Proposed Rules Title 1

TITLE 1. ADMINISTRATION

Part 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION

Chapter 355. REIMBURSEMENT RATES

Subchapter J. PURCHASED HEALTH SERVICES

The Texas Health and Human Services Commission (HHSC) proposes to repeal §355.8301, concerning Reimbursement, and replace it with new §355.8443 to correspond with the language approved by the Centers for Medicare and Medicaid Services (CMS) in the Texas Medicaid State Plan Amendment (06-005-723) related to covered services and reimbursement methodology for School Health and Related Services (SHARS). Since the services are only available to students under the age of 21, HHSC proposes to move the new rule to Division 23, Early and Periodic Screening, Diagnosis and Treatment (EPSDT).

Background and Justification

These services are delivered by school districts to Medicaid-eligible special education students under the age of 21 as required by the Individual with Disabilities Education Improvement Act. School districts fund the nonfederal share of Medicaid for SHARS and receive the federal share for these services. School districts must certify their public expenditures and submit annual cost reports, which are subject to cost reconciliation and settlement processes.

CMS no longer allows school districts, as public entities, to receive reimbursement that is greater than the Medicaid-allowable cost for delivering SHARS. HHSC has been working with CMS for more than a year to agree upon the covered services and related reimbursement methodology for SHARS. The resulting methodology is contained in new §355.8443. Since §355.8301 explained the processes for reimbursement under SHARS, as they existed under the Texas Medicaid State Plan prior to September 1, 2006, HHSC must repeal it and replace it with new §355.8443.

CMS only approved the existing methodology until August 31, 2006; the proposed new rule will be retroactively effective September 1, 2006.

Section-by-Section Summary

HHSC proposes to repeal §355.8301 and replace it with §355.8443. New §355.8443 provides the covered services and reimbursement methodology approved by CMS for school districts effective retroactive to September 1, 2006.

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 that there will be no fiscal impact to the state government. There will be no net fiscal impact to the State to implement these changes, but the revisions to the reimbursement methodology will result in less federal funding to the school districts. Since the services are required to be delivered to special education students in accordance with the federal Individuals with Disabilities Education Improvement Act funding requirements, the school districts will be required to spend additional state/local funding to make up the loss of federal Medicaid funding. 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

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 repeal of the existing rule and adoption of the new rule. The anticipated public benefit, as a result of enforcing these changes in the rules, will be to clarify the covered services and reimbursement for those services as well as to define the cost reporting, reconciliation and settlement processes for SHARS delivered by school districts to Medicaid-eligible special education students under the age of 21.

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 Texas Government Code, §2007.043.

Public Comment

Written comments on the proposal may be submitted to Gary Crane, in Rate Analysis for Acute Care and Cost Reporting Services, 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 Gary.Crane@hhsc.state.tx.us within 30 days of publication of this proposal in the Texas Register.

Division 16. SCHOOL HEALTH AND RELATED SERVICES

1 TAC §355.8301

(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.)

Statutory Authority

The repeal is proposed under the Texas Government Code, §531.033, which authorizes 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 rule affects the Human Resources Code, Chapter 32, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by this proposal.

§355.8301.Reimbursement.

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 April 30, 2007.

TRD-200701689

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: June 10, 2007

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

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

1 TAC §355.8443

Statutory Authority

The new rule is proposed under the Texas Government Code, §531.033, which authorizes 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 rule affects the Human Resources Code, Chapter 32, and the Texas Government Code, Chapter 531. No other statutes, articles, or codes are affected by this proposal.

§355.8443.Reimbursement Methodology for School Health and Related Services (SHARS).

(a) School-based services are known as School Health and Related Services (SHARS) in Texas. These services are available to children under the age of 21 years and eligible for the Early and Periodic Screening and Diagnosis and Treatment (EPSDT) program. The SHARS services are provided by school district staff and include the following services:

(1) Audiology and Hearing Services;

(2) Physician Services;

(3) Occupational Therapy;

(4) Physical Therapy;

(5) Psychological Services;

(6) Speech and Language Services;

(7) Nursing Services;

(8) Counseling Services;

(9) Transportation Services; and

(10) Personal Care Services.

(b) Direct Medical Services Payment Methodology. Effective for dates of service on or after September 1, 2006, providers are reimbursed on an interim basis for SHARS direct medical services per unit of service at the lesser of the provider's billed charges or a provider-specific interim rate.

(1) The units of service are 15-minute units for all covered services other than medication administration (a nursing service) which are based on a per-visit basis; assessment services, which are based on a per-hour basis; and personal care services on the bus and specialized transportation services, which are based on a per-one-way trip basis.

(2) The provider-specific interim rate is the rate for a specific service for a period that is provisional in nature, pending the completion of a cost reconciliation and a cost settlement for that period.

(3) To determine the Medicaid-allowable direct and indirect costs of providing SHARS direct medical services to Medicaid-eligible clients, the following steps are performed:

(A) Direct costs are accumulated on the annual cost report, resulting in total direct costs. The cost report contains the scope of cost and methods of cost allocation. Direct costs for direct medical services include unallocated payroll costs and other unallocated costs that can be directly charged to direct medical services. Direct payroll costs include total compensation (i.e., salaries and benefits and contract compensation) of direct services personnel and provided by the school district's staff, excluding transportation personnel. Other direct costs include costs directly related to the approved direct services personnel for the delivery of medical services, such as purchased services, capital outlay, travel, materials and supplies.

(B) Total direct costs for direct medical services from subparagraph (A) of this paragraph are reduced by any federal payments for those costs, resulting in adjusted direct costs for direct medical services.

(C) Adjusted direct costs for direct medical services from subparagraph (B) of this paragraph are then allocated to direct medical services regardless of payer source by applying the direct medical services percentage derived from an HHSC-administered time study, resulting in net direct costs.

(D) An HHSC-administered time study is used to determine the percentage of time that medical service personnel spend on direct medical services, general and administrative time and all other activities to account for 100 percent of time to assure that there is no duplicate claiming. This time study methodology will utilize two mutually exclusive cost pools representing individuals performing predominantly administrative activities and direct services, respectively. A sufficient number of medical services personnel will be sampled to ensure time study results that will have a confidence level of at least 95 percent with a precision of plus or minus five percent overall. The same single direct medical services time study percentage is applied against costs for all medical disciplines.

(E) Indirect costs are determined by applying the school district's specific unrestricted indirect cost rate to its net direct costs. Texas public school districts use predetermined fixed rates for indirect costs. The Texas Education Agency (TEA) has, in cooperation with the United States Department of Education (USDE), developed an indirect cost plan to be used by school districts in Texas. Pursuant to the authorization in 34 CFR §75.561(b), TEA approves unrestricted indirect cost rates for school districts for the USDE, which is the cognizant agency for school districts.

(F) Net direct costs and indirect costs are added together.

(G) Medicaid's portion of total net costs is identified by multiplying the results of subparagraph (F) of this paragraph by the ratio of the total number of students with Individualized Education Programs (IEPs) receiving medical services and eligible for Medicaid over the total number of students with IEPs receiving medical services.

(c) Transportation Services Payment Methodology. Effective for dates of service on and after September 1, 2006, providers are reimbursed for covered SHARS transportation services per unit of service at the lesser of the provider's billed charges or a provider-specific interim rate. The unit of service is based on a one-way trip. The provider-specific interim rate is the rate for a period that is provisional in nature, pending the completion of a cost reconciliation and a cost settlement for that period. To determine the Medicaid-allowable direct and indirect costs of providing SHARS-covered transportation services to Medicaid-eligible clients, the following steps are performed:

(1) Direct costs are accumulated on the annual cost report, resulting in total direct costs. Direct costs for covered transportation services include unallocated payroll costs and other unallocated costs that can be directly charged to covered transportation services. Direct payroll costs include total compensation (i.e., salaries and benefits and contract compensation) of bus drivers and mechanics. Other direct costs include costs directly related to the delivery of covered transportation services, such as professional and contracted services, contracted transportation costs, gasoline and other fuels, other maintenance and repair costs, vehicle insurance, interest, rentals, and vehicle depreciation. Depreciation must be documented by completing the Depreciation Schedule in the SHARS Cost Report. Allowable depreciation expense includes only pure straight-line depreciation. No accelerated or additional first-year depreciation expense is allowable. Required detail must be provided for each depreciable asset and each depreciable asset must be assigned a correct estimated useful life. Minimum usual lives must be consistent with "Estimated Useful Lives of Depreciable Hospital Assets," published by the American Hospital Association (AHA).

(2) Total direct costs for covered transportation services from paragraph (1) of this subsection are reduced by any federal payments for those costs, resulting in adjusted direct costs for covered transportation services.

(3) Adjusted direct costs from paragraph (2) of this subsection are then allocated to Medicaid by applying the ratio of one-way trips provided pursuant to an IEP to Medicaid beneficiaries over total one-way specialized transportation trips. Daily trip logs will be maintained to record one-way specialized transportation trips.

(4) Indirect costs are determined by applying the school district's specific unrestricted indirect cost rate to its net direct costs. Texas public school districts use predetermined fixed rates for indirect costs. TEA has, in cooperation with the USDE, developed an indirect cost plan to be used by school districts in Texas. Pursuant to the authorization in 34 CFR §75.561(b), TEA approves unrestricted indirect cost rates for school districts for the USDE, which is the cognizant agency for school districts.

(5) Net direct costs and indirect costs are added together.

(d) Certification of Funds Process. Each provider certifies on a quarterly basis an amount equal to each interim rate times the units of service reimbursed during the previous federal fiscal quarter.

(1) Each provider certifies on an annual basis through its cost report its total actual incurred allowable costs/expenditures.

(2) Providers are permitted only to certify Medicaid-allowable costs and are not permitted to certify any indirect costs that are outside their unrestricted indirect cost rate.

(e) Annual Cost Report Process. Each provider will complete an annual cost report for all SHARS services delivered during the previous state fiscal year covering September 1 through August 31. The cost report is due on or before March 1 of the year following the reporting period. The primary purposes of the cost report are to:

(1) Document the provider's total Medicaid-allowable scope of costs for delivering SHARS, including direct costs and indirect costs, based on approved cost allocation methodology procedures; and

(2) Reconcile its interim payments to its total Medicaid-allowable scope of costs based on approved cost allocation methodology procedures.

(A) The annual SHARS Cost Report includes a certification of funds statement that must be completed, certifying the provider's actual incurred costs/expenditures.

(B) All filed annual SHARS Cost Reports are subject to review by HHSC or its designee.

(f) The Cost Reconciliation Process. The cost reconciliation process must be completed within twenty-four months of the end of the reporting period covered by the annual SHARS Cost Report. The total Medicaid-allowable scope of costs based on approved cost allocation methodology procedures are compared to the provider's Medicaid interim payments for SHARS delivered during the reporting period as documented in the Medicaid Management Information System (MMIS), resulting in a cost reconciliation.

(g) The Cost Settlement Process. HHSC utilizes a cost settlement process as follows:

(1) If a provider's interim payments exceed the actual, certified costs of the provider for SHARS to Medicaid clients, HHSC will recoup the federal share of the overpayment using one of these two methods:

(A) Offset all future claims payments from the provider until the amount of the federal share of the overpayment is recovered; or

(B) The provider will return an amount equal to the overpayment.

(2) If the actual certified costs of a provider for SHARS exceed the interim Medicaid payments, HHSC will pay the federal share of the difference to the provider in accordance with the final actual certification agreement.

(3) HHSC shall issue a notice of settlement that denotes the amount due to or from the provider.