The Texas Health and Human Services Commission (HHSC) proposes to amend §355.101, concerning Introduction; §355.102, concerning General Principles of Allowable and Unallowable Costs; §355.103, concerning Specifications for Allowable and Unallowable Costs; §355.105, concerning General Reporting and Documentation Requirements, Methods, and Procedures; §355.106, concerning Basic Objectives and Criteria for Audit and Desk Review of Cost Reports; §355.107, concerning Notification of Exclusions and Adjustments; and §355.110, concerning Informal Reviews and Formal Appeals.

Background and Justification

Sections 355.101 through 355.111 in Subchapter A detail the cost determination process for nursing facilities, intermediate care facilities for persons with mental retardation and community-based programs where HHSC is responsible for calculating recommended reimbursements. HHSC is amending Subchapter A to: 1) incorporate the School Health and Related Services program; 2) accommodate the utilization of a web-based cost reporting system; 3) formalize certain existing practices; 4) standardize the cost at which a purchase must be depreciated; 5) allow for the reporting of certain costs associated with workers' compensation; and 6) specify the repercussions of submitting an incomplete request for an informal review.

Incorporation of the School Health and Related Services (SHARS) Program

HHSC is amending Subchapter A to incorporate the SHARS program. Reimbursements for the SHARS program are based on cost-report data but SHARS is not currently addressed in Subchapter A. Incorporation of SHARS into Subchapter A will make cost-reporting requirements consistent across all community-based programs for which HHSC determines payment rates. Where differences in cost determination processes specific to SHARS exist, they will be noted in Subchapter A.

Accommodation of Web-Based Cost Reporting

HHSC is in the early stages of rolling out a web-based cost-reporting system (the State of Texas Automated Information Reporting System or STAIRS) to replace its existing cost reporting system and is proposing to amend Subchapter A to accommodate both the current cost-reporting system and this new system. Features of STAIRS and associated proposed amendments include the following:

STAIRS will be able to limit access to the data entry portion of the application to individuals who have completed the required cost-report trainings. This feature will make the requirement that cost-report training certificates be submitted with each cost report obsolete. In response to this feature, HHSC proposes to eliminate the requirement that cost-report training certificates be submitted with cost reports completed through STAIRS.

STAIRS will be able to accept electronic signatures, which could make obsolete the requirement that signed and notarized cost-report certifications be submitted with each cost report. HHSC proposes to allow electronic signatures on cost-report certifications when such signatures are specifically allowed under HHSC policies and procedures.

Finally, STAIRS will enable HHSC to notify providers of exclusions and adjustments made to their reported expenses via e-mail. In response to this feature, HHSC proposes to allow notices of exclusions and adjustments to be made either via e-mail or United States mail rather than limiting such notices to United States mail, as is the case under the current rule language.

Formalizing Existing Practices

Section 355.102 details general principles of allowable and unallowable costs. HHSC proposes to amend this section to formalize the requirement that health and life insurance premiums and other employee benefits be direct costed.

Section 355.110 details requirements for submitting a request for an informal review. HHSC proposes to amend this section to formalize the requirement that additional information submitted by a provider be submitted by hand delivery, United States mail, or special mail delivery. As well, HHSC proposes to eliminate a reference to an informal review panel because informal reviews are not considered by panels but rather by individual HHSC staff.

Standardizing the Cost at Which a Purchase Must be Depreciated

Current language in §355.103 requires providers to depreciate items costing more than $2,500 except for extraordinary repairs, which must be depreciated if they cost more than $1,000. HHSC proposes to standardize when providers are required to depreciate items by amending this section to require extraordinary repairs to be depreciated if they cost more than $2,500.

Allowing for the Reporting of Certain Costs Associated with Workers' Compensation

Section 355.103 details specific allowable and unallowable costs. HHSC proposes to amend this section to allow for reporting the part of a workers' compensation litigation award or settlement that reimburses the injured employee for lost wages and medical bills on a cost report as an allowable cost. Workers' compensation benefits are already allowable costs and since these newly allowable costs will accrue as benefits to the employee, this proposal is consistent with current policy.

Repercussions of Submitting an Incomplete Request for an Informal Review

Current language in §355.110 requires that an interested party must, with its request for an informal review, submit a concise statement of the specific actions or determinations it disputes, its recommended resolution, and any supporting documentation the interested party deems relevant to the dispute. This rule language does not indicate the repercussions of failing to meet this requirement. HHSC proposes to amend this section to indicate that a request for an informal review that does not meet the requirements detailed in the rule will not be accepted.

Section-by-Section Summary

The proposed amendments to §355.101 are as follows:

Revise subsection (a) to incorporate the SHARS program.

Add a new paragraph (4) to subsection (b) which defines the terms "Texas Education Agency" and "TEA."

The proposed amendments to §355.102 are as follows:

Revise subsection (b) to add a closing parenthesis at the end of the subsection.

Revise subsection (d) to replace a reference to preparers' signing the Cost Report Methodology Certification with a generic reference to cost report preparers and to exempt cost reports submitted through the State of Texas Automated Information and Reporting System (STAIRS) from the requirement that a cost-report training certificate be submitted with each cost report.

Modify subsection (d)(1) by creating two subparagraphs (A) and (B). Subparagraph (A) incorporates a requirement that new cost report preparers for the SHARS program must complete state-sponsored online cost-report training while subparagraph (B) contains the original contents of paragraph (1) but limits their applicability to all programs except SHARS.

Add a new subsection (d)(4) to indicate that the failure of a SHARS provider to comply with the requirements of subsection (d) may result in an administrative contract violation as specified in Title 1 of the Texas Administrative Code (TAC) §355.8443 (relating to Reimbursement Methodology for School Health and Related Services (SHARS)) and re-number the subsequent paragraph.

Modify subsection (f)(4) to indicate that for SHARS providers, an unrestricted indirect cost rate is utilized.

Add a new paragraph (3) in subsection (g) to indicate that placement as an allowable cost on a cost report of a cost which has been determined to be unallowable may result in an administrative contract violation for a SHARS provider and re-number the subsequent paragraph.

Add a new paragraph (3) in subsection (h) to indicate that inaccuracy in providing, or failure to provide, required financial and statistical data may result in an administrative contract violation for a SHARS provider, and re-number the subsequent paragraph.

Modify subsection (j) to indicate that health insurance premiums, life insurance premiums and other employee benefits must be direct costed.

Add a new subsection (j)(1)(D)(iii)(III) to indicate that failure to use an approved or required allocation method may result in an administrative contract violation for a SHARS provider, and re-number the subsequent subclause.

The proposed amendment to §355.103 is as follows:

Modify subsection (b)(6)(B) to indicate that extraordinary repairs costing $2,500 or more, with a useful life in excess of one year, should be capitalized and depreciated.

Modify subsection (b)(17)(I) to indicate that, for workers' compensation litigation awards and settlements, the part of the award or settlement that reimburses the injured employee for lost wages and medical bills is an allowable cost.

The proposed amendments to §355.105 are as follows:

Modify subsection (b)(4)(A)(ii) to allow for electronic signatures on cost-report certifications when such signatures are specifically allowed under HHSC policies and procedures.

Modify subsection (b)(4)(A)(vii) to exempt cost reports submitted through STAIRS from the requirement to include a copy of the state-issued cost report training certificate.

Add a new subsection (b)(4)(B)(ii) to indicate that placement on a cost report of an amount which was determined to be inaccurately placed may result in an administrative contract violation for a SHARS provider, and re-number the subsequent clause.

Add a new subsection (b)(4)(C)(ii) to indicate that failure to file a completed cost report by the cost report due date constitutes an administrative contract violation for a SHARS provider, and re-number the subsequent clause.

Modify paragraph (1) in subsection (c) to indicate that SHARS providers must submit cost reports to HHSC Rate Analysis as specified in 1 TAC §355.8443.

Add a new paragraph (2) in subsection (f) to indicate that failure to reimburse HHSC for the cost of an out-of-state audit within 60 days of the request for payment constitutes an administrative contract violation for a SHARS provider, and re-number the subsequent paragraph.

Modify subsection (i)(4)(A) to update the titles of cross-referenced sections.

The proposed amendments to §355.106 are as follows:

In subsection (a), add a new paragraph (3) to indicate that failure by a SHARS provider to complete cost reports according to instructions and rules may result in an administrative contract violation, and re-number the subsequent paragraph.

In subsection (f), add a new paragraph (3) to indicate that failure by a SHARS provider to allow access to any and all records necessary to verify information submitted on a cost report may result in an administrative contract amendment, and re-number the subsequent paragraph.

The proposed amendment to §355.107 is as follows:

Modify subsection (a) to indicate that notice to providers of exclusions and adjustments to reported expenses on a cost report consists of either a letter to the provider or an e-mail notification.

The proposed amendments to §355.110 are as follows:

Modify subsection (a)(1)(C) to replace a reference to a Texas Department of Aging and Disability Services (DADS) contracted provider with a reference to an HHSC Enterprise contracted or enrolled provider.

Modify subsection (c)(1)(B) to indicate that if the requirements of the subparagraph are not met, the request for an informal review will not be accepted.

Modify subsection (c)(1)(C) to replace a reference to the applicable DADS Form 2031 with a reference to the applicable HHSC Enterprise or Texas Medicaid and Healthcare Partnership signature authority designation form.

Modify subsection (c)(2)(A) to require that additional information must be received in writing by hand delivery, United States (U.S.) mail, or special mail delivery and to replace a reference to the panel's written decision with a reference to the informal review written decision.

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 rules are in effect there will be no fiscal impact to state government. While allowing certain lawsuit settlement amounts pertaining to workers' compensation claims to be reported on cost reports and increasing the cost at which an extraordinary repair is required to be depreciated will increase the cost base used in determining payment rates, the increase is not expected to be significant. As well, since payment rates are constrained by appropriations, it is not expected that the small increase in the cost base will have any impact on actual payment rates. The amended rules 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 sections.

Small Business and Micro-business Impact Analysis

Carolyn Pratt, Director of Rate Analysis, has determined that there is no adverse economic effect on small businesses or micro-businesses as a result of enforcing or administering the amendments. The implementation of the proposed rule amendments does not require any changes in practice or any additional cost to the contracted provider.

HHSC does not anticipate that there will be any economic cost to persons who are required to comply with these amendments. The amendments will not affect local employment.

Public Benefit

Carolyn Pratt also has determined that for each of the first five years the amendments are in effect, the expected public benefits are: 1) that the rules will provide clear guidance to agency staff and providers on requirements pertaining to SHARS cost determination, reporting of health and life insurance and other employee benefits, and the filing and processing of informal reviews; 2) the rules will provide needed flexibility to implement a new, web-based cost reporting system; 3) the cost at which providers are required to depreciate items will be standardized throughout the cost determination rules; and 4) additional expenses related to reimbursing injured employees for lost wages and medical bills will be recognized in the cost report databases HHSC uses to determine reimbursement rates.

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 fax to (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 amendments are 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 provide 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 Human Resources Code, Chapter 32.

The amendments affect Texas Government Code Chapter 531 and Texas Human Resources Code Chapter 32. No other statutes, articles, or codes are affected by this proposal.