1. (a) General Information. As specified in §§355.701-355.707 of this title (relating to General Specifications; Methodology; Basic Objectives and Criteria for Desk Review of Cost Reports; Determination of Inflation Indices; Notification; Adjusting Rates When New Legislation, Regulations, or Economic Factors Affect Costs; and Reviews and Administrative Hearings), TDMHMR reimburses qualified providers for case management services provided to Medicaid eligible individuals with mental retardation or a related condition. The Texas Board of Mental Health and Mental Retardation determines reimbursement at least annually for case management services. Reimbursement is:

   1. (1) uniform statewide;
   2. (2) prospective (see §355.741 of this title (relating to Definitions)); and
   3. (3) cost related.

2. (b) Basis for Reimbursement Analysis.

   1. (1) For the reimbursement period, providers will be reimbursed on the projected expenses required to provide case management services for individuals with mental retardation or a related condition.
   2. (2) TDMHMR or its designee collects both statistical and cost data. The statistical information includes the number of telephone and in person (face-to-face) case management contacts provided to clients and the number of direct server hours performed during the cost reporting period. The cost data include direct costs, programmatic indirect costs, and general and administrative costs, including salaries, benefits, and non-labor costs.
   3. (3) The reimbursement is based upon cost report data submitted by providers, consultation with service providers, and consultation with professionals experienced in case management services.

3. (c) Reporting of Cost.

   1. (1) Cost reporting. Each provider must submit financial and statistical information in a cost report or survey format designated by TDMHMR or its designee. The cost report will capture the expenses of the provider including salaries and benefits, administration, building and equipment, utilities, supplies, travel, and indirect overhead expenses related to the provision of case management services.

   2. (2) The following requirements apply.

      1. (A) Accounting requirements. All information submitted on the cost reports must be based upon the accrual method of accounting unless the governmental entity operates on a cash or modified accrual basis. The provider must complete the cost report according to the prescribed statement of allowable and unallowable costs. Cost reporting should be consistent with generally accepted accounting principles (GAAP). In cases in which cost reporting rules conflict with GAAP, Internal Revenue Service, or other authorities, the cost reporting rules take precedence for Medicaid provider cost reporting.
      2. (B) Reporting period. The provider must prepare the cost report to reflect activities during the provider's fiscal year. The cost report is due three months after the end of this fiscal year, although an extension may be granted for good cause. TDMHMR or its designee may require cost reports or other information for other time periods. Failure to file an acceptable cost report or complete required additional information will result in a hold on the vendor payments until the cost report information or additional information is provided. The provider must certify the accuracy of the cost report or additional information.
      3. (C) Review of cost reports. As specified in §355.703 of this title (relating to Basic Objectives and Criteria for Desk Review of Cost Reports), TDMHMR or its designee reviews each cost report or survey. Cost reports not completed according to instructions or rules are returned to the provider for proper completion.
      4. (D) On-site audit of cost reports. TDMHMR or its designee performs a sufficient number of audits each year to ensure the fiscal integrity of the case management reimbursement. The number of on-site audits actually performed each year may vary. Adjustments consistent with the results of on-site audits are made to the reimbursement base until the reimbursement base is closed for final reimbursement analysis.
      5. (E) Recordkeeping requirements. Each provider must maintain records according to the requirements specified in 40 TAC §69.202. The provider must ensure that the records are accurate and sufficiently detailed to support the financial and statistical information reported in the cost report. If a provider does not maintain records which support the financial and statistical information submitted on the cost report, the provider will be given 90 days to correct this recordkeeping. A hold of the vendor payments to the provider will be made if the deficiency is not corrected within 90 days from the date the provider is notified.
      6. (F) Access to records. The provider must allow TDMHMR or its designated agents access to any and all records necessary to verify information on the cost report.
      7. (G) Reviews of cost report disallowances. A provider who disagrees with TDMHMR or its designee on cost report disallowances may request a review of the disallowances as specified in §355.707 of this title (relating to Reviews and Administrative Hearings).
      8. (H) TDMHMR or its designee notifies providers of exclusions and adjustments to reported expenses made during desk reviews and on-site audits of cost reports according to §355.705 of this title (relating to Notification).

4. (d) Reimbursement methodology.

   1. (1) Reimbursement by unit of service. Reimbursement for case management services will be determined for a unit of service defined as a case management contact. The action can be face-to-face or by telephone. See §355.741 of this title (relating to Definitions) for the definition of "case management contact."
   2. (2) Exclusion or adjustment of expenses. Providers must eliminate unallowable expenses from the cost report. TDMHMR or its designee excludes from the reimbursement base any unallowable expenses included in the cost report and makes adjustments to expenses reported by providers to ensure that the reimbursement base reflects costs which are consistent with efficiency, economy and quality of care, are necessary for the provision of case management services, and are consistent with federal and state Medicaid regulations. If there is doubt as to the accuracy or allowability of a significant part of the information reported, individual cost reports may be eliminated from the reimbursement base.

   3. (3) Reimbursement determination process. The Texas Board of Mental Health and Mental Retardation determines reimbursement according to §355.701 of this title (relating to General Specifications). As specified in §355.706 of this title (relating to Adjusting Rates When New Legislation, Regulations, or Economic Factors Affect Costs), the Texas Board of Mental Health and Mental Retardation may also adjust reimbursements when new legislation, regulations, or economic factors affect costs. TDMHMR staff submit reimbursement recommendations to the Texas Board of Mental Health and Mental Retardation. Recommended reimbursements are determined in the following manner:

      1. (A) Total allowable costs for each provider will be determined from analyzing the allowable historical costs reported on the cost report.
      2. (B) Each provider's total allowable costs are projected from the historical cost reporting period to the prospective reimbursement period using inflation factors according to §355.704 of this title (relating to Determination of Inflation Indices).
      3. (C) For each type of contact (face-to-face and telephone) each provider's cost per contact is calculated. The mean provider cost per contact is calculated, and the statistical outliers (those providers whose cost per contact exceeds plus or minus (+/-) two standard deviations of the mean provider cost per contact) are removed. After removal of the statistical outliers, the mean cost per contact is calculated. This mean cost per contact becomes the recommended reimbursement per contact as of May 20, 1995.

5. (e) General information. Only allowable cost information is used to compile the reimbursement base. See §355.741 of this title (relating to Definitions) for definitions of allowable and unallowable costs.

   1. (1) List of allowable costs. The following list of allowable costs is not comprehensive; instead, it is meant to serve as a general guide and to clarify certain key expense areas. The absence of a particular cost does not necessarily mean that expense is not an allowable cost.

      1. (A) Compensation of staff providing case management services. Compensation may be provided only to those staff who provide case management services directly to the clients or who support the work of staff providing case management services, including supervisors, administrators, and clerical workers. This category includes:

         1. (i) wages and salaries;
         2. (ii) payroll taxes and insurance, including Federal Insurance Contributions Act (FICA or Social Security), unemployment compensation insurance, workman's compensation insurance; and
         3. (iii) employee benefits. This category includes employer paid health, life accident, liability and disability insurance for employees; contributions to employee retirement funds; and deferred compensation limited to the dollar amount the employer contributes.
      2. (B) Indirect costs. Costs incurred at administrative and support levels of management (that is, personnel, staff development, legal, quality assurance, accounting, bookkeeping, and building and equipment maintenance) above the staff providing case management services are allowable only if the costs were incurred in the purchase of materials, supplies, or services used by the staff providing case management services in the conduct of normal operations. Allowable costs are limited to the allocated portion of these costs which can be documented as being related to the delivery of case management services.
      3. (C) Utilization review committee.
      4. (D) Materials and supplies. This category includes office supplies, housekeeping supplies, and materials and supplies for the operation, maintenance, and repair of buildings, grounds, and equipment.
      5. (E) Utilities. This category includes electricity, natural gas, fuel oil, water, waste water, garbage collection, telephone, and telegraph.

      6. (F) Buildings, equipment, and capital expenses.

         1. (i) Buildings, equipment, and capital used by the staff providing case management services or in support of the staff providing case management services, and not for personal business. If these costs are shared with other program operations the portion of these costs relating directly to the provision of case management services may be allowed on a prorata basis if the proportion of use for provision of case management services is documented.

         2. (ii) Depreciation and amortization expense. Property owned by the provider entity and improvements to owned, leased or rented property that is used in the provision of case management services that are valued at more than $500 at the time of purchase must be depreciated or amortized, using the straight line method. The minimum usable lives to be assigned to common classes of depreciable property are:

            1. (I) buildings: a minimum of 30 years, with a minimum salvage value of 10%;
            2. (II) transportation equipment used for the transport of clients, materials and supplies, or staff providing case management services: a minimum of three years for passenger automobiles, with a minimum salvage value of 10%; five years for light trucks and vans, with a minimum salvage value of 10%.
      7. (G) Provider owned property. Property may be treated by the provider as ordinary expenses when the property and improvements to the property owned, leased, or rented by the provider are valued at less than $500 at the time of purchase.
      8. (H) Rental and lease expense. This category includes buildings, building equipment, transportation equipment, equipment, materials and supplies. Allowable rental or lease expense paid to a related party is limited to the actual allowable cost incurred by the related party.
      9. (I) Transportation expense. This category includes depreciation, lease, or mileage claimed at the allowable reimbursement per mile set by the state legislature for state employees.
      10. (J) Business and professional association dues limited to associations devoted primarily to the issues of case management.
      11. (K) Outside training costs. These expenses are limited to direct costs (transportation, meals, lodging, and registration fees) for training provided to staff providing case management services. The training must be directly related to issues concerning case management, and it must be located within the continental United States.

   2. (2) List of unallowable costs. Unallowable costs are not included in the reimbursement base used to determine recommended reimbursement. The following list clarifies certain expense categories of unallowable costs. See also §355.741 of this title (relating to Definitions) for definition of unallowable costs.

      1. (A) Compensation in the form of salaries, benefits, or any form of compensation given to individuals for the provision and support of services other than case management services.
      2. (B) Personal expenses not directly related to the provision of case management services.
      3. (C) Management fees or indirect costs that are not derived from the actual cost of materials, supplies or services provided directly to staff providing case management services.
      4. (D) Advertising expenses other than those for advertising in the yellow pages, adds for employee recruitment, and advertising to meet any statutory or regulatory requirement.
      5. (E) Business expenses not directly related to the provision of case management services.
      6. (F) Political contributions.
      7. (G) Depreciation and amortization of unallowable costs. This category includes amounts in excess of those resulting from straight line depreciation method, capitalized lease expenses in excess of the actual lease payment, and goodwill or any excess above the actual value of the physical assets at the time of purchase.
      8. (H) Trade discounts of all types. This category includes returns, allowances, and refunds.
      9. (I) Donated facilities, materials, supplies and services including the values assigned to the services of unpaid workers and volunteers.
      10. (J) Dues to all types of political and social organizations, and to professional associations not directly and primarily concerned with case management services.
      11. (K) Entertainment expenses except those incurred for entertainment provided to the staff providing case management services as an employee benefit.
      12. (L) Board of directors fees.
      13. (M) Fines and penalties for violations of regulations, statutes, and ordinances of all types.
      14. (N) Fundraising and promotional expenses.
      15. (O) Interest expenses on loans pertaining to unallowable items and on that portion of interest paid which is reduced or offset by interest income.
      16. (P) Insurance premiums pertaining to items of unallowable cost.
      17. (Q) Accrued expenses that are not a legal obligation of the provider or are not clearly enumerated as to dollar amount. This category includes any form of profit sharing and the accrued liabilities of deferred compensation plans.
      18. (R) Mileage expense exceeding the current reimbursement rate set by the Texas Legislature for state employee travel.
      19. (S) Costs of purchases from a related party which exceed the original cost to the related party.
      20. (T) Out of state travel expenses, except for provision of case management related services including training and quality assurance functions.
      21. (U) Contributions to self-insurance funds which do not represent payments based on current liabilities.
      22. (V) Expenses incurred because of imprudent business practices.
      23. (W) Expenses which cannot adequately be documented.
      24. (X) Expenses not reported according to the instructions of the cost report.
      25. (Y) Expenses not allowable under other pertinent federal, state, or local laws or regulations.

Source Note:The provisions of this §355.743 adopted to be effective October 1, 1993, 18 TexReg 6311; amended to be effective October 13, 1995, 20 TexReg 7981; transferred effective September 1, 1997, as published in the Texas Register December 26, 1997, 22 TexReg 12748.