1. (a) The Texas Board of Protective and Regulatory Services reviews the Texas Department of Protective and Regulatory Services' (TDPRS's) payment rates for providers of 24-hour residential child care services annually in an open meeting, after considering pertinent financial and statistical information, TDPRS rate recommendations developed according to the provisions of this subchapter (proposed rates), other staff recommendations, the cost-finding methodology, agency service demands, public testimony, and the availability of appropriated revenue. Prior to the open meeting in which rates are presented for adoption, rate packets which contain the proposed rates and average inflation factor amounts are sent to provider association groups. Rate packets are sent to any other interested party, by written request. Providers who wish to comment on the proposed rates may attend the open meeting and give public testimony. Notice of the open meetings are published in the Texas Register. If proposed rates are adopted by the board, all foster care providers will receive notice of the adopted rates by letter.

2. (b) To develop the rate recommendation for board consideration for Level of Care 1, TDPRS analyzes the most recent statistical data available on expenditures on a child by families published by the United States Department of Agriculture (USDA) from the lower and middle income groups. The USDA, in compiling data on child-rearing expenditures, has determined that, in general, costs considered to be necessities did not vary as much as those considered to be discretionary among households by income group. In recognition of this determination and the desire to provide for a margin above the cost of basic necessities, TDPRS uses the following formula to determine a basic maintenance payment. The rate for Level of Care 1 is a foster care maintenance payment which does not cover salary expenses or administrative expenses.

   1. (1) TDPRS excludes medical costs from its calculations for Level of Care 1 since medical costs are covered by Medicaid.
   2. (2) TDPRS determines a per day cost for each of the following cost categories across all age groups specified in the USDA data: housing; food; transportation; clothing; and education, child care, and other.
   3. (3) The per day costs for all of the cost categories are summed into a total cost per day for the lower income group and a total cost per day for the middle income group specified in the USDA data.
   4. (4) TDPRS multiplies the total cost per day for the lower income group by .72.
   5. (5) TDPRS multiplies the total cost per day for the middle income group by .28.
   6. (6) The results of the above multiplication are added to become the total cost per day. This total cost per day is projected using the Implicit Price Deflator-Personal Consumption Expenditures (IPD-PCE) Index, which is a general cost inflation index, from the period covered in the USDA statistics to the next effective rate period. Information on inflation factors is specified in this section.

3. (c) To develop rate recommendations for board consideration for Levels of Care 2 through 6 and emergency shelters, TDPRS analyzes the information submitted in provider cost reports and related documentation in the following ways.

   1. (1) TDPRS excludes the expenses specified in §700.1805 and §700.1806 of this title (relating to Unallowable Costs and Costs Not Included in Recommended Payment Rates). In addition to the exclusions and adjustments made during audit desk reviews and on-site audits, TDPRS may, at its sole discretion, exclude or adjust certain expenses in the cost report data base in order to base rates on the reasonable and necessary costs that a prudent and cost effective provider must incur. An example of a provider who is not prudent and cost effective is a provider who has an occupancy rate of 30% or less. These exclusions or adjustments include, but are not limited to, revenue offset adjustments, occupancy adjustments, and cost projection adjustments. TDPRS may exclude from the data base any cost report that is not completed according to the published methodology and the specific instructions to the cost report. Some of the reasons for exclusion of a cost report from the data base include, but are not limited to, receiving the cost report too late to be included in the data base, low occupancy exclusions, auditor recommended exclusions, exclusions for days of service errors, providers that do not participate in the level of care system, providers with no public placements, using cost estimates instead of actual costs, not using the accrual method of accounting for reporting information on the cost report, not reconciling between the cost report and the provider's general ledger, and not maintaining records that support the data reported on the cost report.
   2. (2) TDPRS does not use in its rate determination for Levels of Care 5 and 6 the costs of providers who have 50% or more of their days of service from private placements.
   3. (3) TDPRS excludes from median occupancy determination and from rate determination providers whose occupancy rates are 30% or below.
   4. (4) TDPRS expands the days of service and expenses of providers that report less than a full year of data on the cost report. To expand the days of service and expenses as if the provider were in operation for a full year, TDPRS multiplies the days of service and expenses by the following factor. Expansion factor = 365/number of days reported on the cost report.
   5. (5) TDPRS allocates payroll taxes and employee benefits to each salary line item on the cost report on a pro rata basis based on the portion of that salary line item to the amount of total salary expense. The employee benefits for administrator/director, assistant administrator, owner, partners, or stockholders are allocated directly to the corresponding salaries for these positions. The allocated payroll taxes are Federal Insurance Contributions Act (FICA) or social security, the workers' compensation insurance (WCI), and the federal and state unemployment (FUTA/SUTA).
   6. (6) TDPRS reduces reported costs by the amount of federal revenue reported, including revenue from USDA, and Chapter 1 and Chapter 2 Education revenue. TDPRS also reduces vocational costs by the amount of revenue earned by a facility from a vocational program. Revenue earned and paid to a child from a vocational program is not used to reduce vocational expenses.

   7. (7) TDPRS groups allowable costs into the following cost areas:

      1. (A) administration;
      2. (B) routine daily service;
      3. (C) dietary services;
      4. (D) therapeutic services;
      5. (E) building and transportation;
      6. (F) medical and dental services; and
      7. (G) educational services.
   8. (8) TDPRS allocates or spreads affected costs according to a model of staff-to-child ratios identified in a facility that meets level of care monitoring standards. TDPRS will provide, upon written request, the model ratios and the costs on the cost report to which the ratios are applied. The affected costs are administrative salaries of the director, assistant, and other administrative staff; houseparent and recreation staff salaries; therapy salaries; maintenance staff salaries; building repair expenses; nurse salaries; and education expenses for providers who serve children in an emergency shelter or children who have a determination by the admission, review, and dismissal (ARD) committee. TDPRS allocates these affected costs across levels of care served by the provider. Emergency shelter costs are not allocated across levels of care since, for rate-setting purposes, all children in emergency shelters are considered to be at the same level of care. An example of one way in which costs are allocated or spread using some of the model ratios is illustrated by the following chart.
4. (d) The Texas Board of Protective and Regulatory Services reviews payment rates annually for providers of 24-hour residential child care services in an open meeting, after considering pertinent financial and statistical information, TDPRS rate recommendations developed according to the provisions of this subchapter, other staff recommendations, the cost-finding methodology, agency service demands, public testimony, and the availability of appropriated revenue. The board may also adjust payment rates, if determined appropriate, when federal or state laws, rules, standards, regulations, policies or guidelines are changed or adopted. These adjustments may result in increases or decreases in payment rates. The board determines whether the payment rates are within TDPRS's budget. If there are not sufficient revenues to reimburse providers at the rates determined by the cost-finding methodology, the board will inform providers that there are not sufficient revenues available to pay the determined rates. If the board finds that there is insufficient revenue to pay the determined rates and as long as this insufficiency exists, the board will reduce each level of care rate by the same percentage. The amount resulting from these across-the-board reductions to the level of care rates must be sufficient to allow the agency to operate within available revenues.

Source Note:The provisions of this §700.1802 adopted to be effective January 1, 1994, 18 TexReg 8975.