PART 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION
CHAPTER 355. REIMBURSEMENT RATES
SUBCHAPTER J. PURCHASED HEALTH SERVICES
DIVISION 4. MEDICAID HOSPITAL SERVICES
The Texas Health and Human Services Commission (HHSC) adopts new §355.8054, concerning Children's Hospital Reimbursement Methodology, with changes to the proposed text as published in the May 30, 2008, issue of the Texas Register (33 TexReg 4276). The text of the rule will be republished. Section 355.8054 will supersede the Medicaid children's hospital reimbursement methodology within 1 TAC §355.8063(o) and (r).
This new rule will supersede the children's hospital reimbursement methodologies at §355.8063(o) (in-state children's hospitals) and §355.8063(r) (out-of-state children's hospitals). This rule will separate the Medicaid reimbursement methodologies for children's hospitals into a stand-alone rule to clarify definitions, processes, and timing related to children's hospital reimbursement. The new rule will become effective for claims approved for payment for admissions in state fiscal year 2009. The requirements in §355.8063(o) and (r) will continue to apply to claims approved for payment through state fiscal year 2008.
The new rule will distinguish the TEFRA (Tax Equity and Fiscal Responsibility Act of 1982) cost-based reimbursement methodology for in-state children's hospitals from the prospective payment reimbursement methodology for other hospitals, which is in new §355.8052, Inpatient Hospital Reimbursement Methodology. Additionally, the new rule includes the language from §355.8063(r), regarding the reimbursement methodology for out-of-state children's hospitals, which is derived from the in-state children's hospital methodology.
The rule language for in-state and out-of-state children's hospital reimbursement contained in this new rule is substantially the same as the language in §355.8063(o) and (r).
HHSC received written comments during the 30-day comment period from the Texas Association of Public and Nonprofit Hospitals (TAPNH) and Southwest Mental Health Hospital. A summary of the comments and responses follows.
Comment: TAPNH expressed general support of HHSC's efforts to restructure and clarify the Medicaid reimbursement methodologies for inpatient hospital services.
Response: HHSC appreciates the support of this proposed change and believes that the new rule structure and clarity will be beneficial to HHSC and the provider community. The rule language was not changed in response to the comment.
Comment: TAPNH requested that HHSC clarify whether the reduction factor described at new 1 TAC §355.8052(d)(2), related to Medicaid inpatient hospital reimbursement for hospitals reimbursed based on a prospective payment system, will be applied to the rates used to pay out-of-state children's hospitals. TAPNH recommended that any and all rate reductions applied to Diagnosis Related Group (DRG)-based hospitals in Texas also be applied to out-of-state children's hospitals.
Response: The reduction factor for DRG-based hospitals at §355.8052(d)(2) is associated with staying within available funding from the Texas Legislature for rebasing hospital payment rates. Since HHSC is not rebasing out-of-state hospitals in fiscal year 2009 and thereafter without specific funding to do so, applying a reduction factor to existing out-of-children's hospital rates would not be consistent with the application of the reduction factor. The rule language was not changed in response to the comment.
Comment: TAPNH recommended HHSC clarify that the reimbursement to an out-of-state children's hospital will be calculated by multiplying the payment rate by the respective assigned DRG relative weight described at §355.8052(e).
Response: HHSC's intent was to calculate the reimbursement to out-of-state children's hospitals consistently with calculations made for DRG-based hospitals by multiplying the out-of-state payment rate by the relative weight for the DRG assigned to the adjudicated claim. The following language was added at §355.8054(b)(5) to clarify this process: "(5) HHSC reimburses each out-of-state children's hospital a prospective payment for covered inpatient hospital services. The payment amount is determined by multiplying the result in paragraph (4) of this subsection by the relative weight for the Diagnosis Related Group (DRG) assigned to the adjudicated claim."
Comment: Southwest Mental Health Center recommended the rule be amended to include in-state children-only specialty hospitals, and specifically inpatient children-only freestanding psychiatric hospitals. Additionally, Southwest Mental Health Center recommended that the reimbursement methodology for children's hospitals described in §355.8054 be made retroactive to January 1, 2008.
Response: HHSC recognizes that CMS does not specifically address the situation of a children's hospital that serves only behavioral health patients. CMS rules exempt psychiatric hospitals and children's hospitals from the inpatient hospital prospective payment system. Texas Medicaid currently reimburses all freestanding psychiatric hospitals consistently with the Medicare psychiatric prospective payment system, but reimburses acute care children's hospitals under a TEFRA-based methodology. HHSC agrees to allow an exception to §355.8063(v) (as renumbered in the amended version), which relates to Medicaid reimbursement of freestanding psychiatric facilities, to allow a freestanding psychiatric facility only treating children under age 21 to be reimbursed as a TEFRA in-state children's hospital. The hospital will be required to meet the criteria prescribed in §355.8063(w) to be eligible for TEFRA reimbursement described in §355.8054(a). The methodology change for children's freestanding psychiatric facilities will become effective with the concurrent amendments to §355.8063.
The new section is adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; 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 provides HHSC with the authority to propose and adopt rules governing the determination of Medicaid reimbursements.
§355.8054.Children's Hospital Reimbursement Methodology.
(a) In-state children's hospitals.
(1) HHSC or its designee reimburses in-state children's hospitals under methods and procedures described in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA).
(2) For dates of admission on or after September 1, 2003, children's hospitals with allowable Direct Graduate Medical Education (DGME) costs will receive a pro rata share of their annual DGME cost based on available funds appropriated specifically for this purpose.
(3) Interim payments are determined by multiplying a hospital's charges allowed under Medicaid by the interim rate effective on the date of admission. The interim rate is derived from the hospital's most recent tentative or final Medicaid cost report settlement.
(4) The amount and frequency of interim payments will be subject to the availability of funds appropriated for that purpose. Interim payments are subject to settlement at both tentative and final audit of a hospital's cost report.
(5) Cost Settlement.
(A) The cost settlement process is limited by the TEFRA target cap set pursuant to the Social Security Act §1886(b) (42 U.S.C. §1395ww(b)).
(B) Notwithstanding the process in subparagraph (A) of this paragraph, HHSC or its designee uses each hospital's final audited cost report, which covers a fiscal year ending during a base year period, for calculating the TEFRA target cap for a hospital.
(C) HHSC or its designee selects a new base year period for calculating the TEFRA target cap at least every three years.
(D) HHSC or its designee increases a hospital's TEFRA target cap in years in which the target cap is not reset under this paragraph, by multiplying the target cap by the CMS Prospective Payment System Hospital Market Basket Index adjusted to the hospital's fiscal year.
(E) For a newly recognized children's hospital, the base year period for calculating the TEFRA target cap is the hospital's first full 12-month cost reporting period occurring after the effective date of recognition. For each cost reporting period after the hospital's base year period, an increase in the TEFRA target cap will be applied as described in subparagraph (D), until the TEFRA target cap is recalculated in subparagraph (C) of this paragraph.
(6) After a Medicaid participating hospital is recognized by Medicare as a children's hospital, the hospital must submit written notification to HHSC's designee's provider enrollment contact, including documents verifying its status as a Medicare children's hospital. Upon receipt of the written notification from the hospital, HHSC or its designee will convert the hospital to the reimbursement methodology described in this subsection retroactive to the effective date recognized by Medicare.
(b) Out-of-state children's hospitals. HHSC or its designee calculates the prospective payment rate for an out-of-state children's hospital as follows:
(1) HHSC determines the overall average cost per discharge for all in-state children's hospitals by:
(A) Summing the Medicaid allowed cost from tentative or final cost report settlements for the base year; and
(B) Dividing the result in subparagraph (A) of this paragraph by the number of in-state children's hospitals' base year claims described in §355.8052(c)(4) of this title (relating to Inpatient Hospital Reimbursement).
(2) HHSC determines the average relative weight for all of in-state children's hospitals' base year claims described in §355.8052(c)(4) of this title by:
(A) Assigning a relative weight to each claim pursuant to §355.8052(e)(1)(B)(iii) of this title;
(B) Summing the relative weights for all claims; and
(C) Dividing by the number of claims.
(3) The result in paragraph (1) of this subsection is divided by the result in paragraph (2) of this subsection to arrive at the adjusted cost per discharge.
(4) The adjusted cost per discharge in paragraph (3) of this subsection is the payment rate used for payment of claims.
(5) HHSC reimburses each out-of-state children's hospital a prospective payment for covered inpatient hospital services. The payment amount is determined by multiplying the result in paragraph (4) of this subsection by the relative weight for the Diagnosis Related Group (DRG) assigned to the adjudicated claim.
(6) The payment rate is not adjusted for inflation.
(7) HHSC will not recompute the adjusted cost per discharge effective September 1, 2008 or thereafter.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on July 14, 2008.
TRD-200803585
Steve Aragón
Chief Counsel
Texas Health and Human Services Commission
Effective date: August 3, 2008
Proposal publication date: May 30, 2008
For further information, please call: (512) 424-6900
The Texas Health and Human Services Commission (HHSC) adopts new §355.8056, concerning State-Owned Teaching Hospital Reimbursement Methodology, without changes to the proposed text as published in the May 30, 2008, issue of the Texas Register (33 TexReg 4277) and will not be republished. Section 355.8056 will supersede the Medicaid inpatient hospital reimbursement methodology for state-owned teaching hospitals at 1 TAC §355.8063.
This new rule will change the Medicaid reimbursement methodology for state-owned teaching hospitals from the current prospective payment reimbursement methodology in §355.8063 to a TEFRA cost-based reimbursement methodology. Creating a new rule for state-owned teaching hospitals will distinguish the TEFRA methodology from the prospective payment methodology used for most other hospitals, which is set out in new §355.8052. The new rules will become effective for claims approved for payment for admissions in state fiscal year 2009. The methodology in §355.8063 will continue to apply to claims approved for payment through state fiscal year 2008.
Because HHSC will change the reimbursement methodology for state-owned teaching hospitals beginning in state fiscal year 2009, these hospitals will be excluded from rate recalculation for state fiscal year 2009. State-owned teaching hospitals will be reimbursed their cost for inpatient hospital services based on their cost report filed at the end of the first state fiscal year after this rule becomes effective. The state-owned teaching hospitals' initial interim rate will be based on their most recent audited tentative or final cost report completed prior to fiscal year 2009.
Finally, this new rule clarifies that direct graduate medical education (DGME) expenses are not considered costs associated with inpatient hospital services and are not settled to cost. Instead, state-owned teaching hospitals will be reimbursed a pro rata share of their annual allowable DGME costs based on the availability of funds appropriated for DGME.
HHSC received written comments during the 30-day comment period from the Texas Association of Public and Nonprofit Hospitals (TAPNH). A summary of the comments and responses follows.
Comment: TAPNH expressed general support of HHSC's efforts to restructure and clarify the reimbursement methodologies for Medicaid inpatient hospital services.
Response: HHSC appreciates the support of this proposed change and believes that the new rule structure and clarity will be beneficial to HHSC and the provider community. The rule language was not changed in response to the comment.
Comment: TAPNH requested assurance that since state-owned teaching facilities are being moved to a TEFRA cost-based reimbursement methodology, these providers will not receive funds designated by the Texas Legislature for hospital rate rebasing. TAPNH's assumption is that the funds appropriated for rebasing are specific to rebasing hospitals that are reimbursed through the DRG-based inpatient hospital reimbursement methodology.
Response: HHSC assures the funds appropriated by the Texas Legislature for the purpose of re-basing inpatient hospital rates will not be used to pay increased amounts to the state-owned teaching hospitals. The fiscal impact associated with changing the state-owned teaching hospitals to a TEFRA cost-based reimbursement methodology will not be included in the assumptions for the fiscal impact of available funds for rebasing inpatient hospital rates. The rule language was not changed in response to the comment.
The new rule is adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; 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 provides HHSC with the authority to propose and adopt rules governing the determination of Medicaid reimbursements.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on July 14, 2008.
TRD-200803586
Steve Aragón
Chief Counsel
Texas Health and Human Services Commission
Effective date: August 3, 2008
Proposal publication date: May 30, 2008
For further information, please call: (512) 424-6900
The Texas Health and Human Services Commission (HHSC) adopts an amendment to §355.8061, concerning Payment for Hospital Services, without changes to the proposed text as published in the May 30, 2008, issue of the Texas Register (33 TexReg 4279) and will not be republished. The amendment references three new rules being adopted by HHSC.
The amendment to §355.8061 adds references to §355.8052, Inpatient Hospital Reimbursement Methodology; §355.8054, Children's Hospital Reimbursement Methodology; and §355.8056, State-Owned Teaching Hospital Reimbursement Methodology. The new references in §355.8061 reflect a concurrent rewrite of §355.8063, Reimbursement Methodology for Inpatient Hospital Services.
HHSC is adopting three new rules to govern Medicaid inpatient hospital reimbursement: §355.8052, Inpatient Hospital Reimbursement Methodology; §355.8054, Children's Hospital Reimbursement Methodology; and §355.8056, State-Owned Teaching Hospital Reimbursement Methodology.
The reimbursement methodology for inpatient hospital reimbursement (other than children's and state-owned teaching hospitals), previously in §355.8063 subsections (a) through (n), and (p) through (q), will be in new §355.8052. The reimbursement methodology for children's hospitals, previously in §355.8063 subsections (o) and (r), will be in new §355.8054. The reimbursement methodology for state-owned teaching hospitals, previously covered in §355.8063, will be in new §355.8056.
These new rules will supersede §355.8063 for claims approved for payment for admissions in state fiscal year 2009. The requirements in §355.8063 will continue to apply to claims approved for payment through state fiscal year 2008.
HHSC did not receive comments regarding the proposed rule during the 30-day comment period.
The amendment is adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; 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 provides HHSC with the authority to propose and adopt rules governing the determination of Medicaid reimbursements.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on July 14, 2008.
TRD-200803587
Steve Aragón
Chief Counsel
Texas Health and Human Services Commission
Effective date: August 3, 2008
Proposal publication date: May 30, 2008
For further information, please call: (512) 424-6900
The Texas Health and Human Services Commission (HHSC) adopts an amendment to §355.8063, concerning Reimbursement Methodology for Inpatient Hospital Services, with changes to the proposed text as published in the May 30, 2008, issue of the Texas Register (33 TexReg 4280). The text of the rule will be republished. The amendment deletes subsection (u) to discontinue high volume payments made annually to eligible hospitals participating in the Medicaid Disproportionate Share Hospital (DSH) program, and to modify the reimbursement methodology for freestanding psychiatric facilities that primarily treat children under age 21.
This amendment, along with a proposed amendment to §355.8065(f)(2)(D) published in the July 4, 2008, issue of the Texas Register (33 TexReg 5115), discontinues Medicaid high volume payments and restores Disproportionate Share Hospital (DSH) funds to approximately 60 private urban hospitals.
Prior to state fiscal year 2003, qualifying private urban hospitals received a portion of available Medicaid DSH funds to offset their Medicaid shortfall and uncompensated care costs. In response to a cost containment provision in the 2002-2003 General Appropriations Act (Article II, Special Provisions, Section 33, 77th Legislature, Regular Session, 2001), the DSH payments to these hospitals were reduced. At the same time, HHSC instituted a high volume payment program for these same hospitals.
Currently, five public urban hospitals receive approximately $26,400,000 additional DSH funds as a result of the cost containment adjustments made in the DSH program in 2003. These five public urban hospitals are required to transfer the exact amount of additional DSH funds they receive as a result of the cost containment adjustment to HHSC through an intergovernmental transfer (IGT). HHSC then uses these funds as the state share for the high volume payments referenced in this rule (approximately $10 million) as well as to offset appropriation cuts made by the 77th Legislature (approximately $16 million).
This amendment deleting subsection (u) of §355.8063 removes the high volume payments currently being made annually to the DSH qualified private urban hospitals. The proposed amendment to §355.8065(f)(2)(D) removes the DSH conversion factor language that directs the approximately $26,400,000 to the five public urban hospitals. This removal of the conversion factor will result in $26,400,000 of DSH funds being allocated to the approximately 60 private urban hospitals that were the recipients of the high volume payments being deleted by this amendment. Therefore, these private hospitals will not be impacted in their total Medicaid reimbursement as a result of these rule changes.
The deletion of the high volume payments will result in a loss of approximately $16 million in IGT funds transferred from hospitals to the state general revenue that were used to offset appropriation cuts made by the 77th Legislature. This is the net effect on revenues to all parties of the deletion of the cost containment language in the DSH rule, §355.8065(f)(2)(D), and the deletion of the high volume payment language at §355.8063(u).
There is an additional fiscal impact to state government as a result of HHSC's decision, in response to comments described below, to allow an exemption for children's freestanding psychiatric hospitals to be reimbursed under the in-state children's hospital TEFRA reimbursement methodology. There will be a fiscal impact of $419,112 for state fiscal year (SFY) 2009; $428,122 for SFY 2010; $433,507 for SFY 2011; $433,507 for SFY 2012; and $433,507 for SFY 2013 in state general revenue. There will be no fiscal impact for local governments or local health and human services agencies.
HHSC also is adopting three new rules to govern Medicaid inpatient hospital reimbursement: §355.8052, Inpatient Hospital Reimbursement Methodology; §355.8054, Children's Hospital Reimbursement Methodology; and §355.8056, State-Owned Teaching Hospital Reimbursement Methodology. These new rules will supersede portions of §355.8063 for claims approved for payment for admissions beginning in state fiscal year 2009. The requirements in §355.8063 will continue to apply to claims approved for payment through state fiscal year 2008.
As described below, in response to comments received at the May 8, 2008 Medical Care Advisory Committee (MCAC) meeting and during the 30-day comment period, HHSC also is adding a new subsection (w) to §355.8063 to modify the Medicaid reimbursement methodology for freestanding psychiatric facilities that primarily treat children under age 21.
HHSC received written comments during the 30-day comment period from Southwest Mental Health Center. A summary of the comments and responses follows.
Comment: Southwest Mental Health Center (Southwest) requested that HHSC reimburse children-only freestanding psychiatric facilities as children's hospitals rather than freestanding psychiatric hospitals. Southwest described the change to the Medicare Federal Prospective Payment rates as having a financially devastating impact for children-only freestanding psychiatric facilities. Southwest further stated that the change in prospective payment rates for children-only psychiatric facilities is contrary to the cost differential and exemption for children's hospitals currently recognized by Medicare and Medicaid. Southwest explained that children's mental health care is very expensive due to the required staff-to-child ratios, and stated that unless it is reimbursed as a children's hospital, it will be unable to provide care at the clinical levels needed for children. Southwest recommended an amendment to new §355.8054, which relates to Medicaid children's hospital reimbursement and is being adopted concurrently with this rule, to recognize children-only specialty hospitals, and specifically inpatient freestanding children-only psychiatric hospitals, as children's hospitals for Medicaid reimbursement purposes. Additionally, Southwest requested that rate changes be made retroactive to January 1, 2008 for hospitals that will be reimbursed under new §355.8054.
Response: HHSC recognizes that CMS does not specifically address the situation of a children's hospital that serves only behavioral health patients. CMS rules exempt psychiatric hospitals and children's hospitals from the inpatient hospital prospective payment system. Texas Medicaid currently reimburses all freestanding psychiatric hospitals consistent with the Medicare psychiatric prospective payment system and reimburses acute care children's hospitals under a TEFRA-based methodology. HHSC agrees to allow an exception to §355.8063(v), which relates to Medicaid reimbursement of freestanding psychiatric facilities, and to allow a freestanding psychiatric facility only treating children under age 21 to be reimbursed as a TEFRA in-state children's hospital. The hospital will be required to meet the criteria prescribed in new §355.8063(w) to be eligible for TEFRA reimbursement described in §355.8054(a). The new subsection (w) will become effective on September 1, 2008.
The amendment is adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; 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 provides HHSC with the authority to propose and adopt rules governing the determination of Medicaid reimbursements.
§355.8063.Reimbursement Methodology for Inpatient Hospital Services.
(a) Introduction. Except as otherwise specified in subsection (q) of this section, the Texas Medical Assistance Program (Medicaid) reimburses hospitals, except in-state children's hospitals, for covered inpatient hospital services using a prospective payment system. In-state children's hospitals are reimbursed for covered inpatient hospital services using the methodology described in subsection (o) of this section. For hospitals other than in-state children's hospitals, the Health and Human Services Commission (HHSC) or its designee groups hospitals into payment divisions using the average base year payment per case in each hospital after adjusting each hospital's base year payment per case by a case mix index and a cost-of-living index. The payment divisions are separated into $100 increments. If a payment division has less than ten observations for Medicaid data, the HHSC or its designee considers that payment division to be statistically invalid. Hospitals within that payment division are placed into the nearest valid payment division.
(b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Diagnosis-related group (DRG)--The taxonomy of diagnoses as defined in the Medicare DRG system or as otherwise specified by the HHSC or its designee.
(2) Case mix index--The hospital-specific average relative weight.
(3) Relative weight--The arithmetic mean of the dollars for a specific DRG divided by the arithmetic mean of the dollars for all cases.
(4) Standard dollar amount--The weighted mean base year payment for all hospitals in a payment division after adjusting each hospital's base year payment per case by a case mix index, and a cost-of-living index. The HHSC or its designee establishes a minimum standard dollar amount of $1,600 and applies it to those hospitals whose standard dollar amount is less than the minimum. The HHSC or its designee applies cost-of-living indexes to the standard dollar amounts established for the base year to calculate standard dollar amounts for prospective years. A cost-of-living index is not applied to the minimum standard dollar amount.
(5) Base year--A 12-consecutive-month period of claims data selected by the HHSC or its designee as the basis for establishing the payment divisions, standard dollar amounts, and relative weights. The HHSC or its designee selects a new base year at least every three years.
(6) Base year payment per case--The payment that would have been made to a hospital 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. In calculating the base year payment per case, the HHSC or its designee uses the interim rate established at tentative or final settlement, if applicable, of the most recent cost reporting period up to and including the cost reporting period associated with the base year.
(7) Interim rate--Total reimbursable Title XIX inpatient costs, as specified in paragraph (6) of this subsection, divided by total covered Title XIX inpatient charges per tentative or final cost reporting period. The interim rate established at tentative settlement includes incentive/penalty payments to the extent that they continue to be permitted by federal law and regulation and continue to be included on Title XVIII cost reports.
(8) New hospital--A facility that has been in operation under present and previous ownership for less than three years and that initially enrolls as a Title XIX provider after the current base year. A new hospital must have been substantially constructed within the five previous years from the effective date of the prospective rate period.
(9) Children's hospital--A hospital within Texas that is recognized by Medicare as a children's hospital and is exempted by Medicare from the Medicare prospective payment system.
(10) Out-of-state children's hospital--A hospital outside of Texas that is recognized by Medicare as a children's hospital and is exempted by Medicare from the Medicare prospective payment system.
(c) Calculating relative weights and standard dollar amounts. The HHSC or its designee uses recent Texas claims data to calculate both the relative weights and standard dollar amounts. A relative weight is calculated for each DRG and applied to all payment divisions. A separate standard dollar amount is calculated for each payment division. Except for border hospitals with a Texas Medicaid provider number beginning with an H and out-of-state children's hospitals, the HHSC or its designee uses the overall arithmetic mean base year payment per case, including the cost of living update as specified in subsection (n) of this section, as the standard dollar amount to reimburse out-of-state hospitals. The overall arithmetic mean base year payment per case, including the cost of living update as specified in subsection (n) of this section, is also used as the standard dollar amount to reimburse military hospitals providing inpatient emergency services for admissions on or after October 1, 1993. The calculation of the standard dollar amount for out-of-state children's hospitals is described in subsection (r) of this section. Except for new hospitals, the overall arithmetic mean base year payment per case, including the cost of living update as specified in subsection (n) of this section, is also used as the standard dollar amount to reimburse hospitals that initially enroll as a Title XIX provider after the current base year. The standard dollar amount for new hospitals is the lesser of the overall arithmetic mean base year payment per case plus three percentile points, including the cost of living update as specified in subsection (n) of this section, or the hospital's average Medicaid cost per Medicaid discharge based on the tentative or final settlement, if applicable, of the hospital's first 12-month cost reporting period occurring after the hospital's enrollment as a Title XIX provider. In the event that the new hospital is a replacement facility for a hospital that is currently enrolled as a Title XIX provider, the hospital is reimbursed by using either the standard dollar amount of the existing provider or the standard dollar amount for new hospitals, whichever is greater. The use of the hospital's average Medicaid cost per Medicaid discharge, after adjusting for case-mix intensity, as its standard dollar amount is applied prospectively to the beginning of the next prospective year and is applicable only if the tentative or final settlement is completed and available at least 60 days before the beginning of the prospective year. The hospital's Medicaid costs are determined using similar methods and procedures used in Title XVIII of the Social Security Act, as amended, effective October 1, 1982, by Public Law 97-248. When two or more Title XIX participating providers merge, the HHSC or its designee combines the Medicaid inpatient costs, as described in this subsection, of each of the individual providers to calculate a standard dollar amount, effective at the start of the next prospective period, to be used to reimburse the merged entity. Acquisitions and buyouts do not result in a recalculation of the standard dollar amount of the acquired provider unless acquisitions or buyouts result in the purchased or acquired hospital becoming part of another Medicaid participating provider. When the HHSC or its designee determines that the HHSC or its designee has made an error that, if corrected, would result in the standard dollar amount of the provider for which the error was made changing to a new payment division, either higher or lower, the HHSC or its designee moves the provider into the correct payment division, and the HHSC or its designee reprocesses claims paid using the initial, incorrect standard dollar amount that was in effect for the current state fiscal year by using the existing standard dollar amount of the payment division in which the provider was moved. In the determination of the corrected payment division, the HHSC or its designee uses the relative weights that are currently in effect for the state fiscal year. The correction of this error condition only applies to the current state fiscal year payments. No corrections are made to payment rates for services provided in previous state fiscal years. If a specific DRG has less than ten observations for Medicaid data, the HHSC or its designee uses the corresponding Medicare relative weight, except for DRGs relating to organ transplants. Relative weights for organ transplant DRGs with less than ten observations may be developed using Medicaid-specific data. The relative weights include organ procurement costs for both solid and nonsolid organs. The HHSC or its designee makes no distinction between urban and rural hospitals and there is no federal/national portion within the payment.
(d) Add-on payments. There are no separate add-on payments. The HHSC or its designee:
(1) includes capital costs in the standard dollar amount for each payment division;
(2) includes the cost of indirect medical education in the standard dollar amount for each payment division;
(3) includes the cost of malpractice insurance in the standard dollar amount for each payment division; and
(4) includes return on equity in the standard dollar amount for each payment division.
(e) Calculating the payment amount. The HHSC or its designee reimburses each hospital for covered inpatient hospital services by multiplying the standard dollar amount established for the hospital's payment division by the appropriate relative weight. The patient's DRG classification is primarily based on the patient's principal diagnosis. The resulting amount is the payment amount to the hospital.
(f) Patient transfers. If a patient is transferred, the HHSC or its designee establishes payment amounts as specified in paragraphs (1) - (4) of this subsection. If appropriate, the HHSC or its designee manually reviews transfers for medical necessity and appropriate payment.
(1) If the patient is transferred to a skilled nursing facility or intermediate care facility, the HHSC or its designee pays the transferring hospital the total payment amount of the patient's DRG.
(2) If the patient is transferred to another hospital, the HHSC or its designee pays the receiving hospital the total payment amount of the patient's DRG. The HHSC or its designee pays the transferring hospital a DRG per diem. The DRG per diem is based on the following formula: (DRG relative weight x standard dollar amount)/DRG mean length of stay (LOS) x LOS. The LOS is the lesser of the DRG mean LOS, the claim LOS, or 30 days. The 30-day factor is not used in establishing a DRG per diem amount for a medically necessary stay of a recipient less than age one in a Title XIX participating hospital or a recipient less than age six in a disproportionate share hospital as defined by the HHSC.
(3) If the HHSC or its designee determines that the transferring hospital provided a greater amount of care than the receiving hospital, the HHSC or its designee reverses the payment amounts. The transferring hospital is paid the total payment amount of the patient's DRG and the receiving hospital is paid the DRG per diem.
(4) The HHSC or its designee makes multiple transfer payments by applying the per diem formula to the transferring hospitals and the total DRG payment amount to the discharging hospital.
(g) Split billing. The HHSC or its designee does not allow interim billings by providers. The hospital may bill the HHSC or its designee when the patient exceeds his 30-day inpatient hospital limit or is discharged. The HHSC or its designee bases payment on the diagnosis codes known at billing. The payment is final.
(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. 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) Recalibrating the relative weights. The HHSC or its designee recalibrates the relative weights whenever the standard dollar amounts are rebased.
(j) Revising the diagnosis related groups. The HHSC or its designee parallels the taxonomy of diagnoses as defined in the Medicare DRG prospective payment system unless a revision is required based on Texas claims data or other factors as determined by the HHSC or its designee.
(k) Appeals.
(1) A hospital may appeal individual claims as specified in other HHSC rules. As specified in subparagraphs (A) - (C) of this paragraph, a hospital may also appeal mechanical, mathematical, and data entry errors in base year claims data and incorrectly computed subsequent adjustments to the hospital's base year claims data because of the base year's tentative or final settlement.
(A) If a hospital believes that the HHSC or its designee made a mechanical, mathematical, or data entry error in computing the hospital's base year claims data, the hospital may request a review of the disputed calculation by the HHSC or, at the HHSC direction, its designee. A hospital may not request a review if the disputed calculation is the result of the hospital's submittal of incorrect data or the result of the HHSC or its designee's application of an interim rate to the base year claims data derived from a cost reporting period occurring before the base year. Upon the provider hospital's request, the HHSC or its designee provides the applicable available data used in calculating the hospital's base year claims data to the provider hospital. The hospital must submit a specific written request for review and appropriate specific documentation supporting its contention that there has been a mechanical, mathematical, or data entry error to the HHSC or its designee. Except as specified in subparagraph (C) of this paragraph, the request must be submitted within 60 days after the hospital receives initial notification of its payment division and standard dollar amount. The HHSC or its designee conducts the review as quickly as possible and notifies the hospital of the results. If the hospital is dissatisfied with the results of the review, the hospital may request a formal hearing under the procedures, including the expedited processing provisions, except that, in the event of any conflict, the procedures contained in this section apply. Except as specified in subparagraph (C) of this paragraph, if the review or appeal is completed at least 60 days before the beginning of the next prospective year, any adjustment required after the completion of the review or appeal is applied to that next prospective year. If the review or appeal is not completed at least 60 days before the beginning of the next prospective year, any adjustment required after the completion of the review or appeal is applied only to the subsequent prospective year. The base year claims data used by the HHSC or its designee pending the review or appeal is the base year claims data established by the HHSC or its designee.
(B) If a hospital believes that the HHSC or its designee incorrectly computed subsequent adjustments to the hospital's base year claims data because of the base year's tentative or final settlement, the hospital may request a review of the disputed calculation related to the tentative or final settlement by the HHSC or, at the HHSC direction, its designee. The hospital's request may also include a request to review the tentative or final settlement. The hospital must submit a specific written request for review and appropriate specific documentation supporting its contention that the tentative or final settlement is incorrect to the HHSC or its designee. Except as specified in subparagraph (C) of this paragraph, the request must be submitted within 60 days after the hospital receives notification of a tentative or final settlement of the base year data. The HHSC or its designee conducts the review as quickly as possible and notifies the hospital of the results. If the hospital is dissatisfied with the results of the review, the hospital may request a formal hearing under the procedures, including the expedited processing provisions, contained in Chapter 1 of this title (relating to the Texas Board of Health), except that, in the event of any conflict, the procedures contained in this section apply. Except as specified in subparagraph (C) of this paragraph, if the review or appeal is completed at least 60 days before the beginning of the next prospective year, any adjustment required after the completion of the review or appeal is applied to that next prospective year. If the review or appeal is not completed at least 60 days before the beginning of the next prospective year, any adjustment required after the completion of the review or appeal is applied only to the subsequent prospective year. The interim rate applied to the base year claims data pending the review or appeal is the interim rate established by the HHSC or its designee.
(C) If a hospital believes that the HHSC or its designee incorrectly computed the hospital's 1985 base year claims data as specified in subparagraph (A) of this paragraph, the hospital may submit a specific written request for review and appropriate specific documentation supporting its contention within 60 days after the effective date of this section. If a hospital believes that the HHSC or its designee incorrectly computed the tentative or final settlement of the cost reporting period associated with the 1985 base year as specified in subparagraph (B) of this paragraph, the hospital may submit a specific written request for review and appropriate specific documentation supporting its contention within 60 days after the effective date of this section. The hospital must follow the process described in subparagraph (A) or (B) of this paragraph, as appropriate. If the review or appeal is completed by December 31, 1987, any adjustment required after the completion of the review or appeal is applied to the March 1, 1988, adjustment described in subsection (n) of this section. If the review or appeal is not completed by December 31, 1987, any adjustment required after the completion of the review or appeal is applied to the next prospective year.
(2) A hospital may not appeal the prospective payment methodology used by the HHSC or its designee, including:
(A) the payment division methodologies;
(B) the DRGs established;
(C) the methodology for classifying hospital discharges within the DRGs;
(D) the relative weights assigned to the DRGs; and
(E) the amount of payment as being inadequate to cover costs.
(l) Cost reports. Each hospital must submit a cost report at periodic intervals as prescribed by Medicare or as otherwise prescribed by the HHSC or its designee. The HHSC or its designee uses data from these reports in rebasing years, in making adjustments as described in subsections (n) and (q) of this section, and in completing cost settlements for children's hospitals.
(m) Cost settlements. If a hospital has already begun its fiscal year on September 1, 1986, cost settlement for that portion of the hospital's fiscal year which occurs before September 1, 1986, is based on reimbursement for covered inpatient hospital services under similar methods and procedures used in the Social Security Act, Title XVIII, as amended, effective October 1, 1982, by Public Law 97-248. Except as otherwise specified in subsection (q) of this section, there are no cost settlements for services provided to recipients admitted as inpatients to hospitals reimbursed under the prospective payment system on or after the implementation date of the prospective payment system.
(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.
(C) The HHSC or its designee makes a March 1, 1988, adjustment.
(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 will not be applied to the standard dollar amount for admissions during the period September 1, 2003 through August 31, 2008. 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) Reimbursement to in-state children's hospitals. The HHSC or its designee reimburses in-state children's hospitals under similar methods and procedures used in the Social Security Act, Title XVIII, as amended, effective October 1, 1982, by Public Law 97-248, Tax Equity and Fiscal Responsibility Act (TEFRA) except for the cost of direct graduate medical education (DGME). For cost reporting periods beginning on or after September 1, 2003, children's hospitals with allowable DGME costs as determined under TEFRA principles will receive a pro rata share of their annual TEFRA DGME cost based on appropriations or allocations from appropriations made specifically for this purpose. The amount and frequency of interim payments will also be subject to the availability of appropriations made specifically for this purpose. Interim payments are subject to settlement at both tentative and final audit of a hospital's cost report. The HHSC or its designee establishes target rates and stipulates payments per discharge, incentives, and percentage of payments. The HHSC or its designee uses each hospital's 1987 final audited cost reporting period (fiscal year ending during calendar year 1987) as its target base period. The target base period for hospitals recognized by Medicare as children's hospitals after the implementation of this subsection is the hospital's first full 12-month cost reporting period occurring after its recognition by Medicare. The HHSC or its designee annually increases each hospital's target amount for the target base period by the cost-of-living index described in subsection (n) of this section. The HHSC or its designee selects a new target base period at least every three years. The HHSC or its designee bases interim payments to each hospital upon the interim rate derived from the hospital's most recent tentative or final Medicaid cost report settlement. If a Title XIX participating hospital is subsequently recognized by Medicare as a children's hospital after the implementation of this subsection, the hospital must submit written notification to the HHSC or its designee and include adequate documentation and claims data. Upon receipt of the written notification from the hospital, the HHSC or its designee reserves the right to take 90 days to convert the hospital's reimbursement to the reimbursement methodology described in this subsection.
(p) Day and cost outliers. Effective for inpatient hospital services provided on or after July 1, 1991, the HHSC or its designee pays day or cost outliers for medically necessary inpatient services provided to clients less than age one in all Title XIX participating hospitals and clients less than age six in disproportionate share hospitals, as defined by the HHSC, that are reimbursed under the prospective payment system. For purposes of outlier payment adjustments, disproportionate share hospitals are defined as those hospitals identified by the HHSC during the previous state fiscal year as disproportionate share hospitals. If an admission qualifies for both a day and a cost outlier, only the outlier resulting in the highest payment to the hospital is paid. (Note: This subsection does not address reimbursement for the provision of other necessary inpatient hospital services under the Early and Periodic Screening, Diagnosis, and Treatment Program, as required by the Omnibus Budget and Reconciliation Act of 1989.)
(1) To establish day outliers, the HHSC or its designee first removes from the current base year data those admissions whose actual lengths of stay are greater than or equal to plus or minus three standard deviations from the arithmetic mean length of stay for each DRG. The HHSC or its designee then recomputes the arithmetic mean length of stay and the standard deviations for each DRG. Inpatient days, which exceed two standard deviations beyond the arithmetic mean length of stay for the DRG are eligible for a day outlier. Payment is based on 70% of a per diem amount of a full DRG payment. The per diem amount is established by dividing the full DRG payment amount by the arithmetic mean length of stay for the DRG.
(2) To establish cost outliers, the HHSC or its designee first determines what the amount of reimbursement for the admission would have been if the HHSC or its designee reimbursed the hospital under similar methods and procedures used in the Social Security Act, Title XVIII, as amended, effective October 1, 1982, by Public Law 97-248, Tax Equity and Fiscal Responsibility Act (TEFRA). The HHSC or its designee then determines the outlier threshold by using the greater of the full DRG payment amount multiplied by 1.5 or an amount determined by selecting the lesser of the universe mean of the current base year data multiplied by 11.14, or the hospital's standard dollar amount multiplied by 11.14. The hospital's standard dollar amount is the amount that the HHSC or its designee uses to reimburse the hospital under the prospective payment system. The outlier threshold is subtracted from the amount of reimbursement for the admission established under the TEFRA principles. The HHSC or its designee multiplies any remainder by 70% to determine the actual amount of the cost outlier payment.
(3) If a recipient less than age one is admitted to and remains in a hospital past his or her first birthday, medically necessary inpatient days and hospital charges after the child reaches age one are included in calculating the amount of any day or cost outlier payment.
(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 for Medicaid Fee-for-Service (FFS) and Primary Care Case Management (PCCM) inpatient 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 (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.
(r) Reimbursement to out-of-state children's hospitals. For admissions on or after September 1, 1991, the standard dollar amount for out-of-state children's hospitals is calculated as specified in this subsection. The HHSC or its designee calculates the overall average cost per discharge for in-state children's hospitals based on tentative or final settlement of cost reporting periods ending in calendar year 1990. The overall average cost per discharge is adjusted for intensity of service by dividing it by the average relative weight for all admissions from in-state children's hospitals during state fiscal year 1990 (September 1, 1989 through August 31, 1990). The adjusted cost per discharge is updated each year by applying the cost-of-living index described in subsection (n) of this section. The resulting product is the standard dollar amount to be used for payment of claims as described in subsection (e) of this section. The HHSC or its designee selects a new cost reporting period and admissions period from the in-state children's hospitals at least every three years for the purpose of calculating the standard dollar amount for out-of-state children's hospitals.
(s) Reimbursement of inpatient direct graduate medical education (GME) costs. The Medicaid allowable inpatient direct graduate medical education cost, as specified under similar methods and procedures used in the Social Security Act, Title XVIII, as amended, effective October 1, 1982, by Public Law 97-248, is calculated for each hospital having inpatient direct graduate medical education costs on its tentative or final audited cost report. Those inpatient direct medical education costs are removed from the calculation of the interim rate described in subsection (b)(7) of this section and not used in the calculation of the provider's standard dollar amount described in subsection (c) of this section. Those allowable inpatient direct graduate medical education costs for services delivered to Medicaid eligible patients with inpatient admission dates on or after September 1, 1997, will be subject to the cost determination and settlement provisions as described in this subsection. No Medicaid inpatient direct graduate medical education cost settlement provisions are applied to inpatient hospital admissions prior to September 1, 1997. For cost reporting periods beginning on or after September 1, 2003, providers with Medicaid allowable direct graduate medical education costs as described in this subsection will receive a pro rata share of their annual GME cost based on appropriations or allocations from appropriations made specifically for this purpose. The amount and frequency of interim payments will also be subject to the availability of appropriations made specifically for this purpose. Interim payments are subject to settlement at both tentative and final audit of a provider's cost report.
(t) Non-State Owned Hospital Supplemental Inpatient Payments. Notwithstanding other provisions of this chapter, supplemental payments will be made each state fiscal year in accordance with this subsection to eligible hospitals that serve high volumes of Medicaid and uninsured patients.
(1) Supplemental payments are available under this subsection for inpatient hospital services provided by a publicly-owned hospital or hospital affiliated with a hospital district in Bexar, Dallas, Ector, El Paso, Harris, Lubbock, Nueces, Midland, Potter, Randall, Tarrant, and Travis counties. Supplemental payments will be made for inpatient services on or after July 6, 2001, for Bexar, Dallas, Ector, El Paso, Harris, Lubbock, Nueces, Tarrant, and Travis counties. Supplemental payments will be made for inpatient services on or after February 7, 2004, for Midland County. Supplemental payments will be made for inpatient services on or after May 29, 2004 for Potter and Randall counties.
(2) State funding for supplemental payments authorized under this paragraph will be limited to and obtained through intergovernmental transfers of local or hospital district funds. The supplemental payments described in this paragraph will be made in accordance with the applicable regulations regarding the Medicaid upper limit provisions codified at 42 C.F.R. §447.272.
(3) In each county listed in paragraph (1) of this subsection, the publicly-owned hospital or hospital affiliated with a hospital district that incurs the greatest amount of cost for providing services to Medicaid and uninsured patients, will be eligible to receive supplemental high volume payments. The supplemental payments authorized under this paragraph are subject to the following limits:
(A) In each state fiscal year the amount of any inpatient supplemental payments and outpatient supplemental payments may not exceed the hospital's "hospital specific limit," as determined under §355.8065(f)(2)(E) of this chapter (relating to Reimbursement to Disproportionate Share Hospitals (DSH)) for DSH hospitals; and
(B) The amount of inpatient supplemental payments and fee-for-service Medicaid inpatient payments the hospital receives in a state fiscal year may not exceed Medicaid inpatient billed charges for inpatient services provided by the hospital to fee-for-service Medicaid recipients in accordance with 42 CFR §447.271.
(4) Notwithstanding the provisions of paragraphs (1) - (3) of this subsection, a privately-operated hospital that executes an indigent care affiliation agreement (as defined in this subsection) with a hospital district or state or local governmental entity is eligible to receive supplemental payments under this paragraph. The purpose of the affiliation is to pay for unreimbursed care to the Medicaid population to ensure the continued viability of the communities' Medicaid providers.
(A) Supplemental payments will be made for inpatient services on or after June 11, 2005, for eligible hospitals in Hidalgo, Maverick, Montgomery, Travis, Bexar, and Webb counties. Supplemental payments will be made for inpatient services on or after November 12, 2005, for eligible hospitals in all other counties in the State of Texas.
(B) A hospital that is eligible to receive supplemental payments under this paragraph must provide a copy of the fully executed indigent care affiliation agreement to HHSC prior to payment of any supplemental funds under this paragraph.
(C) An eligible hospital must certify, on a form prescribed by HHSC and prior to payment of any supplemental funds under this paragraph, the following:
(i) No part of any supplemental payment paid to the hospital under this paragraph will be returned or reimbursed to the hospital district or state or local governmental entity;
(ii) No part of any supplemental payment paid to the hospital under this paragraph will be used to pay a contingent fee, consulting fee, or legal fee associated with the hospital's receipt of the supplemental funds; and
(iii) The person signing the certification on behalf of the hospital is legally authorized to bind the hospital and to certify the matters described in the certification.
(D) A hospital district or state or local governmental entity must certify, on a form prescribed by HHSC and prior to payment of any supplemental funds under this paragraph, the following:
(i) The hospital district or state or local governmental entity has not received and has no agreement to receive, any portion of the funds paid to an eligible hospital that has executed an affiliation agreement with the hospital district or state or local governmental entity;
(ii) The hospital district or state or local governmental entity has not entered into a contingent fee arrangement related to the hospital district's or state or local governmental entity's participation in the supplemental payment program authorized under this paragraph;
(iii) The hospital district or state or local governmental entity is authorized to participate in the supplemental payment program authorized under this paragraph pursuant to a vote of the hospital district's or state or local governmental entity's governing body in a public meeting preceded by public notice published in accordance with the hospital district's or state or local governmental entity's usual and customary practices or the Texas Open Meetings Act, as applicable;
(iv) All affiliation agreements, consulting agreements, or legal services agreements executed by the hospital district or state or local governmental entity related to the hospital district's or state or local governmental entity's participation in the supplemental payment program authorized under this paragraph are available for public inspection upon request.
(E) Beginning August 31, 2008, each participating hospital and hospital district or state or local governmental entity must submit a fully executed indigent care affiliation agreement as well as certification forms on or before August 31st of each fiscal year to be eligible to receive supplemental payments under this paragraph during the following fiscal year.
(F) If the federal Centers for Medicare and Medicaid Services (CMS), the United States Department of Health and Human Services, or other responsible legal authority recoups federal financial participation related to an eligible hospital's receipt and/or use of supplemental payments authorized under this paragraph, HHSC may recoup an amount equivalent to the amount of supplemental payments recouped by CMS. Supplemental payments under this paragraph may be subject to any adjustments for payments made in error, including, without limitation, adjustments under §371.1703 of this title (relating to recovery of overpayments), 42 C.F.R. part 455, and chapter 403, Texas Government Code. HHSC will send a notice of recoupment to the hospital and will recoup from any current or future Medicaid payments as follows:
(i) HHSC will recoup from the hospital against which the disallowance was directed;
(ii) If, within 30 days of the hospital's receipt of HHSC's written notice of recoupment, the hospital has not paid the full amount of the recoupment or entered into an agreement, in writing, with HHSC, HHSC may withhold any or all Medicaid payments from the hospital until such time as HHSC has recovered an amount equal to the hospital's disallowance. If HHSC determines that recovery through a withhold is not feasible, HHSC may recover the amount of the CMS recoupment from the other affiliated hospitals that are a party to the same indigent care affiliation under this paragraph through a withhold of any or all Medicaid payments until such time as HHSC has recovered an amount equal to the hospital's disallowance unless the recoupment is prohibited by law.
(G) Funding of supplemental payments under this paragraph shall be disbursed as follows:
(i) Supplemental payments available under this paragraph shall be payable to a hospital affiliated with a hospital district or state or local governmental entity in proportion to the amount transferred by the hospital district or state or local governmental entity affiliated with the private hospital, subject to legislative appropriation. Such supplemental payments will be based on calculations made by HHSC and will be made quarterly, beginning April 1, 2007.
(ii) If a hospital district or state or local governmental entity does not transfer to HHSC sufficient funding for the time period specified to generate the full amount allowable under this paragraph, each hospital affiliated with that hospital district or state or local governmental entity will receive a portion of the supplemental payment under paragraph (5) of this subsection based on that hospital's percentage of the full entitlement for all hospitals affiliated with that hospital district or state or local governmental entity.
(iii) HHSC will issue one supplemental payment for a hospital for inpatient services the hospital provided on or before August 31, 2006, if the hospital meets the criteria of subparagraphs (A) - (C) of this paragraph no later than May 31, 2007, and if a sufficient amount of funds (as determined by HHSC) are transferred to HHSC to support the one-time supplemental payment no later than December 1, 2007. A hospital district or state or local governmental entity must notify HHSC in a manner prescribed by HHSC of the date it intends to transfer funds related to the supplement payment authorized under this subparagraph. The supplemental payment will be processed for each participating hospital based on the amount of funds transferred to HHSC up to the calculated maximum payment for the applicable retroactive time period. A hospital that satisfies the criteria of subparagraphs (A) - (C) of this paragraph after May 31, 2007, will not be eligible for the supplemental payment authorized under this subparagraph but will be eligible to receive regular supplemental payments under paragraph (5) of this subsection. If the full amount of the calculated intergovernmental transfer (IGT) transfer is not made by the transfer deadlines specified by HHSC, the supplemental payment for that time period will be calculated based on the amount of the funds transferred. Regular quarterly supplemental payments for state fiscal year 2007 for which IGT funds are received will be made, beginning in April 2007, to each participating hospital for which a copy of the fully executed indigent care affiliation agreement, as well as any required certification forms, have been timely received.
(iv) Annual retroactive supplemental payments will be processed once for each state fiscal year, beginning with state fiscal year 2007, in September of the following calendar year (September 2008 for state fiscal year 2007) provided HHSC determines there is sufficient room available for funding under the applicable aggregate upper payment limit for private hospitals. Hospital districts or state or local governmental entities must notify HHSC Rate Analysis in a manner prescribed by HHSC if they intend to transfer funds related to the annual retroactive payments. If HHSC determines that the retroactive funding claimed pursuant to this clause will exceed the applicable aggregate upper payment limit for private hospitals, HHSC will reduce the amount of the transfer for the retroactive payment under this clause proportionately for each participating private hospital in an amount sufficient to ensure compliance with the applicable aggregate upper payment limit. If the retroactive supplemental payment calculation results in the verification that a specific hospital or hospitals were overpaid for the retroactive time period, HHSC will initiate the same process as outlined in subparagraph (F)(i) - (ii) of this paragraph to recover the amount of the overpayment.
(H) State funding for supplemental payments authorized under this paragraph will be limited to and obtained through intergovernmental transfers of local governmental entity or hospital district funds or transfer of State General Revenue. The supplemental payments described in this subsection will be made in accordance with the applicable regulations regarding the Medicaid upper limit provisions codified at 42 C.F.R. §447.272.
(5) An eligible hospital under this subsection will receive quarterly supplemental payments. The quarterly payments will be limited to one-fourth of the lesser of:
(A) The difference between the hospital's Medicaid inpatient billed charges and Medicaid payments the hospital receives for services provided to fee-for-service Medicaid recipients. Medicaid billed charges and payments will be based on a twelve consecutive-month period of fee-for-service claims data selected by HHSC; or
(B) The difference between the hospital's "hospital specific limit," as determined under §355.8065(f)(2)(E) of this chapter relating to Reimbursement to Disproportionate Share Hospitals (DSH)) for DSH hospitals and the hospital's DSH payments as determined by the most recently finalized DSH reporting period.
(6) For purposes of calculating the "hospital specific limit" in paragraph (5)(B) of this subsection, the "cost of services to uninsured patients, " as defined by §355.8065(b)(5) of this chapter and "Medicaid shortfall," as defined by §355.8065(b)(16) of this chapter, will be adjusted as follows:
(A) The amount of Medicaid payments (including inpatient and outpatient supplemental payments) that exceed Medicaid cost will be subtracted from the "Medicaid shortfall."
(B) The amount of the "Medicaid shortfall," as adjusted in accordance with subparagraph (A) of this paragraph, will be subtracted from the "cost of services to uninsured patients" to ensure that, during any state fiscal year, a hospital does not receive more in total Medicaid payments (inpatient and outpatient rate payments, graduate medical education payments, supplemental payments and disproportionate share hospital payments) than its cost of serving Medicaid patients and patients with no health insurance.
(u) State Owned Hospital Supplemental Inpatient Payments. Notwithstanding other provisions of this attachment, supplemental payments will be made each state fiscal year in accordance with this subsection to state government-owned or operated hospitals for inpatient services provided to Medicaid patients.
(1) Supplemental payments are available under this subsection for inpatient hospital services provided by state government-owned or operated hospitals on or after December 13, 2003. To qualify for a supplemental payment, the hospital must be owned or operated by the state of Texas.
(2) The aggregate supplemental payment amount will be the annual difference between the aggregate upper payment limit and the inpatient fee-for-service Medicaid payments made to the state government-owned or operated hospitals under this attachment. The aggregate upper payment limit will be calculated, based on Medicare payment principles and in accordance with the federal upper limit regulations at 42 CFR §447.272, using the most recent cost report data available.
(3) The amount of the supplemental payment made to each state government-owned or operated hospital will be determined by:
(A) dividing each hospital's fee-for-service Medicaid payments by the sum of the Medicaid fee-for-service payments of all state government-owned of operated hospitals;
(B) multiplying the percentage calculated in subparagraph (A) of this paragraph by the aggregate supplemental payment calculated in paragraph (2) of this subsection.
(4) Supplemental payments determined under this subsection will be calculated annually and paid quarterly.
(5) Supplemental payments made under this subsection when combined with other inpatient payments made under this section shall not exceed the maximum amounts allowable under applicable federal regulations at 42 CFR §447.271.
(v) Reimbursement to freestanding psychiatric facilities. Effective January 1, 2008, HHSC or its designee reimburses freestanding psychiatric facilities under the prospective payment system, a hospital-specific per diem rate. The per diem rate will be determined based upon the Medicare federal base per diem for inpatient psychiatric facilities with facility-based adjustments for wages, rural location, and length of stay as determined by Medicare, to the extent possible within available funds. HHSC or its designee will not cost settle for services provided to recipients admitted as inpatients to freestanding psychiatric facilities reimbursed under the prospective payment system on or after the implementation date of the prospective payment system. The freestanding psychiatric inpatient per diem rates are for Medicaid clients under 21 years of age. Per diem rates will be increased only if the Texas Legislature appropriates funds for this specific purpose.
(w) Reimbursement to children's freestanding psychiatric facilities. On or after September 1, 2008, an in-state freestanding psychiatric facility that primarily serves individuals under the age of 21 will be exempted from the freestanding psychiatric facility prospective payment system methodology described in subsection (v) of this section and instead reimbursed as an in-state children's hospital as described in §355.8054 of this title if the facility meets the following requirements:
(1) After a Medicaid participating freestanding psychiatric hospital is recognized by Medicare as a freestanding psychiatric facility, it must request of HHSC or its designee that the facility be reimbursed as a children's hospital. The hospital must submit its request on or after September 1, 2008, in writing, to HHSC or its designee's provider enrollment contact and include documentation showing that during the previous two hospital fiscal years, at least 95 percent of the facility's total inpatient days were for services to individuals under the age of 21. HHSC will cost settle the annual cost report for the hospital fiscal year in which the request was submitted.
(2) After a freestanding psychiatric hospital has been recognized by HHSC as a children's hospital, for continued recognition as a children's hospital, it must annually submit to HHSC's Medicaid Audit Division documentation with its annual cost report showing that at least 95 percent of its total inpatient days were for services to individuals under the age of 21. A hospital that does not meet this 95 percent threshold based on its annual cost report will be reimbursed based on the prospective hospital-specific per diem rate as described in subsection (v) of this section, effective the first day of the hospital fiscal year following the cost reporting period in which the hospital did not meet the 95 percent threshold.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on July 14, 2008.
TRD-200803588
Steve Aragón
Chief Counsel
Texas Health and Human Services Commission
Effective date: August 3, 2008
Proposal publication date: May 30, 2008
For further information, please call: (512) 424-6900