(a) Purpose of methodology. Performance-based add-on payments provide additional funding to nursing facilities that meet specific performance criteria.
(b) Funding source. Each fiscal year, the Commissioner of the Texas Health and Human Services Commission (HHSC) will identify the portion, if any, of Medicaid nursing facility service provider funding that will be designated for performance-based add-on payments. This amount is subsequently called the Performance-based Add-on Fund (PAF).
(c) Provider defined. For the purposes of this methodology, a nursing facility provider is a Medicaid long-term care contracted provider licensed and regulated by the Texas Department of Human Services (DHS).
(d) Provider eligibility. To be eligible for performance-based add-on payments, a provider must have had Medicaid-certified beds during the entire service period as defined in subsection (e) of this section.
(e) Service period. The service period for the first year of performance-based add-on payments will begin on September 1, 2000. Each service period will correspond to a state fiscal year that begins September 1 of one year and continues through August 31 of the following year.
(f) Performance criteria. Provider performance will be judged on the basis of compliance with state and federal regulations as well as on the basis of resident outcomes.
(g) Regulatory compliance. Compliance with state and federal regulations is a prerequisite for performance-based add-on payments.
(h) Regulatory compliance accountability period. Each provider's regulatory compliance will be determined as the lowest level of compliance attained on any regulatory visit to that provider during the service period and recorded in the Long-Term Care-Regulatory (LTC-R) data warehouse as of November 30 of the calendar year in which the service period ends. If the service period does not encompass a certification survey to the provider, then the most recently recorded certification visit prior to the service period will be included in the determination of the provider's regulatory compliance.
(i) Levels of regulatory compliance. The levels of regulatory compliance are based on Health Care Financing Administration (HCFA) State Operations Manual, Transmittal 274, June 1995, HCFA-Pub. 7. The following table provides the precise definition for each compliance level.
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(j) Resident outcomes. Resident outcomes are determined using a system of Quality Indicators (QIs) whose definitions were designed by the Center for Health Systems Research and Analysis (CHSRA) under contract to HCFA. These QIs are computed from resident assessment data transmitted directly from the facilities to the HCFA Minimum Data Set (MDS) automation system. The QI automation that will be used in the performance-based add-on system is the DHS implementation already in use for the Quality Reporting System (QRS).
(k) Resident outcomes performance indices. Provider performance with respect to resident outcomes is scored using two indices derived from QI scores. These indices are called the Potential Advantages Score (PAS) and the Potential Disadvantages Score (PDS).
(l) Potential advantages score. The following table provides the definitions for the PAS scale.
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(m) Potential disadvantages score. The following table provides the definitions for the PDS scale.
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(n) Determination of PAS and PDS. The PAS index is calculated by counting the number of QIs on which a provider appears at or below the 10th percentile performance threshold. The PDS index is calculated by counting the number of QI conditions on which either a provider appears at or above the 90th percentile performance threshold or on which it has a non-zero numerator for any one of three sentinel event QIs. The sentinel event QIs are dehydration, fecal impaction, and pressure sores in low risk residents. PAS and PDS indices are converted to PAS and PDS ratings using the definitions in the tables in subsection (l) and subsection (m) of this section.
(o) Determination of the 10th and 90th percentile QI performance thresholds.
  (1) For defining the 10th and 90th percentile performance thresholds, the QI scale is divided into 100 steps. The PAS threshold is defined as the smallest QI value (in .01 steps) that yields the largest percentile less than or equal to 10%. The PDS threshold is defined as the largest QI value (in .01 steps) that yields the smallest percentile greater than or equal to 90%.
  (2) If because of the distribution of QI scores, the 10th percentile performance threshold for a particular QI cannot be determined, then that QI is excluded from those that can count toward PAS. Similarly, a QI is excluded from those that can count toward PDS if the 90th percentile threshold cannot be determined.
  (3) For the three QIs that HCFA identifies as sentinel events (dehydration, pressure sores in low risk residents, and fecal impaction), a single occurrence counts toward the PDS. Sentinel event QIs have neither a PAS nor PDS threshold.
(p) Resident outcomes performance accountability period. Each provider's Resident Outcomes Performance Indices will be determined from MDS resident assessments with assessment dates during the service period and recorded in the DHS Quality Reporting System's MDS database as of November 30 of the calendar year in which the service period ends.
(q) Calculation of yearlong quality indicators. QI values are simple quotients consisting of a numerator and a denominator. The numerators and denominators of each provider's QIs will be calculated for each of the four quarters that span the service period. If a lack of provider MDS data prevents QI calculations for any quarter, the provider will become ineligible for performance-based add-on payments. The four numerators for each provider QI will be summed to create a yearlong provider numerator. The four denominators for each provider QI will be summed to create a yearlong provider denominator. The resulting yearlong QI numerators and denominators will be used to determine the 10th and 90th percentile performance thresholds using the methods described in subsection (o) of this section.
(r) Determination of provider performance units. Total Performance Units (TPU) will be calculated for each eligible provider using the formula: Provider TPU = #Medicaid Days x C x (A + B), where "#Medicaid Days" is the number of Medicaid days of service that were provided during the service period, and "A", "B", and "C" are the performance weights as detailed in subsection (l) of this section for PAS, subsection (m) of this section for PDS, and subsection (i) of this section for Regulatory Compliance.
(s) Determination of add-on payment per performance unit. The amount of additional payment for each performance unit (PPU) will be calculated from the formula, PPU = PAF/ (sum of the provider TPU of all eligible facilities).
(t) Determination of provider performance pay. The total amount of performance-based pay due to each provider will be calculated from the formula, Provider Performance Pay = Provider TPU x PPU.
(u) Review of DHS determination.
  (1) DHS or its designee notifies nursing facilities of their tentative eligibility for provider performance pay during the service period. Any nursing facility, including those nursing facilities that do not qualify or that contend that the amount of payment to be disbursed is incorrect, is allowed to request a review by DHS or its designee. The actual amount of payment also may vary if a successful review request by one or more nursing facilities necessitates an adjustment in the amount of payments to the other nursing facilities in the program. The review must be completed before November 30 after the regulatory compliance accountability period. Because of the state's ongoing review of data elements used in the formulas after DHS or its designee notifies the nursing facilities of their dollar amount reward, it is possible that a nursing facility may either gain or lose eligibility after receiving tentative notification, which would affect payment amounts.
  (2) Deficiencies recorded in the Long Term Care-Regulatory (LTC-R) data systems as of November 30 of the calendar year in which the service period ends will be included in the determination of performance weight C. Contested deficiencies pending Informal Dispute Resolution (IDR), but recorded in LTC-R data systems, will be included in the determination of performance weight C. MDS assessment corrections that have not been recorded in the appropriate automation system as of November 30 of the calendar year in which the service period ends will not be considered in the determination of provider performance weights A and B.
  (3) The performance-based add-on payment methodology is designed to disburse the entire performance-based add-on fund. Once the payments are made, no additional review or appeal is available to the nursing facilities.
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