement agency and a completed OAG Rent and Relocation Verification Form signed by a representative from a law enforcement agency, the office of a county or district attorney, a representative from a family violence center, a family violence nonresidential center, a family violence shelter center, or any agency deemed appropriate by the OAG .

(g) To determine the amount of an award for relocation expenses, the victim or claimant must provide the OAG proof of actual costs or an estimate of the relocation expenses on the form provided and approved by the OAG. Relocation expenses may include, but are not limited to the costs of rental deposits, utility connections, moving vans, moving labor, packing, private vehicle mileage, transportation, lodging, and meals. Relocation expenses shall be limited to the victim's proportionate share of costs based on the number of adult tenants listed on the leasing agreement. Expenses for transportation, lodging, and meals will be reimbursed in a manner consistent with §61.404 of this title. Restrictions on reimbursement for travel under 20 miles are not applicable for this award.

(h) (No change.)

(i) An award for rental expenses under this provision may be approved for three months of rent, not to exceed $1,800.00. Rent payments shall be limited to the victim's proportionate share of rent based on the number of adult tenants listed on the leasing agreement. Pursuant to Tex. Code Crim. Proc. Art 56.41(b)(5), rent and relocation expenses shall be denied if the offender occupies the new residence with the victim or claimant. To make an award for rental expenses, the victim must provide to the OAG the following information:

(1) a copy of the signed lease or signed contract for a rental agreement for the victim, or a written statement from the landlord showing the location of the rental property, the date of the victim's move-in, the rent amount, the rent due date, and the names of the occupants of the rental property; [ ~~and~~ ]

(2) the landlord's name, phone number, address, and federal tax identification number or social security number; or the name of the management company to whom the rent is paid and its phone number, address, and federal tax identification number ; and [ . ]

(3) other information deemed necessary by the OAG to assist in locating the victim or claimant.

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 25, 2007.

TRD-200702631

Stacey Napier

Deputy Attorney General

Office of the Attorney General

Earliest possible date of adoption: August 5, 2007

For information regarding this publication, contact Lauri Saathoff, Agency Liaison, at (512) 463-2096.

Subchapter J. ADMINISTRATIVE REMEDIES

1 TAC §61.901, §61.905

The Office of the Attorney General (OAG) proposes an amendment Subchapter J, §61.901 and new §61.905, concerning Administrative Remedies. The proposed amendment and new section will better serve victims of crime by improving the administration of the Texas Crime Victims' Compensation Program.

The proposed amendment and new section accurately implement, interpret, and prescribe the law and minimum standards of practices, procedures, and policies of the OAG relating to the administration of the Texas Compensation to Victims of Crime Fund as required by the Administrative Procedures Act, Texas Government Code, Chapter 2001.

The proposed amendment to §61.901 clarifies that the final decision of the OAG may only be rendered by the hearing officer after a final ruling hearing, a prehearing conference, or based on the available record.

New §61.905 requires an itemized statement and verification of legal services rendered to be submitted for payment of attorney fees.

Herman Millholland, Chief, Crime Victim Services Division of the Office of the Attorney General, has determined that for each year of the first five years that the proposed amendment and new section will be in effect, there will be no additional estimated costs to the state and to local governments expected as a result of enforcing or administering the proposed amendment and new section. Mr. Millholland has determined that for each year of the first five years that the proposed amendment and new section will be in effect, there will be no additional estimated reductions in costs to the state and to local governments as a result of enforcing or administering the proposed amendment and new section. Mr. Millholland has determined that for each year of the first five years that the proposed amendment and new section will be in effect, there will be no additional estimated loss or increase in revenues to the state or to local governments as a result of enforcing or administering the proposed amendment and new section. Mr. Millholland has determined that for each year of the first five years that the proposed amendment and new section will be in effect, that enforcing or administering the amended rule and new section does not have foreseeable implications relating to cost or revenues of the state or local governments.

Mr. Millholland has determined that for each year of the first five years that the proposed amendment and new section will be in effect, the anticipated public benefit is clarification and modification of existing policies, with the additional public benefit of having a more effective and efficient administration of a state grant fund program for victim-related services and assistance to certain crime victims. Mr. Millholland has determined that for each year of the first five years that the proposed amendment and new section will be in effect, the probable economic cost to persons and small businesses required to comply with the proposed amendment and new section is minimal because the proposed amendment and new section does not significantly change the requirements for submitting applications to the OAG for Crime Victims' Compensation.

Mr. Millholland determined that for each of the first five years the amendment and new section are in effect the public benefit anticipated as a result of the amendment and new section will be a savings estimated at $1.2 million per year.

The amendment and new section are proposed under Texas Code of Criminal Procedure, Article 56.33, which authorizes the OAG to amend rules pertaining to its administration.

The amendment and new section affect Texas Code of Criminal Procedure, Chapter 56.

§61.901.Request for Reconsideration of Award Decision.

(a) (No change.)

(b) Within 30 days of the date of the OAG's award decision, the victim or claimant must submit a signed, written request for reconsideration stating the reasons for the request for reconsideration. If the victim or claimant fails to file a written request for reconsideration of the OAG's award decision within the 30-day time period, the decision of the OAG becomes [ ~~the~~ ] final and the victim or claimant waives the right to further appeal [ ~~decision of the agency~~ ].

(c) The OAG may not grant a reconsideration if a request is not filed by the victim or claimant within the 30-day time period, unless the victim or claimant shows good cause for late filing. The victim or claimant must provide to the OAG a signed, written explanation showing good cause for failing to submit a written request for reconsideration of the OAG's award decision within the 30-day time period. If the OAG does not find that good cause exists for late filing, the decision of the OAG becomes [ ~~the~~ ] final and the victim or claimant waives the right to further appeal [ ~~decision of the agency~~ ].

(d) The OAG will provide the victim or claimant a written notification of its reconsideration decision. If the victim or claimant is dissatisfied with the reconsideration of the OAG's award decision, the victim or claimant must file a signed, written request for a hearing with the OAG within 30 days of the date of the OAG's written notification of the reconsideration decision. If the victim or claimant fails to file a written request for a hearing within the 30-day time period, the reconsideration decision becomes final and the victim or claimant waives the right to a hearing. A final decision from the attorney general may only be rendered by the OAG hearing officer after a prehearing conference, a final ruling hearing, or based on the available record.

(e) (No change.)

§61.905.Attorney Fees.

(a) Pursuant to Tex. Code Crim. Proc. Art. 56.43 the OAG shall determine and award reasonable attorney fees to the attorney representing a victim or claimant in a dispute of an OAG compensation determination.

(b) If there is no hearing or dispute about the amount awarded to the victim or claimant and the attorney only assists the victim or claimant in filling out a CVC application for compensation, the attorney fee shall be the lesser of either $300 or 25% of the amount the attorney assisted the victim or claimant in obtaining.

(c) If the victim or claimant disputes the amount awarded and the attorney represents the victim in a reconsideration review or hearing, the OAG shall determine and award reasonable attorney fees commensurate with legal services rendered. Attorney fees for representation in a disputed claim shall not exceed 25% of the amount the attorney assisted the victim or claimant in obtaining. To request payment of attorney fees a written request for payment and the following documentation must be submitted to CVC by the attorney:

(1) an "Attorney's Statement Regarding Fees" form provided by the OAG; and

(2) an itemized statement of legal services rendered.

(d) If the attorney fee is based on an undetermined benefit amount which the attorney assisted the victim or claimant in obtaining, the attorney may request attorney fee payments in installments or in a lump sum upon final payment to or on behalf of a victim or claimant. The attorney may be required to submit an itemized statement of legal services rendered prior to each attorney fee payment. Attorney fee payments shall not be paid in excess of the amount claimed in the itemized statement of legal services.

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 25, 2007.

TRD-200702633

Stacey Napier

Deputy Attorney General

Office of the Attorney General

Earliest possible date of adoption: August 5, 2007

For information regarding this publication, contact Lauri Saathoff, Agency Liaison, at (512) 463-2096.

Part 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION

Chapter 353. MEDICAID MANAGED CARE

Subchapter A. GENERAL PROVISIONS

1 TAC §353.2

The Texas Health and Human Services Commission (HHSC) proposes to amend §353.2, Definitions, to update the definition of value-added services. The term value-added services is used to define additional services that Medicaid managed care organizations provide to their Medicaid members and that enhance the value of the services that are required to be provided under the managed care contracts.

Background and Justification

Senate Bill (S.B.) 10, 80th Legislature, Regular Session, 2007, adds §533.019 to the Government Code to require HHSC to actively encourage Medicaid managed care organizations that contract with HHSC to offer value-added benefits, including health care services or benefits or other types of services that are in addition to those that are required to be offered by the health plans and that have the potential to improve the health status of enrollees in the plans. S.B. 10 specifies that this law change applies to managed care contracts effective September 1, 2007, and states that HHSC shall seek to amend contracts before September 1, 2007, in order to meet this effective date.

The current rule states that value-added services must be health care services. To align the rule with S.B. 10 and planned contract changes for value-added services, the proposed amendment states that value-added services may be health care services or positive incentives that promote healthy lifestyles and improve health outcomes.

This rule applies to Medicaid managed care, but since the managed care contracts for the Children's Health Insurance Program (CHIP) are combined with the Medicaid contracts, these changes also will give CHIP managed care plans flexibility to offer additional value-added services to CHIP members.

Section-by-Section Summary

As amended, §353.2(67) revises the definition of value-added services to broaden the scope of the value-added services that may be offered by Medicaid managed care plans to their enrollees. Value-added services may be actual health care services, benefits, or positive incentives that HHSC determines will promote healthy lifestyles and improve health outcomes. These may include participating in certain health-related programs or engaging in certain health-conscious behaviors.

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that during each year of the first five years that the amended rule is in effect, there will be no fiscal impact to state government. The proposed rule will not result in any fiscal implications for local health and human services agencies. Local governments will not incur additional costs.

Small and Micro-business Impact Analysis

Mr. Suehs has also determined that there will be no effect on small businesses or micro businesses to comply with the amendment 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

Mr. Chris Traylor, Associate Commissioner for Medicaid and CHIP, has determined that for each year of the first five years the amended rule is in effect, the public will benefit by allowing Medicaid managed care organizations to provide a broader range of value-added services to their members. These services will promote healthier lifestyles and improve health outcomes.

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 environment 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 environment 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 proposed rule may be submitted to Shirley Stanford, Program Specialist VI in the Medicaid/CHIP Division, by mail to the Texas Health and Human Services Commission, P.O. Box 85200, MC H312, Austin, Texas 78708-5200, by fax to (512) 491-1972, or by e-mail to shirley.stanford@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Public Hearing

A public hearing is scheduled for July 11, 2007 at 9:00 a.m. in the HHSC Lone Star Conference Room, at 11209 Metric Boulevard, Austin, Texas 78758. Persons requiring further information, special assistance, or accommodations should contact Meisha Spencer at (512) 491-1453.

Statutory Authority

The amendment is proposed under the Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; the Human Resources Code §32.021 and the Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; and the Texas Government Code §533.002, which directs HHSC to implement the Medicaid managed care program.

The proposed amendment affects the Human Resources Code Chapter 32, and the Texas Government Code Chapters 531 and 533. No other statutes, articles, or codes are affected by this proposal.

§353.2.Definitions.

The following words and terms, when used in this chapter, shall have the following meanings, unless the content clearly indicates otherwise.

(1) - (66) (No change.)

(67) Value-Added Services--Additional services for coverage beyond those specified in the Request For Proposal. Value-Added Services may [ ~~must~~ ] be actual health care services , [ or ] benefits , or positive incentives that the Commission determines will promote healthy lifestyles and improve health outcomes. [ ~~rather than gifts, incentives, health assessments or educational classes.~~ ] These may include participating in certain health-related programs or engaging in certain health-conscious behaviors. Best practice approaches to delivering covered services are not considered Value-Added Services. For foster children in a statewide Medicaid managed care program, value added services may include non-health care services and benefits that support the physical, mental and/or developmental well being of the child.

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 25, 2007.

TRD-200702610

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Chapter 355. REIMBURSEMENT RATES

Subchapter A. COST DETERMINATION PROCESS

1 TAC §355.114

The Texas Health and Human Services Commission (HHSC) proposes to amend §355.114, concerning Consumer Directed Services Payment Option, in its Reimbursement Rates Chapter.

Background and Justification

The Department of Aging and Disability Services (DADS) implemented the Consumer Directed Services (CDS) model in September 2001, in multiple Medicaid programs in response to Senate Bill 1586, 76th Legislature, Regular Session, 1999. The CDS model allows consumers or their legal guardians to be employers of record for the service providers. Thus, under CDS, consumers have greater control and responsibility for their care and are able to self-direct their services. Consumers who choose consumer direction choose a CDS Agency (CDSA) to provide financial management services such as payroll processing, assistance with developing a budget, and guidance to the consumer acting as an employer.

The CDS model is available in the following programs.

Community Based Alternatives (CBA)

Community Living Assistance and Support Services (CLASS)

Deaf-Blind-Multiple Disability Waiver (DBMD)

Primary Home Care (PHC)

Consumer Managed Personal Assistance Services (CMPAS)

Medically-Dependent Children's Program (MDCP).

Beginning in January 2008, CDS will also be available in the Home and Community Based Services (HCS) and the Texas Home Living (TxHmL) programs.

The current reimbursement methodology for CDS allocates a flat fee out of the total payment rate for each CDS hour of service, regardless of the amount of the total payment rate. During the renewal of the Texas Home Living (TxHmL) waiver, the Centers for Medicare and Medicaid Services (CMS), United States Department of Health and Human Services, directed Texas to revise the current CDSA payment rate structure from a flat rate tied to the CDSA personal care services hours (such as attendant and respite care) to one that reflects the CDSA's actual level of effort in providing support services. CMS recommended that Texas adopt a monthly fee be paid to the CDSAs. The proposed amendment to §355.114 modifies the reimbursement methodology for CDS regarding the payment made to CDSAs, as directed by CMS. The proposed amendment also standardizes language in §355.114.

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that, for the first five-year period the proposed amendment is in effect, there are no fiscal implications for state government as a result of enforcing or administering the section. There are no fiscal implications for local governments as a result of enforcing or administering the section.

Small Business and Micro-business Impact Analysis

Mr. Suehs has also determined that there will be no adverse economic effect on small or micro-businesses as a result of enforcing or administering the proposed section. There is no anticipated economic cost to persons who are required to comply with the proposed section. There is no anticipated effect on local employment in geographic areas affected by this section.

Public Benefit and Costs

Carolyn Pratt, Director of Rate Analysis, has determined that, during the first five years the proposed section is in effect, the public benefit anticipated as a result of enforcing §355.114 is that the Health and Human Services Commission (HHSC) will be in compliance with the CMS mandate regarding reimbursement methodology for CDS agencies.

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

The 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 Sarah Hambrick in the Rate Analysis Division, MC H-400, Texas Health and Human Services Commission, P.O. Box 85200, Austin, TX 78708-5200; by fax (512) 491-1998 or by e-mail at sarah.hambrick@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Statutory Authority

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

The proposed amendment to §355.114 affects the Human Resources Code Chapter 32, and the Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal.

§355.114.Consumer Directed Services Payment Option.

(a) For all programs providing consumer directed services (CDS) except the Home and Community-based Services (HCS) program, the sum of the payments to [ ~~payment rate for~~ ] the contracted CDS agency for a 12-month period and the funds available to [ ~~payment rate for~~ ] the consumer participating in CDS for a 12-month period must not exceed the amount paid [ ~~payment rate made~~ ] to contracted providers for non-CDS consumers in these programs for the same 12-month period . [ The payment rate for the contracted CDS agency is determined by modeling the estimated cost to carry out the responsibilities of the CDS agency. The payment rate for the consumer is determined by subtracting the contracted CDS agency payment rate from the payment rate made to contracted providers in these programs. ]

(1) The monthly payment to the contracted CDS agency is determined by modeling the estimated cost to carry out the responsibilities of the CDS agency.

(2) The funds available to the consumer participating in CDS are determined by subtracting the payments to the CDS agency for a 12-month period from the total amount authorized for the consumer's services for the same 12-month period.

(b) For the HCS program the [ payment rate for the contracted CDS agency is determined by modeling the estimated cost to carry out the responsibilities of the CDS agency. The payment rate for the consumer is modeled and is based on the direct care rate plus a portion of the operating costs from the case management fee. The ] sum of the payment to [ ~~rate for~~ ] the contracted CDS agency for a 12-month period , the funds available to the consumer participating in CDS for a 12-month period , and the case management fee remaining for the provider agency for the same 12-month period must not [ ~~cannot~~ ] exceed, on average, the amount paid to contracted providers for non-CDS consumers in the program for the same 12-month period [ ~~these programs~~ ].

(1) The monthly payment to the contracted CDS agency is determined by modeling the estimated cost of carrying out the responsibilities of the CDS agency.

(2) The funds available to the consumer participating in CDS are modeled and are based on the direct care costs plus a portion of the operating costs included in the HCS rate.

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 25, 2007.

TRD-200702611

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Subchapter D. REIMBURSEMENT METHODOLOGY FOR INTERMEDIATE CARE FACILITIES FOR PERSONS WITH MENTAL RETARDATION (ICF/MR)

1 TAC §355.456

The Health and Human Services Commission (HHSC) proposes an amendment to §355.456, concerning the reimbursement methodology for the Intermediate Care Facilities for Persons with Mental Retardation (ICF/MR) program.

Background and Justification

This rule establishes the reimbursement methodology for state-operated and non-state operated facilities in the ICF/MR program. HHSC, under its authority and responsibility to administer and implement rates, is updating the methodology by eliminating the rebasing process and by using audited cost report data. The amended rule will reflect the method used to determine rates effective September 1, 2007.

The amendment to this rule is made in accordance with the appropriations under the 2008 - 09 General Appropriations Act (Article II, Special Provisions, Section 57(b)(1), H.B. 1, 80th Legislature, Regular Session, 2007). Current rules for the ICF/MR program limit payment rates to the amount of funds appropriated for the program. The proposed amendment will not change this limitation.

Section-by-Section Summary

The amendment revises §355.456(d) to:

(1) Remove the rebasing process to determine rates for the ICF/MR program. The process of using a consultant and advisory panel is no longer used for rate determination in these programs. The current process, which will be used for rate determination effective September 1, 2007, will update the modeled rates based on audited cost report cost data to the extent possible within the appropriations for the 2008 - 2009 biennium.

(2) Remove the timeframe for the rebasing process since the rates are determined in accordance with §355.101(c)(1) (relating to Introduction), "coincident with the state's biennium."

(3) Remove references to annually inflating rates since the rates are determined on the state's biennium.

(4) Remove references to collecting a sample of cost data from providers since all providers are required to submit cost reports.

The amendment also deletes §355.456(e), the transitional add-on rate, which is obsolete.

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 no additional cost to the state for each state fiscal year the rule is implemented. The proposed rule will not result in any fiscal implications for local health and human services agencies. Local governments will incur no additional costs.

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 amendment. The implementation of these proposed rule amendments does not require any changes in practice or any additional cost to the contracted provider. In addition, current rules for these programs limit payment rates to the amount of funds appropriated for the program. The proposed elimination of the rebasing process, including elimination of language regarding annual inflation, does not change this limitation.

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

Public Benefit

Carolyn Pratt, Director of Rate Analysis, has determined that, for each of the first five years the amendment is in effect, the expected public benefit is that obsolete rule language will be eliminated and the rules will reflect the actual method used to determine rates effective September 1, 2007.

Takings Impact Assessment

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.

Public Comment

Questions about the content of this proposal may be directed to Carolyn Pratt in the HHSC Rate Analysis Department by telephone at (512) 491-1359 or by facsimile at (512) 491-1998. Written comments on the proposal may be submitted to Ms. Pratt by facsimile, by e-mail to carolyn.pratt@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.

Public Hearing

A public hearing is scheduled for July 16, 2007, at 10:00 a.m. in the HHSC Lone Star Conference Room at the Braker Center, Building H, 11209 Metric Boulevard, Austin, Texas 78758. Persons requiring further information, special assistance, or accommodations should contact Meisha Spencer at (512) 491-1453.

Statutory Authority

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

§355.456. Reimbursement [ ~~Rate Setting~~ ] Methodology.

(a) Types of facilities. There are two types of facilities for purposes of rate setting: state-operated and non-state operated. Facilities are further divided into classes that are determined by the size of the facility.

(b) Classes of non-state operated facilities. There is a separate set of reimbursement rates for each class of non-state operated facilities, which are as follows.

(1) Large facility--A facility with a Medicaid certified capacity of 14 or more as of the first day of the full month immediately preceding a rate's effective date or, if certified for the first time after a rate's effective date, as of the date of initial certification.

(2) Medium facility--A facility with a Medicaid certified capacity of nine through 13 as of the first day of the full month immediately preceding a rate's effective date or, if certified for the first time after a rate's effective date, as of the date of initial certification.

(3) Small facility--A facility with a Medicaid certified capacity of eight or fewer as of the first day of the full month immediately preceding a rate's effective date or, if certified for the first time after a rate's effective date, as of the date of initial certification .

(c) Classes of state-operated facilities. There is a separate interim rate for each class of state-operated facilities, which are as follows:

(1) Large facility--A facility with a Medicaid certified capacity of 17 or more as of the first day of the full month immediately preceding a rate's effective date or, if certified for the first time after a rate's effective date, as of the date of initial certification.

(2) Small facility--A facility with a Medicaid certified capacity of 16 or less as of the first day of the full month immediately preceding a rate's effective date or, if certified for the first time after a rate's effective date, as of the date of initial certification.

(d) Reimbursement rate determination for non-state operated facilities. HHSC will adopt the reimbursement rates for non-state operated facilities in accordance with §355.101 of this title (relating to Introduction) and this subchapter.

[ ~~(1)~~ ~~The initial modeled rates for calendar year 1997 are set according to paragraph (7) of this subsection.~~ ]

[ ~~(2)~~ Annual rates for the time period between the years that modeled rates are rebased are set by inflating the direct service portion of the previous year's rates by the Personal Consumption Expenditures (PCE) Chain-Type Index as defined in §355.108 of this title (relating to Determination of Inflation Indices). These rates are uniform by class of facility and client level-of-need, and determined prospectively and annually. ]

[ ~~(3)~~ In the year 2000, the models from which the rates are based are analyzed to determine if rebasing is necessary for the rates paid in the year 2001. The models will be analyzed every three years thereafter to determine if rebasing is necessary. ]

(1) [ ~~(4)~~ ] Reimbursement rates combine residential and day program services, i.e., payment for the full 24 hours of daily service.

(2) [ ~~(5)~~ ] Reimbursement rates are differentiated based on client level-of-need. The levels of need are intermittent, limited, extensive, pervasive, and pervasive plus.

[ ~~(6)~~ ~~Modeled rates are rebased according to §355.458 of this title (relating to Rebasing the Non-State Operated Facility Modeled Rates).~~ ]

(3) [ ~~(7)~~ ] The recommended modeled rates are based on cost components deemed appropriate for economically and efficiently operated services. The determination of these components is based on cost reports submitted by ICF/MR providers [ a combination of data including, but not limited to, historical costs and operational information collected from a representative sample of ICF/MR providers. In the year 2000 and every three years thereafter, an advisory panel consisting of providers, advocates, and HHSC, and an independent consultant retained by HHSC analyzes available information regarding historical cost and operational data and level-of-need assessment to determine if revisions to the models are necessary. HHSC will review the analysis in setting rates ].

[ ~~(e)~~ Transitional add-on. A transitional add-on, in an amount to be determined by HHSC, will be paid to a provider for a consumer who is admitted to a small non-state operated facility on or after October 1, 2001, if the consumer is admitted from a large state-operated facility. The transitional add-on will be paid for the time period the consumer resides in the small non-state operated facility or for 180 calendar days, whichever time period is less. ]

(e) [ ~~(f)~~ ] Reimbursement determination for state-operated facilities. Except as provided in paragraph (2) of this subsection and subsection (f) [ ~~(g)~~ ] of this section, state-operated facilities are reimbursed an interim rate with a settlement conducted in accordance with paragraph (1)(B) of this subsection. HHSC will adopt the interim reimbursement rates for state-operated facilities in accordance with §355.101 of this title (relating to Introduction) and this subchapter.

(1) State-operated facilities certified prior to January 1, 2001, will be reimbursed using an interim reimbursement rate and settlement process.

(A) Interim reimbursement rates for state-operated facilities are based on the most recent cost report accepted by HHSC.

(B) Settlement is conducted each state fiscal year by class of facility. If there is a difference between allowable costs and the reimbursement paid under the interim rate, including applied income, for a state fiscal year, federal funds to the state will be adjusted based on that difference.

(2) A state-operated facility certified on or after January 1, 2001, will be reimbursed using a pro forma rate determined in accordance with §355.101(c)(2)(B) and §355.105(h) of this title (relating to Introduction and General Reporting and Documentation Requirements). A facility will be reimbursed under the pro forma rate methodology until HHSC receives an acceptable cost report which includes at least 12 months of the facility's cost data and is available to be included in the annual interim rate determination process.

(f) [ ~~(g)~~ ] HHSC may define experimental classes of service to be used in research and demonstration projects on new reimbursement methods. Demonstration or pilot projects based on experimental classes may be implemented on a statewide basis or may be limited to a specific region of the state or to a selected group of providers. Reimbursement for an experimental class is not implemented, however, unless HHSC and the Health Care Financing Administration (HCFA) approve the experimental methodology.

(g) [ ~~(h)~~ ] Cost Reporting. For cost reports pertaining to providers' fiscal years ending in calendar year 2004 and subsequent years the following applies:

(1) Providers must follow the cost-reporting guidelines as specified in §355.105 of this title (relating to General Reporting and Documentation Requirements, Methods, and Procedures).

(2) Providers must follow the guidelines in determining whether a cost is allowable or unallowable as specified in §355.102 and §355.103 of this title (relating to General Principles of Allowable and Unallowable Costs, and Specifications for Allowable and Unallowable Costs).

(3) Revenues must be reported on the cost report in accordance with §355.104 of this title (relating to Revenues).

(h) [ ~~(i)~~ ] Adjusting costs. Each provider's total reported allowable costs, excluding depreciation and mortgage interest, are projected from the historical cost-reporting period to the prospective reimbursement period as described in §355.108 of this title (relating to Determination of Inflation Indices). HHSC may adjust reimbursement if new legislation, regulations, or economic factors affect costs, according to §355.109 of this title (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs).

(i) [ ~~(j)~~ ] Field Audit and Desk Review. Desk reviews or field audits are performed on cost reports for all contracted providers. The frequency and nature of the field audits are determined by HHSC to ensure the fiscal integrity of the program. Desk reviews and field audits will be conducted in accordance with §355.106 of this title (relating to Basic Objectives and Criteria for Audit and Desk Review of Cost Reports), and providers will be notified of the results of a desk review or a field audit in accordance with §355.107 of this title (relating to Notification of Exclusions and Adjustments). Providers may request an informal review and, if necessary, an administrative hearing to dispute an action taken under §355.110 of this title (relating to Informal Reviews and Formal Appeals).

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 25, 2007.

TRD-200702612

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

1 TAC §355.458

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

The Health and Human Services Commission (HHSC) proposes to repeal §355.458, concerning the rebasing of model rates for non-state operated providers in the Intermediate Care Facilities for Persons with Mental Retardation (ICF/MR) program.

Background and Justification

This rule establishes the rebasing process that is part of the reimbursement methodology for non-state operated facilities in the ICF/MR program. The rebasing process revises the underlying assumptions on which the modeled rates are calculated. HHSC, under its authority and responsibility to administer and implement rates, is updating the methodology by eliminating the rebasing process and by using audited cost report data. Section 355.456 in this subchapter, which is amended as part of this rule packet, reflects the method used to determine rates effective September 1, 2007.

Section-by-Section Summary

This rule is repealed in its entirety. The purpose of this repeal is to delete the rate rebasing process to determine rates for the ICF/MR program, because the process of using a consultant and advisory panel is no longer used for rate determination in this program. The current process, which will be used for rate determinations effective September 1, 2007, will update the modeled rates based on audited cost report cost data to the extent possible within the appropriations for the 2008 - 2009 biennium.

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 repeal is in effect there will be no additional cost to the state for each state fiscal year the rule is implemented. The proposed rule will not result in any fiscal implications for local health and human services agencies. Local governments will incur no additional costs.

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 repeal. The implementation of the proposed repeal does not require any changes in practice or any additional cost to the contracted provider. In addition, current rules for this program limit payment rates to the amount of funds appropriated for the program. The proposed elimination of the rebasing process does not change this limitation.

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

Public Benefit

Carolyn Pratt, Director of Rate Analysis, has determined that, for each of the first five years the repeal is in effect, the expected public benefit is that an obsolete method for determining ICF/MR rates will be eliminated and that other rules within this subchapter will reflect the actual method used to determine rates for this program effective September 1, 2007.

Takings Impact Assessment

Regulatory Analysis

Public Comment

Public Hearing

Statutory Authority

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

§355.458.Rebasing the Non-State Operated Facility Modeled Rates.

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 25, 2007.

TRD-200702613

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Subchapter E. COMMUNITY CARE FOR AGED AND DISABLED

1 TAC §355.507

The Texas Health and Human Services Commission (HHSC) proposes to amend §355.507, concerning Reimbursement Rates-Reimbursement Methodology for the Medically Dependent Children Program (MDCP).

Background and Justification

The purpose of this amendment is to: (1) base MDCP rates on Community Based Alternatives home-and-community-support-services (CBA HCSS) fee-for-service historical costs, unless the current MDCP rates are higher; current rates contained in the rule will be deleted; (2) establish that rates for independent registered nurse (RN) and licensed vocational nurse (LVN) services will be 80 percent of the CBA HCSS rates for these services; (3) base the MDCP camp rate on the Community Living Assistance and Support Services direct service agency (CLASS DSA) out-of-home respite rate; and (4) establish that facility-based respite rates will be based on 77 percent of the nursing facility fee-for-service rates.

Currently, MDCP provider reimbursement rates for some services are lower than for other Medicaid long term care programs (e.g., CBA HCSS, CLASS DSA), although the services delivered are similar. In an effort to achieve consistency in Medicaid payments for similar services in Medicaid long term care programs, HHSC is proposing to make the MDCP rates for LVN, RN, and personal assistance services provided by home and community support services agencies the same as those in CBA and to make the camp rate ceiling in MDCP the same as the out-of-home respite rate ceiling in the CLASS program.

In 2003, cost surveys were collected from MDCP providers in order to determine if increased Medicaid rates for RN, LVN and personal assistance services in MDCP were justified and to determine if the MDCP rates should be higher than or equal to other long term care programs. Analyses of these cost surveys determined that the costs for delivering MDCP services were very similar to the costs for services delivered by CBA HCSS agencies for RN, LVN, and personal assistance services. Subsequently, it was determined that, when funds became available and based on the similarity of their costs, MDCP rates should equal the CBA rates. Based on increased appropriations for the MDCP program for the 2008 - 2009 biennium, this amendment proposes rate increases for MDCP to bring the rates for RN, LVN, and personal assistance services in line with CBA. In addition, the amendment proposes to align the camp rate ceiling with the out-of-home CLASS respite rate ceiling. The CLASS program utilizes the out-of-home respite rate ceiling to pay for camp services. Actual camp rates paid are the lessor of the actual camp cost or the rate ceiling amount.

Currently in the MDCP program, the rates paid to independent RN and LVN providers are less than the rates paid to contracted HCSS agency RN and LVN providers. This difference in rates is because the independent providers do not have the same overhead and operational costs as an HCSS agency. The rule proposal establishes the independent rate for RN and LVN providers at 80 percent of the HCSS agency rate to recognize this cost difference.

The rates for MDCP facility-based respite care were established at 63 percent of the 1996 nursing facility rate and have remained constant since that time. The proposed rule establishes the facility respite rate for MDCP at 77 percent of the nursing facility base rate by level of care, which will result in an increase in the facility respite rates.

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that, for the first five-year period the proposed amendment is in effect there will be a fiscal impact to state government of $1,682,405 for state fiscal year (SFY) 2008, $1,833,422 for SFY 2009, $1,957,343 for SFY 2010, $1,957,343 for SFY 2011, and $1,957,343 for SFY 2012 as a result of increased rates to MDCP providers. 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

Public Benefit and Costs

Carolyn Pratt, Director of Rate Analysis, has determined that, during the first five years the proposed section is in effect, the public benefits anticipated as a result of enforcing the section are that there will be increased consistency in payment rates for similar services across Medicaid long term care programs while increasing rates for the MDCP program.

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

Public Comment

Written comments on the proposal may be submitted to Victor Perez in the Rate Analysis Division, Texas Health and Human Services Commission, P.O. Box 85200, Austin, TX 78708-5200; by fax (512) 491-1998 or by e-mail at Victor.Perez@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Statutory Authority

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

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

§355.507.Reimbursement Methodology for the Medically Dependent Children Program.

(a) The Texas Health and Human Services Commission (HHSC) determines payment rates for qualified contracted providers for the provision of services in the Medically Dependent Children Program (MDCP). HHSC applies the general principles of cost determination as specified in §355.101 of this title (relating to Introduction).

(b) Effective September 1, 2007, rates for home-and-community-support-service agency (HCSS) registered nurse (RN), HCSS agency licensed vocational nurse (LVN), and HCSS agency personal assistance services (PAS) (with delegation of the service by an RN and without delegation of the service by an RN)), will be based upon the Community-Based Alternatives (CBA) HCSS-approved rates for RN and LVN services in accordance with §355.503 of this title (relating to Reimbursement Methodology for the Community-Based Alternatives Waiver Program) and non-participant PAS in accordance with §355.112(l) of this title (relating to Attendant Compensation Rate Enhancement). However, if the rates in effect for these MDCP services on August 31, 2007, are greater than the approved rates for the CBA HCSS for RN, LVN, and non-participant PAS, the higher MDCP rates will remain in effect on September 1, 2007. Effective September 1, 2007, the reimbursement rate for independent RNs will be equal to 80 percent of the MDCP rate for HCSS agency RNs, and the reimbursement rate for independent LVNs will be equal to 80 percent of the MDCP rate for HCSS agency LVNs.

[ ~~(1)~~ Payment rates for MDCP services in effect on January 1, 1998, will remain in effect until HHSC obtains sufficient reliable cost data to determine new payment rates. These payment rates per hour of direct service are $24.00 for independent registered nurse (RN), $20.00 for independent licensed vocational nurse (LVN), $27.50 for home-and-community-support-service agency RN or LVN, $10.22 for personal assistance service (PAS) with delegation of the service by an RN, and $9.84 for PAS without delegation of the service by an RN. ]

(c) The rate ceiling for camp services will be equivalent to the Community Living Assistance and Support Services direct service agency (CLASS DSA) out-of-home respite rate. Actual payments for this service will be the lesser of the rate ceiling or the actual cost of the camp.

(d) Facility-based respite care rates are determined on a 24-hour basis. The rates for facility-based respite care are calculated at 77 percent of the daily nursing facility base rates by level of care The base rates used in this calculation do not include nursing facility rate add-ons.

(e) [ ~~(2)~~ ] Payment rates may be determined in the future on a pro forma basis in accordance with §355.105(h) of this title (relating to General Reporting and Documentation Requirements, Methods, and Procedures). [ Payment rates if determined on a pro forma basis will include payment rates per hour of service for independent registered nurse (RN), independent licensed vocational nurse (LVN), home-and-community-support-service agency RN, home-and-community-support-service agency LVN, and personal assistance services. ]

(f) [ ~~(3)~~ ] The following sections of this title will apply to cost reports or surveys required to obtain the necessary information to determine new payment rates: §355.102 of this title (relating to General Principles of Allowable and Unallowable Costs), §355.103 of this title (relating to Specifications for Allowable and Unallowable Costs), §355.104 of this title (relating to Revenues), §355.105 of this title (relating to General Reporting and Documentation Requirements, Methods, and Procedures), §355.106 of this title (relating to Basic Objectives and Criteria for Audit and Desk Review of Cost Reports), §355.107 of this title (relating to Notification of Exclusions and Adjustments), §355.108 of this title (relating to Determination of Inflation Indices), §355.109 of this title (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs), §355.110 of this title (relating to Informal Reviews and Formal Appeals), and §355.111 of this title (relating to Administrative Contract Violations).

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 25, 2007.

TRD-200702614

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Subchapter F. REIMBURSEMENT METHODOLOGY FOR PROGRAMS SERVING PERSONS WITH MENTAL ILLNESS AND MENTAL RETARDATION

1 TAC §355.722

The Health and Human Services Commission (HHSC) proposes an amendment to §355.722, concerning the reporting of costs and fiscal accountability spending requirements for the Home and Community-based Services (HCS) program.

Background and Justification

On an annual basis, HCS providers must submit cost reports as directed by HHSC or its designee and in accordance with this subchapter. HHSC, under its authority and responsibility to administer and implement rates, is amending this rule to clarify its applicability and to update the cost reporting processes for HCS providers. The amended rule will reflect the method used to collect cost data for determining rates effective September 1, 2007.

The amendment to this rule is made in accordance with the appropriations under the 2008-09 General Appropriations Act (Article II, Special Provisions, Section 57(b)(1), H.B. 1, 80th Legislature, Regular Session, 2007). Current rules for the HSC program limit payment rates to the amount of funds appropriated for the program. The proposed amendment will not change this limitation.

Section-by-Section Summary

The amendment removes an incorrect reference in subsection (a) to "state operated" and in subsection (j)(1) and (2) to "non-state operated" HCS providers, since these rules apply to all HCS providers and not just state operated providers.

The amendment deletes subsection (a)(3) regarding annually inflating rates in the rate model, since the rates are determined on the state's biennium.

The amendment deletes subsections (b) - (o) from the rules. These changes: (1) remove references to collecting a sample of cost data from providers since all providers are required to submit cost reports; and (2) remove redundant rule language because the language is already incorporated into the rule by reference. The rule references the cost determination process rules at §§355.101 - 355.110, which standardize key rules for all long-term care programs. Therefore, any duplication of rule language to the contents of these sections (§§355.101 - 355.110) has been removed from §355.722.

Under new subsections (c) and (d), the amendment adds references to the cost determination process rules regarding desk reviews and field audits to standardize these rules with other long-term care rules.

The amendment eliminates outdated subsections (r) and (s) and certain provisions of (v) - related to cost reports and fiscal accountability for past periods of time no longer in effect.

The amendment replaces the references in subsection (v) (now subsection (j)) to the Texas Department of Mental Health and Mental Retardation (TDMHMR) with references to the Department of Aging and Disability Services (DADS).

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 no additional cost to the state for each state fiscal year the rule is implemented. The proposed rule will not result in any fiscal implications for local health and human services agencies. Local governments will incur no additional costs.

Small Business and Micro-business Impact Analysis

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

Public Benefit

Carolyn Pratt, Director of Rate Analysis, has determined that, for each of the first five years the amendment is in effect, the expected public benefit is that obsolete and duplicative rule language will be eliminated and the rules will reflect the actual method used to collect costs that are used to determine rates effective September 1, 2007.

Takings Impact Assessment

Regulatory Analysis

Public Comment

Public Hearing

Statutory Authority

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

§355.722.Reporting Costs by Home and Community-based Services (HCS) Providers.

(a) On an annual basis, all [ ~~state-operated~~ ] HCS providers must submit cost reports as directed by HHSC or its designee and in accordance with this subchapter. The Texas Health and Human Services Commission (HHSC) applies the general principles of cost determination as specified in §355.101 of this title (relating to Introduction).

(1) Direct service costs are defined to include costs associated with personnel who provide direct hands-on support for consumers and include personnel such as direct care workers, first-level supervisors of direct care workers, registered nurses, licensed vocational nurses, and other personnel who provide activities of daily living training and clinical program services. Direct service costs include: costs related to wage rates, benefits, payroll taxes, contracts for direct services, and direct service supervision information. Accrued leave (sick or vacation) can only be considered a direct service cost if the employee has a right to a cash value of that leave upon termination.

(2) For staff whose duties include work other than the provision of direct services, the proportion of work that is spent on direct services may be included in the direct service costs. The proportion of their salary and benefits that are compensation for direct services work can be included in the direct service cost report only to the extent that the salary and benefits for this direct service work must be the lesser of the actual wages and benefits or the wages and benefits for a comparable direct care workers assumed in the model. The provider must have a procedure that specifies how direct service work time is allocated.

[ ~~(3)~~ The direct service portions of the current rate model are inflated on an annual basis as specified in §355.723(g)(1) of this title (relating to Reimbursement Methodology for Home and Community-Based Services (HCS)). This will increase the indirect part of the rate proportionately.]

(3) [ ~~(4)~~ ] Providers must report the following costs:

(A) Staff wages related to the delivery of direct services including residential assistance, day habilitation services, and the direct supervision of the delivery of these services.

(B) These costs may be either the HCS provider's actual expense or contracted expenditures.

[ ~~(b)~~ HHSC will select a sample of non-state operated HCS providers which will be required to submit a full and accurate account of all costs related to the provision of services for an HCS provider's fiscal year in order to collect data for the analysis referenced in §355.723(g)(2) of this title (relating to Reimbursement Methodology for Home and Community-Based Services (HCS).]

~~[ ~~(c)~~ HHSC will conduct desk audits of all full cost reports and/or direct service cost reports, and will conduct on-site reviews of a sample of providers submitting cost reports.]~~

[ ~~(d)~~ Record keeping requirements. Each HCS provider must retain records according to HHSC's requirements. HCS providers must ensure that records are accurate and sufficiently detailed to support the legal, financial, and statistical information provided to HHSC.]

~~[ ~~(e)~~ Noncompliance with record keeping requirements. Failure to maintain records that support the information submitted to HHSC constitutes a violation of the HCS provider contract.]~~

~~[ ~~(f)~~ Allowable and unallowable costs. HCS providers must complete cost reports in accordance with this subchapter.]~~

[ ~~(g)~~ Certification. HCS providers must certify the accuracy of cost reports submitted to HHSC. HCS providers may be liable for civil and/or criminal penalties if the cost report is not completed according to HHSC requirements.]

[ ~~(h)~~ Due date. HCS providers must submit direct service cost reports no later than 90 calendar days after the end of the reporting period or 90 days after the date that HHSC mails the form to the HCS provider, whichever is later. HCS providers must submit full cost reports no later than 90 days after the reporting period or 90 days after the date that HHSC mails the form to the HCS provider, whichever is later.]

[ ~~(i)~~ Extension of due date. HHSC may grant extensions of due dates for good cause. Good cause is defined as one that the HCS provider could not reasonably be expected to control. An HCS provider must submit a request for extension in writing to HHSC before the cost report due date. HHSC will respond to a request for extension within 10 working days of its receipt.]

[ ~~(j)~~ Cost data. HHSC may at times require additional financial and statistical information to ensure the fiscal integrity of the HCS Program. Each provider must submit additional information to HHSC upon request, unless the information is not at the HCS provider's disposal.]

~~[ ~~(k)~~ Failure to submit requested data. Failure to submit acceptable cost data by the due date constitutes a violation of the HCS provider contract.]~~

[ ~~(l)~~ Review of cost data. HHSC or its designee reviews each HCS provider's cost data to ensure that the financial and statistical information submitted conforms to all applicable rules and instructions. Forms that are not completed according to HHSC's instructions or rules may be returned to the HCS provider for proper completion.]

[ ~~(m)~~ On-site audits. TDMHMR or its designee performs a sufficient number of on-site financial audits to ensure the fiscal integrity of the HCS Programs. The number of on-site audits performed may vary.]

[ ~~(n)~~ On-site audit standards. HHSC performs on-site financial audits in a manner consistent with the generally accepted auditing standards (GAAS) approved by the American Institute of Certified Public Accountants and included in Standards for Audit of Governmental Organizations, Programs, Activities and Functions, issued by the United States Comptroller General.]

[ ~~(o)~~ Access to records. Each HCS provider must allow access to HHSC to any and all records necessary to verify cost data submitted to HHSC. This requirement includes records pertaining to related-party transactions and other business activities engaged in by the HCS provider that are directly or indirectly related to the provision of contracted services. Failure to allow inspection of pertinent records within 10 working days following written notice from HHSC constitutes a violation of the HCS provider contract. If the administrative office or other entity pertaining to a multi-contract operation refuses access to records, then the penalties are extended to all of the provider's entities having Medicaid contracts with TDMHMR. Additional rules regarding access to records that are out-of-state may be found in §355.105 of this title (relating to General Reporting and Documentation Requirements, Methods, and Procedures).]

(b) [ ~~(p)~~ ] Reviews of exclusions or adjustments. An HCS provider who disagrees with HHSC's exclusion or adjustment of items in cost reports may request an informal review and, when appropriate, an administrative hearing as specified in §355.110 of this title (relating to Informal Reviews and Formal Appeals).

(c) Field audit and desk review. Desk reviews or field audits are performed on cost reports for all contracted providers. The frequency and nature of the field audits are determined by HHSC to ensure the fiscal integrity of the program. Desk reviews and field audits will be conducted in accordance with §355.106 of this title (relating to Basic Objectives and Criteria for Audit and Desk Review of Cost Reports).

(d) [ ~~(q)~~ ] Notification of exclusions and adjustments. HHSC will notify an HCS provider of the results of a desk review or field audit [ ~~exclusions and any adjustments, including caps applied, to reported costs~~ ] in accordance with §355.107 of this title (relating to Notification of Exclusions and Adjustments). [ ~~§355.705 of this title (relating to Notification).~~ ]

~~[ ~~(r)~~ The information in subsections (d) - (p) of this section applies to cost reports pertaining to provider's fiscal years ending in calendar year 2001, 2002 and 2003.]~~

~~[ ~~(s)~~ For cost reports pertaining to providers' fiscal years ending in calendar year 2004 and subsequent years the following applies:]~~

(e) [ ~~(1)~~ ] Providers must follow the cost-reporting guidelines as specified in §355.105 of this title (relating to General Reporting and Documentation Requirements, Methods, and Procedures).

(f) [ ~~(2)~~ ] Providers must follow the guidelines in determining whether a cost is allowable or unallowable as specified in §355.102 and §355.103 of this title (relating to General Principles of Allowable and Unallowable Costs, and Specifications for Allowable and Unallowable Costs) [ ~~, in addition to the following~~ ].

(g) [ ~~(3)~~ ] Revenues must be reported on the cost report in accordance with §355.104 of this title (relating to Revenues).

(h) [ ~~(t)~~ ] Allowable compensation for owners and related parties and definitions of owners and related parties are specified in §355.102(i) and §355.103(b)(2) of this title (relating to General Principles of Allowable and Unallowable Costs and Specifications for Allowable and Unallowable Costs and subsection (a)(2) of this section. Owner and related party employees who provide both direct care and indirect services must maintain daily time sheets that record the time spent on activities in each area. The provider must maintain documentation relating to compensation, bonuses, and benefits of each owner or related party in accordance with §355.105(b)(2)(B)(xi) of this title (relating to General Reporting and Documentation Requirements, Methods, and Procedures). The maximum hours per fiscal year that an owner and related party employee may report on the cost report is 2080 hours per fiscal year.

(i) [ ~~(u)~~ ] Each provider's total reported allowable costs, excluding depreciation and mortgage interest, are projected from the historical cost-reporting period to the prospective reimbursement period as described in §355.108 of this title (relating to Determination of Inflation Indices). HHSC may adjust reimbursement if new legislation, regulations, or economic factors affect costs, according to §355.109 of this title (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs).

(j) [ ~~(v)~~ ] Fiscal Accountability.

(1) General principles. Fiscal accountability is a process used to gauge the ongoing financial performance under the [ ~~non-state operated~~ ] reimbursement rates.

(2) Annual reporting. Fiscal accountability will consist of the annual reporting of the direct service costs including wages, and benefits, from all [ ~~non-state operated~~ ] HCS providers. The data will be collected on a cost report designed by HHSC in accordance with §355.105(b) of this title (relating to General Reporting and Documentation Requirements, Methods, and Procedures).

(A) The Department of Aging and Disability Services (DADS) [ ~~TDMHMR~~ ] will place a vendor hold on payments to an HCS provider whose provider agreement is being assigned or terminated. The HCS provider will submit a cost report for the current reporting period to HHSC. Upon receipt of an appropriate cost report and repayment of any amounts due to HHSC in accordance with this section, the vendor hold will be released.

(B) HCS providers are exempt from submitting cost reports in accordance with this section for the portion of their programs that convert to the Mental Retardation Local Authority (MRLA Program) for the fiscal year in which the conversion occurred.

(3) HHSC will require HCS providers to report all direct costs incurred on an annual fiscal year basis. HHSC will compare the reported direct service costs to the total direct service revenue.

[ ~~(4)~~ Paragraph (5) of this subsection applies to that portion of the HCS provider's fiscal year that occurs after April 5, 1998. Paragraph (6) of this subsection, concerning the following fiscal accountability repayment, applies to that portion of the provider's fiscal year that begins on or after January 1, 1999.]

[ ~~(5)~~ Direct service revenues are calculated by multiplying the number of units eligible for payment that have been paid, for services delivered during the reporting period times the appropriate direct service portion of the rate for the service billed.]

~~[ ~~(A)~~ HCS providers whose direct service costs are 85% or more of the direct service revenues will not be subject to repayment under this section.]~~

[ ~~(B)~~ HCS providers whose direct service costs are less than 80% of the direct service revenues will be required to pay to TDMHMR the difference between the direct service costs and 95% of the direct service revenues.]

[ ~~(C)~~ HCS providers whose direct service costs are between 80% and 85% of the direct service revenues will be required to pay to TDMHMR 100% of the difference between the direct service costs and 85% of the direct service revenues.]

(4) [ ~~(6)~~ ] Direct Service Revenues are calculated by multiplying the number of units eligible for payment that have been paid for services delivered during the reporting period times the appropriate direct service portion of the rate for the service billed.

(A) HCS providers whose direct service costs are 90% or more of the direct service revenues will not be subject to repayment under this section.

(B) HCS providers whose direct service costs are between 85% and 90% of the direct service revenues will be required to pay to DADS [ ~~TDMHMR~~ ] 50% of the difference between the direct service costs and 90% of the direct service revenues.

(C) HCS providers whose direct service costs are between 80% and 85% of the direct service revenues will be required to pay to DADS [ ~~TDMHMR~~ ] 100% of the difference between the direct service costs and 85% of the direct service revenues plus 50% of the difference between 85% and 90% of the direct service revenues.

(D) HCS providers whose direct service costs are less than 80% of the direct service revenues will be required to pay to DADS [ ~~TDMHMR~~ ] the difference between the direct service costs and 95% of the direct service revenues.

(5) [ ~~(7)~~ ] Where applicable, HCS providers will be notified of the requirement to repay revenues within 90 days of submitting their cost reports. An HCS provider's repayment status may change as a result of the desk reviews or outside audits of cost reports, or adjustments to claims paid to the HCS provider for services provided in the cost reporting period. HCS providers will submit the repayment amount within 60 days of notification.

(6) [ ~~(8)~~ ] Repayment will be made by the following:

(A) the HCS provider or legal entity submitting the report;

(B) any other legal entity responsible for the debts or liabilities of the submitting entity; or

(7) [ ~~(9)~~ ] HCS providers required to repay revenues to DADS [ ~~TDMHMR~~ ] will be jointly and severally liable for any repayment. DADS [ ~~TDMHMR~~ ] will apply a vendor hold on Medicaid payments to a HCS provider for not making the payment to DADS [ ~~TDMHMR~~ ] within 60 days of receiving notice.

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 25, 2007.

TRD-200702615

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

1 TAC §355.723

The Health and Human Services Commission (HHSC) proposes an amendment to §355.723, concerning the reimbursement methodology for the Home and Community-Based Services (HCS) program.

Background and Justification

HHSC sets payment rates to be paid to HCS providers annually, and this rule sets out the reimbursement methodology that is used to set those rates. HHSC, under its authority and responsibility to administer and implement rates, is updating the reimbursement methodology by eliminating the rebasing process. The amended rule will reflect the method used to determine rates effective September 1, 2007.

The amendment to this rule is made in accordance with the appropriations under the 2008 - 09 General Appropriations Act (Article II, Special Provisions, Section 57(b)(1), H.B. 1, 80th Legislature, Regular Session, 2007). Current rules for the HSC program limit payment rates to the amount of funds appropriated for the program. The proposed amendment will not change this limitation.

Section-by-Section Summary

The amendment deletes the rebasing process to determine rates for the HCS program in subsections (c), (e), (f), and (g). The process of using a consultant and advisory panel is no longer used for rate determination in this program. The current process, which will be used for rate determination effective September 1, 2007, will update the modeled rates based on audited cost report cost data submitted by HCS providers to the extent possible within the appropriations for the 2008 - 2009 biennium.

The amendment to subsection (e) (now subsection (d)) clarifies that the rates are determined on the state biennium with the addition of a cross reference to §355.722 in this subchapter.

The amendment removes references in subsections (c) and (e) to collecting a sample of cost data from providers since all providers are required to submit cost reports.

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 no additional cost to the state for each state fiscal year the rule is implemented. The proposed rule will not result in any fiscal implications for local health and human services agencies. Local governments will incur no additional costs.

Small Business and Micro-business Impact Analysis

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

Public Benefit

Takings Impact Assessment

Regulatory Analysis

Public Comment

Public Hearing

Statutory Authority

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

§355.723.Reimbursement Methodology for Home and Community-Based Services (HCS).

(a) HHSC sets payment rates to be paid to HCS providers annually. Rates are prospective in nature.

(b) Reimbursement rates apply to all non-state operated HCS providers uniformly by type of service component provided and the individual's level-of-need. Reimbursements for state-operated HCS providers are adjusted based on allowed costs reported at the end of the state fiscal year, in accordance with this subchapter. The state-operated cost adjustment will not exceed allowable federal maximums.

[ ~~(c)~~ Modeled rates are based on relevant cost information including a sample of historical cost information and operational experience of HCS service providers in Texas. The modeled rates are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable state and federal laws, regulations, and quality and safety standards.]

(c) [ ~~(d)~~ ] Rates vary by level of need for residential support, supervised living, HCS foster/companion care, and day habilitation.

(d) [ ~~(e)~~ ] The recommended modeled rates [ ~~effective January 1, 1997,~~ ] are based on cost components deemed appropriate for a provider. The determination of these components is based on cost reports submitted by HCS providers in accordance with §355.722 of this subchapter (relating to Reporting Costs by Home and Community-based Services (HCS) Providers). [ historical cost and operational information collected from a representative sample of HCS providers. An advisory panel consisting of providers, advocates, an independent firm and HHSC and TDMHMR personnel, will analyze available information regarding historical cost and operational data and level-of-need assessment. The analysis will result in recommendations to the board for rates which are reasonable and adequate. ]

[ ~~(f)~~ The modeled rate for a service component developed or modified after January 1, 1997, but prior to the rebasing process initiated under subsection (g) of this section, and provided after the effective date of this rule, will be based on cost assumptions used in modeling existing rates, actual or projected utilization patterns, and the recommendations of an advisory panel consisting of program providers, department personnel, and advocates for persons with mental retardation.]

(e) [ ~~(g)~~ ] The rates are derived for each type of service and, when appropriate, each level-of-need and include the following cost factors: direct service staffing costs (wages for direct care, direct care supervisors, benefits, modeled staffing ratios); non-personnel operating costs; facility costs (for respite care only); room and board costs for overnight, out-of-home respite care; administrative costs; and professional consultation and program support costs.

[ ~~(1)~~ Annual rates for the time period between the years that modeled rates are rebased are set by inflating the direct cost portion of the previous year's rates by the Personal Consumption Expenditure (PCE) Chain-Type Index.]

~~[ ~~(2)~~ The modeled rates will be analyzed to determine if rebasing is necessary for the rates effective September 1, 2001, using the following process:]~~

~~[ ~~(A)~~ HHSC will seek to obtain a consultant to perform a detailed analysis of cost and operational information for a sample of providers throughout the state.]~~

~~[ ~~(B)~~ Site visits will be made to each of the sample HCS providers to collect cost data and discuss operations.]~~

[ ~~(C)~~ An advisory panel will be formed consisting of service providers, advocates, and HHSC and TDMHMR personnel who will analyze available information regarding historical cost and operational data and level-of-need assessment.]

[ ~~(D)~~ The advisory panel, HHSC, TDMHMR, and the independent firm will recommend adjustments to rate factors if required, based on the results of the analysis of the sample of cost and operational information.]

(f) [ ~~(3)~~ ] Refinement/adjustment of the cost factors and model assumptions will be considered, as appropriate, by HHSC.

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 25, 2007.

TRD-200702616

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Subchapter H. REIMBURSEMENT METHODOLOGY FOR 24-HOUR CHILD CARE FACILITIES

1 TAC §355.7103

The Texas Health and Human Services Commission (HHSC) proposes to amend §355.7103, Rate-Setting Methodology for 24-Hour Residential Child Care Reimbursements in its Reimbursement Rates Chapter.

Background and Purpose

The background and purpose of the amendment is twofold: 1) propose a new rate determination methodology for the Department of Family and Protective Services' (DFPS) Psychiatric Step-Down program for children in DFPS conservatorship; and 2) provide the method for determining payment rates effective September 1, 2007, for the 24-Hour Residential Child Care Program.

DFPS is proposing program rules for a new Psychiatric Step-Down program in this issue of the Texas Register. This program will be for children in DFPS conservatorship who have extreme behaviors and histories of inpatient psychiatric care to assist them in transitioning to more traditional Child Protective Services residential care settings. HHSC is proposing a rule amendment at 1 TAC §355.7103(p) that will allow payment rates for this program to be determined on a pro forma approach in accordance with existing rules at 1 TAC §355.105(h), relating to General Reporting and Documentation Requirements, Methods, and Procedures. Section 355.105(h) states that if insufficient data are available to determine payment rates using cost reports, rates may be based on a pro forma analysis by HHSC staff. A pro forma analysis is defined as an item-by-item, or classes-of-items, calculation of the reasonable and necessary expenses for a provider to operate.

Appropriations for the DFPS 24-Hour Child-Care Program for the state fiscal years 2008 through 2009 are anticipated to increase by an amount sufficient to support an average rate increase of 4.3 percent above current rates for this program. The amendment to §355.7103(m) provides that, for foster families, the rates effective September 1, 2007 through August 31, 2009, for each level of service will be equal to the minimum rate paid to foster families for that level of service in effect August 31, 2007, plus 4.3 percent. As well, the amendment provides that, for Child Placing Agencies (CPAs), the rates effective September 1, 2007 through August 31, 2009, for each level of service will be equal to the rate paid to CPAs for that level of service in effect August 31, 2007, plus 4.3 percent. Remaining appropriated funds shall be distributed proportionally across all other types of providers of foster care based on each provider type's ratio of costs as reported on the most recently audited cost report to existing payment rates. The remaining subsections of §355.7103 have been re-lettered to accommodate the new language in subsection (m).

Fiscal Note

Cindy Brown, Chief Financial Officer of DFPS, has determined that for the first five year period the proposed section will be in effect there are foreseeable fiscal implications for state government as a result of enforcing or administering the section. The effect on state government for the first five years the proposed amendment is in effect is an estimated additional cost of $10,314,152 in fiscal year (FY) 2008; $11,100,462 in FY 2009; $11,688,055 in FY 2010; $12,422,764 in FY 2011; and $13,194,332 in FY 2012.

Small Business and Micro-business Impact Analysis

Ms. Brown has also determined that there will be no adverse economic effect on small or micro-businesses as a result of enforcing or administering the proposed section. There is no anticipated economic cost to persons who are required to comply with the proposed section. There is no anticipated effect on local employment in geographic areas affected by this section.

Public Benefit and Costs

Carolyn Pratt, Director of Rate Analysis, has determined that, for each of the first five years that the proposed amendments will be in effect, the public benefit anticipated as a result of the rule change will be that a post hospitalization "step-down" program will be available for children with extreme behaviors and histories of inpatient psychiatric care episodes to assist them in transitioning into more traditional residential care settings. In addition, there will be an increase in rates paid to foster families and providers of 24-hour residential child care, which should help to encourage more foster family applications and provide financial cost-of-living increases to foster families. In addition, increased payment rates for other providers of 24-hour residential child care will allow providers to cover more of their costs of serving these children. There is no anticipated economic cost to persons who are required to comply with the proposed sections.

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

Public Comment

Written comments on the proposal may be submitted to Pam McDonald in the Rate Analysis Department, Texas Health and Human Services Commission, P.O. Box 85200, Austin, TX 78708-5200; by fax (512) 491-1998 or by e-mail at pam.mcdonald@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Statutory Authority

The amendment is 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 Government Code §531.055, which authorizes the executive commissioner to adopt rules for the operation and provision of health and human services by the health and human services agencies and to adopt or approve rates of payment required by law to be adopted or approved by a health and human services agency; and the Human Resources Code, §40.004(c) and (d), which authorize the executive commissioner to consider fully all written and oral submissions to the DFPS Council about a proposed rule.

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

§355.7103.Rate-Setting Methodology for 24-Hour Residential Child-Care Reimbursements.

(a) - (l) (No change.)

(m) For the state fiscal year 2008 through 2009 biennium, for foster families, the payments effective September 1, 2007 through August 31, 2009 for each level of service will be equal to the minimum rate paid to foster families for that level of service in effect August 31, 2007 plus 4.3 percent. For Child Placing Agencies (CPAs), the rates effective September 1, 2007, through August 31, 2009 for each level of service will be equal to the rate paid to CPAs for that level of service in effect August 31, 2007, plus 4.3 percent. Additional appropriated funds remaining after the rate increase for foster families and CPAs shall be distributed proportionally across general residential operations and residential treatment centers based on each of these provider type's ratio of costs as reported on the most recently audited cost report to existing payment rates.

(n) [ ~~(m)~~ ] HHSC may adjust payment rates, if determined appropriate, when federal or state laws, rules, standards, regulations, policies, or guidelines are changed or adopted. These adjustments may result in increases or decreases in payment rates. Providers must be informed of the specific law, rule, standard, regulation, policy or guideline change and be given the opportunity to comment on any rate adjustment resulting from the change prior to the actual payment rate adjustment.

(o) [ ~~(n)~~ ] To implement Chapter 1022 of the Acts of the 75th Texas Legislature, §103, the executive director may develop and implement one or more pilot competitive procurement processes to purchase substitute care services, including foster family care services and specialized substitute care services. The pilot programs must be designed to produce a substitute care system that is outcome-based and that uses outcome measures. Rates for the pilot(s) will be the result of the competitive procurement process, but must be found to be reasonable by the executive director. Rates are subject to adjustment as allowed in subsections (a) and (m) of this section.

(p) Payment rates for psychiatric step-down services are determined on a pro forma basis in accordance with §355.105(h) of this title (relating to General Reporting and Documentation Requirements, Methods, and Procedures).

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 25, 2007.

TRD-200702617

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Subchapter J. PURCHASED HEALTH SERVICES

Division 4. MEDICAID HOSPITAL SERVICES

1 TAC §355.8061

The Health and Human Services Commission (HHSC) proposes an amendment to §355.8061, concerning the payment of hospital services, in Chapter 355, Reimbursement Rates.

Background and Justification

High-volume providers of Medicaid covered services receive enhanced payments. The purpose of this amendment to §355.8061(a)(2) is to update the base year for determining which outpatient hospitals qualify as high-volume providers. The rule currently identifies a high-volume outpatient hospital provider as a provider that was paid $200,000 during calendar year 2000. The amendment will change the qualification period from calendar year 2000 to calendar year 2004 and allows HHSC to use a more current base year in determining the outpatient hospital providers who qualify for high-volume payments.

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that during the first five year period the amended rule is in effect there will be no additional costs or savings for each state fiscal year the rule is implemented. The proposed rule will not result in any fiscal implications for local health and human services agencies. Local governments will incur no additional costs. HHSC does not anticipate that there will be any economic cost to persons who are required to comply with this amendment. The amendment will not affect a local economy.

Small Business and Micro-business Impact Analysis

HHSC has determined that there is no adverse economic effect on small businesses or micro-businesses, or on businesses of any size, as a result of enforcing or administering the amendment, since providers will continue to be reimbursed under their current reimbursement rate.

Public Benefit

Carolyn Pratt, Director of Rate Analysis, has determined that, for each year of the first five years the amendment is in effect, the public benefit expected is that HHSC will use a more current base year in determining the outpatient hospital providers who qualify for the high-volume payments.

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

Public Comment

Questions about the content of this proposal may be directed to Alisa Jacquet (telephone: (512) 491-1432; FAX: (512) 491-1998) in HHSC Rate Analysis for Hospital Acute Care Services. Written comments on the proposal may be submitted to Ms. Jacquet via facsimile, E-mail to alisa.jacquet@hhsc.state.tx.us, or mail to HHSC Rate Analysis, Mail Code H-400, P.O. Box 85200, Austin, TX 78708-5200, within 30 days of publication in the Texas Register.

Statutory Authority

The amendment is proposed under the Texas Government Code, §531.033, which authorizes the Executive Commissioner of HHSC to adopt rules necessary to carry out the Commission's duties, and §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 proposed amendment affects Texas Government Code, §531.033 and §531.021(b) and Chapter 32 of the Human Resources Code. No other statutes, articles, or codes are affected by this proposal.

§355.8061.Payment for Hospital Services.

(a) The Health and Human Services Commission (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 §355.8063 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 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 [ ~~2000~~ ]. 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) - (5) (No change.)

(b) - (d) (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 June 25, 2007.

TRD-200702618

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

1 TAC §355.8063

The Health and Human Services Commission (HHSC) proposes to amend §355.8063, concerning the Reimbursement Methodology for Inpatient Hospital Services.

Background and Justification

As required by the 2008-09 General Appropriations Act (Article II, Health and Human Services Commission, Rider 52, H.B. 1, 80th Legislature, Regular Session, 2007), the proposed amendments change the Medicaid reimbursement methodology for inpatient hospital services. Specifically, HHSC proposes to amend §355.8063, subsections (h), (n)(2) and (q).

Section-by-Section Summary

Currently, there are provisions in §355.8063(h) and (n)(2) that expire on August 31, 2007. HHSC uses Standard Dollar Amounts in the calculation of inpatient hospital reimbursement rates. Based on Medicaid appropriations for fiscal year 2008, the amendment to §355.8063(h) will extend the time period during which HHSC will not rebase or recalculate the Standard Dollar Amounts (SDAs) to August 31, 2008. The exception will be that HHSC will partially rebase state-owned teaching hospitals effective September 1, 2007, ending August 31, 2008, based on fiscal year 2003 cost data inflated to fiscal year 2005 using a cost-of-living index, adjusted proportionately to available funds. The state-owned teaching hospitals will then be rebased with all other eligible hospitals in fiscal year 2009 based on available appropriations. Also based on fiscal year 2008 Medicaid appropriations, the amendment to §355.8063(n)(2) will extend the period for which the cost of living index is not applied to the SDAs to August 31, 2008.

Section 355.8063(q) is amended as required by the 2008-09 General Appropriations Act (Article II, Health and Human Services Commission, Rider 52, H.B. 1, 80th Legislature, Regular Session, 2007). This amendment changes the categories of hospitals that are eligible to receive the greater of Diagnosis Related Group (DRG) or Tax Equity and Fiscal Responsibility Act (TEFRA) reimbursement based on cost settlement. The amendment specifies that until HHSC implements a new reimbursement system for Fee-for-Service (FFS) and Primary Care Management (PCCM) inpatient services, hospitals are eligible to receive the greater of DRG or TEFRA reimbursement for FFS and PCCM services if, as of September 1, 2007, the hospital is: 1) located in a county with 50,000 or fewer persons, or 2) a Medicare-designated Rural Referral Center or Sole Community Hospital not located in a metropolitan statistical area, or 3) a Medicare-designated Critical Access Hospital. Hospitals reimbursed by cost settlement under TEFRA cost principles will not be subject to the TEFRA cap.

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that during the first five-year period the amended rule is in effect there will be a net cost of approximately $3.9 million in general revenue and approximately $5.9 million in federal funds for each state fiscal year the rule is implemented. The proposed rule will not result in any fiscal implications for local health and human services agencies. Local governments will incur no additional costs. HHSC does not anticipate that there will be any economic cost to persons who are required to comply with this amendment. The amendment will not affect a local economy.

Small Business and Micro-business Impact Analysis

Public Benefit

Carolyn Pratt, Director of Rate Analysis, has determined that, for each year of the first five years the amendment is in effect, the public will benefit because HHSC's Medicaid inpatient hospital reimbursement will be consistent with appropriated funds, and hospitals that are located in a county with 50,000 or fewer persons, or a Medicare-designated Rural Referral Center or Sole Community Hospital not located in a metropolitan statistical area, or a Medicare-designated Critical Access Hospital will receive the greater of DRG or TEFRA reimbursement for Medicaid services.

Regulatory Analysis

Takings Impact Assessment

Public Comment

Statutory Authority

The amendment is proposed under the Texas Government Code, §531.033, which authorizes the Executive Commissioner of HHSC to adopt rules necessary to carry out the commission's duties, and §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 proposed amendment affects Texas Government Code, §531.033 and §531.021(b) and Chapter 32 of the Human Resources Code. No other statutes, articles, or codes are affected by this proposal.

§355.8063.Reimbursement Methodology for Inpatient Hospital Services.

(a) - (g) (No change.)

(h) Rebasing the standard dollar amounts. The HHSC or its designee rebases the standard dollar amount for each payment division at least every three years. HHSC will not rebase or recalculate the standard dollar amounts for each payment division for admissions during the period September 1, 2003 through August 31, 2008. HHSC will partially rebase state-owned teaching hospitals effective September 1, 2007 ending August 31, 2008, based on FY 2003 cost data inflated to FY 2005 using a cost-of-living index, adjusted proportionately to available funds. [ ~~2007.~~ ] The relative weights are recalibrated whenever the standard dollar amounts are recalculated. The standard dollar amounts are not rebased on an interim basis unless the HHSC or its designee determines that special circumstances warrant rebasing.

(i) - (m) (No change.)

(n) Adjustments to base year claims data.

(1) Beginning with 1985 hospital fiscal year cost reporting periods, the HHSC or its designee adjusts each hospital's base year claims data and resulting payment division and standard dollar amount to reflect the interim rate established at tentative and final settlement, if applicable, of the cost reporting period associated with the base year. The adjustments are applied only to claims data for months within the base year that coincide with months within the hospital's cost reporting period. The claims data for months within the base year that do not coincide with months within the hospital's cost reporting period remain unchanged until the tentative or final settlement of the cost reporting period containing those months has been completed. The adjustments are applied to the next prospective year beginning September 1, 1988, except as specified in subparagraphs (A), (B), and (C) of this paragraph.

(A) If the tentative or final settlement is not completed and available at least 60 days before the beginning of the next prospective year, any adjustment required because of the settlement is applied to the subsequent prospective year.

(B) If a review or appeal of a tentative or final settlement is not completed at least 60 days before the beginning of the next prospective year, the interim rate applied to the claims data on which the hospital's payment division and standard dollar amount are established is the interim rate established at tentative or final settlement by the department or its designee. Any adjustment required after the completion of the review or appeal is applied only to the subsequent prospective year.

(2) The HHSC or its designee updates the standard dollar amount each year for each payment division by applying a cost-of-living index to the standard dollar amount established for the base year. The cost-of-living index for state fiscal years 2003, 2004, 2005, 2006 , 2007 and 2008 [ ~~2007~~ ] will not be applied to the standard dollar amount for admissions during the period September 1, 2003 through August 31, 2008 [ ~~2007~~ ]. The index used to update the standard dollar amounts is the greater of:

(A) the Health Care Financing Administration's (HCFA) Market Basket Forecast (PPS Hospital Input Price Index) based on the report issued for the federal fiscal year quarter ending in March of each year, adjusted for the state fiscal year by summing one-third of the annual forecasted rate of the index for the current calendar year and two-thirds of the annual forecasted rate of the index for the next calendar year; or

(B) an amount determined by selecting the lesser of the following two measures:

(i) the change in total charges per case for the latest year available compared to total charges per case for the previous year; or

(ii) the change in the Texas medical consumer price index-urban (that is, the arithmetic mean of the Houston and Dallas/Fort Worth medical consumer price indices for urban consumers) for the latest year available compared to the Texas medical consumer price index-urban for the previous year.

(o) - (p) (No change.)

(q) Hospitals in counties with 50,000 or fewer persons and certain other hospitals. Hospitals will be reimbursed the greater of the prospective payment system rate or a cost-reimbursement methodology authorized by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) using the most recent data if, as of September 1, 2007, the hospital is:

(1) located in a county with 50,000 or fewer persons or;

(2) a Medicare-designated Rural Referral Center (RRC) or Sole Community Hospital (SCH) not located in a metropolitan statistical area (MSA), as defined by the U.S. Office of Management and Budget; or

(3) a Medicare-designated Critical Access Hospital (CAH), shall be reimbursed the greater of the prospective payment system rate or a cost-reimbursement methodology authorized by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) using the most recent data. Hospitals reimbursed under TEFRA cost principles will be paid without the imposition of the TEFRA cap.

[ ~~(q)~~ Hospitals with 100 or fewer licensed beds and certain hospitals with more than 100 licensed beds. The policies in this subsection apply only to hospital fiscal years beginning on or after September 1, 1989 for hospitals with 100 or fewer licensed beds at the beginning of the hospital's fiscal year or hospital fiscal years beginning on or after September 1, 2003 for hospitals with more than 100 licensed beds at the beginning of the hospital's fiscal year, located in a county that is not in a metropolitan statistical area (MSA) as defined by the U.S. Office of Management and Budget (OMB) and designated by the Center for Medicare & Medicaid Services as a Sole Community Provider (SCH) or Rural Referral Center RCC. At tentative cost settlement of the hospital's fiscal year (with subsequent adjustment at final cost settlement, if applicable), the HHSC or its designee determines what the amount of reimbursement during the fiscal year would have been if the HHSC or its designee reimbursed the hospital under similar methods and procedures used in Title XVIII of the Social Security Act, as amended, effective October 1, 1982, by Public Law 97-248, Tax Equity and Fiscal Responsibility Act (TEFRA). This determination is made without imposing a TEFRA cap. If the amount of reimbursement under the TEFRA principles is greater than the amount of reimbursement received by the hospital under the prospective payment system, the HHSC or its designee reimburses the difference to the hospital. ]

(r) - (w) (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 June 25, 2007.

TRD-200702619

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

1 TAC §355.8065

The Texas Health and Human Services Commission (HHSC) proposes to amend §355.8065, concerning the Additional Reimbursement to Disproportionate Share Hospitals.

Background and Justification

Acute care hospitals (except state teaching hospitals covered under §355.8067) participating in the Texas 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 fund. HHSC, as the Medicaid single state agency, establishes each hospital's eligibility for reimbursement and the amount of reimbursement as specified in this rule.

The damage caused by Hurricanes Katrina and Rita in 2005 demonstrated the need for HHSC to be able to address a situation where a hospital is located in a county declared to be a federal natural disaster area, and due to the disaster, the hospital may have its qualification disrupted. The Legislature expressed its intent in the 2008-09 General Appropriations Act (Article II, Health and Human Services Commission, Rider 65, H.B. 1, 80th Legislature, Regular Session, 2007) that HHSC consider and compensate for the negative impact on DSH funding to hospitals located in counties whose population has changed as a result of a federally declared natural disaster. Under this amendment, acute care hospitals (except state teaching hospitals) that are impacted as a result of a federally declared natural disaster will have the opportunity to request that their disproportionate share funding not be impacted in an adverse manner.

In addition, HHSC needs to amend this rule to update the conversion factors that expire August 31, 2007, and to update cost report citations. These changes will ensure equitable funding to DSH safety net hospitals for State Fiscal Years 2008 and 2009 and will ensure the State obtains accurate data.

Section-by-Section Summary

The amendment to §355.8065(f)(2)(D) updates the conversion factors, which will expire August 31, 2007, for State Fiscal Years 2008 and 2009. This change ensures that proper payments are made to select hospitals receiving payments in the disproportionate share hospital (DSH) program using the cost conversion methodology that is effective September 1, 2007.

The amendment to §355.8065(f)(2)(E)(ii) updates a reference in the rule to a worksheet page in the Centers for Medicare and Medicaid Services (CMS) Hospital and Hospital Health Care Complex Cost Report. This change is needed due to revisions to the cost report format.

The amendment adds new §355.8065(j) to the rule to address the process for qualification and payment of disproportionate share hospital funds to an acute care hospital (except a state teaching hospital) located in a county that is a federally declared natural disaster area. Under this new section, if population driven qualification and reimbursement factors are affected by a federally declared natural disaster, resulting in a negative impact to the hospital's DSH funding, the hospital will be able to request a review of that data for the upcoming year at the time the hospital submits the annual DSH program application. If the request is approved, the State will use the hospital's data from the most recent year prior to the natural disaster for qualification and reimbursement purposes. This new section is added in response to 2008-09 General Appropriations Act (Article II, Health and Human Services Commission, Rider 65, H.B. 1, 80th Legislature, Regular Session, 2007).

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that for the first five-year period the proposed amendment is in effect, there will be no fiscal implications for state government as a result of enforcing or administering the section. These changes may impact the allocation of a sum certain amount of DSH funds among DSH-eligible hospitals. Local governments will not incur additional costs as a result of these amendments.

Small Business and Micro-business Impact Analysis

Mr. Suehs has also determined that there is no adverse economic effect on small businesses or micro-businesses, as a result of enforcing or administering the amendment. HHSC does not anticipate that there will be any economic costs to persons who are required to comply with the proposed amendment. HHSC does not anticipate any negative impact on local employment.

Public Benefit

Carolyn Pratt, Director of Rate Analysis, has determined that for each of the first five years the amendment is in effect, the public benefit expected as a result of enforcing the amendment is that the conversion factors will reflect accurate calculations for cost containment DSH adjustments, there will be an accurate reference to the CMS cost report, and providers that are impacted as a result of a federally declared natural disaster will have the opportunity to request that their disproportionate share funding not be impacted in an adverse manner.

Regulatory Analysis

Takings Impact Assessment

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

Public Comment

Written comments on the proposal may be submitted to Henry Welles, Rate Analyst for Hospital Acute Care Services, by mail at HHSC Rate Analysis, Mail Code H-400, P.O. Box 85200, Austin, TX 78708-5200, by facsimile to (512) 491-1998, or by e-mail to Henry.Welles@hhsc.state.tx.us, within 30 days of publication of this proposal in the Texas Register.

Statutory Authority

The amendment is 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; 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 (Medicaid) payments under Human Resources Code Chapter 32.

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

§355.8065.Additional Reimbursement to Disproportionate Share Hospitals.

(a) - (e) (No change.)

(f) Reimbursing Medicaid disproportionate share hospitals. The commission shall reimburse Medicaid disproportionate share hospitals on a monthly basis. Monthly payments will equal one twelfth of annual payments unless it is necessary to adjust the amount because payments will not be made for a full 12-month period, to comply with the annual state disproportionate share hospital allotment, or to comply with other state or federal disproportionate share hospital program requirements. Before the start of the next state fiscal year, the commission determines the size of the available funds to reimburse disproportionate share hospitals for the next state fiscal year, which begins each September 1. The funds available to reimburse the state chest hospitals and state mental hospitals equal the total of their adjusted hospital specific limits. The available fund for the remaining hospitals equals the lesser of the funds remaining in the state's annual disproportionate share allotment or the sum of qualifying hospitals' adjusted hospital specific limits. Payments shall be made in the following manner, unless the commission determines the hospital's proposed reimbursement has exceeded its specific limit.

(1) A state chest hospital meets the requirements for disproportionate share status and provides inpatient hospital services receives annually up to 175 percent f its adjusted hospital specific limit. A state mental hospital that meets the requirements of disproportionate share status and provides inpatient psychiatric services receives 100 percent of its adjusted hospital specific limit.

(2) For the remaining hospitals, payments will be made based on both weighted inpatient Medicaid days and weighted low-income days. The commission weights each hospital's total inpatient Medicaid days and low-income days by the appropriate weighting factor. The commission defines a low-income day as a day derived by multiplying a hospital's total inpatient census days from its fiscal year ending the previous calendar year by its low-income utilization rate. Hospital districts and city/county hospitals with greater than 250 licensed beds in the state's largest MSAs shall receive weights based proportionally on the MSA population according to the most recent decennial census. MSAs with populations greater than or equal to 121,000, according to the most recent decennial census, are considered "the largest MSAs." Children's hospitals also shall receive weights because of the special nature of the services they provide. All other hospitals receive weighting factors of 1.0. The inpatient Medicaid days of each hospital shall be based on the latest available state fiscal year data for patients entitled to Title XIX benefits. The available fund shall be divided into two parts. One half of the available fund will reimburse each qualifying hospital by its percent of the total inpatient Medicaid days. One-half of the available fund will reimburse each qualifying hospital by its percent of low income days. The commission determines whether hospitals in rural areas will receive 5.5% or more of the gross disproportionate share hospital funds for non-state hospitals. If hospitals in rural areas will receive at least 5.5% of the gross non-state hospital funds, the commission will reimburse them using existing principles. If hospitals in rural areas will not receive at least 5.5% of non-state hospital funds, the commission will reimburse them at 5.5 percent of non-state hospital funds, using existing principles. Reimbursement for the remaining hospitals is determined as follows:

(A) The single state agency or its designee determines the average monthly number of weighted Medicaid inpatient days and weighted low-income days of each qualifying hospital.

(B) A qualifying hospital receives a monthly disproportionate share payment based on the following formula:

Figure: §355.8065(f)(2)(B) (No change.)

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

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

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

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

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

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

(D) For state fiscal year 2008 [ ~~2006~~ ] (September 1, 2007 [ ~~2005~~ ] through August 31, 2008 [ ~~2006~~ ]), and state fiscal year 2009 [ ~~2007~~ ] (September 1, 2008 [ ~~2006~~ ] through August 31, 2009 [ ~~2007~~ ]), the monthly disproportionate share payment calculated under subparagraph (C) of this paragraph is subject to a conversion factor that is applied as follows:

(i) A conversion factor of 1.11 [ ~~1.10~~ ] is applied to payments made to hospital districts located in MSAs with populations greater than 3 million.

(ii) A conversion factor of 1.02 [ ~~1.01~~ ] is applied to payments made to hospital districts located in MSAs with populations between 1 and 3 million.

(iii) A conversion factor of .96 [ ~~.97~~ ] is applied to payments made to children's hospitals.

(iv) A conversion factor of .92 [ ~~.93~~ ] is applied to payments made to private, urban, general hospitals located in a MSA.

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

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

(E) The commission or its designee determines the hospital specific limit for each disproportionate share hospital. This limit is the sum of a hospital's Medicaid shortfall, as defined in subsection (b)(16) of this section, and its cost of services to uninsured patients, as defined in subsection (b)(5) of this section, multiplied by the appropriate inflation update factor, as provided for in subsection (g)(2)(E) of this section.

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

(ii) The total Medicaid billed charges for each hospital are converted to cost, utilizing a calculated cost-to-charge ratio (inpatient and outpatient). The commission or its designee determines that ratio by using the hospital's Form HCFA 2552, Hospital and Hospital Health Care Complex Cost Report, that was submitted for the fiscal year ending in the previous calendar year. The commission or its designee uses the latest available Medicaid cost report in the absence of the Medicaid cost report submitted in the fiscal year ending in the previous calendar year. To determine the cost-to-charge ratio (inpatient and outpatient) for each hospital, the commission or its designee uses the total cost from the HCFA 2552, Worksheet B, Part I, Column 25, and total charges from the HCFA 2552, Worksheet C , Part I, Column 8 [ 6 ]. The ratio is the total cost divided by the total gross patient charges.

(iii) The commission or its designee determines the cost of services to patients who have no health insurance or source of third party payments for services provided during the fiscal year for each hospital. Hospitals are surveyed each year to determine charges that can be attributed to patients without insurance or other third party resources. The charges from reporting hospitals are multiplied by each hospital's cost-to-charge ratio (inpatient and outpatient) to determine the cost.

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

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

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

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

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

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

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

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

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

(g) - (i) (No change.)

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

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 25, 2007.

TRD-200702620

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

1 TAC §355.8067

The Texas Health and Human Services Commission (HHSC) proposes to amend §355.8067, concerning the Disproportionate Share Hospital Reimbursement Methodology.

Background and Justification

State teaching hospitals participating in the Texas 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. HHSC, as the Medicaid single state agency, establishes each hospital's eligibility for reimbursement and the amount of reimbursement as specified in this rule.

The damage caused by Hurricanes Katrina and Rita in 2005 demonstrated the need for HHSC to be able to address a situation where a hospital is located in a county declared to be a federal natural disaster area, and due to the disaster, the hospital may have its qualification disrupted. The Legislature expressed its intent in the 2008 - 09 General Appropriations Act (Article II, Health and Human Services Commission, Rider 65, H.B. 1, 80th Legislature, Regular Session, 2007) that HHSC consider and compensate for the negative impact on DSH funding to hospitals located in counties whose population has changed as a result of a federally declared natural disaster. Under this amendment, state teaching hospitals that are impacted as a result of a federally declared natural disaster will have the opportunity to request that their disproportionate share funding not be impacted in an adverse manner.

In addition, HHSC needs to amend this rule to update cost report citations. This change will ensure the State obtains accurate data.

Section-by-Section Summary

The amendment to §355.8067(f)(1)(A) updates a reference in the rule to a worksheet page in the Centers for Medicare and Medicaid Services (CMS) Hospital and Hospital Health Care Complex Cost Report. This change is needed due to revisions to the cost report format.

The amendment adds new subsection (h) to the rule to address the process for qualification and payment of disproportionate share hospital funds to a hospital located in a county that is a federally declared natural disaster area. Under this new section, if population driven qualification and reimbursement factors are affected by a federally declared natural disaster, resulting in a negative impact to the hospital's DSH funding, the hospital will be able to request a review of that data for the upcoming year at the time the hospital submits the annual DSH program application. If the request is approved, the State will use the hospital's data from the most recent year prior to the natural disaster for qualification and reimbursement purposes. This new section is added in response to the 2008 - 09 General Appropriations Act (Article II, Health and Human Services Commission, Rider 65, H.B. 1, 80th Legislature, Regular Session, 2007).

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that for the first five-year period the proposed amendment is in effect, there will be no fiscal implications for state government as a result of enforcing or administering the section. Local governments will not incur additional costs as a result of these amendments.

Small Business and Micro-business Impact Analysis

Public Benefit

Carolyn Pratt, Director of Rate Analysis, has determined that for each of the first five years the amendment is in effect, the public benefit expected as a result of enforcing the amendment is that there will be an accurate reference to the CMS cost report and providers that are impacted by a federally declared natural disaster will have the opportunity to request their disproportionate share hospital funding not be impacted in an adverse manner.

Regulatory Analysis

Takings Impact Assessment

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

Public Comment

Written comments on the proposal may be submitted to Henry Welles, Rate Analyst for Hospital Acute Care Services, by mail at HHSC Rate Analysis, Mail Code H-400, P.O. Box 85200, Austin, TX 78708-5200, by facsimile to (512) 491-1998, or by e-mail to Henry.Welles@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Statutory Authority

The amendment is 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; 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 Human Resources Code Chapter 32.

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

§355.8067.Disproportionate Share Hospital Reimbursement Methodology.

(a) - (e) (No change.)

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

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

(A) The total billed Medicaid charges for each hospital are converted to cost, utilizing a calculated cost-to-charge ratio (inpatient and outpatient). The department or its designee determines that ratio by using the hospital's HCFA 2552-92, Hospital and Hospital Health Care Complex Cost Report, that was submitted for the fiscal year ending in the previous calendar year. The department or its designee uses the latest available Medicare cost report in the absence of the Medicare cost report submitted in the fiscal year ending in the previous calendar year. To determine the cost-to-charge ratio (inpatient and outpatient) for each hospital, the department or its designee uses the total cost from the HCFA 2552-92, Worksheet B, Part 1, Column 25, and total charges from the HCFA 2552-92, Worksheet C, Part 1, Column 8. [ 6. ] The ratio is the total cost divided by the total gross patient charges.

(B) The department or its designee determines the cost of services to patients who have no health insurance or source of third party payments for services provided during the year for each hospital. Hospitals are surveyed each year to determine charges that can be attributed to patients without insurance or other third party resources. The charges are multiplied by each hospital's cost-to-charge ratio (inpatient and outpatient) to determine the cost.

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

(g) (No change.)

(h) If a hospital is located in a county that is declared a federal natural disaster area, it may request that the state use the hospital's data from the most recent year prior to the natural disaster for qualification and reimbursement purposes. This request must be submitted in writing to the state with the hospital's annual DSH application. The state reserves the right to approve or deny the written exception request and will notify the hospital of its decision prior to the beginning of the DSH program year. Hospitals may request an administrative review of the state's decision in this subsection. The review will be conducted under the provisions of §355.8065(g) of this title (relating to Additional Reimbursement to Disproportionate Share Hospitals).

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 25, 2007.

TRD-200702621

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Division 23. EARLY AND PERIODIC SCREENING, DIAGNOSIS, AND TREATMENT (EPSDT) MEDICAL PHASE

1 TAC §355.8441

The Texas Health and Human Services Commission (HHSC) proposes to amend §355.8441, concerning Reimbursement Methodologies for Early and Periodic Screening, Diagnosis and Treatment (EPSDT) Services).

Elsewhere in this issue of the Texas Register , the HHSC contemporaneously withdraws the previously published proposed amendment to §358.8441. The amendment was published in the May 4, 2007, issue of the Texas Register (32 TexReg 2435). The amendment is withdrawn in order to consolidate the previous amendments with the current proposed amendments.

Background and Justification

The 2008-2009 General Appropriations Act (Article II, Special Provisions Relating to All Health and Human Services Agencies, Section 57(b)(3)(ii)(d), H.B. 1, 80th Legislature, Regular Session, 2007) increases Medicaid rates for therapy services delivered by home health agencies to Medicaid clients under age 21 to be more consistent with Medicaid fees paid to physicians and independently enrolled therapists for similar services. As a result, HHSC proposes to change the Medicaid reimbursement methodology for therapy services delivered to Medicaid clients under age 21 by home health agencies.

Alberto N. v. Hawkins was filed in 1999, in the U.S. District Court for the Eastern District of Texas. Plaintiffs were children who alleged they had been denied access to certain medically necessary in-home Medicaid service, including personal care services (PCS). To meet plaintiffs' needs and the needs of those similarly situated, HHSC is establishing a personal care services benefit designed especially for THSteps beneficiaries. Currently, personal care services for THSteps-eligible beneficiaries are available through the Primary Home Care program operated by the Department of Aging and Disability Services. The proposed new PCS benefit is expected to be operational by September 1, 2007. The personal care services benefit will be available to any THSteps-eligible beneficiary who requires assistance with activities of daily living, instrumental activities of daily living, and health-related functions due to a physical, cognitive, or behavioral limitation related to his or her disability or chronic health condition, regardless of diagnosis, type of illness, or condition. This proposed reimbursement methodology rule accompanies new personal care services program rules at 1 TAC §§363.601, 363.603, 363.605, and 363.607, which were previously proposed in the April 16, 2007, issue of the Texas Register. In conjunction with this rule, HHSC proposed new §355.8443 of this title (relating to Reimbursement Methodology for School Health and Related Services (SHARS)) published in the May 11, 2007, issue of the Texas Register.

Section-by-Section Summary

Proposed §355.8441, paragraphs (5), (6), and (7), are being revised to reimburse home health agencies the lesser of their billed charges for a specific physical, occupational, or speech therapy service or the fee established by HHSC. The proposed fee established by HHSC will be based on a review of Medicaid and Medicare fees for similar services; an analysis of cost reports provided by home health agencies; modeling, using other data available to HHSC such as relevant cost or fee surveys; or a combination thereof, with any adjustments necessary to remain within available funds.

Proposed §355.8441(12)(A) provides that the reimbursement methodology for personal care services delivered by school districts is located at §355.8443, relating to the Reimbursement Methodology for School Health and Related Services (SHARS).

Proposed §355.8441(12)(B) describes the reimbursement methodology for personal care services delivered by providers other than school districts as fees determined by HHSC or its designee using at least one of the following methods: a review of rates paid to providers delivering similar services; modeling using an analysis of other data available to HHSC; or a combination of the two. Personal care services delivered under the Consumer Directed Services (CDS) payment option will be reimbursed in accordance with §355.114, relating to the Consumer Directed Services Payment Option.

Fiscal Notes

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that, during the first five-year period the proposed rule is in effect, there will be a fiscal impact to state government for increases in Medicaid rates paid for therapy services delivered by home health agencies of $19.3 million for state fiscal year (SFY) 2008; $20.3 million for SFY 2009; $21.9 million for SFY 2010; $23.5 million for SFY 2011; and $25.3 million for SFY 2012. The proposed rule will not result in any fiscal implications for local health and human services agencies. Local governments will not incur additional costs.

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that, during the first five-year period the proposed rule is in effect there will be a fiscal impact to state government for Medicaid rates paid for personal care services of $53.6 million for state fiscal year (SFY) 2008; $55.6 million for SFY 2009; $57.0 million for SFY 2010; $58.3 million for SFY 2011; and $59.7 million for SFY 2012. The proposed rules 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 proposal, 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

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

Public Comment

Written comments on the proposal may be submitted to Nancy Kimble, Senior Rate Analyst in the Rate Analysis Division, 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 Nancy.Kimble@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Statutory Authority

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

§355.8441.Reimbursement Methodologies for Early and Periodic Screening, Diagnosis and Treatment[ ~~-Comprehensive Care Program~~ ] (EPSDT[ ~~-CCP~~ ]) Services.

The following are reimbursement methodologies for services provided under the Early and Periodic Screening, Diagnosis and Treatment[ ~~-Comprehensive Care Program~~ ] (EPSDT[ ~~-CCP~~ ]) program, delivered only to Medicaid clients under age 21 , also known as the Texas Health Steps[ ~~-CCP~~ ] (THSteps[ ~~-CCP~~ ])[ ~~, only to client under age 21~~ ]. Reimbursement methodologies for services provided to all Medicaid clients, including clients under age 21, are located elsewhere in this chapter.

(1) THSteps[ ~~-CCP~~ ] counseling and psychotherapy services are reimbursed to freestanding psychiatric hospitals and facilities in accordance with §355.8063 of this title (relating to Reimbursement Methodology for Inpatient Hospital Services). The reimbursement methodologies for counseling and psychotherapy services provided to all Medicaid clients are located elsewhere in this chapter.

(2) - (4) (No change.)

(5) Physical therapy (PT) services are reimbursed in accordance with the [ ~~existing~~ ] Medicaid reimbursement methodologies for the applicable provider type as follows:

(A) independently enrolled therapists, §355.8081 of this title (relating to Payments for Laboratory and X-ray Services, Radiation Therapy, Physical Therapists' Services, Physician Services, Podiatry Services, Chiropractic Services, Optometric Services, Ambulance Services, Dentists' Services, and Psychologists' Services);

(B) HHAs[ ~~, §355.8021 of this title;~~ ] . Fees for these services are statewide visit rates determined appropriate by HHSC. The fees are based on a review of Medicaid and Medicare fees for similar services, an analysis of cost reports provided by HHAs, modeling using an analysis of other data available to HHSC such as relevant cost or fee surveys, or a combination thereof ;

(C) Medicare-certified outpatient facilities known as comprehensive outpatient rehabilitation facilities (CORFs) and outpatient rehabilitation facilities (ORFs), §355.8085 of this title;

(D) freestanding rehabilitation hospitals, §355.8063 of this title; and

(E) outpatient hospitals, §355.8061 of this title (relating to Payment for Hospital Services).

(6) Occupational therapy (OT) services are reimbursed in accordance with the [ ~~existing~~ ] Medicaid reimbursement methodologies for the applicable provider type as follows:

(A) independently enrolled therapists, §355.8081 of this title;

(C) Medicare-certified outpatient facilities known as comprehensive outpatient rehabilitation facilities (CORFs) and outpatient rehabilitation facilities (ORFs), §355.8085 of this title;

(D) freestanding rehabilitation hospitals, §355.8063 of this title; and

(E) outpatient hospitals, §355.8061 of this title.

(7) Speech-language pathology (SLP) services are reimbursed in accordance with the [ ~~existing~~ ] Medicaid reimbursement methodologies for the applicable provider type as follows:

(A) independently enrolled therapists, §355.8081 of this title;

(C) Medicare-certified outpatient facilities known as comprehensive outpatient rehabilitation facilities (CORFs) and outpatient rehabilitation facilities (ORFs), §355.8085 of this title;

(D) freestanding rehabilitation hospitals, §355.8063 of this title; and

(E) outpatient hospitals, §355.8061 of this title.

(8) - (11) (No change.)

(12) Personal care services (PCS) are reimbursed in accordance with the following Medicaid reimbursement methodologies for the applicable provider type:

(A) School districts delivering PCS under School Health and Related Services (SHARS) are reimbursed in accordance with §355.8443 of this title (relating to Reimbursement Methodology for School Health and Related Services (SHARS)); and

(B) Providers other than school districts delivering PCS are reimbursed as follows:

(i) PCS and PCS delivered in conjunction with delegated nursing services are reimbursed fees determined by HHSC or its designee. The fees are determined using at least one of the following methods: a review of rates paid to providers delivering similar services; modeling using an analysis of other data available to HHSC; or a combination thereof, as determined appropriate by HHSC.

(ii) PCS delivered through the Consumer Directed Services (CDS) payment option are reimbursed in accordance with §355.114 of this title (relating to Consumer Directed Services Payment Option).

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 25, 2007.

TRD-200702609

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Division 28. PHARMACY SERVICES: REIMBURSEMENT

1 TAC §355.8551

The Texas Health and Human Services Commission (HHSC or Commission) proposes amendments to §355.8551, relating to the Dispensing Fee in the Medicaid Vendor Drug Program.

Background and Justification

The 2008-2009 General Appropriations Act (Article II, Special Provisions Relating to All Health and Human Services Agencies, Section 57, H.B. 1, 80th Legislature, Regular Session, 2007) includes approximately $56.5 million in general revenue for the biennium to increase the Medicaid Vendor Drug Program (VDP) dispensing fee to pharmacies.

Currently, §355.8551 provides for a dispensing expense of $5.27 per prescription. Based on the 2004-2005 General Appropriations Act (Article II, Health and Human Services Commission, H.B. 1, 78th Legislature, Regular Session, 2003), this amount was reduced to $5.14. The 2008-2009 General Appropriations Act includes funding for the restoration of this rate and provides additional funds to increase the dispensing expense to $7.50.

The proposed amendment also updates language to reflect the revised name for the general cost inflation index that the Vendor Drug Program uses. The new name for the index, which is maintained by the U.S. Department of Commerce's Bureau of Economic Analysis, is the Personal Consumption Expenditures (PCE) pricing index rather than the Implicit Price Deflator. The proposed amendment also changes the time frame for inflation increases from "annually" to "on the first day of the biennium" (i.e., every two years). All changes are being made within the available funds appropriated.

Section-by-Section Summary

The proposed amendment to §355.8551(2) increases the Medicaid pharmacy dispensing expense from $5.27 to $7.50 per prescription. The proposed amendments to §355.8551(3) update the inflation pricing index used for the dispensing fee to the Personal Consumption Expenditures (PCE) chain-type price index and change the period for inflation adjustments from "annual" to "on the first day of the biennium."

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that, during the first five years the proposed rule is in effect, there will be a fiscal impact to state government of $26.8 million for state fiscal year (SFY) 2008; $28.2 million for SFY 2009; $29.7 million for SFY 2010; $30.9 million for SFY 2011; and $32.2 million for SFY 2012 as a result of the increased rate. The proposed rule will not result in any fiscal implications for local health and human services agencies. Local governments will not incur additional costs.

Small and Micro-Business Impact Analysis

HHSC has determined that there will not be an effect on small businesses or micro businesses to comply with the proposed amendments, 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

Carolyn Pratt, Director of Rate Analysis, has determined that, for each of the first five years the proposed rule is in effect, the public will benefit from the adoption of the rule. The anticipated public benefit, as a result of enforcing the proposed amendment, is pharmacists will receive an increased fee for dispensing prescriptions to Medicaid clients.

Regulatory Analysis

HHSC has determined that this proposal is not a "major environmental rule" as defined by the Government Code, §2001.0225. A "major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risks to human health from environmental exposure and that may adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure.

Takings Impact Assessment

Public Comment

Written comments on the proposal may be submitted to James Hollinger, Acute Care Rate Analyst in the Rate Analysis Department, Texas Health and Human Services Commission, P.O. Box 85200, Austin, TX 78708-5200, Mail Code H-400; by fax to (512) 491-1998; or by e-mail to James.Hollinger@hhsc.state.tx.us within 30 days of the publication of this proposal in the Texas Register.

Statutory Authority

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

§355.8551.Dispensing Fee.

The Texas Health and Human Services Commission (Commission) reimburses contracted Medicaid pharmacy providers according to the dispensing fee formula defined in this section. The dispensing fee is determined by the following formula: Dispensing Fee = (((Estimated Drug Ingredient Cost + Estimated Dispensing Expense) divided by (1 - Inventory Management Factor)) - Estimated Drug Ingredient Cost) + Delivery Fee, where:

(1) The estimated drug ingredient costs are defined in §355.8541 of this title (relating to Legend and Non-legend Medication) and §355.8545 of this title (relating to Texas Maximum Allowable Cost).

(2) The estimated dispensing expense is $7.50 [ ~~$5.27 for state fiscal year 1997. This will be adjusted annually subject to the availability of funds to account for general inflation~~ ].

(3) The inflation adjustment will be made, subject to the availability of appropriated funds, on the first day of the biennium [ ~~state fiscal year~~ ]. The projected rate of inflation [ ~~for the upcoming state fiscal year~~ ] shall be based upon a forecast of the [ ~~Implicit Price Deflator-~~ ] Personal Consumption Expenditures (PCE) chain-type price index as the general cost inflation index. HHSC uses the lowest feasible PCE forecast consistent with the forecasts of nationally recognized sources available to HHSC at the time proposed reimbursement is prepared for public dissemination and comment [ ~~produced by a nationally recognized forecasting firm~~ ].

(4) The inventory management factor is 2.0%.

(5) The total dispensing fee shall not exceed $200 per prescription.

(6) Add-on amounts

(A) A delivery incentive shall be paid, subject to the availability of appropriated funds; to approved providers who certify in a form prescribed by the Commission that the delivery services meet minimum conditions for payment of the incentive. These conditions include: making deliveries to individuals rather than just to institutions, such as nursing homes; offering no-charge prescription delivery to all Medicaid recipients requesting delivery in the same manner as to the general public; and, publicly displaying the availability of prescription delivery services at no charge. The delivery incentive is $.15 per prescription and is to be paid on all Medicaid prescriptions filled for legend drugs. This delivery incentive is not to be paid for over-the-counter drugs, which are prescribed as a benefit of this program.

(B) A generic drug dispensing incentive of $0.50 per prescription will be paid on all Medicaid prescriptions filled for preferred generic drugs for which a manufacturer has agreed to pay a supplemental rebate. Preferred generic drugs are subject to the Preferred Drug List (PDL) requirements, as described in §354.1924 of this title.

(7) Notwithstanding other provisions of this section, the Commission may adjust the dispensing fee to address budgetary constraints in accordance with the provisions of 1 TAC §355.201.

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 25, 2007.

TRD-200702622

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Division 31. AMBULANCE SERVICES

1 TAC §355.8600

The Texas Health and Human Services Commission (HHSC) proposes to amend §355.8600, concerning Reimbursement for Ambulance Services. The proposed amendment changes the reimbursement methodology for ambulance services from one based on a reasonable charge methodology for ground ambulance services to one based on statewide, flat fees for all ambulance services.

Background and Justification

The 2008-2009 General Appropriations Act (Article II, Special Provisions Relating to All Health and Human Services Agencies, Section 57, House Bill 1, 80th Legislature, Regular Session, 2007) includes about $31.3 million in general revenue for the biennium to increase Medicaid rates for ambulance services. These additional funds will enable Medicaid reimbursement for ambulance services to move toward the Medicare ambulance fee schedule.

Current Medicaid reimbursement methodology rules for ambulance services at 1 TAC §355.8600 are based on a reasonable charge methodology for ground ambulance providers. For providers in existence in 1991, a reasonable charge for a specific service is the lowest of: (1) the ground ambulance provider's 1991 customary charge for that service; (2) the 1992 prevailing charges made for similar services in the geographic locality; or (3) the actual charge of the eligible provider. Fees for ground ambulance providers that came into existence after 1991 are based on the lesser of: (1) the provider's actual charges; (2) the 75th percentile of the applicable prevailing charges profile for the provider's locality; or (3) the 50th percentile of the applicable prevailing charges profile. Fees for air ambulance providers (i.e., rotary or fixed wing) are based on the lesser of the provider's actual charges or the published fee schedule; however, the current reimbursement methodology rule does not include air ambulance providers.

Medicare has been phasing in a national fee schedule for ground and air ambulance services since April 1, 2002. Effective calendar year 2006, Medicare payments for ambulance services are based entirely on the Medicare ambulance fee schedule.

The proposed rule specifies that both ground and air ambulance services are reimbursed based on the lesser of the provider's billed charges or fees established by HHSC. The proposed rule further specifies that the fees established by HHSC are based on a review of the Medicare fee schedule and/or an analysis of other data available to HHSC, such as relevant fee surveys, with any adjustments made within available funding.

Section-by-Section Summary

Proposed 1 TAC §355.8600 is being revised so that all ambulance providers will be reimbursed the lesser of their billed charges for a specific ambulance service or the fee established by HHSC. The established fee will be based on a review of the Medicare ambulance fee schedule or other data available to HHSC, such as relevant fee surveys, and with any adjustments being made within available funds.

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that, during the first five-year period the proposed rule is in effect, there will be a fiscal impact to state government of $15.2 million for state fiscal year (SFY) 2008; $16.0 million for SFY 2009; $17.3 million for SFY 2010; $18.6 million for SFY 2011; and $20.0 million for SFY 2012 as a result of increased rates to ambulance providers. The proposed rule will not result in any fiscal implications for local health and human services agencies. Local governments will not incur additional costs.

Small and Micro-business Impact Analysis

Mr. Suehs has also determined that there will be no effect on small businesses or micro businesses to comply with the proposal, as they will not be required to alter their business practices as a result of the proposed 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

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 proposed amendment. The anticipated public benefit, as a result of enforcing the amendment, will be to provide for a consistent rate methodology for all providers of ambulance services regardless of the year the provider came into existence, provide a method to determine a rate for both ground and air providers, and create a flat fee for providers that is known in advance of the service. It is anticipated that these proposed changes will encourage the delivery of ambulance services to the Medicaid population.

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

Public Comment

Written comments on the proposal may be submitted to Nancy Kimble, 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 Nancy.Kimble@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Statutory Authority

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

§355.8600.Reimbursement for Ambulance Services.

Ground and air ambulance [ ~~Ambulance~~ ] services are [ ~~shall be~~ ] reimbursed based on the lesser of the provider's billed charges or fees established by the Texas Health and Human Services Commission (HHSC). Fees established by HHSC are based on a review of the Medicare fee schedule and/or an analysis of other data available to HHSC such as relevant fee surveys, with any adjustments made within available funding. [ in accordance with a reasonable charge methodology. The Texas Health and Human Services Commission (HHSC) or its designee shall define and determine reasonable charges and payments as follows, with all determinations and adjustments to those determinations made within available funding. ]

~~[ ~~(1)~~ A reasonable charge for a specific service shall be the lowest of:]~~

~~[ ~~(A)~~ the provider's customary charge for that service;]~~

~~[ ~~(B)~~ the prevailing charges made for similar services in the geographic locality; or]~~

~~[ ~~(C)~~ the actual charge of the eligible provider.]~~

[ ~~(2)~~ HHSC or its designee shall use a statistical base for making reasonable charge determinations. The statistical base is comprised of individual charges gathered from available sources, including Medicare (Title XVIII) and Medicaid (Title XIX).]

[ ~~(3)~~ Determination of reasonable charges, as set forth in this section and established by HHSC or its designee, shall be made in accordance with applicable federal requirements. Payments for services provided must not exceed the Medicare fee schedule.]

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 25, 2007.

TRD-200702623

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Chapter 357. HEARINGS

The Texas Health and Human Services Commission (HHSC) proposes to amend §357.305, concerning Administrative Review of Fair Hearing Decisions, and to promulgate new Subchapter R, concerning Judicial and Administrative Review of Hearings, §§357.701 - 357.703.

Background and Justification

The Health and Human Services Commission (HHSC) is required to have procedural rules that direct the conduct of administrative hearings. H.B. 75, 80th Legislature, Regular Session, 2007, amended Texas Government Code Chapter 531 to require state court judicial review of HHSC decisions relating to benefit programs under Texas Human Resources Code Chapters 32 (Medicaid) and 33 (Nutritional Assistance Programs). H.B. 75 also requires HHSC to amend the current administrative review process to require an applicant for or recipient of benefits under these programs to request an administrative review of the decision by an agency attorney as a prerequisite for judicial review.

The rule proposed to amend, §357.305, sets out the provisions of the former administrative review process which will be limited to decisions involving Chapter 31, Human Resources Code. The proposed new Subchapter R includes the rules necessary to implement these new statutory requirements, which are codified as Texas Government Code §531.019.

Section by Section Summary

Section 357.305, which describes the process and timeframes for requesting a review of agency fair hearing decisions by an agency attorney, is amended to describe the administrative review process for decisions involving Chapter 31, Human Resources Code.

New §357.701 establishes the purpose and applicability of the proposed subchapter, which applies to the administrative and judicial review of HHSC hearing decisions relating to the benefit programs under Chapters 32 and 33, Human Resources Code.

New §357.702 defines the terms used in the new subchapter.

New §357.703 sets out the process and timeframes for requesting and obtaining administrative review and judicial review of the applicable hearing decisions.

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that for the first five years this amendment and proposed new subchapter are in effect, the cost to HHSC of the implementation and administration of the new administrative review process and judicial review will amount to approximately $468,026 in general revenue. There will be no cost to local governments.

Small and Micro-business Impact

Mr. Suehs also has determined that there will be no adverse economic effect on small or micro businesses as a result of enforcing or administering this amendment and the proposed new subchapter. The proposal increases flexibility for appellants and does not add any new requirements for businesses. There is no anticipated economic cost to persons who are required to comply with this amendment and the proposed new subchapter. There is no anticipated effect on local employment in geographic areas affected by this amendment and the proposed new subchapter.

Public Benefit

Paul Leche, Special Counsel for Appeals, has determined that, for each year of the first five years this amendment and the proposed new subchapter are in effect, the public will benefit as a result of these changes. The anticipated public benefit will be that all parties and their attorneys, as well as all other members of the public involved in the HHSC hearing process, will have a clear understanding of the right to an administrative review by the agency and, after the final agency determination, the right to have the decision in appropriate cases reviewed by a district court in Travis County.

Regulatory Analysis

HHSC has determined that this proposal is not a "major environmental rule" as defined by §2001.0225 of the 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 the state or a section of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure.

Takings Impact Statement

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 Texas Government Code.

Public Comment

Questions about the content of this proposal may be directed to Paul Leche, Special Counsel for Appeals, by telephone at (512) 487-3315. Written comments on the proposal may be submitted to Paul Leche, Texas Health and Human Services Commission, HHSC Appeals Division, P.O. Box 149030 (MC W-613), Austin, Texas 78714-9030, or by e-mail to paul.leche@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Subchapter D. FAIR HEARINGS

1 TAC §357.305

Statutory Authority

Sections Affected

The amendment affects Texas Human Resources Code Chapters 32 and 33, Texas Government Code Chapter 531, and Texas Administrative Code Title 1, Part 15, Chapter 357.

§357.305.Administrative Review of Fair Hearing Decisions.

(a) Unless otherwise described in these rules, the hearing officer's decision is the agency's final administrative decision. The agency is, however, aware of the need to monitor hearing decisions for procedural and programmatic accuracy and provides a process for administrative review of decisions that are challenged by appellants.

(b) Request for administrative review of public assistance programs of Chapter 31, Human Resources Code must be postmarked within 30 days of date of the decision and should be addressed to the Hearings Administrator.

(c) Requests for administrative review will be processed as outlined in §357.703 (a) and (b) of this title (relating to Process and Timeframes).

[ ~~(a)~~ The hearing officer's decision is the DHS' final administrative decision. DHS is, however, aware of the need to monitor hearing decisions for procedural and programmatic accuracy and provides a process for administrative review of decisions that are challenged by appellants.]

~~[ ~~(b)~~ Request for administrative review must be postmarked within 30 days of date of the decision and should be addressed to the appropriate regional attorney.]~~

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 25, 2007.

TRD-200702624

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Subchapter R. JUDICIAL AND ADMINISTRATIVE REVIEW OF HEARINGS

1 TAC §§357.701 - 357.703

Statutory Authority

The new rules 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, and §531.0055(e), which provides authority for the commissioner to adopt rules and policies for the operation and provision of health and human services by the health and human services agencies.

Sections Affected

The new rules affect Texas Human Resources Code Chapters 32 and 33, Texas Government Code Chapter 531, and Texas Administrative Code Title 1, Part 15, Chapter 357.

§357.701.Purpose and Application.

The purpose of this subchapter is to address the process for requesting administrative and judicial review of certain hearings. This subchapter applies to those hearings provided in this chapter that are related to benefits provided under the public assistance programs of Chapters 32 (Medicaid) and 33, (Nutrition Assistance Programs) Human Resources Code.

§357.702.Definitions.

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

(1) Administrative Review--A desk review performed by an HHS system attorney of a hearing decision related to benefits provided under the public assistance programs of Chapters 32 and 33, Human Resources Code.

(2) Appellant--An applicant or client who requests a hearing or requests an administrative review of the hearing decision either personally or through a representative.

(3) Commission--The Texas Health and Human Services Commission.

(4) Date of Notice--The date on the written notice that informs the client of the agency action or decision.

(5) Day--A calendar day, unless otherwise specified.

(6) Health and Human Services (HHS) System Agencies--The following five state agencies that are responsible for health and human services functions:

(A) Texas Health and Human Services Commission (HHSC);

(B) Department of Aging and Disability Services (DADS);

(D) Department of Family and Protective Services (DFPS); and

(E) Department of State Health Services (DSHS).

(7) Hearings Administrator--The administrator for fair and fraud hearings in the HHSC Appeals Division.

(8) Representative--Any person who assists the appellant in presenting the appellant's case. A legal counsel, relative, friend, or other spokesperson designated by the appellant may serve as a representative.

§357.703.Process and Timeframes.

(a) The hearing officer makes the final administrative decision in a hearing for the HHS system agency and its designees, unless, in those instances related to benefits provided under the public assistance programs of Chapters 32 and 33, Human Resources Code, the appellant or the appellant's representative files a request for an administrative review of the hearing decision.

(b) The following provisions establish the process and timelines for an administrative review under this subchapter.

(1) An appellant or the appellant's representative may make a timely request for an administrative review of a hearing officer's decision.

(2) To be timely, a request for an administrative review of the hearing officer's decision must be postmarked not later than the 30th day after the date of the notice of the decision and must be addressed to the Hearings Administrator. A request for administrative review will be considered timely if filed after 30 days, where appellant demonstrates good cause.

(3) Within 10 days of receipt of the request for administrative review, the Commission designates a HHS system attorney to handle the administrative review of the hearing decision on behalf of the HHS system agency. The assigned attorney reviews the hearing decision for errors of law and errors of fact using the "preponderance of evidence" standard. This standard means that the evidence as a whole shows that the fact sought to be proved is more probable than not.

(4) The attorney completes the administrative review and notifies the appellant in writing of the results not later than the 15th business day after the date the attorney receives the request for review.

(5) When an administrative review is conducted, the attorney makes the final decision for the HHS system agency and its designees.

(c) If the attorney's final decision in the administrative review is adverse to the appellant, judicial review may be obtained by filing for review with a district court in Travis County not later than the 30th day after the date of the notice of the final decision as provided under Government Code Chapter 2001.

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 25, 2007.

TRD-200702625

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Chapter 358. MEDICAID ELIGIBILITY

Subchapter E. INCOME

1 TAC §358.465

Pursuant to Senate Bill (S.B.) 22, 80th Legislature, Regular Session, 2007, amending Subchapter B, Chapter 32 of the Human Resources Code, the Texas Health and Human Services Commission (HHSC) proposes to amend the Texas Administrative Code (TAC), Title 1, Part 15, Subchapter E, Chapter 358, Medicaid Eligibility, §358.465 General Principles Concerning Income, paragraph (3). The purpose of this amendment is to allow $20 exclusion of unearned or earned income from an individual's monthly income in determining an individual's eligibility for community attendant services.

Background and Justification

The special income limit of 300% percent of the Supplemental Security Income (SSI) Federal Benefit Rate (FBR) is used for determining eligibility for Community Attendant (CA) services. The special income limit is $1,869 per month for 2007.

Under 42 CFR 435.1005 Federal Financial Participation (FFP) is available for recipients whose eligibility is based on the special income limit provided the individual's income, before deductions, does not exceed 300% percent of the SSI FBR.

The 80th Legislature enacted S.B. 22 to exclude a $20 of unearned or earned income from an individual's gross monthly income in determining an individual's eligibility for community attendant services.

Federal approval to allow the $20 disregard is required to implement this provision.

The amendment to the TAC is necessary to comply with S.B. 22.

Rule Change Summary

This rule incorporates the statutory change to allow a $20 exclusion of unearned or earned income from an individual's gross monthly income in determining an individual's eligibility for community attendant services. The rule also changes language of "Type Program 14" to "special income limit programs."

Fiscal Note

Thomas M. Suehs, Deputy Executive Commissioner for Financial Services, has determined that for the first five years these proposed rules are in effect, the cost to HHSC of the implementation will amount to approximately $311,212 in general revenue. There will be no cost to local governments.

Small and Micro-business Impact Analysis Mr. Suehs also has determined that there will be no adverse economic effect on small or micro businesses as a result of this amendment. The proposal does not add any new requirements for businesses. There is no anticipated economic cost to persons who are required to comply with this change. There is no anticipated effect on local employment in geographic areas affected by this change.

Anne Heiligenstein, Deputy Executive Commissioner for Social Services, has determined that for each of the first five years the proposed amendment is in effect, the public will benefit from the adoption of the rule because the $20 disregard will allow individuals with income slightly higher than the 300% of the SSI FBR to be eligible for CA.

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 risks to human health from environmental exposure and that may adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of 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

Public Comment

Written comments on the proposal may be submitted to Dee Church at Mail Code 2090, P.O. Box 12668, Austin, TX 78711-2668, by fax to (512) 206-5211, or by e-mail to dee.church@hhsc.state.tx.us within 30 days of publication of the proposal in the Texas Register.

Statutory Authority

The amendment is proposed under the Texas Government Code, §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; the Human Resources Code, §32.061, regarding the Community Attendant Services Program; 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 amendment affects the Human Resources Code, Chapter 32, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by this proposal.

§358.465.Income Exclusions.

(a) General exclusion. For each month, the first $20 of unearned or earned income is excluded. This exclusion is applied first to unearned income, then to earned income if the unearned income is less than $20. If no unearned income exists, the entire $20 exclusion is applied to the earned income. Exceptions are as follows.

(1) Although the exclusion does not apply to VA pensions and parents' DIC, it does apply to VA compensation and insurance. If, however, a client receives income from a VA pension and another source, he retains the general exclusion.

(2) In the case of an eligible couple, only one exclusion is applied to the couple's combined earned income.

(3) The $20 general exclusion does not apply to those cases for which eligibility is determined based on the special income limit up to 300% of the SSI federal benefit rate, unless the case is a Community Attendant Services case [ ~~Type Program 14 and community attendant services cases~~ ].

(b) - (g) (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 June 25, 2007.

TRD-200702626

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Chapter 370. STATE CHILDREN'S HEALTH INSURANCE PROGRAM

The Texas Health and Human Service Commission (HHSC) proposes to amend Chapter 370, State Children's Health Insurance program. HHSC proposes to amend the following rules: §370.4, Definitions; §370.20, Application Availability and File Date; §370.22, Completion of Telephone Applications; §370.43, Citizenship and Residency; §370.44, Income and Assets; §370.46, Waiting Period; §370.51, Deadline and Method for Requesting Review; §370.52, Disposition of a Request for Review; §370.303, Completion of Enrollment; §370.307, Continuous Enrollment Period, §370.325, Cost-Sharing Cap; and §370.401, Perinates.

HHSC proposes to repeal §370.23, Application Contents. HHSC also proposes to repeal §370.53, Reconsideration by HHSC. Section 370.53 is being repealed because HHSC assumed request for review responsibility effective May 1, 2007.

HHSC proposes to add new §370.60, Renewals, which includes information on when the renewal packet and reminder notices are sent. HHSC is also adding new §370.70, Income Eligibility Check during the 6th Month of Coverage, and new §370.71, Review and Reconsideration of Disenrollment Determination, which includes information on the process for performing an income check for households with income above 185% Federal Poverty Limit (FPL) and disenrollment of households subject to the income check.

HHSC proposes to amend the title of Subchapter B to align the title of the chapter to improve the description of the information contained with the subchapter. The new name is "Application Screening, Referral, Processing Renewal, and Disenrollment".

Background and Justification

House Bill 109, 80th Legislature, Regular Session, 2007, requires HHSC to make changes to eligibility and cost sharing policy and procedures. The changes include allowing a child care deduction, modifying the 90 day wait policy, extending the enrollment period, updating the cost-sharing cap, increasing household asset limit and vehicle excess value exclusion amounts, and conducting an income eligibility check for households with income above 185% Federal Poverty Limit (FPL).

In addition, HHSC is aligning rules due to policy clarifications and process improvement changes. These changes include clarifying file date policy, allowing clients to select a health plan via telephone, defaulting clients into a health plan who fail to choose one, clarifying the definition of countable income, clarifying that the value of unlicensed or inoperable vehicles must be counted in the eligibility determination, and deleting references to HHSC's designee and references to reconsideration by HHSC due to a shift in the request for review functions from the vendor to state staff.

Section-by-Section Summary

Amended §370.4 is revised to: update the definition of countable income to exclude the income of children or siblings under age 18 who attend school and delete information related to regular or predictable income; add a definition of net budget group income; and renumber the definitions as appropriate to accommodate the new definition.

Subchapter B title is revised to more accurately describe the contents of the subchapter.

Section 370.20 is revised to clarify that the file date for applications received via telephone or internet is the date a name and address is provided as long as the signature is received by the final due date.

Section 370.22 is revised to delete a reference to an obsolete section.

Section 370.23 is being deleted because the rule is being repealed.

Section 370.43 is revised to simplify language. References to gross income are changed to net income in §370.44. In addition, the asset limit is changed, vehicle exclusion amounts are updated, and language is clarified to match existing policy.

Section 370.46 is revised to update the 90-day waiting period criteria to apply a wait only to applicants who were covered by a health benefits plan during the 90 days prior to application.

Sections 370.51 and 370.52 are revised to remove the word designee as HHSC now handles the request for review functions rather than the vendor and remove references to HHSC timeframes. Section 370.53 is being deleted due to the shift in responsibility for request for review functions from the vendor to state staff thus making the reconsideration by HHSC obsolete.

Section 370.60 is added to describe the renewal process.

Section 370.70 is added to provide information related to performing an income check for households with income above 185% FPL in the 6th month of coverage. Section 370.71 is added to provide information related to disenrollment of households and HHSC requirements during a request for review.

Section 370.303 is revised to add telephone as a method to select a health plan or Primary Care Provider (PCP) and defaults members into a health plan if they fail to choose a health plan. Section 370.307 is revised to update the enrollment period from six to twelve months.

Section 370.325 is amended to adjust the cost-sharing cap to a twelve month amount based on the household's net income instead of gross income.

Section 370.401 is amended to exempt Perinates from the six month income verification requirement.

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 a fiscal impact of $247.3 million of additional cost to state government and provides for $14.1 million in additional revenue from client cost sharing. The proposed rules 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 proposal 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 rules. There is no anticipated negative impact on local employment.

Public Benefit

Joanne Molina, interim Associate Commissioner for Family Services, 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 sections. The anticipated public benefit, as a result of enforcing the sections, will be the increased access to medical assistance to a population of children under age 19 who are not currently eligible to receive Medicaid benefits due to income or asset limits.

Regulatory Analysis

Takings Impact Assessment

Public Comment

Written comments on the proposal may be submitted to Ramona McKissic at P.O. Box 12668, Austin, Texas 78711-2668, by fax to (512) 206-4536, or by e-mail Ramona.McKissic@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Public Hearing

A public hearing is scheduled for July 19, 2007 from 9 a.m. to 10 a.m. central time in the Winter Building Public Hearing room located at 701 West 51st St., Austin, Texas 78751. Persons requiring further information, special assistance, or accommodations should contact Reymundo Aguilar at (512) 206-5252.

Subchapter A. PROGRAM ADMINISTRATION

1 TAC §370.4

Statutory Authority (CHIP)

The amendments are proposed under the authority granted to HHSC by Government Code, §531.033, which authorizes the Executive Commissioner of HHSC to adopt rules necessary to implement HHSC's duties and the Texas Health and Safety Code, §62.051(d), which directs HHSC to adopt rules as necessary to implement the Children's Health Insurance Program.

The proposed amendments affect the Texas Health and Safety Code, Chapter 62, and the Texas Administrative Code, Chapter 370. No other statutes, articles, or codes are affected by these proposed amendments.

§370.4.Definitions.

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

(1) - (10) (No change.)

(11) Countable Income--For the month of receipt , any type of payment that is a regular and predictable gain or a benefit to a Budget Group that is not specifically exempted. In determining countable income, do not include income [ Regular and predictable income is income received in one month that is either likely to be received in the next month and was received on a regular and predictable basis in past months. It does not include income that was received on an irregular and unpredictable basis in past months, or is ] received by the child or sibling member of the Budget Group who is under age 18 and enrolled in school [ ~~fulltime, or in school part-time and working less than 30 hours per week~~ ].

(12) - (21) (No change.)

(22) Net Budget Group Income--Gross Monthly Countable Income minus any allowable deductions.

(23) [ ~~(22)~~ ] Qualified Alien--An alien who, at the time of application, satisfies the criteria established under 8 U.S.C. §1641(b).

(24) [ ~~(23)~~ ] SSI--Supplemental Security Income.

(25) [ ~~(24)~~ ] State Fiscal Year--The 12-month period beginning September 1 of each calendar year and ending August 31 of the following calendar year.

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 25, 2007.

TRD-200702597

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Subchapter B. APPLICATION SCREENING, REFERRAL, PROCESSING, RENEWAL, AND DISENROLLMENT

Division 1. APPLICATION PROCESSES

1 TAC §370.20, §370.22

Statutory Authority

The proposed amendments affect the Texas Health and Safety Code, Chapter 62, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by these proposed amendments.

§370.20.Application Availability and File Date.

(a) (No change.)

(b) Establishing a file date

(1) (No change.)

(2) For applications received via telephone or internet, the file date is [ ~~established in one of the following two ways:~~ ]

[ ~~(A)~~ ] the [ ~~The~~ ] date name and address [ ~~all information required under §370.23 of this title (relating to Application Contents)~~ ] is provided [ ~~except for a written signature~~ ], as long as the applicant provides a written signature by the final due date [ ~~39th day~~ ].

[ ~~(B)~~ The date the applicant provides, at a minimum, the applicant's name and address, as long as a written signature is provided within 10 calendar days of the date the name and address is provided. HHSC's designee sends the applicant an application requesting a signature, enclosing a letter that explains the file date policy. If it is not returned by the 10th day, the vendor may deny eligibility on the basis that no valid application has been received. If a signature is not provided until after the 10-day deadline, the file date is the date the signature is received.]

§370.22.Completion of Telephone Applications.

If an Applicant telephones to apply, the State or its designee completes as much of the application as possible over the telephone, prints it, and mails it to the Applicant. The Applicant is responsible for submitting to HHSC or its designee all information required [ ~~under §370.23 of this chapter (relating to Application Contents)~~ ].

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 25, 2007.

TRD-200702598

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Division 4. ELIGIBILITY CRITERIA

1 TAC §§370.43, 370.44, 370.46

Statutory Authority

§370.43.Citizenship and Residency.

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

(e) The Applicant states the child's citizenship, immigration status and Texas residency on the Application. The [ ~~If the applicant states the child is not a United States citizen, the~~ ] applicant must provide documentary evidence of the child's citizenship or Qualified Alien status that is satisfactory to HHSC [ ~~a Bureau of Citizenship and Immigration Services (formerly known as the U.S. Immigration and Naturalization Service) approved document that demonstrates that the child is a Qualified Alien~~ ].

§370.44.Income and Assets.

(a) - (c) (No change.)

(d) Net [ ~~Gross~~ ] Income Test.

(1) A child is income eligible if the net [ ~~gross~~ ] budget group income, after rounding down cents, is equal to or less than the 200% of FPL for the Budget Group's size. All Budget Groups must pass the net [ ~~gross~~ ] income test.

(2) Budget Groups with a net [ ~~gross~~ ] monthly income greater than 150% of FPL will be subject to an assets test in accordance with subsection (h) of this section.

(e) - (g) (No change.)

(h) Assets test.

(1) In order to be eligible for CHIP, a Budget Group with a net [ ~~gross~~ ] monthly income greater than 150% FPL must not own more than $10,000 [ ~~own $5,000.00 or less~~ ] in Countable Liquid Assets and Excess Vehicle Value combined.

(2) Determination of Excess Vehicle Value.

(A) Vehicles whose value must be considered include: registered or unregistered [ ~~any operable, licensed~~ ] automobile, truck, motorcycle, SUV, van, motor home or boat that is owned by a member of the Budget Group. Vehicles whose value is not considered in the determination of Excess Vehicle Value include vehicles that are:

(i) - (iii) (No change.)

(B) Vehicle values will be determined by HHSC based on [ ~~taken from~~ ] the Hearst Corporation National Auto Research Division Black Book , lowest wholesale price in the average quality range listed for the make, model, and year of the vehicle. If the Black Book has no listing for the vehicle, HHSC will utilize the low retail value for the vehicle from the National Automobile Dealers Association (N.A.D.A) Used Care Guide. If the vehicle is not listed in either publication, HHSC may accept the client's estimate of value . [ The vehicle value taken from the Black Book will be the lowest wholesale price in the average quality range listed for the make, model and year of the vehicle. If the Black Book has no listing for the vehicle, the value is self-declared by the applicant. No deductions are allowed for amounts owed on a vehicle. ]

(3) Exempt vehicles.

(A) (No change.)

(B) A Budget Group may claim an exemption under subparagraph (A)(i) - (iv) of this paragraph for only one vehicle worth $18,000 [ ~~$15,000.00~~ ] or more.

(C) A Budget Group may claim an exemption under subparagraph (A) of this paragraph for all vehicles worth less than $18,000 [ ~~$15,000.00~~ ].

(D) (No change.)

(4) Other exemptions for vehicles. If a Budget Group has no fully exempt vehicle:

(A) the first $18,000 [ ~~$15,000.00~~ ] of the value of the Budget Group's highest valued countable vehicle is exempt. Any value over $18,000 [ ~~$15,000.00~~ ] is considered Excess Vehicle Value and is counted towards the Budget Group's $10,000 [ ~~$5,000.00~~ ] assets limit; and

(B) the first $7,500 [ ~~$4,650.00~~ ] of the value of each additional vehicle owned by the Budget Group is exempt. The value in excess of $7,500 [ ~~$4,650.00~~ ] is considered Excess Vehicle Value and is counted towards the Budget Group's $10,000 [ ~~$5,000.00~~ ] assets limit.

§370.46.Waiting Period.

(a) The waiting period is a delay in the start of health care coverage that: [ ~~and~~ ]

(1) applies to a child who was covered by a health benefits plan at any time during the 90 days before the date of application for coverage; and [ ~~determined to be CHIP eligible, and~~ ]

(2) extends for a period of 90-days after

[ ~~(1)~~ ] the last date on which the applicant was covered under a health benefits plan. [ ~~first day of the month in which the child is determined eligible for CHIP, if the day of eligibility is on or before the 15th day of the month; or~~ ]

~~[ ~~(2)~~ the first day of the month after which the child is determined eligible for CHIP, if the day of eligibility is after the 15th day of the month.]~~

(b) (No change.)

(c) The 90-day waiting period specified in subsection (a) of this section does not apply to a child under the following circumstances:

(1) - (2) (No change.)

(3) The child's health insurance coverage costs more than 10 percent of the Budget Group's net [ ~~gross~~ ] monthly income;

(4) - (5) (No change.)

(d) (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 June 25, 2007.

TRD-200702600

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Division 5. REVIEW AND RECONSIDERATION OF ELIGIBILITY DENIALS AND TEMPORARY ENROLLMENT

1 TAC §370.51, §370.52

Statutory Authority

§370.51.Deadline and Method for Requesting Review.

An applicant may request [ a ] review of a determination of denial of eligibility or of HHSC's failure to make a timely determination by contacting HHSC [ ~~HHSC's designee~~ ] in writing within 30 working days from the notice of the action.

§370.52.Disposition of a Request for Review.

(a) HHSC [ ~~HHSC's designee~~ ] must complete its review within established timeframes upon [ ~~10 working days of~~ ] receipt of the request for review.

(b) HHSC [ ~~HHSC's designee~~ ] must notify the requester in writing of the results of its review [ ~~not later than the 10th day following receipt of the request~~ ]. The written notification must:

(1) - (2) (No change.)

(3) explain any applicable rights to reconsideration or review of the determination or state that the determination is final.

~~[ ~~(3)~~ if the action is upheld, inform the requester of the right to request reconsideration within 15 working days and provide instructions on how to request reconsideration by HHSC.]~~

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 25, 2007.

TRD-200702601

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Division 6. RENEWAL PROCESS

1 TAC §370.60

Statutory Authority

The new rule is proposed under the authority granted to HHSC by Government Code, §531.033, which authorizes the Executive Commissioner of HHSC to adopt rules necessary to implement HHSC's duties and the Texas Health and Safety Code, §62.051(d), which directs HHSC to adopt rules as necessary to implement the Children's Health Insurance Program.

The new rule affects the Texas Health and Safety Code, Chapter 62, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by the proposed new rule.

§370.60.Renewal.

(a) During the 9th month for a twelve-month coverage period, a renewal packet is mailed to families enrolled in CHIP.

(b) Households who fail to return the renewal information are mailed a reminder notice.

(d) Coverage will not be renewed if the household fails to return all required renewal information by the deadline set by HHSC.

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 25, 2007.

TRD-200702603

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Division 7. DISENROLLMENT

1 TAC §370.70, §370.71

Statutory Authority

The new rules are proposed under the authority granted to HHSC by Government Code, §531.033, which authorizes the Executive Commissioner of HHSC to adopt rules necessary to implement HHSC's duties and the Texas Health and Safety Code, §62.051(d), which directs HHSC to adopt rules as necessary to implement the Children's Health Insurance Program.

The proposed new rules affect the Texas Health and Safety Code, Chapter 62, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by these proposed new rules.

§370.70.Income Eligibility Check in 6th Month of Coverage.

(a) CHIP households enrolled in a 12-month coverage period with income levels above 185% FPL will have the household income reviewed during the sixth month of coverage. The household remains eligible for coverage if the household income remains within income eligibility limits described in §370.44 of this title (relating to Income and Assets).

(b) CHIP households described in subsection (a) of this section will be disenrolled if:

(1) the household income is determined to exceed the income eligibility limits described in §370.44 of this title;

(2) the household fails to provide requested income information within the timeframes set by HHSC; or

(3) the household otherwise fails to cooperate with HHSC in the review process.

(1) HHSC has provided the family an opportunity to demonstrate that the family's income is within the income eligibility limits prescribed in this chapter;

(2) the family fails to demonstrate such eligibility within the timeframes set by HHSC; and.

(3) HHSC has provided the family 30 days notice prior to disenrollment.

§370.71.Review and Reconsideration of Disenrollment Determination.

(a) A member may request a review of a suspension or termination of enrollment by contacting HHSC in writing within 30 working days from the notice of the action, or within 15 working days from the notice of the action if the member is requesting continuation of enrollment pending the review decision.

(b) Following receipt of the request for review, HHSC will complete its review within the timeframes required by federal regulation.

(1) explain the reason for the action;

(2) inform the requestor whether the action was reversed; and

(3) explain any applicable rights to reconsideration or review of the determination or state that the determination is final.

(d) A suspension or termination of enrollment is not subject to review if the sole basis for the decision is a provision in the State plan or in Federal or State law that affects all enrollees or a group of enrollees without regard to their individual circumstances.

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 25, 2007.

TRD-200702604

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Subchapter B. APPLICATION SCREENING, REFERRAL AND PROCESSING

Division 1. APPLICATION PROCESSES

1 TAC §370.23

Statutory Authority

The repeal is proposed under the authority granted to HHSC by Government Code, §531.033, which authorizes the Executive Commissioner of HHSC to adopt rules necessary to implement HHSC's duties and the Texas Health and Safety Code, §62.051(d), which directs HHSC to adopt rules as necessary to implement the Children's Health Insurance Program.

The proposed repeal affects the Texas Health and Safety Code, Chapter 62, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by the proposed repeal.

§370.23.Application Contents.

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 25, 2007.

TRD-200702599

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Division 5. REVIEW AND RECONSIDERATION OF ELIGIBILITY DENIALS AND TEMPORARY ENROLLMENT

1 TAC §370.53

Statutory Authority

The proposed repeal affects the Texas Health and Safety Code, Chapter 62, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by the proposed repeal.

§370.53.Reconsideration by HHSC.

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 25, 2007.

TRD-200702602

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Subchapter C. ENROLLMENT, DISENROLLMENT, AND RENEWAL OF MEMBERSHIP

Division 1. ENROLLMENT

1 TAC §370.303, §370.307

Statutory Authority

§370.303.Completion of Enrollment.

(a) - (b) (No change.)

(c) An Applicant may select a PCP or Health Plan by mail, telephone, or facsimile [ ~~return the enrollment form either by mail, with the enrollment packet, or by facsimile~~ ].

(d) (No change.)

(e) Members who fail to select a managed care plan or PCP during the period established by the commission will have a managed care plan selected for them by HHSC or its designee using criteria determined by HHSC. HHSC shall establish a default methodology [ Enrollment for a particular child is closed 90 calendar days after that child is determined eligible for CHIP if the Applicant has not completed enrollment by that time. An Applicant who fails to complete enrollment must initiate a new Application for health care coverage ].

§370.307.Continuous Enrollment Period.

(a) CHIP enrollment always begins on the first calendar day of the month and continues for a period up to 12 [ 6 ] consecutive months.

(b) (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 June 25, 2007.

TRD-200702605

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Division 2. COST-SHARING REQUIREMENTS

1 TAC §370.325

Statutory Authority

§370.325.Cost-Sharing Cap.

(a) (No change.)

(b) A Budget Group with gross income at or below 150% of FPL has a cost-sharing cap during the 12 [ 6 ]-month coverage period of 1.25% of its annual gross income.

(c) A Budget Group with gross income greater than 150% of FPL has a cost-sharing cap during the 12 [ 6 ]-month coverage period equal to 2.5% of its annual gross income.

(d) (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 June 25, 2007.

TRD-200702606

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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

Subchapter D. ELIGIBILITY FOR UNBORN CHILDREN

1 TAC §370.401

Statutory Authority

The amendment is proposed under the authority granted to HHSC by Government Code, §531.033, which authorizes the Executive Commissioner of HHSC to adopt rules necessary to implement HHSC's duties and the Texas Health and Safety Code, §62.051(d), which directs HHSC to adopt rules as necessary to implement the Children's Health Insurance Program.

The proposed amendment affects the Texas Health and Safety Code, Chapter 62, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by the proposed amendment.

§370.401.Perinates.

(a) (No change.)

(b) A perinate who is CHIP eligible under subsection (a) of this section is:

(1) - (4) (No change.)

(5) exempt from the requirements in §370.70 of this title (relating to Income Eligibility Check in 6th Month of Coverage).

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 25, 2007.

TRD-200702607

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: August 5, 2007

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