The Texas Health and Human Service Commission (HHSC) adopts new Subchapter O, concerning Delivery System and Provider Payment Initiatives, and new §353.1301, concerning General Provisions. The new rule is adopted with changes to the proposed text as published in the January 20, 2017, issue of the Texas Register (42 TexReg 169). The text of the rule will be republished.

BACKGROUND AND JUSTIFICATION

This new rule describes certain general provisions that will apply to all Medicaid managed care delivery system and provider payment initiatives, or directed payments. As part of the recent overhaul of federal Medicaid managed care (MMC) rules, the Centers for Medicare & Medicaid Services (CMS) allowed states that operate MMC to direct managed care organizations' (MCOs') payments to providers. This rule describes provisions HHSC considers to be universal to all such directed payment programs that are, or will be, implemented in Texas. The Quality Incentive Payment Program for Nursing Facilities (QIPP) and the Uniform Hospital Rate Increase Program (UHRIP) are being implemented under this subchapter through new §353.1303 and §353.1305, respectively, which are being adopted concurrently.

COMMENTS

The 30-day comment period ended February 21, 2017. During this period, HHSC received comments regarding the new rule from twenty-five (25) entities, including:

Adelanto HealthCare Ventures

Baylor Scott & White Health

Bexar County Hospital District dba University Health System

Children's Health of Dallas

Cook Children's Hospital

CRISTUS Health

Driscoll Children's Hospital

Ector County Hospital District

Falls Community Hospital and Clinic (FCHC)

Hospital Corporation of America (HCA)

Memorial Hermann Health System

Midland Memorial Hospital

Nueces County Hospital District (NCHD)

Parkland Health & Hospital System

Teaching Hospitals of Texas (THOT)

Tenet Healthcare

Texas Association of Health Plans (TAHP)

Texas Children's Hospital

Texas Health Resources

Texas Hospital Association (THA)

Texas Organization of Rural and Community Hospitals (TORCH)

Texas Rural Health Association

University Medical Center Health System (UMC Lubbock)

University Medical Center of El Paso (UMC El Paso)

University of Texas Physicians (UT Physicians)

A summary of comments and HHSC's responses follow.

Definitions

Comment: Two commenters requested that HHSC clarify the definition of "public funds" in subsection (b)(10) to ensure that the clause "within the sole and unrestricted control of a governmental entity" applies only to "other public revenues," and not to taxes, assessments, levies, and investments. The commenters noted that other law, like the statutes authorizing Local Provider Participation Funds (LPPFs), may restrict the uses of funds derived from those sources.

Response: The definition of "public funds" that was proposed in this rule is identical to the definition of the term in other administrative rules and, to HHSC's knowledge, has not resulted in confusion regarding the permissible sources of public funds that may be transferred to HHSC to support supplemental payments. However, in light of the increased use of LPPFs in the state, and to avoid any concerns about the use of such funds for the purposes described in this subchapter, HHSC amended subsection (b)(10) in response to this comment.

Source of the non-federal share

Comment: As proposed, subsection (e)(2) limits the source of the non-federal share of payments to non-state-owned providers to IGTs from non-state governmental entities. One commenter noted that in other hospital supplemental payment programs, state general revenue appropriated to other state agencies is transferred to HHSC as the non-federal share of payments to non-state providers. The commenter requested that HHSC amend proposed subsection (e)(2) to allow that practice in the programs described in this subchapter.

Response: HHSC agrees with this comment. The intent of the language as proposed in (e)(2) was to exclude state general revenue appropriated to HHSC as a source of the non-federal share available for non-state providers. HHSC did not intend to preclude the use of funds appropriated to other state agencies or state-owned providers that might wish to transfer funds to HHSC for the purposes described in this subchapter. The rule was changed in response to this comment.

Reconciliation of the non-federal share

Comment: One commenter suggested HHSC establish a process to ensure that the encounter data submitted by MCOs is correct and that payment reconciliations are done expeditiously.

Response: HHSC declines to revise the subsection, but agrees with the commenter on the importance of accurate encounter data. HHSC always works to ensure that the encounter data reported by MCOs is accurate.

Failure of a governmental entity to transfer funds

Comment: Some commenters asked HHSC to delete the penalties in subsection (h) for governmental entities that fail to transfer funds timely. One commenter specifically requested that HHSC remove the language making providers operated by such a governmental entity ineligible for future participation in programs under this subchapter.

Response: Subsection (h) is intended to protect state general revenue by describing the method the state will use to recover its expenditures: withholding Medicaid payments from a provider operated by the governmental entity that does not timely complete the transfer of funds. It is appropriate to retain that language in the rule so that all participants are aware of the consequences of failure to timely transfer. However, HHSC agrees that ineligibility for future participation in Subchapter O programs may unnecessarily penalize some public providers. In response to this comment, HHSC revised subsection (h) to delete the sentence related to future program ineligibility.

Comment: Two commenters asked HHSC to delete subsection (h) because the provision "conditions participation on IGT agreements."

Response: HHSC disagrees with this statement. Subsection (h) does not require IGT commitment agreements. It is unlikely this provision will ever be invoked, since funds to support payments under this subchapter are transferred to HHSC in advance of the state expending the funds. However, in the unlikely event that state general revenue has been expended as a result of the failure of a governmental entity to transfer funds, it is appropriate for the administrative rule to describe the method that the state will employ to recover the state's expenditure. No changes were made to the rule in response to this comment.

Comment: One commenter suggested that HHSC revise subsection (h) to withhold payments from all providers receiving enhanced payments under this subchapter, not just those operated by the governmental entity.

Response: Subsection (h) as proposed describes the method HHSC will use to recover its expenditures when a governmental entity has failed to timely transfer funds for the purposes described in the subchapter. The funds that replenish the state's expenditures in these programs must be public funds. Medicaid payments to publicly operated providers are public funds; Medicaid payments to privately operated providers are not. Withholding Medicaid payments from privately operated providers to recover the state's expenditures would result in an impermissible provider donation from the private provider to the state. Consequently, the commenter's suggestion is not acceptable. No changes were made to the rule in response to this comment.

Comment: One commenter encouraged HHSC to add language to subsection (h) providing for a "cure period" to allow a governmental entity an opportunity to remedy a funding shortfall before withholding provider payments from providers operated by that entity.

Response: HHSC cannot agree to this request because it creates uncertainty in the timing of the state's recovery of its expenditures. HHSC is unwilling to float the funds while the governmental entity attempts to cure the shortfall. For that reason, the state will initiate the process of placing the public provider on payment hold as soon as possible after the transfer deadline is missed. Of course, the state will stop the process or lift the payment hold as soon as the governmental entity transfers the funds to HHSC or otherwise cures the shortfall. No changes were made to the rule in response to this comment.

Failure of an MCO to comply with contract provisions

Comment: One commenter noted that subsection (i) uses the permissive phrase "may investigate" to describe HHSC's response to provider claims of contract violations by the MCOs. The commenter requested that HHSC revise subsection (i) to eliminate uncertainty and to establish that HHSC will investigate provider claims of contract violations by MCOs.

Response: HHSC agrees with this comment. HHSC changed subsection (i) to clarify that HHSC will investigate all provider claims of contract violations related to directed expenditures under this subchapter.

Disallowance of federal funds

Comment: Several commenters suggested that HHSC delete subsection (j)(1) which provides that, in the event of a disallowance by CMS on the basis of an impermissible provider donation, the governmental entity responsible for the non-federal share must transfer funds to HHSC in the amount of the disallowance. Some commenters said this provision would place an undue burden on governmental entities responsible for the non-federal share by requiring that such entities be solely responsible for repayments; other commenters simply suggested that subsection (j)(2) could cover every possible type of disallowance and give HHSC the flexibility to recoup from all program participants, i.e., MCOs, providers, and/or sponsoring governmental entities. One commenter suggested excepting public rural and community hospitals from this provision. Another commenter stated that providers should be responsible in the event of a disallowance because they received the funds.

Response: HHSC disagrees and declines to revise the subsection as the commenters suggest. HHSC believes this provision is necessary in light of recent heightened scrutiny by CMS of the funding arrangements underlying payments to private providers and because of the uncertain authority of HHSC to recoup from providers or the MCO when CMS disallows federal funds on these grounds. The safest option in this scenario is to obtain funds from the governmental entities (including public rural and community hospitals) to cover the non-federal share of disallowed payments. HHSC does not think the same is true when CMS disallows federal funds on grounds other than provider donations. In such cases, relying on other federal and state law and contract authority to recoup from MCOs, providers, or governmental entities is appropriate.

Comment: One commenter suggested amending subsection (j)(2) to give an MCO the express ability to recoup from the provider. The commenter noted that subsection (k)(2) contains such a statement, but requested that it be in subsection (j)(2) as well.

Response: The commenter is correct that subsection (k)(2) gives MCOs the authority to recoup overpayments from providers. HHSC does not believe that this provision should also be in subsection (j)(2).

Recoupment

Comment: Two commenters suggested that HHSC revise subsection (k)(1) so that recoupments of overpayments from MCOs are returned to the governmental entity that provided the funds.

Response: HHSC disagrees and declines to revise the subsection as the commenters suggest. The reconciliation process described in subsection (g) takes into account recoupments of overpayments from MCOs. Following reconciliation, to the extent that funds are not needed to cover expenditures, they may be returned to the governmental entity.

Comment: One commenter expressed concern about subsection (k)(3), which authorizes MCOs to recoup from a provider when payments to that provider were made in error or due to fraud. The commenter stated that providers have no recourse against an MCO if the provider disagrees with the recoupment action.

Response: The rule, as proposed, does not modify any statutory or contractual rights a provider has to dispute an action taken by an MCO with which the provider disagrees. Texas Government Code §§533.005(15) and (19) require that MCO contracts include provisions for tracking and resolving provider complaints regarding claims and for responding to provider appeals. Those requirements are also included in the HHSC-MCO Uniform Managed Care Contract at 8.2.4. MCOs that fail to resolve provider complaints as required in the statute and Uniform Managed Care Contract are subject to liquidated damages or other appropriate penalties. No changes were made to the rule in response to this comment.

State's cost of administering programs

Comment: Two commenters suggested that HHSC revise subsection (l) because it is unclear what may qualify as "the state's cost of administering a program" and what it means to be "generating the costs." As a result, said the commenters, it will be difficult for program participants to estimate the state's costs and predict any potential financial responsibility related to such costs.

Response: HHSC declines to revise the subsection, but it intends to provide adequate advance notice before collecting the state's costs to administer a program under new Subchapter O, Delivery System and Provider Payment Initiatives. Additionally, HHSC anticipates that the costs associated with UHRIP and QIPP will be minimal and far outweighed by the benefits of participation in these programs.

Comment: Two commenters stated that HHSC does not quantify or project the amount of costs for which the participating hospitals in UHRIP will be responsible, and the hospitals need this information to forecast the overall funding requirements for a SDA. They also observed that the administrative cost of the program will depend on how HHSC ultimately structures it.

Response: HHSC agrees with the commenters that administrative costs of programs under new Subchapter O will depend on how HHSC ultimately structures them, but HHSC cannot quantify or project the costs of these programs in the rule at this time.

Comment: One commenter suggested that HHSC clarify which program participants are responsible for the state's administrative costs. The commenter, who was addressing this requirement in the context of UHRIP, observed that this requirement appears to include any entity receiving a rate increase.

Response: HHSC confirms the commenter's understanding that this subsection can apply to entities receiving a rate increase through UHRIP. However, subsection (l) applies to all programs under Subchapter O, and these programs may have different participants. For this reason, HHSC declines to revise the subsection as the commenter suggests. In regards to UHRIP, HHSC would also say that it is appropriate that entities receiving a rate increase through the program should be responsible for the state's costs of administering the program.

Changes from the proposed version that are not in response to comments

The following change to the final rule from the proposed version was made by HHSC to improve the clarity of the rule, and not in response to a comment:

Subsection (k), relating to recoupment, was revised to clarify that nothing in the rule may be construed to limit the independent authority of another federal or state agency to recover from a provider for a payment made due to fraud.

STATUTORY AUTHORITY

The new rule is adopted under Texas Government Code §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; 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; 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 Texas Human Resources Code, Chapter 32; and with Texas Government Code §533.002, which authorizes HHSC to implement the Medicaid managed care program.