1 TAC §355.723
The Texas Health and Human Services Commission (HHSC)
proposes to amend §355.723, relating to Reimbursement Methodology
for Home and Community-Based Services (HCS), under Title 1, Part 15,
Chapter 355, Subchapter F.
Elsewhere in this issue of the Texas Register,
HHSC contemporaneously withdraws its earlier proposal to §355.723,
which was published in the May 8, 2009, issue of the
Texas Register (34 TexReg 2732).
Background and Justification
Section 355.723 establishes the reimbursement methodology for the
Home and Community-Based Services (HCS) waiver program. HHSC, under
its authority and responsibility to administer and implement rates,
is updating this rule to: (i) describe how administrative and operations
expenses are allocated to the various HCS service types, (ii) describe
how the foster/companion care coordinator component of the foster/companion
care rate is determined, (iii) delete language indicating that payment
rates are determined annually and that state-operated HCS providers
are reimbursed at cost, and (iv) clarify the current reimbursement
methodology.
The Department of Aging and Disability Services (DADS) provides
individualized services and supports to persons with mental retardation
who are living with their families, in their own homes, or in other
community settings, such as small group homes, through the HCS Medicaid
waiver program. In order to receive matching federal funds, this waiver
requires approval from the federal Centers for Medicare and Medicaid
Services (CMS).
Under the current HCS reimbursement methodology, a monthly "Administration
and Operations" fee is used to reimburse providers for certain administration
and operations expenses related to various HCS services. The fee currently
is a flat $938.62 per consumer per month or approximately $11,263
per annum. In 2008, a waiver renewal application was submitted to
CMS for the HCS waiver program, which was set to expire August 31,
2008. As a condition of the waiver approval, CMS directed HHSC to
develop and implement a new payment methodology that would incorporate
administration and operations costs into the rate for covered services
and to discontinue reimbursing for those expenses as a separate monthly
payment. HHSC informed CMS that it anticipated implementing the new
methodology in September 2009.
In response to provider concerns regarding CMS's directive, HHSC
submitted a letter to CMS in October 2008 requesting that CMS reconsider
its decision to redistribute the monthly fee. In January 2009 CMS
reaffirmed its direction and asked HHSC to submit a corrective action
plan on how it intended to redistribute the monthly fee in order to
maintain federal funding for the HCS waiver program.
To come into compliance with the CMS directive, HHSC formed a workgroup
and gathered feedback on possible options to redistribute the monthly
administration and operations fee to the individual services in the
HCS waiver. HHSC considered the feedback from the workgroup and other
interested parties, including HCS providers specializing in the provision
of foster/companion care services. This proposed rule reflects the
results of that feedback by proposing weighting factors for distributing
these costs. While this proposed weighting methodology represents
a reduction in the total administration and operations reimbursement
for foster/companion care services, it equalizes the administration
and operations percent of the total rate for foster/companion care
and residential support services.
Currently, many HCS providers pay the full foster/companion care
direct services rate to individuals providing foster/companion care
in order to recruit and retain foster/companion care providers. These
HCS providers cover the cost of foster/companion care coordination
with the funds from the monthly administration and operations fee,
even though the foster/companion care direct services rate includes
a foster/companion care coordinator component. To enable providers
to continue funding the costs for foster/companion care coordination
using administration and operations funds, the proposed rule determines
a stand-alone foster/companion care coordinator component of the foster/companion
care rate. This component will be funded out of the administration
and operations costs prior to the allocation of the administration
and operations costs to the various HCS services. As a result, providers
will be able to continue funding the costs for foster/companion care
coordination using administration and operations funds.
Language indicating how often payment rates are determined is being
deleted because the frequency of rate determination is addressed in §355.101
of this title (relating to Introduction). Language indicating that
state-operated HCS providers are reimbursed at cost is being deleted
because there are currently no state-operated HCS providers and, if
there were, they would be reimbursed in the same manner as all other
HCS providers. Language concerning the reimbursement methodology is
being modified to clarify the rate determination process.
Section-by-Section Summary
The proposed amendment to §355.723:
Revises subsection (a) to add a title and to delete language pertaining
to the frequency of rate determination.
Deletes subsection (b) as an obsolete reference to state-operated
HCS providers and renumbers subsequent subsections within this section.
Revises renumbered subsection (b) to add a title and to indicate
that only rates for residential support, supervised living, HCS foster/companion
care, and day habilitation vary by level of need.
Revises renumbered subsection (c) to add a title and to list the
cost components included in the HCS rates.
Adds subsection (d)(2) - (3) which describes how the foster/companion
care coordinator component of the foster/companion care rate is calculated.
Adds subsection (d)(4) - (9) which describes how the administration
and operations cost component included in the recommended rate is
calculated.
Deletes subsection (e) because the cost factors listed in this
subsection are now listed as cost components in renumbered subsection
(c) and renumbers subsequent subsections within this section. The
list of cost components in renumbered subsection (c) is identical
to the list of cost factors in deleted subsection (e) except that
"non-personnel operation costs" have been replaced with "operation
costs."
Revises renumbered subsection (e) to add a title and replaces the
term "factors" with the term "components."
Fiscal Note
Gordon E. Taylor, Chief Financial Officer for the Department of
Aging and Disability Services, has determined that, during the first
five-year period the amended rule is in effect, there will be no fiscal
impact to state government because the amendment merely reallocates
existing funds across services. While some providers will receive
reduced Medicaid revenues under the amended rule and others will receive
increased Medicaid revenues, overall, the amendment is budget neutral.
The amended rule will not result in any fiscal implications for local
health and human services agencies. There are no fiscal implications
for local governments as a result of enforcing or administering the
section.
Small Business and Micro-Business Impact Analysis
Under §2006.002 of the Texas Government Code, a state agency
proposing an administrative rule that may have an adverse economic
effect on small businesses must prepare an economic impact statement
and a regulatory flexibility analysis. The economic impact statement
estimates the number of small businesses subject to the rule and projects
the economic impact of the rule on small businesses. The regulatory
flexibility analysis describes the alternative methods the agency
considered to achieve the purpose of the proposed rule while minimizing
adverse effects on small businesses.
In 2007 approximately 273 entities provided HCS services to DADS
consumers. Based on 2007 Texas Medicaid cost reports for the HCS program
(the most recent data available), of these entities, approximately
188 were small businesses, of which approximately 136 were micro-businesses.
HHSC considered four alternatives to come into compliance with the
CMS requirements described in the "Background and Justification" section
above. The Commission selected the Alternative 3 methodology for the
proposed rule. Under the proposed rule, while there will be a reduction
in the total administrative and operations reimbursement for HCS providers,
including small businesses, specializing in the provision of foster/companion
care services, the rate paid for administration and operations costs
associated with foster/companion care and residential support services
will be closer to the actual costs of administering and operating
these services than under both the current methodology and the other
alternatives considered and will represent substantially equal percentages
of the direct service rate associated with these two services. The
anticipated economic impact of the proposed rule is more fully described
under Alternative 3 below.
HHSC considered the following four alternative approaches for complying
with the CMS directive. Each alternative incorporates a weight-based
allocation methodology to determine the administrative and operations
reimbursement associated with each HCS service, with the weights based
on the level of administrative and operations effort required to provide
the various services. The CMS directive requires that administration
and operations reimbursement be allocated to the various HCS services
in some fashion. HHSC considered a variety of allocation methods before
determining that a weight-based method based upon level of effort
was the most accurate and administratively feasible method.
Commonly accepted allocation methods include units of service,
salaries, labor, total costs, total-costs-less-facility-costs, and
level of effort measures. To be acceptable in a specific situation,
an allocation method must provide a reasonable reflection of the actual
business operations and resources expended toward each unique activity.
The units of service allocation method may be used only when all
services have equivalent units of service, for example, if all units
of service are equal to one day or one hour. HHSC determined that
the units of service method was not acceptable for allocating costs
within the HCS program because the units of service for the various
HCS services are not equivalent (the residential support and foster/companion
care services have a unit of service of one day, the day habilitation
service has a unit of service equal to a partial day, and most of
the remaining HCS services (i.e., physical therapy, nursing, supported
home living, etc.) have a unit of service equal to one hour.
The salaries and total costs allocation methods may be used when
all services are labor-intensive without programmatic residential
facility or residential building costs. HHSC determined that these
methods were not acceptable allocation methods for allocating costs
within the HCS program because the residential supports service includes
some residential building costs.
The two remaining commonly accepted allocation methods were the
labor cost and total-cost-less-facility-cost. Both of these methods
require facility costs to be segregated from non-facility costs. This
segregation is not possible in the HCS program because of the way
day habilitation costs are recorded by many HCS providers. HCS providers
often contract with non-related parties to provide day habilitation
services for their consumers and pay the day habilitation provider
a fixed amount per unit of service provided. This fixed amount is
intended to cover the day habilitation provider's labor costs and
facility costs (day habilitation services are typically provided in
a day habilitation facility). In these situations, the HCS provider
is not able to segregate the day habilitation center facility costs
from its non-facility costs. As a result of this inability to segregate
these costs, HHSC determined that the labor and total-cost-less facility-cost
allocation methods were not acceptable for allocating costs within
the HCS program.
Based upon this review of commonly-accepted allocation methods,
HHSC determined that a weight-based allocation methodology based on
the amount of administrative and operations effort required to provide
the various services was the most accurate and administratively feasible
method available.
Analyses of the impacts of the various alternatives did not include
the impact of additional funds appropriated for rate increases for
the HCS program by the 81st Texas Legislature for the 2010-11 biennium.
Alternative 1: Alternative 1 considered allocation weights based
purely on objective level of effort data collected from workgroup
participants and additional HCS providers specializing in the provision
of foster/companion care services. These data indicated that a unit
of residential support services took three times as much effort to
administer as a unit of foster/companion care services. Allocation
weights for the three residential options from this data were 1.00
for residential support services, 0.33 for foster/companion care services,
and 0.30 for supported home living services. Under this alternative,
88 small businesses experienced a reduction in HCS Medicaid revenues.
These reductions ranged in size from $14 per annum to $753,875 per
annum. Of the 136 micro-businesses, 75 experienced a reduction in
HCS Medicaid revenues. These reductions ranged in size from $72 per
annum to $502,924 per annum.
Under Alternative 1, the percent of each residential-setting service
rate accruing from administration and operations ranged from 35.4%
to 18.5% (depending on consumer level of need) for residential support
services, to 25.9% to 11.7% (depending on consumer level of need)
for foster/companion care services, to 44.9% for supported home living
services.
Alternative 2: HHSC also considered modifying the allocation weights
to build in incentives for the provision of foster/companion care.
Weights were modified to calculate that a unit of residential support
service requires only twice as much effort to administer as a unit
of foster/companion care services. Allocation weights for the three
residential options were set at 1.00 for residential support services,
0.50 for foster/companion care services, and 0.30 for supported home
living. Under this alternative, 80 small businesses experience a reduction
in HCS Medicaid revenues. These reductions ranged in size from $130
per annum to $336,330 per annum. Of the 136 micro-businesses, 69 experienced
a reduction in HCS Medicaid revenues. These reductions ranged in size
from $130 per annum to $262,162 per annum.
Under Alternative 2, the percent of each residential-setting service
rate accruing from administration and operations ranged from 33.8%
to 17.5% (depending on consumer level of need) for residential support
services, to 38.5% to 19.2% (depending on consumer level of need)
for foster/companion care services, to 43.1% for supported home living
services.
Alternative 3: Alternative 3 combines a stand-alone flat fee and
a weights-based allocation. Under this alternative HHSC would comply
with the CMS requirements discussed above by: (i) setting a stand-alone
foster/companion care coordinator component of the foster/companion
care rate funded out of the administration and operations funds and
(ii) allocating the remaining administration and operations funds
to the various HCS services using the allocation weights presented
in Alternative 2.
HHSC developed this alternative to enable providers to continue
funding the costs for foster/companion care coordination using administration
and operations funds as described in the "Background and Justification"
section above.
Under this alternative, 70 small businesses will experience a reduction
in HCS Medicaid revenues. These reductions would range in size from
$30 per annum to $211,161 per annum. Of the 136 micro-businesses,
63 will experience a reduction in HCS Medicaid revenues. These reductions
would range in size from $30 per annum to $128,005 per annum.
Under Alternative 3, the percent of each residential setting service
rate accruing from administration and operations ranged from 32.2%
to 16.5% (depending on consumer level of need) for residential support
services, to 31.8% to 15.1% (depending on consumer level of need)
for foster/companion care services, to 41.4% for supported home living
services.
Alternative 4: Alternative 4 would set allocation weights for residential
support services, foster/companion care, and supported home living
equal to 1.00. Under this alternative, 98 small businesses would experience
a reduction in HCS Medicaid revenues. These reductions would range
in size from $18 per annum to $122,798 per annum. Of the 136 micro-businesses,
71 would experience a reduction in HCS Medicaid revenues. These reductions
would range in size from $18 per annum to $43,614 per annum.
Under Alternative 4, the percent of each residential-setting service
rate accruing from administration and operations ranged from 24.5%
to 11.9% (depending on consumer level of need) for residential support
services, to 39.0% to 19.5% (depending on consumer level of need)
for foster/companion care services, to 61.7% for supported home living
services.
Alternatives 1 and 2 were not selected because of the adverse impact
they would have on small businesses and micro-businesses. In addition,
HHSC was concerned about the impact of the reduction in funding for
administration and operations expenses for foster/companion care services
on HCS providers specializing in providing these services under this
alternative. These alternatives were rejected in favor of Alternative
3, which incorporates a reasonable incentive to support provision
of foster/companion care services.
Alternative 4 was not selected because the weights it uses to distribute
administrative and operations overhead costs are contrary to all data
available to HHSC and analyses of administrative and operations effort
required for different services. Equalizing the weights for residential
support services, foster/companion care services, and supported home
living services ignores the difference between the administration
and operations effort and costs for these three services. The equalization
of the weights and payments for administration and operations costs
for all consumers, regardless of the actual cost to deliver the service,
would perpetuate the underfunding of administration and operations
costs for the provision of residential services.
Alternative 3 was selected for proposal. HHSC believes that the
proposed weights in Alternative 3 will more closely align payment
for administrative and operations expenses with administrative effort
so that services that require more effort or time to administer and
operate will be equitably compensated than any of the other alternatives.
It is HHSC's position that rates should be as closely aligned with
costs as possible to ensure equity, avoid false incentives, and ensure
accountability for taxpayer funds. Alternative 3 also allows providers
to continue funding the costs for foster/companion care coordination
using administration and operations funds and comes the closest of
the various alternatives to equalizing the ratio of administration
and operations funds to direct care funds for the various residential
settings. Finally, Alternative 3 has a negative impact on the smallest
number of small businesses of any of the alternatives and has a negative
impact on the smallest number of micro-businesses of any of the alternatives
other than Alternative 2 which negatively impacts one less micro-business
than Alternative 3.
Public Benefit
Carolyn Pratt, Director of Rate Analysis, has determined that,
for each of the first five years the amendment is in effect, the expected
public benefit is that the rate determination methodology for the
HCS waiver program will be in compliance with CMS requirements, thereby
maintaining federal funding for this program. As well, obsolete and
duplicative rule language will be eliminated and the reimbursement
methodology will be clarified.
Public Hearing
HHSC will hold a public hearing on August 12, 2009, at 9:00 a.m.
(Central Time) to receive public comment on the proposal. The hearing
will be held in the Lone Star Conference Room of the Health and Human
Services Commission, Braker Center, Building H, 11209 Metric Boulevard,
Austin, Texas. Entry is through Security at the main entrance of the
building, which faces Metric Boulevard. Persons requiring Americans
with Disabilities Act (ADA) accommodation or auxiliary aids or services
should contact Meisha Scott by calling (512) 491-1453, at least 72
hours prior to the hearing so appropriate arrangements can be made.
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.
Regulatory Analysis
HHSC has determined that this proposal is not a "major environmental
rule" as defined by §2001.0225 of the Texas Government Code.
"Major environmental rule" is defined to mean a rule the specific
intent of which is to protect the environment or reduce risk to human
health from environmental exposure and that may adversely affect,
in a material way, the economy, a sector of the economy, productivity,
competition, jobs, the environment or the public health and safety
of a state or a sector of the state. This proposal is not specifically
intended to protect the environment or reduce risks to human health
from environmental exposure.
Public Comment
Questions about the content of this proposal may be directed to
Pam McDonald in the HHSC Rate Analysis Department by telephone at
(512) 491-1373. Written comments on the proposal may be submitted
to Ms. McDonald by facsimile at (512) 491-1998, by e-mail to pam.mcdonald@hhsc.state.tx.us,
or by mail to HHSC Rate Analysis, Mail Code H-400, P.O. Box 85200,
Austin, Texas 78708-5200, within 30 days of publication of this proposal
in the Texas Register.
Statutory Authority
The amendment is proposed under Texas Government Code §531.033,
which authorizes the Executive Commissioner of HHSC to adopt rules
necessary to carry out the commission's duties; Texas Human Resources
Code §32.021 and Texas Government Code §531.021(a), which
provides HHSC with the authority to administer the federal medical
assistance (Medicaid) program in Texas; and Texas Government Code §531.021(b),
which establishes HHSC as the agency responsible for adopting reasonable
rules governing the determination of fees, charges, and rates for
medical assistance payments under the Texas Human Resources Code,
Chapter 32.
The amendment affects Texas Government Code Chapter 531 and Texas
Human Resources Code Chapter 32. No other statutes, articles, or codes
are affected by this proposal.
§355.723.Reimbursement Methodology for Home and Community-Based Services (HCS).
(a) Prospective payment rates. HHSC sets
payment rates to be paid prospectively
to HCS providers [annually. Rates are prospective in nature].
[(b) Reimbursement rates
apply to all non-state operated HCS providers uniformly by type of
service component provided and the individual's level-of-need. Reimbursements
for state-operated HCS providers are adjusted based on allowed costs
reported at the end of the state fiscal year, in accordance with this
subchapter. The state-operated cost adjustment will not exceed allowable
federal maximums.]
(b) [(c)] Levels of need. Rates
vary by level of need for residential support, supervised living,
HCS foster/companion care, and day habilitation. Rates do not
vary by level of need for any other HCS service.
(c) [(d)] Recommended rates. The
recommended modeled rates for each HCS service type and level
of need include the following cost components: direct service staffing
costs (wages for direct care, direct care supervisors, benefits, modeled
staffing ratios); facility costs (for respite care only); room and
board costs for overnight, out-of-home respite care; administration
and operation costs; and professional consultation and program support
costs [are based on cost components deemed appropriate
for a provider]. The determination of these components is based
on cost reports submitted by HCS providers in accordance with §355.722
of this subchapter (relating to Reporting Costs by Home and Community-based
Services (HCS) Providers).
(d) Administration and
operation cost component. The administration and operation cost component
included in the recommended rate described in subsection (c) of this
section for each HCS service type is determined as follows.
(1) Step 1. Determine total projected administration
and operation costs and projected units of service by service type
using cost reports submitted by HCS providers in accordance with §355.722
of this subchapter.
(2) Step 2. Determine the foster/companion
care coordinator component of the foster/companion care rate as follows.
For fiscal years 2010 through 2013, this component will be modeled
using the weighted average foster/companion care coordinator wage
as reported on the most recently available, reliable audited HCS cost
report database plus 10.25 percent for payroll taxes and benefits
inflated to the rate period and a consumer to foster/companion care
coordinator ratio of 1:15. For fiscal year 2014 and thereafter, this
component will be determined by summing total reported foster/companion
care coordinator wages and allocated payroll taxes and benefits from
the most recently available audited cost report, inflating those costs
to the rate period and dividing the resulting product by the total
number of foster care units of service reported on that cost report.
(3) Step 3. Determine total foster/companion
care coordinator dollars as follows. Multiply the foster/companion
care coordinator component of the foster/companion care rate from
paragraph (2) of this subsection by the total number of foster care
units of service reported on the most recently available, reliable
audited HCS cost report database.
(4) Step 4. Determine total projected administration
and operation costs after offsetting total foster/companion care coordinator
dollars as follows. Subtract the total foster/companion care coordinator
dollars from paragraph (3) of this subsection from the total projected
administration and operation costs from paragraph (1) of this subsection.
(5) Step 5. Determine projected weighted
units of service for each HCS service type as follows:
(A) Supervised Living and Residential Support
Services. Projected weighted units of service for Supervised Living
and Residential Support Services equal projected Supervised Living
and Residential Support units of service times a weight of 1.00;
(B) Day Habilitation. Projected weighted
units of service for Day Habilitation equal projected Day Habilitation
units of service times a weight of 0.25;
(C) Foster/Companion Care. Projected weighted
units of service for Foster/Companion Care equal projected Foster/Companion
Care units of service times a weight of 0.50;
(D) Supported Home Living. Projected weighted
units of service for Supported Home Living equal projected Supported
Home Living units of service times a weight of 0.30;
(E) Respite. Projected weighted units of
service for Respite equal projected Respite units of service times
a weight of 0.20;
(F) Supported Employment. Projected weighted
units of service for Supported Employment equal projected Supported
Employment units of service times a weight of 0.25;
(G) Behavioral Support. Projected weighted
units of service for Behavioral Support equal projected Behavioral
Support units of service times a weight of 0.18;
(H) Physical Therapy, Occupational Therapy,
Speech Therapy and Audiology. Projected weighted units of service
for Physical Therapy, Occupational Therapy, Speech Therapy and Audiology
equal projected Physical Therapy, Occupational Therapy, Speech Therapy
and Audiology units of service times a weight of 0.18;
(I) Social Work. Projected weighted units
of service for Social Work equal projected Social Work units of service
times a weight of 0.18;
(J) Nursing. Projected weighted units of
service for Nursing equal projected Nursing units of service times
a weight of 0.18.
(6) Step 6. Calculate total projected weighted
units of service by summing the projected weighted units of service
from paragraph (5)(A) - (J) of this subsection.
(7) Step 7. Calculate the percent of total
administration and operation costs to be allocated to the service
type by dividing the projected weighted units for the service type
from paragraph (5) of this subsection by the total projected weighted
units of service from paragraph (6) of this subsection.
(8) Step 8. Calculate the total administration
and operation cost to be allocated to that service type by multiplying
the percent of total administration and operation costs allocated
to the service type from paragraph (7) of this subsection by the total
administration and operation costs after offsetting total foster/companion
care coordinator dollars from paragraph (4) of this subsection.
(9) Step 9. Calculate the administration
and operation cost component per unit of service for each HCS service
type by dividing the total administration and operation cost to be
allocated to that service type from paragraph (8) of this subsection
by the projected units of service for that service type from paragraph
(1) of this subsection.
[(e) The rates are derived
for each type of service and, when appropriate, each level-of-need
and include the following cost factors: direct service staffing costs
(wages for direct care, direct care supervisors, benefits, modeled
staffing ratios); non-personnel operating costs; facility costs (for
respite care only); room and board costs for overnight, out-of-home
respite care; administrative costs; and professional consultation
and program support costs.]
(e) [(f)] Refinement and
adjustment. Refinement/adjustment of the cost components
[factors] and model assumptions will be considered, as appropriate,
by HHSC.
This agency hereby certifies that the proposal has
been reviewed by legal counsel and found to be within the agency's
legal authority to adopt.
Filed with the Office of the Secretary of State on July 13, 2009.
TRD-200902844
Steve Aragón
Chief Counsel
Texas Health and Human Services Commission
Earliest possible date of adoption: August 23, 2009
For further information, please call: (512) 424-6900