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. 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) The initial modeled rates for calendar year 1997 are set according to paragraph (7) of this subsection.
   2. (2) Annual rates for the time period between the years that modeled rates are rebased are set by inflating the direct service portion of the previous year's rates by the Personal Consumption Expenditures (PCE) Chain-Type Index as defined in §355.108 of this title (relating to Determination of Inflation Indices). These rates are uniform by class of facility and client level-of-need, and determined prospectively and annually.
   3. (3) In the year 2000, the models from which the rates are based are analyzed to determine if rebasing is necessary for the rates paid in the year 2001. The models will be analyzed every three years thereafter to determine if rebasing is necessary.
   4. (4) Reimbursement rates combine residential and day program services, i.e., payment for the full 24 hours of daily service.
   5. (5) Reimbursement rates are differentiated based on client level-of-need. The levels of need are intermittent, limited, extensive, pervasive, and pervasive plus.
   6. (6) Modeled rates are rebased according to §355.458 of this title (relating to Rebasing the Non-State Operated Facility Modeled Rates).
   7. (7) The modeled rates are based on cost components deemed appropriate for economically and efficiently operated services. The determination of these components is based on a combination of data including, but not limited to, historical costs and operational information collected from a representative sample of ICF/MR providers. In the year 2000 and every three years thereafter, an advisory panel consisting of providers, advocates, and HHSC, and an independent consultant retained by HHSC analyzes available information regarding historical cost and operational data and level-of-need assessment to determine if revisions to the models are necessary. HHSC will review the analysis in setting rates.
5. (e) Transitional add-on. A transitional add-on, in an amount to be determined by HHSC, will be paid to a provider for a consumer who is admitted to a small non-state operated facility on or after October 1, 2001, if the consumer is admitted from a large state-operated facility. The transitional add-on will be paid for the time period the consumer resides in the small non-state operated facility or for 180 calendar days, whichever time period is less.

6. (f) Reimbursement determination for state-operated facilities. Except as provided in paragraph (2) of this subsection and subsection (g) 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 (relating to Introduction) 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). 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.
7. (g) 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 Health Care Financing Administration (HCFA) approve the experimental methodology.

8. (h) Cost Reporting. For cost reports pertaining to providers' fiscal years ending in calendar year 2004 and subsequent years the following applies:

   1. (1) Providers must follow the cost-reporting guidelines as specified in §355.105 of this title (relating to General Reporting and Documentation Requirements, Methods, and Procedures).
   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).
9. (i) 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).
10. (j) 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.