The Health and Human Services Commission (HHSC) adopts amendments to §355.105, concerning General Reporting and Documentation Requirements, Methods, and Procedures, without changes to the proposed text as published in the May 2, 2008, issue of the Texas Register (33 TexReg 3506).

Background and Justification

This rule establishes cost reporting and documentation requirements, methods and procedures for all Department of Aging and Disability Services (DADS) programs for which the Health and Human Services Commission (HHSC) administers rates. HHSC, under its authority and responsibility to administer and implement rates, is updating this rule by clarifying certain requirements relating to continuous daily timesheets and detailing the procedures for determining limits on related-party salaries, wages and benefits.

Continuous daily timesheets are required when a provider directly charges payroll costs of direct care employees who work across cost areas, service areas, and/or job classifications. Existing rules do not detail the content requirements for these timesheets. This amendment will give providers clear guidance as to what information must be included in a timesheet to be acceptable for cost report documentation purposes.

Currently, HHSC applies salary caps to salary amounts reported on Medicaid cost reports by providers for related-party administrators, directors, assistant administrators, assistant directors, and owners, partners, and stockholders. The salary caps are applied by HHSC under the authority of §355.102, which requires that, for cost reporting purposes, allowable costs must be reasonable and necessary, and, for nursing facilities (NFs), under the authority of §355.306, which describes the capping methodology in detail. The amendment creates a consolidated related-party salary capping rule for all DADS programs in a single Texas Administrative Code (TAC) section and codifies the methodology used to calculate these caps for all programs. This amendment will ensure that the calculation of related-party compensation limitation for non-NF programs is described as clearly in the rules as is the calculation of such limitations for the NF program. The amendment does not change the current method used to cap related-party salaries on the cost report, rather it serves to clarify and consolidate current practice into the rule.

The amendment also deletes obsolete language, deletes the requirement that legacy Texas Department of Mental Health and Mental Retardation providers maintain financial records for five years and instead requires these providers to comply with DADS record keeping requirements that financial records be maintained for three years and 30 days, updates agency references and updates references to other sections of the TAC. These changes will make the rule easier to understand and apply.

Comments

The 30-day comment period ended June 2, 2008. During this period, HHSC received comments regarding the proposed amendments to §355.105 from representatives of the Private Providers Association of Texas, Community Living Concepts, Inc, and Vita-Living, Inc. HHSC received some comments that were not applicable to the proposed rule. A summary of the applicable comments relating to the proposed rules and HHSC's responses follows.

Comment concerning Small Business and Micro-business Impact Analysis: Equally concerning is the Commission's analysis of the rules effect on small business noted on pages 3506 and 3507 of the May 2, 2008, Texas Register which states HHSC has determined that the proposed amendments do not require any changes in practice or any additional cost to the contracted provider. The Association argues otherwise and requests a copy of HHSC's analysis on which this determination is based. Completion of timesheets has been required for many years. Since the rule's inception, however, HHSC has altered its intent and provider expectations through "practice" rather than "rule" and without sufficient prior notice to providers and sound analysis of the resultant impact, both administratively and financially, such "practices" have had on contracted providers.

Response: Continuous daily timesheets are currently required documentation of costs included in the cost reports, and as such, are included in the cost report training that all cost report preparers are required to complete. Codifying existing requirements does not impose any additional hardship on any providers, including small businesses.

HHSC did not change the proposed rule in response to this comment.

Comment Concerning §355.105(b)(2)(B)(xii)(I) and (II): The Association opposes the above proposed changes for the same reasons as stated in the Association's March 17, 2008 comments related to the reimbursement rule amendments that were published as proposed in the February 15, 2008, Texas Register. The requirements, both the ones proposed above and those included in other ICF/MR and HCS reimbursement-related rules under Title 1, Part 15, Chapter 355, are:

overly burdensome, lead to provider staff inefficiencies and detract from the staff's ability to provide "hand-on" care to the consumer,

unnecessarily costly to implement,

more detailed than required to document service delivery and assure program quality, and

contrary to the mandates of HB 2540 - 80th Texas Legislature which directs HHSC to explore more efficient and effective cost reporting processes.

Response: Continuous daily timesheets are required documentation of costs included in the cost reports, and as such, are included in the cost report training. This rule merely codifies these requirements.

HB 2540 requires the adoption of a pilot program. HHSC will adopt any changes made to cost report requirements as a result of the pilot at a later date. Regular processes must continue until the completion of the pilot and adoption of any changes resulting from the pilot.

HHSC did not change the proposed rule in response to this comment.

Comment Concerning §355.105(b)(2)(B)(xii)(I) and (II): Providers have in some cases advanced beyond the manual time sheets whereby using electronic time clocks for employees to record start time and stop time. To ask providers that have gone to the electric time capture systems to make a major step backwards to the use of manual continuous timesheets is saying the state does not recognize the use of technology. It has been stated that as a result of this rule that there are no changes in practices or any additional cost to the contracted provider, HHSC must not be aware how much time consuming manual time sheets are. For a small provider with a few employees this may be true, however for a provider with a large number of hourly direct care staff it is very labor intensive and therefore costly to process.

Response: These rules do not preclude electronic methods of recording time worked. Any form of time documentation that meets all the requirements spelled out in the rule is acceptable.

HHSC did not change the proposed rule in response to this comment.

Comment Concerning §355.105(b)(2)(B)(xii)(I) and (II): A commenter expressed concern about continuous daily timesheets for employees who provide direct care and administrative functions in multiple programs. The commenter was concerned about the correct reporting of these costs on the cost report.

Response: This rule does not change the current reporting and allocation requirements. Only employees who provide direct care as well as other tasks are required to complete continuous daily timesheets. Direct care costs must be directly charged to the applicable program. Employees who provide administrative tasks that support multiple programs must be allocated to all programs using one of the allowed allocation methods.

HHSC did not change the proposed rule in response to this comment.

Comment Concerning §355.105(b)(6)(i)(1) - (4): The amendments under (i)(1) and (2) should be consistent with the changes we understand will soon be adopted under §335.457(b)(2)(C)(iv) and §355.722(h). These aforementioned changes support the sum of all direct care hours for any individual owner or related party not exceed 2,600 hours in any given fiscal year. Previously the requirement limited the hours to 2,080. This change should thus be extended to the above proposed amendments governing limitations on related party salaries, wages, and/or benefits. Note: The data base to support these proposed caps is currently 5 or more years behind the cost report year to which the caps would be applied. As a consequence, there is no fair way to implement this practice and the rule provides no such duty. It has been the department's practice to announce its annual model rates and caps for the first time after the close of the cost report year, at the earliest, or upon audit years later. This exposes affected providers to hardship, uncertainty and no fair way to predict a compliant course of spending before the cost report year begins.

Response: This rule calculates the maximum reportable salary for related parties for Medicaid cost reporting purposes. The rule adopted under §335.457(b)(2)(C)(iv) and §355.72(h) calculates the maximum reportable hours for related parties. Using the 2600 hours to calculate the hourly salary cap as suggested by the commenter would result in a lower salary cap than would be calculated under the rule as proposed.

HHSC uses the previous year's audited cost report data to determine the salary caps. That data is then inflated to the current year for calculation of the final salary cap amount. Salary caps for the 2007 cost reports will be based upon 2006 cost report data inflated to the 2008 cost reporting period. The limits on related-party salaries, wages, and/or benefits discussed in this clause are applied by HHSC auditors during the cost report audit process and are applied to salaries, wages, and/or benefits that are not subject to fiscal accountability. As a result, it is not necessary for providers to know what the limitations will be prior to completing and submitting their cost reports.

HHSC did not change the proposed rule in response to this comment.

Comment Concerning §355.105(b)(6)(i)(1) - (4): As stated in the May 2, 2008, Texas Register, the above proposed amendments codify current practice. Based on comments from some of our member organizations, the Association is concerned about the clarity of rule and whether all providers to whom this limitation applies are familiar with the current practice, in particular providers who have not yet been required to complete a cost report or have only been in operation for one year, thus have only completed one cost report. In other words, newly certified HCS providers or ICF/MR providers who have recently acquired an ICF/MR program, yet who have not previously owned/operated one. Unless one knows what the 90th percentile factor is before a cost reporting period begins, how can one assess and ensure compliance with the limitation if the limitation to the 90th percentile is not known/calculated by HHSC until after a cost reporting period.

Response: The limits on related-party salaries, wages, and/or benefits discussed in this clause are applied by HHSC auditors during the cost report audit process and are applied to salaries, wages, and/or benefits that are not subject to fiscal accountability. As a result, it is not necessary for providers to know what the limitations will be prior to completing and submitting their cost reports.

HHSC did not change the proposed rule in response to this comment.

The amendment is adopted under the Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; the Human Resources Code §32.021, and the Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; and the Texas Government Code §531.021(b), which provides HHSC with the authority to propose and adopt rules governing the determination of Medicaid reimbursements.