|(a) Introduction. The Health and Human Services Commission
(HHSC) may reward or penalize a hospital under this section based
on the hospital's performance with respect to exceeding or failing
to achieve outcome and process measures relative to all Texas Medicaid
and CHIP hospitals that address the rates of potentially preventable
(1) Actual to Expected Ratio--The ratio of actual potentially
preventable complications (PPCs) within an inpatient stay compared
with expected PPCs within an inpatient stay, where the expected number
depends on the all patient refined diagnosis related group at the
time of admission (APR DRG or its replacement classification system)
is adjusted for the patient's severity of illness. HHSC, at its discretion,
determines the relative weights of PPCs when calculating the actual
to expected ratio. Expected PPC results calculation is based on the
statewide norms and is calculated from Medicaid traditional fee-for-service
(FFS), Children's Health Insurance Program or CHIP, and, if available,
managed care data.
(2) Adjustment time period--The state fiscal year (September
through August) that a hospital's claims are adjusted in accordance
with subsection (f) or (g)(5) of this section. Adjustments will be
done on an annual basis.
(3) All Patient Refined Diagnosis Related Group (APR
DRG)--A diagnosis and procedure code classification system for inpatient
(4) Case-mix--A measure of the clinical characteristics
of patients treated during the reporting time period based on diagnosis
and severity of illness. "Higher" case-mix refers to sicker patients
who require more hospital resources.
(5) Children's Health Insurance Program or CHIP or
Program--The Texas State Children's Health Insurance Program established
under Title XXI of the federal Social Security Act (42 U.S.C. Chapter
7, Title XXI) and Chapters 62 and 63 of the Texas Health and Safety
(6) Inpatient claims during the reporting time period--Includes
Medicaid traditional FFS, CHIP, and, if available, managed care data
for inpatient hospital claims filed for reimbursement by a hospital
(A) had a date of admission occurring within the reporting
(B) were adjudicated and approved for payment during
the reporting time period and the six-month grace period that immediately
followed, except for such claims that had zero inpatient days;
(C) were not inpatient stays for patients who are covered
(D) were not claims for patients diagnosed with major
metastatic cancer, organ transplants, human immunodeficiency virus
(HIV), or major trauma; and
(E) were not subject to other exclusions as determined
(7) HHSC--The Health and Human Services Commission
or its designee.
(8) Hospital--A public or private institution licensed
under Chapter 241 or Chapter 577, Texas Health and Safety Code, including
a general or special hospital as defined by §241.003, Texas Health
and Safety Code.
(9) Managed care organization (MCO)--Managed care is
a health care delivery system or dental services delivery system in
which the overall care of a patient is coordinated by or through a
single provider or organization. MCO refers to such a provider or
organization under contract with HHSC to provide services to Medicaid
(10) Medicaid program--The medical assistance program
established under Chapter 32, Texas Human Resources Code.
(11) Norm--The Texas statewide average or the standard
by which hospital PPC performance is compared.
(12) Potentially preventable complication (PPC)--A
harmful event or negative outcome with respect to a person, including
an infection or surgical complication, that:
(A) occurs after the person's admission to an inpatient
acute care hospital; and
(B) may have resulted from the care, lack of care,
or treatment provided during the hospital stay rather than from a
natural progression of an underlying disease.
(13) Potentially preventable event (PPE)--A potentially
preventable admission, a potentially preventable ancillary service,
a potentially preventable complication, a potentially preventable
emergency room visit, a potentially preventable readmission, or a
combination of those events, which are more fully defined in §354.1070
of this title.
(14) Present on Admission (POA) Indicators--A coding
system that requires hospitals to accurately submit principal and
secondary diagnoses that are present at the time of admission. POA
codes are essential for the accurate calculation of PPC rates and
consist of the current coding set approved by CMS.
(15) Reporting time period--The period of time that
includes hospital claims that are assessed for PPCs. This may be a
state fiscal year (September through August) or other specified time
frame as determined by HHSC. PPC Reports will consist of statewide
and hospital-specific reports and will be done at least on an annual
basis, using the most complete data period available to HHSC.
(16) Safety-net hospital--As defined in §355.8052
of this title (relating to Inpatient Hospital Reimbursement).
(c) Calculating a PPC rate. Using inpatient claims
during the reporting time period and HHSC-designated software and
methodology, HHSC calculates an actual PPC rate and an expected PPC
rate for each hospital included in the analysis. The methodology for
inclusion of hospitals in the analysis will be described in the statewide
and hospital-specific reports. HHSC will determine at its discretion
the relative weights of PPCs when calculating the actual to expected
ratio. The actual-to-expected ratio is rounded to two decimal places
and used to determine reimbursement adjustments described in subsection
(f) of this section.
(d) Comparing the PPC performance of all hospitals
included in the analysis. Using the rates determined in subsection
(c) of this section, HHSC calculates a ratio of actual-to-expected
(e) Reporting results of PPC rate calculations. HHSC
provides a confidential report to each hospital included in the analysis
regarding the hospital's performance with respect to potentially preventable
complications, including the PPC rates calculated as described in
subsection (c) of this section and the hospital's actual-to-expected
ratio calculated as described in subsection (d) of this section.
(1) A hospital may request the underlying data used
in the analysis to generate the report via an email request to the
HHSC email address found on the report.
(2) The underlying data contains patient-level identifiers
and other information deemed relevant by HHSC.
(f) Hospitals subject to reimbursement adjustment and
amount of adjustment.
(1) A hospital with an actual-to-expected PPC ratio
equal to or greater than 1.10 and equal to or less than 1.25 is subject
to a reimbursement adjustment of -2%;
(2) A hospital with an actual-to-expected PPC ratio
greater than 1.25 is subject to a reimbursement adjustment of -2.5%.
(g) Claims subject to reimbursement adjustment.
(1) The reimbursement adjustments described in subsection
(f) of this section apply to all Medicaid fee-for-service claims beginning
November 1, 2013 and after.
(2) The reimbursement adjustments will occur after
the confidential report on which the reimbursement adjustments are
based is made available to hospitals.
(3) The reimbursement adjustments for a hospital will
cease in the adjustment time period that is after the hospital receives
a confidential report indicating an actual-to-expected ratio of less
(4) On an annual basis and based on review of the data
quality and accuracy, HHSC may determine if reimbursement adjustments
(5) Based on HHSC-approved POA data screening criteria,
HHSC may implement automatic payment reductions to hospitals who fail
POA screening. The POA screening criteria and methodology will be
described in the statewide and hospital specific reports. At its discretion,
HHSC applies the following adjustments based on POA screening criteria:
(A) Failure to meet POA screening criteria, first reporting
period violation: 2% reduction applied to all Medicaid fee-for-service
claims in the corresponding adjustment period.
(B) Failure to meet POA screening criteria, two or
more violations in a row: 2.5% applied all Medicaid fee-for-service
claims in the corresponding adjustment period.
(C) If a hospital passes POA screening criteria during
a reporting time period, any future violations of the POA screening
criteria will be considered a first violation.
(6) The reimbursement adjustments based on POA screening
criteria will cease when the hospital passes HHSC-approved POA screening
criteria for an entire reporting time period, at which the hospital
will be subject to reimbursement adjustments, if applicable, based
on criteria outlined in subsection (f) of this section.
(7) Hospitals that receive a reimbursement adjustment
based on POA screening criteria outlined in paragraph (5) of this
subsection will not concurrently receive reductions outlined in subsection
(f) of this section.
(h) Targeted incentive payments for safety-net hospitals.
(1) HHSC determines annually whether a safety-net hospital
may receive an incentive payment for performance on PPC incidence.
(2) The appropriated funds for the targeted incentive
payments are split in half, 50 percent for PPCs and 50 percent for
potentially preventable readmissions. HHSC may change the allocated
percentages based on review of data and the changing needs of the
(3) The dataset used in the incentive analysis is the
same as the dataset used in the PPC reimbursement adjustments.
(4) Hospitals that are eligible for a targeted incentive
payment must meet the following requirements:
(A) be a safety-net hospital;
(B) have an actual-to-expected ratio of at least 10
percent lower than the statewide average (actual-to-expected ratio
is less than or equal to 0.90);
(C) have not received a penalty for either PPCs or
potentially preventable readmissions; and
(D) are not low-volume, as defined by HHSC.
(5) Calculation of targeted incentive payments.
(A) Calculate base allocation. Each eligible hospital
is awarded a base allocation not to exceed $100,000.
(B) Calculate variable allocation. Each eligible hospital
is awarded a variable allocation, which is calculated from remaining
funds after distribution of base allocations to all eligible hospitals.
The variable allocation has the following components:
(i) Hospital size score. Each eligible hospital's size
divided by the average size of the whole group of hospitals within
each incentive pool. Size is calculated based on total inpatient facility
claims paid to each eligible hospital. Each eligible hospital's size
calculation is capped at 2.00.
(ii) Hospital Performance score. Each eligible hospital's
performance divided by the average performance of the whole group
of hospitals within each incentive pool. Performance is calculated
by actual to expected ratio.
(iii) Composite score. Each eligible hospital receives
a composite score, which is the hospital's size score multiplied by
the hospital's performance score.
(iv) Each hospital's composite score divided by the
sum of all eligible hospitals' composite scores is multiplied by the
remaining incentive funds, after distribution of base allocations.
(C) Calculate final allocation. The final allocation
to each eligible hospital is equal to the eligible hospital's base
allocation plus the eligible hospital's variable allocation.
(6) Each eligible hospital's PPC incentive payment
will be divided between FFS and MCO reimbursements based on the percentage
of its total paid FFS and MCO Medicaid inpatient hospital reimbursements
for the reporting time period accruing from FFS.
(7) PPC incentive payments may be made as lump sum
payments or tied to particular claims or recipients at HHSC's discretion.
(8) HHSC will post the methodology for calculating
and distributing incentives on its public website.
(9) Targeted incentive payments for safety-net hospitals
are not included in the calculation of a hospital's hospital-specific
limit or low income utilization rate.