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:
      Attached Graphic
      

   9. (9) TDPRS includes therapy costs in its recommended payment rates for emergency shelters. TDPRS includes therapy costs in its recommended payment rates for Levels of Care 3 through 6, which will be considered as allowable costs for inclusion on the provider's annual cost report, only if one of the following conditions apply. The provider must access Medicaid for therapy for children in their care unless:

      1. (A) the child is not eligible for Medicaid or is transitioning from Medicaid Managed care to fee-for-service Medicaid; or
      2. (B) the necessary therapy is not a service allowable under Medicaid; or
      3. (C) service limits have been exhausted and the provider has been denied an extension; or
      4. (D) there are no Medicaid providers available that meet the needs identified in the service plan within 45 miles to provide the therapy; or
      5. (E) it is essential and in the child's best interest for a non-Medicaid provider to provide therapy to the child and arrange for a smooth coordination of services for a transitional period of time not to exceed 90 days or 14 sessions. Any exception beyond the 90 days or 14 sessions must be approved by TDPRS prior to the provision of services.
   10. (10) TDPRS will remove the additional staffing cost that was added to the reported cost report expenses for Level of Care 5 to accommodate the staffing requirement set forth in the monitoring standards for Level of Care 5 effective September 1, 1994, at which time costs associated with meeting the staffing requirement at Level of Care 5 should be fully reflected in the cost base used to determine rates.

   11. (11) TDPRS calculates an occupancy rate for each provider based on that provider's maximum program capacity, total days of service and number of days in the provider's reporting period. TDPRS also calculates a median occupancy rate for each level of care. Since TDPRS is unable to compute an occupancy rate for TDPRS foster group homes at Level of Care 2, the median occupancy rate for Level of Care 2 is calculated without TDPRS foster group homes.

       1. (A) The formula for calculating a provider's occupancy rate is as follows. The provider's maximum program capacity is multiplied by the number of days in the provider's reporting period. The result of this calculation is divided into the provider's total days of service and multiplied by 100 to convert the result to a whole number. Occupancy Rate = (Total days of service/(maximum program capacity times number of days in provider's reporting period)) times 100.
       2. (B) To calculate the median occupancy rate for each level of care, the occupancy rates of providers who have 60% or more of their days of service within one level of care are placed in an array and arranged from the lowest provider occupancy rate to the highest provider occupancy rate. The median or middle provider's occupancy rate from each level of care occupancy array becomes the median occupancy rate for that level of care. If a provider's occupancy rate for a given level of care is below the median occupancy rate for that level of care, TDPRS adjusts the provider's administration, transportation, donated transportation, building, donated building, educational building, and donated educational building expenses by multiplying each of these expenses by the provider's calculated occupancy adjustment factor and subtracting the result of that multiplication from the expense to be adjusted. The occupancy adjustment factor is determined by dividing the provider's occupancy rate by the median occupancy rate and subtracting that result from one. If the provider's occupancy rate is above the median, no occupancy adjustment is made.
   12. (12) TDPRS projects allowable expenses in each cost area for the period between each provider's reporting period and the next effective rate period. TDPRS uses the Implicit Price Deflator - Personal Consumption Expenditures (IPD-PCE) index, which is a general cost inflation index, and other item-specific inflation indices to calculate these projected allowable expenses. The IPD-PCE is a nationally recognized measure of inflation published by the Bureau of Economic Analysis of the United States Department of Commerce. TDPRS uses the lowest feasible IPD-PCE forecast consistent with the forecasts of nationally recognized sources available to TDPRS at the time the rates are prepared. The item-specific inflation indices are the Federal Insurance Contributions Act (FICA) or social security and Medicare payroll taxes set by federal statute, the workers' compensation insurance (WCI) tax rate determined annually by the Texas State Board of Insurance, and the federal and state unemployment (FUTA/SUTA) rates obtained from the Texas Employment Commission (TEC). If tax rates for the prospective rate period for FICA or FUTA/SUTA or WCI are not known, TDPRS bases its projections on the compounded annual rate of change in these tax rates from the most recent consecutive two-year period for which data are available at the time reimbursement rates are determined. Upon written request, TDPRS will provide inflation factor amounts used to determine rates. Depreciation expenses and mortgage interest expenses are not projected.
   13. (13) TDPRS adds each provider's projected allowable costs in all of the cost areas specified in paragraph (7)(A)-(G) of this subsection in order to obtain a projected total cost for each provider.
   14. (14) TDPRS ranks the projected total costs of all providers from low to high in each level of care cost array for Levels of Care 2 through 6 and emergency shelters.
   15. (15) TDPRS uses the projected total costs of providers who have 60% or more of their days of service within one level of care in the cost array for that level of care. For rate setting purposes, emergency shelters are considered to have 100% of their days of service at the same level.
   16. (16) TDPRS excludes from each level of care cost array and from its reimbursement determination any provider's total cost that exceeds two standard deviations above or below the mean total cost.
   17. (17) TDPRS determines the median projected total cost from each cost array for Levels of Care 2 through 6 and emergency shelters. The median projected total cost becomes the recommended payment rate.
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.
5. (e) To implement Chapter 1022 of the Acts of the 75th Texas Legislature, §103, the executive director may develop and implement one or more pilot competitive procurement processes to purchase substitute care services, including foster family care services and specialized substitute care services. The pilot programs must be designed to produce a substitute care system that is outcome-based and that uses TDPRS's outcome measures. Rates for the pilot(s) will be the result of the competitive procurement process, but must be found to be reasonable by the executive director. Rates are subject to adjustment as allowed in subsection (d) of this section.

Source Note:The provisions of this §700.1802 adopted to be effective January 1, 1994, 18 TexReg 8975; amended to be effective November 1, 1999, 24 TexReg 5215; amended to be effective December 21, 2000, 25 TexReg 12450.