| (a) Prospective Payment System (PPS) Methodology. Federally
Qualified Health Centers (FQHCs) selecting the PPS methodology, in
accordance with section 1902(bb) of the Social Security Act, as amended
by the Benefits Improvement and Protection Act (BIPA) of 2000 (42
U.S.C. §1396a(bb)), effective for the FQHC's fiscal year that
includes dates of service occurring January 1, 2001, and after, will
be reimbursed a PPS per visit encounter rate for Medicaid covered
services. FQHCs are reimbursed a prospective per visit encounter rate
for a visit that meets the requirements of subsections (b)(12) and
(13) of this section. The final base rate for each FQHC existing in
2000 was calculated based on one hundred percent (100%) of the average
of the FQHC's reasonable costs for providing Medicaid covered services
as determined from audited cost reports for the FQHC's 1999 and 2000
fiscal years. The final base rate was calculated by adding the total
audited reimbursable costs as determined from the 1999 and 2000 cost
reports and dividing by the total audited visits for these same two
periods. The reimbursement methodologies described in subsection (b)
of this section apply to the PPS methodology, except for the following:
(1) The effective rate for APPS described in subsection
(b)(4) of this section does not apply to PPS. Increases in the final
base rate or the effective rate for a PPS-reimbursed FQHC shall be
the rate of change in the Medicare Economic Index (MEI) for primary
care. If the increase in an FQHC's costs is greater than the MEI for
PPS, an FQHC may request an adjustment of its effective rate as described
in subsection (b)(6) of this section.
(2) State initiated reviews, described in subsection
(b)(10)(D) of this section, are not applicable for providers who select
the PPS methodology.
(b) Alternative Prospective Payment System (APPS) Methodology.
FQHCs selecting the APPS methodology, in accordance with section 1902(bb)
of the Social Security Act, as amended by the Benefits Improvement
and Protection Act (BIPA) of 2000 (42 U.S.C. §1396a(bb)), effective
for the FQHC's fiscal year that includes dates of service occurring
January 1, 2001, and after, are reimbursed an APPS per visit encounter
rate for Medicaid covered services at one hundred percent (100%) of
reasonable costs. FQHCs are reimbursed a prospective per visit encounter
rate for a visit that meets the requirements of paragraphs (12) and
(13) of this subsection. The final base rate for each FQHC existing
in 2000 was calculated based on one hundred percent (100%) of the
average of the FQHC's reasonable costs for providing Medicaid covered
services as determined from audited cost reports for the FQHC's 1999
and 2000 fiscal years. The final base rate was calculated by adding
the total audited reimbursable costs as determined from the 1999 and
2000 cost reports and dividing by the total audited visits for these
same two periods.
(1) Prior to the Health and Human Services Commission
(HHSC) setting a final base rate pursuant to this section for each
FQHC existing in 2000, each FQHC was reimbursed on the basis of an
interim base rate. The interim base rate for each FQHC was calculated
from the latest finalized cost report settlement, adjusted as provided
for in paragraph (4) of this subsection. When HHSC determined a final
base rate, interim payments were reconciled back to the beginning
of the interim period. For FQHCs that agreed to the APPS methodology
prior to August 31, 2010, adjustments were made to the FQHC's interim
payments only if the interim payments were less than what would have
occurred under the final base rate. Paragraph (10) of this subsection
contains the interim and final base rate methodology for new FQHCs.
The final base rate, as adjusted, applies prospectively from the date
of the final approval. Payments made under the APPS methodology will
be at least equal to the amount that would be paid under PPS.
(2) Reasonable costs, as used in setting the interim
or final base rate or any subsequent effective rate, is defined as
those costs that are allowable under Medicare Cost Principles, as
outlined in 42 C.F.R. part 413, with no productivity screens and no
per visit payment limit. Administrative costs will be limited to thirty
percent (30%) of total costs in determining reasonable costs. Reasonable
costs do not include unallowable costs.
(3) Unallowable costs are expenses that are incurred
by an FQHC and that are not directly or indirectly related to the
provision of covered services, according to applicable laws, rules,
and standards. An FQHC may expend funds on unallowable cost items,
but those costs must not be included in the cost report/survey, and
they are not used in calculating an interim or final base rate determination.
Unallowable costs include, but are not necessarily limited to, the
following:
(A) compensation in the form of salaries, benefits,
or any form of compensation given to individuals who are not directly
or indirectly related to the provision of covered services;
(B) personal expenses not directly related to the provision
of covered services;
(C) management fees or indirect costs that are not
derived from the actual cost of materials, supplies, or services necessary
for the delivery of covered services, unless the operational need
and cost effectiveness can be demonstrated;
(D) advertising expenses other than those for advertising
in the telephone directory yellow pages, for employee or contract
labor recruitment, and for meeting any statutory or regulatory requirement;
(E) business expenses not directly related to the provision
of covered services. For example, expenses associated with the sale
or purchase of a business or expenses associated with the sale or
purchase of investments;
(F) political contributions;
(G) depreciation and amortization of unallowable costs,
including amounts in excess of those resulting from the straight line
depreciation method; capitalized lease expenses, less any maintenance
expenses, in excess of the actual lease payment; and goodwill or any
excess above the actual value of the physical assets at the time of
purchase. Regarding the purchase of a business, the depreciable basis
will be the lesser of the historical but not depreciated cost to the
previous owner or the purchase price of the assets. Any depreciation
in excess of this amount is unallowable;
(H) trade discounts and allowances of all types, including
returns, allowances, and refunds, received on purchases of goods or
services. These are reductions of costs to which they relate and thus,
by reference, are unallowable;
(I) donated facilities, materials, supplies, and services
including the values assigned to the services of unpaid workers and
volunteers whether directly or indirectly related to covered services,
except as permitted in 42 C.F.R. part 413;
(J) dues to all types of political and social organizations
and to professional associations whose functions and purpose are not
reasonably related to the development and operation of patient care
facilities and programs or the rendering of patient care services;
(K) entertainment expenses, except those incurred for
entertainment provided to the staff of the FQHC as an employee benefit.
An example of entertainment expenses is lunch during the provision
of continuing medical education on-site;
(L) board of director's fees, including travel costs
and meals provided for directors;
(M) fines and penalties for violations of statutes,
regulations, and ordinances of all types;
(N) fund raising and promotional expenses, except as
noted in subparagraph (D) of this paragraph;
(O) interest expenses on loans pertaining to unallowable
items, such as investments. Also the interest expense on that portion
of interest paid that is reduced or offset by interest income;
(P) insurance premiums pertaining to items of unallowable
costs;
(Q) any accrued expenses that are not a legal obligation
of the provider or are not clearly enumerated as to dollar amount;
(R) mileage expense exceeding the current reimbursement
rate set by the federal government for its employee travel;
(S) cost for goods or services that are purchased from
a related party and that exceed the original cost to the related party;
(T) out-of-state travel expenses not related to the
provision of covered services, except out-of-state travel expenses
for training courses that increase the quality of medical care and/or
the operating efficiency of the FQHC;
(U) over-funding contributions to self-insurance funds
that do not represent payments based on current liabilities;
(V) overhead costs beyond the thirty percent (30%)
limitation established by HHSC.
Cont'd... |
