1. (a) Types of facilities. There are two types of facilities for purposes of rate setting: state-operated and non-state operated. Facilities are further divided into classes that are determined by the size of the facility.

2. (b) Classes of non-state operated facilities. There is a separate set of reimbursement rates for each class of non-state operated facilities, which are as follows.

   1. (1) Large facility--A facility with a Medicaid certified capacity of 14 or more as of the first day of the full month immediately preceding a rate's effective date or, if certified for the first time after a rate's effective date, as of the date of initial certification.
   2. (2) Medium facility--A facility with a Medicaid certified capacity of nine through 13 as of the first day of the full month immediately preceding a rate's effective date or, if certified for the first time after a rate's effective date, as of the date of initial certification.
   3. (3) Small facility--A facility with a Medicaid certified capacity of eight or fewer as of the first day of the full month immediately preceding a rate's effective date or, if certified for the first time after a rate's effective date, as of the date of initial certification.

3. (c) Classes of state-operated facilities. There is a separate interim rate for each class of state-operated facilities, which are as follows:

   1. (1) Large facility--A facility with a Medicaid certified capacity of 17 or more as of the first day of the full month immediately preceding a rate's effective date or, if certified for the first time after a rate's effective date, as of the date of initial certification.
   2. (2) Small facility--A facility with a Medicaid certified capacity of 16 or less as of the first day of the full month immediately preceding a rate's effective date or, if certified for the first time after a rate's effective date, as of the date of initial certification.

4. (d) Reimbursement rate determination for non-state operated facilities. The Texas Health and Human Services Commission (HHSC) will adopt the reimbursement rates for non-state operated facilities in accordance with §355.101 of this title (relating to Introduction) and this subchapter.

   1. (1) Covered services. Reimbursement rates combine residential and day program services, i.e., payment for the full 24 hours of daily service.
   2. (2) Level of need (LON) differentiation. Reimbursement rates are differentiated based on the level of need (LON) of the individual receiving the service. The levels of need are intermittent, limited, extensive, pervasive, and pervasive plus.
   3. (3) Cost components determination. The recommended modeled rates are based on cost components deemed appropriate for economically and efficiently operated services. The determination of these components is based on cost reports submitted by Intermediate Care Facilities for Individuals with an Intellectual Disability or Related Conditions (ICF/IID) providers.
   4. (4) Direct service workers cost area. This cost area includes direct service workers' salaries, wages, and benefits expenses. The reimbursement rate for this cost area is calculated as specified in §355.7052 of this chapter (relating to Reimbursement Methodology for Determining Attendant Cost Component).
   5. (5) Direct care trainers and job coaches cost area. This cost area includes direct care trainers' and job coaches' salaries, wages, and benefits expenses. The reimbursement rate for this cost area is calculated as specified in §355.7052 of this chapter.
   6. (6) Other resident care cost area. This cost area includes compensation costs for laundry and housekeeping personnel, social workers, medical records personnel, resident care training personnel, therapists, psychologists, and other direct care consultants, as well as costs for medical equipment and supplies, and laundry and housekeeping equipment and supplies.
   7. (7) Dietary costs. This cost area includes compensation costs for dietary personnel as well as costs for food and dietary supplements.
   8. (8) Transportation, facilities and operations costs area. This cost area includes compensation costs for maintenance personnel and drivers, maintenance supplies, departmental equipment and transportation equipment rentals and leases and depreciation, land and leasehold improvement, depreciation and amortization, mortgage interest, property taxes and vehicle insurance, and utilities and telecommunications.
   9. (9) Administration costs. This cost area includes compensation costs for administration personnel such as facility administrator, clerical support and central office staff, administrative staff, general liability insurance, interest expense on working capital, allowable advertising, travel (including mileage reimbursement) and seminars, dues and subscriptions, office supplies, central office costs, and other similar office expenses.

   10. (10) High Medical Needs Add-on reimbursement rate on or after September 1, 2025. This add-on methodology will be implemented pending implementation of the Patient Driven Payment Model (PDPM) for Long-Term Care (LTC), as specified in §355.318 of this chapter (relating to Reimbursement Setting Methodology for Nursing Facilities on or after September 1, 2025).

       1. (A) The add-on is based on the PDPM LTC classification system as described in §355.318 of this chapter.

       2. (B) There are three add-on groupings based on PDPM LTC classification and nursing case-mix classifiers, associated with the assessed nursing score.

          1. (i) Group 1 includes nursing case-mix classifier "E" relating to the Extensive Services category.
          2. (ii) Group 2 includes nursing case-mix classifiers "H" and "L" relating to the Special Care High and Special Care Low categories.
          3. (iii) Group 3 includes nursing case-mix "C" relating to the Clinically Complex category.

       3. (C) An individual must meet the following criteria to be eligible to receive the add-on rate:

          1. (i) be assigned a PDPM LTC nursing case-mix classifier in Group 1, Group 2, or Group 3;
          2. (ii) be a resident of a large state-operated facility for at least six months immediately prior to referral or a resident of a Medicaid-certified nursing facility immediately prior to referral; and
          3. (iii) for residents of a large state-operated facility only, have a LON which includes a medical LON increase as described in 26 TAC §261.241 (relating to Level of Need Criteria), but not be assessed a LON of pervasive plus.

       4. (D) The add-on for each Group is determined based on data and costs from the most recent nursing facility cost reports accepted by HHSC.

          1. (i) Calculate the average number of nursing hours per daily unit of service by dividing total nursing hours by total days of service.
          2. (ii) Calculate the average licensed vocational nurse (LVN) cost per day by multiplying estimated LVN hourly wages by the average number of nursing hours per daily unit of service.
          3. (iii) For each Group, compute the median per diem amount of the nursing care base case-mix adjusted rate component for all facilities as specified in §355.318 of this chapter (relating to Reimbursement Setting Methodology for Nursing Facilities on or after September 1, 2025); and
          4. (iv) Subtract the average nursing daily cost as specified in clause (ii) of this subparagraph from the median per diem amount of the nursing care rate component as specified in clause (iii) of this subparagraph current recommended modeled rates as specified in subsection (d)(3) of this section.

5. (e) Reimbursement determination for state-operated facilities. Except as provided in paragraph (2) of this subsection and subsection (f) of this section, state-operated facilities are reimbursed an interim rate with a settlement conducted in accordance with paragraph (1)(B) of this subsection. HHSC will adopt the interim reimbursement rates for state-operated facilities in accordance with §355.101 of this title and this subchapter.

   1. (1) State-operated facilities certified prior to January 1, 2001, will be reimbursed using an interim reimbursement rate and settlement process.

      1. (A) Interim reimbursement rates for state-operated facilities are based on the most recent cost report accepted by HHSC.
      2. (B) Settlement is conducted each state fiscal year by class of facility. If there is a difference between allowable costs and the reimbursement paid under the interim rate, including applied income, for a state fiscal year, federal funds to the state will be adjusted based on that difference.
   2. (2) A state-operated facility certified on or after January 1, 2001, will be reimbursed using a pro forma rate determined in accordance with §355.101(c)(2)(B) and §355.105(h) of this title (relating to Introduction and General Reporting and Documentation Requirements, Methods and Procedures). A facility will be reimbursed under the pro forma rate methodology until HHSC receives an acceptable cost report which includes at least 12 months of the facility's cost data and is available to be included in the annual interim rate determination process.
6. (f) HHSC may define experimental classes of service to be used in research and demonstration projects on new reimbursement methods. Demonstration or pilot projects based on experimental classes may be implemented on a statewide basis or may be limited to a specific region of the state or to a selected group of providers. Reimbursement for an experimental class is not implemented, however, unless HHSC and the Centers for Medicare and Medicaid Services (CMS) approve the experimental methodology.

7. (g) Cost Reporting.

   1. (1) Providers must follow the cost-reporting guidelines as specified in §355.105 of this title.
   2. (2) Providers must follow the guidelines in determining whether a cost is allowable or unallowable as specified in §355.102 and §355.103 of this title (relating to General Principles of Allowable and Unallowable Costs, and Specifications for Allowable and Unallowable Costs).
   3. (3) Revenues must be reported on the cost report in accordance with §355.104 of this title (relating to Revenues).
8. (h) Adjusting costs. Each provider's total reported allowable costs, excluding depreciation and mortgage interest, are projected from the historical cost-reporting period to the prospective reimbursement period as described in §355.108 of this title (relating to Determination of Inflation Indices). HHSC may adjust reimbursement if new legislation, regulations, or economic factors affect costs, according to §355.109 of this title (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs).
9. (i) Field Audit and Desk Review. Desk reviews or field audits are performed on cost reports for all contracted providers. The frequency and nature of the field audits are determined by HHSC to ensure the fiscal integrity of the program. Desk reviews and field audits will be conducted in accordance with §355.106 of this title (relating to Basic Objectives and Criteria for Audit and Desk Review of Cost Reports), and providers will be notified of the results of a desk review or a field audit in accordance with §355.107 of this title (relating to Notification of Exclusions and Adjustments). Providers may request an informal review and, if necessary, an administrative hearing to dispute an action taken under §355.110 of this title (relating to Informal Reviews and Formal Appeals).

Source Note:The provisions of this §355.456 adopted to be effective March 25, 1997, 22 TexReg 2760; transferred effective September 1, 1997, as published in the Texas Register December 26, 1997, 22 TexReg 12748; amended to be effective April 5, 1998, 23 TexReg 3251; amended to be effective December 20, 1998, 23 TexReg 12652; amended to be effective March 1, 2001, 26 TexReg 1696; amended to be effective August 28, 2001, 26 TexReg 6296; amended to be effective December 23, 2001, 26 TexReg 10277; amended to be effective August 31, 2004, 29 TexReg 8116; amended to be effective September 1, 2007, 32 TexReg 5337; amended to be effective September 1, 2010, 35 TexReg 5026; amended to be effective January 1, 2015, 39 TexReg 9884; amended to be effective September 1, 2015, 40 TexReg 5293; amended to be effective May 24, 2016, 41 TexReg 3689; amended to be effective March 1, 2018, 43 TexReg 339; amended to be effective April 14, 2025, 50 TexReg 2377; amended to be effective September 11, 2025, 50 TexReg 5899.