|(a) Introduction. This section describes the circumstances
for program periods before September 1, 2021, under which HHSC directs
an MCO to provide a uniform percentage rate increase to hospitals
in the MCO's network in a designated service delivery area (SDA) for
the provision of inpatient services, outpatient services, or both.
This section also describes the methodology used by HHSC to calculate
and administer such rate increase.
(b) Definitions. The following definitions apply when
the terms are used in this section. Terms that are used in this and
other sections of this subchapter may be defined in §353.1301
of this subchapter (relating to General Provisions).
(1) Children's hospital--A Medicaid hospital designated
by Medicare as a children's hospital.
(2) Inpatient hospital services--Services ordinarily
furnished in a hospital for the care and treatment of inpatients under
the direction of a physician or dentist, or a subset of these services
identified by HHSC. Inpatient hospital services do not include skilled
nursing facility or intermediate care facility services furnished
by a hospital with swing-bed approval, and any other services that
HHSC determines should not be subject to the rate increase.
(3) Institution for mental diseases (IMD)--A hospital
that is primarily engaged in providing psychiatric diagnosis, treatment,
or care of individuals with mental illness.
(4) Non-urban public hospital--
(A) A hospital owned and operated by a governmental
entity, other than a hospital described in paragraph (8) of this subsection,
defining rural public hospital, or a hospital described in paragraph
(10) of this subsection, defining urban public hospital; or
(B) A hospital meeting the definition of rural public-financed
hospital in §355.8065(b)(37) of this title (relating to Disproportionate
Share Hospital Reimbursement Methodology), other than a hospital described
in paragraph (7) of this subsection defining rural private hospital.
(5) Outpatient hospital services--Preventive, diagnostic,
therapeutic, rehabilitative, or palliative services that are furnished
to outpatients of a hospital under the direction of a physician or
dentist, or a subset of these services identified by HHSC. HHSC may,
in its contracts with MCOs governing rate increases under this section,
exclude from the definition of outpatient hospital services such services
as are not generally furnished by most hospitals in the state, or
such services that HHSC determines should not be subject to the rate
(6) Program period--A period of time for which HHSC
will contract with participating MCOs to pay increased capitation
rates for the purpose of provider payments under this section. Each
program period is equal to a state fiscal year beginning September
1 and ending August 31 of the following year. An SDA that is unable
to participate in the program described in this section beginning
September 1 may apply to participate beginning March 1 of the program
period and ending August 31. Participation during such a modified
program period is subject to the application and intergovernmental-transfer
deadlines described in subsection (g) of this section.
(7) Rural private hospital--A privately-operated hospital
that is a rural hospital as defined in §355.8052 of this title
(relating to Inpatient Hospital Reimbursement).
(8) Rural public hospital--A hospital that is owned
and operated by a governmental entity and is a rural hospital as defined
in §355.8052 of this title.
(9) State-owned hospital--A hospital that is owned
and operated by a state university or other state agency.
(10) Urban public hospital--A hospital that is operated
by or under a lease contract with one of the following entities: the
Dallas County Hospital District, the El Paso County Hospital District,
the Harris County Hospital District, the Tarrant County Hospital District,
the Travis County Healthcare District dba Central Health, the University
Health System of Bexar County, the Ector County Hospital District,
the Lubbock County Hospital District, or the Nueces County Hospital
(c) Classes of participating hospitals.
(1) HHSC may direct the MCOs in an SDA that is participating
in the program described in this section to provide a uniform percentage
rate increase to all hospitals within one or more of the following
classes of hospital with which the MCO contracts for inpatient or
(A) children's hospitals;
(B) non-urban public hospitals;
(C) rural private hospitals;
(D) rural public hospitals;
(E) state-owned hospitals;
(F) urban public hospitals;
(G) non-state-owned IMDs; and
(H) all other hospitals.
(2) If HHSC directs rate increases to more than one
class of hospital within the SDA, the percentage rate increases directed
by HHSC may vary between classes of hospital.
(d) Eligibility. HHSC determines eligibility for rate
increases by SDA and class of hospital.
(1) Service delivery area. Only hospitals in an SDA
that includes at least one sponsoring governmental entity are eligible
for a rate increase.
(2) Class of hospital. HHSC will identify the class
or classes of hospital within each SDA described in paragraph (1)
of this subsection to be eligible for a rate increase. HHSC will consider
the following factors when identifying the class or classes of hospital
eligible for a rate increase and the percent increase applicable to
(A) whether a class of hospital contributes more or
less significantly to the goals and objectives in HHSC's quality strategy,
as required in 42 C.F.R. §438.340, relative to other classes;
(B) which class or classes of hospital the sponsoring
governmental entity wishes to support through intergovernmental transfers
(IGTs) of public funds, as indicated on the application described
in subsection (g) of this section; and
(C) the percentage of Medicaid costs incurred by the
class of hospital in providing care to Medicaid managed care clients
that are reimbursed by Medicaid MCOs prior to any uniform rate increase
administered under this section.
(e) Services subject to rate increase.
(1) HHSC may direct the MCOs in an SDA to increase
rates for all or a subset of inpatient services, all or a subset of
outpatient services, or all or a subset of both, based on the service
or services that will best advance the goals and objectives of HHSC's
(2) In addition to the limitations described in paragraph
(1) of this subsection, rate increases for a non-state-owned IMD are
limited to inpatient psychiatric hospital services provided to individuals
under the age of 21 and to inpatient hospital services provided to
individuals 65 years or older.
(3) UHRIP rate increases will apply only to the in-network
managed care claims billed under a hospital's primary National Provider
Identifier (NPI) and will not be applicable to NPIs associated with
non-hospital sub-providers owned or operated by a hospital.
(f) Determination of percentage of rate increase.
(1) In determining the percentage of rate increase
applicable to one or more classes of hospital, HHSC will consider
the following factors:
(A) information from the participants in the SDA (including
hospitals, managed-care organizations, and sponsoring governmental
entities) on one or both of the following, as indicated on the application
described in subsection (g) of this section:
(i) the amount of IGT the sponsoring governmental entities
propose to transfer to HHSC to support the non-federal share of the
increased rates for the first six months of a program period; and
(ii) the percentage rate increase the SDA participants
propose for one or more classes of hospital for the first six months
of a program period;
(B) the class or classes of hospital determined in
subsection (d)(2) of this section;
(C) the type of service or services determined in subsection
(e) of this section;
(D) actuarial soundness of the capitation payment needed
to support the rate increase;
(E) available budget neutrality room under any applicable
federal waiver programs;
(F) hospital market dynamics within the SDA; and
(G) other HHSC goals and priorities.
(2) HHSC will limit the percentage rate increases determined
pursuant to this subsection to no more than the levels that are supported
by the amount described in paragraph (1)(A)(i) of this subsection.
Nothing in this section may be construed to limit the authority of
the state to require the sponsoring governmental entities to transfer
additional funds to HHSC following the reconciliation process described
in §353.1301(g) of this title, if the amount previously transferred
is less than the non-federal share of the amount expended by HHSC
in the SDA for this program.
(3) After determining the percentage of rate increase
using the process described in paragraphs (1) and (2) of this subsection,
HHSC will modify its contracts with the MCOs in the SDA to direct
the percentage rate increases.
(g) Application process; timing and amount of transfer
of non-federal share.
(1) The stakeholders in an SDA initiate the request
for HHSC to implement a uniform hospital rate increase program by
submitting an application using a form prescribed by HHSC.
(A) The stakeholders in the SDA, including hospitals,
sponsoring governmental entities, and MCOs, are expected to work cooperatively
to complete the application.
(B) The application provides an opportunity for stakeholders
to have input into decisions about which classes of hospital and services
are subject to the rate increases, and the percentage rate increase
applicable to each class, but HHSC retains the final decision-making
authority on these aspects of the program following the processes
described in subsections (d) - (f) of this section.
(C) HHSC must receive the completed application no
later than six months before the beginning of the program period or
modified program period in which the SDA proposes to participate.
(D) HHSC will process the application, contact SDA
representatives or stakeholders if there are questions, and notify
the stakeholders in the SDA of its decisions on the application, including
the classes of hospital eligible for the rate increase, the services
subject to the increase, the percentage rate increase applicable to
each class, and the total amount of IGT required for the first six
months of the program period.
(2) Sponsoring governmental entities must complete
the IGT for the first six months of the program period no later than
four months prior to the start of the program period, unless otherwise
instructed by HHSC. For example, for the program period beginning
September 1, 2017, HHSC must receive the IGT for the first six months
no later than May 1, 2017; for the modified program period beginning
March 1, 2018, HHSC must receive the IGT no later than November 1,
(3) Following the transfer of funds described in paragraph
(2) of this subsection, sponsoring governmental entities must transfer
additional IGT at such times and in such amounts as determined by
HHSC to be necessary to ensure the availability of funding of the
non-federal share of the state's expenditures under this section and
HHSC's compliance with the terms of its contracts with MCOs in the
SDA. In no event may transfers for directed increases in a program
period occur later than November 1 of the calendar year.
(4) HHSC will instruct sponsoring governmental entities
as to the required IGT amounts. Required IGT amounts will include
all costs associated with the uniform rate increase, including costs
associated with premium taxes, risk margins, and administration, plus
(h) Effective date of rate increases. HHSC will direct
MCOs to increase rates under this section beginning the first day
of the program period that includes the increased capitation rates
paid by HHSC to each MCO pursuant to the contract between them.
(i) Reconciliation. HHSC will reconcile the amount
of the non-federal funds actually expended under this section during
the program period with the amount of funds transferred to HHSC by
the sponsoring governmental entities for that same period using the
methodology described in §353.1301(g) of this subchapter.
(j) Recoupment. Payments under this section may be
subject to recoupment as described in §353.1301(k) of this subchapter.
(k) December 2017 limited eligibility. Notwithstanding
the other provisions of this section, any SDA that received approval
from CMS by April 15, 2017, may participate in the program described
in this section for dates of service beginning December 1, 2017. Sponsoring
governmental entities must complete the IGT for the period of December
1, 2017, through February 28, 2018, by a date to be determined by