The Texas Health and Human Services Commission (HHSC) adopts new §353.1303, concerning Quality Incentive Payment Program for Nursing Facilities, with changes to the proposed text as published in the January 20, 2017, issue of the Texas Register (42 TexReg 172). Therefore, the text of the rule will be republished.

Background and Justification

This new rule describes the Quality Incentive Payment Program (QIPP). QIPP is designed to incentivize nursing facilities (NFs) to improve quality and innovation in the provision of NF services, using the Centers for Medicare & Medicaid (CMS) Five-Star Quality Rating System as the measure of success.

During the 83rd Session, the Texas Legislature outlined its goals for the Medicaid managed care carve-in of NFs. In implementing the NF carve-in, HHSC was directed to encourage transformative efforts in the delivery of NF services, including "efforts to promote a resident-centered care culture through facility design and services provided" (Senate Bill 7, 83rd Texas Legislature, Regular Session, 2013).

In 2014, HHSC established the Minimum Payment Amount Program (MPAP). The MPAP, which became effective March 1, 2015, established minimum payment amounts for qualified NFs participating in STAR+PLUS. The STAR+PLUS managed care organizations (MCOs) paid the minimum payment amounts to qualified NFs based on state direction. The MPAP was always intended to be a short-term program that would ultimately transition to a performance-based initiative.

The goal of transition was reinforced during the 84th Legislative Session. The General Appropriations Act for the 2016-2017 biennium contains HHSC Budget Rider 97, which directs HHSC to transition the MPAP to QIPP.

Conceptual Framework for QIPP

Eligibility

QIPP is open to two classes of NFs: non-state government-owned NFs and private NFs. To ensure that QIPP funds are focused on the Medicaid population, private NF participation in QIPP is limited to private NFs with Medicaid utilization as a percentage of total utilization at least equal to the mean for all private Medicaid NFs in Texas plus one standard deviation. Based on the most current data available from 2014 Texas Medicaid NF cost reports, this value is equal to 78 percent, meaning at least 78 percent of a private NF's units of service must have been provided to Medicaid recipients for the private NF to be eligible to participate in QIPP.

Capitation Rate Structure

Total QIPP funding will be limited by 1115 waiver budget-neutrality capacity and the amount of intergovernmental transfer (IGT) funds available for the program. No general revenue will be invested in QIPP. The first six months of QIPP IGTs for a specific capitation rate period are due to HHSC approximately three months prior to the beginning of the rate period to allow HHSC's actuaries certainty as to the amount of funding to be incorporated into the capitation rates for QIPP. The amount of the capitation will be determined by the amount of the non-federal share available for the program.

QIPP funds will be paid through three new components of the STAR+PLUS NF managed care capitation rates. Each component's value will be determined as a percentage of the total amount of funding available for the QIPP program.

Capitation Rate Components

Component One will have a total value equal to 110 percent of the non-federal share of the QIPP program. The interim allocation of funds across qualifying non-state government-owned NFs will be based on historical Medicaid days of NF service. Monthly payment to non-state government-owned NFs will be triggered by the NF's submission to the MCO of a monthly Quality Assurance Performance Improvement (QAPI) Validation Report. Private NFs are not eligible for payments from Component One. The interim allocation of funds across qualifying non-state government-owned NFs will be reconciled to the actual distribution of Medicaid NF days of service across these NFs during the eligibility period as captured by HHSC's Medicaid contractors for fee-for-service and managed care 180 days after the last day of the eligibility period. This reconciliation will only be performed if the weighted average (weighted by Medicaid NF days of service during the eligibility period) of the absolute values of percentage changes between each NFs proportion of historical Medicaid days of NF service and actual Medicaid days of NF service is greater than 20 percent.

Component Two will have a total value equal to 35 percent of remaining QIPP funds after accounting for the funding of Component One. Allocation of funds across qualifying non-state government-owned and private NFs will be proportional, based on historical Medicaid days of NF service. Quarterly payments to NFs will be triggered by improvement on specific quality metrics.

Component Three will have a total value equal to 65 percent of remaining QIPP funds after accounting for the funding of Component One. Allocation of funds across qualifying non-state government-owned and private NFs will be proportional, based on historical Medicaid days of NF service. Quarterly payments to NFs will be triggered by improvement on specific quality metrics. Payments made to NFs meeting the standards of Component Three will include both the 35 percent allocated for Component Two and the remaining 65 percent allocated for Component Three.

Funds that would lapse due to failure of one or more NFs to meet QAPI reporting requirements and/or quality metrics will be distributed across all QIPP NFs based on each NF's proportion of total earned QIPP funds from Components One, Two, and Three combined.

Quality Design

Payments from MCOs to qualified NFs will be made based on improvement on specific quality metrics. QIPP will include at least three quality measures, equally weighted for payment each quarter and currently utilized by CMS' Five-Star Quality Rating System for NFs. Quality metrics may change from eligibility period to eligibility period. Information regarding specific quality metrics for an eligibility period will be provided annually through the QIPP webpage on the HHSC website.

NFs must make incremental improvements towards pre-set goals to qualify for payments. A NF's baseline will remain the same throughout the eligibility period, while the amount of improvement required each quarter increases. Higher levels of improvement are required to access funds from Component Three than are required to access funds from Component Two.

Quality targets will be quarterly in order to allow for quarterly payments. Each successful NF within a class will receive an equal payment amount per Medicaid day of service with days of service based upon an historical measure. A NF that performs better than the national average (e.g., benchmark) for a specific quality indicator may decline in performance and still earn 100 percent of the available funds as long as the NF remains above the benchmark.

The following changes to the final rule from the proposed version were made by HHSC to clarify the rule from the proposed version. It was determined that there may be instances when NFs may not have enough data for a quality metric. In the event that this occurs, HHSC has added the following to section (h)(1): (E) In situations where a NF does not have enough data for a metric to be calculated, the funding associated with that metric will be evenly distributed across all remaining metrics.

COMMENTS

HHSC conducted a public hearing to receive comment on the proposed new rule. HHSC also received written comments on the proposed new rule. Oral and written comments were received from the following entities:

Continental Financial

Eastland Memorial Hospital

Gonzales Healthcare System

Guadalupe Regional Medical Center

NewLight Healthcare

Paragon Healthcare Group

Parkland Health and Hospital System

StoneGate Senior Living

Texas Association of Health Plans (TAHP)

Texas Organization of Rural and Community Hospitals (TORCH)

Uvalde Memorial Hospital

One individual

Summaries of the comments and HHSC's responses to the comments follow:

Comment: Some commenters requested that the IGT dates, currently projected to be May 31, 2017, and November 30, 2017, be delayed by a minimum of thirty days each.

Response: IGT due dates are driven by HHSC's timelines for determination of the Per Member Per Month (PMPM) capitation rates. The PMPM will include the monetary "bump" required to fund the QIPP program. The September 1 PMPMs must be finalized internally by HHSC by June 15 of each calendar year in order to meet all CMS deadlines. The PMPMs cannot be finalized until HHSC has the required IGT funds in hand. An IGT due date of May 31, 2017, provides minimal time (e.g., 15 days) for HHSC to finalize the PMPMs; it is not possible to delay the IGT due date and still meet all required deadlines. Similarly, the November 30 due date for the second IGT payment is set at the latest possible date that will allow HHSC to finalize any required mid-year adjustments to the PMPMs if there is an IGT shortfall for the second six months of the eligibility period.

Participation in QIPP is voluntary and each non-state governmental entity will have to determine if participation in the program meets its business requirements. No changes were made in response to this comment.

Comment: Some commenters requested that the first quarterly payments, currently projected to be made as late as March 2018, be made no later than two weeks prior to the second IGT date (currently November 31, 2017). For example, if the first quarter ends on November 31, 2017, an actual or proxy payment would be made by December 31, 2017, and the second IGT would take place on or about January 15, 2018.

Response: Quality metric data will not be available in time to make actual payments on the timeline requested by the commenter. Proxy payments have proven problematic in other programs. In cases where a proxy payment is made and the provider subsequently fails to meet the metric(s) required to earn the proxy payment, the MCO will have to recoup the proxy payment from the provider. If the provider ceases operations between the time the proxy payment is made and the time the overpayment is identified, it can prove impossible to recoup the owed funds. No changes were made in response to this comment.

Comment: Multiple commenters requested that Component One, currently defined to be equal to 110 percent of the nonfederal share of the program, be revised to equal a greater percentage of the non-federal share of the program (requested percentages ranged from 125 to 150 percent).

Response: HHSC believes that the 10 percent factor incorporated in Component One provides a substantial incentive for entities to IGT.

Participation in QIPP is voluntary and each non-state governmental entity will have to determine if participation in the program meets its business requirements. No changes were made in response to this comment.

Comment: Some commenters requested that funds that would lapse due to failure of one or more NFs to meet quality measures should be distributed across only the non-state government-owned NFs, rather than across all QIPP NFs.

Response: HHSC believes that the 10 percent factor incorporated in Component One provides a substantial incentive for entities to IGT. HHSC does not believe there is a need to further favor NFs owned by non-state government entities over other NFs participating in QIPP.

Participation in QIPP is voluntary and each non-state governmental entity will have to determine if participation in the program meets its business requirements. No changes were made in response to this comment.

Comment: Some commenters request a requirement that Component One payments be made within ten (10) days from the end of the month.

Response: The proposed rules do not specify a timeframe for payments. At this time, HHSC is in discussions with the MCOs to determine the payment timeframes that will be implemented for QIPP. No changes were made in response to this comment.

Comment: Some commenters request that HHSC allow facilities that meet the eligibility criteria to be admitted on a semi-annual basis and be eligible to participate through the end of the program year.

Response: The QIPP metrics and payment methodology are designed for a year-long program that coincides with the state fiscal year and the state-MCO contract period. NFs that do not meet eligibility requirements by the enrollment deadline for the first year of QIPP may enroll for the second year. No changes were made in response to this comment.

Comment: Some commenters request that the rule be changed to allow all facilities to participate in QIPP using a 2014 cost report from any previous owner rather than only the immediate prior owner.

Response: HHSC agrees with this comment and has revised subsection (d) to change the term "the immediately prior owner" to "a prior owner."

Comment: One commenter recommends not excluding current non-state government-owned (NSGO) MPAP participants from QIPP. To that end, the commenter recommends adjusting the language in subsection (d) to "allow an NSGO distribution and participation to be determined based on an as filed cost report by the current or prior Licensed Operator, when historical data can be validated using HHSC auditing processes and procedures."

Response: HHSC agrees with this comment and has revised subsection (d) such that all references to "the most recently available, audited" Cost Report or Direct Care Staff Rate Staffing and Compensation Report, have been revised to indicate "the most recently available" Cost Report or Direct Care Staff Rate Staffing and Compensation Report. However, as the commenter points out, HHSC must ensure that proper data is used. Thus, HHSC amends paragraphs (d)(3) and (d)4) to require that the data source being utilized by potential participating NF must be no less than four years removed from eligibility period in question to ensure that the data source used is no more current than the most recently available, audited cost report database.

Comment: Some commenters request that HHSC give consideration for the distribution and payment of the lapsed failed metrics redistribution to occur quarterly subsequent to and following the distribution of the earned metrics. The commenters believe that this calculation should be feasible for provider payment redistribution following the achieved metrics quarterly distributions as opposed to waiting for an end of the payment.

Response: The proposed language pertaining to funds that would lapse due to failure of one or more NFs to meet quality metrics at (i)(4) does not address the timing of the distribution of these funds. HHSC will work to ensure that these funds are eventually distributed on a quarterly basis as requested by the commenter but cannot guarantee a specific timeline for the distribution of these funds. No changes were made in response to this comment.

Comment: Some commenters request that HHSC consider accepting the currently selected quality metrics for the first two annual periods of the program. At the end of the second period, a collaborative workgroup of stakeholders could be convened to develop and recommend new quality metrics for HHSC consideration.

Response: Neither the proposed nor the adopted rule language address this issue, as HHSC requires flexibility in administering QIPP and reserves the right to make changes to the quality metrics based on the state's performance on all of the quality metrics. If HHSC considers making changes to the metrics, stakeholders will be notified and involved in such discussions. No changes were made in response to this comment.

Comment: Paragraph (b)(9) defines a private NF as one that is not owned by a governmental entity. Some commenters believe that HHSC should clarify that "governmental entity" as referenced in this definition includes only non-state governmental entities and not other governmental entities.

Response: HHSC's intent is that private NFs be NFs that are not owned by any governmental entity, whether that governmental entity is a non-state governmental entity or a state governmental entity. No changes were made in response to this comment.

Comment: The second sentence of clause (c)(1)(A)(i) addresses the change of ownership of a NF from privately owned to publically owned. Some commenters believe that the intent of "publically owned" as used in that clause is to only refer to non-state government owned facilities and not other publically owned facilities, such as those that might have stock traded on a stock exchange or in over the counter markets. Please provide clarification.

Response: HHSC agrees that "publically owned" as used in (c)(1)(A)(i) could be misinterpreted to mean publically traded on a stock exchange and has modified this clause to change "publically owned" to "non-state government owned."

Comment: One commenter suggests that HHSC revise the phrase in paragraph (i)(2) from "a NF must show improvement" to "NF must show statistically significant improvement."

Response: The goal of QIPP is to reward incremental improvement towards a pre-determined goal. Meaningful improvement may not be statistically significant, and for facilities that reach the national average benchmark, improvement may not be required at all. No changes were made in response to this comment.

Comment: One commenter requests clarification to paragraph (g)(1) such that it is clear what will happen to Component One funds if the QAPI validation report is not submitted to the MCO in a timely manner.

Response: HHSC's intent is that Component One funds that are not earned due to the NF's failure to submit a monthly QAPI Validation Report be distributed as described in paragraph (g)(4). We have modified the language in paragraph (g)(4) to clarify that funding would lapse due to failure of one or more NFs to meet QAPI reporting requirements.

Comment: One commenter requests clarification of paragraph (g)(4) regarding the distribution of funds. Specifically, the commenter questions whether the rule should state that the funds will be distributed across all QIPP NFs based on each NF's proportion of total earned QIPP funds from Components Two and Three combined. Further, the commenter questions if the reference to Component One should be deleted since Component One does not involve the quality metrics.

Response: Paragraph (g)(4) is intended to describe the redistribution of funds that would lapse due to the failure of one or more NFs to meet Component One QAPI reporting requirements or Component Two or Component Three quality metrics. We have modified the language in paragraph (g)(4) to clearly include funds that would lapse due to failure of one or more NFs to meet QAPI reporting requirements.

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

The adopted new rule implements Texas Human Resources Code, Chapter 32; Texas Government Code, Chapter 531; and Texas Government Code Chapter 533. No other statutes, articles, or codes are affected by this new rule.