(a) General specifications. The Texas Health and Human Services Commission (HHSC) determines the upper payment limits and reimbursement rates for each PACE contractor. HHSC applies the general principles of cost determination as specified in §355.101 of this title (relating to Introduction).
(b) Frequency of reimbursement determination. The upper payment limits and reimbursement rates are determined coincident with the state's biennium.
(c) Upper payment limit determination. There are three upper payment limits calculated for each PACE contract: one for clients eligible only for Medicaid services (Medicaid-only clients), one for clients eligible for both Medicare and Medicaid services (dual-eligible clients), and one for clients eligible for only Medicare services as Qualified Medicare Beneficiaries (QMBs). An average monthly historical cost per client receiving nursing facility services and Home and Community Based Services (HCBS) under either the fee-for-service payment system or the managed care program is calculated for the counties served by each PACE contract for the upper payment limits for Medicaid-only clients and for dual-eligible clients.
  (1) The upper payment limits for Medicaid-only and for dual-eligible clients for the biennium are calculated for the base period using historical claims and encounter data and member-month data from the most recent state fiscal year of complete claims available prior to the state's biennium.
  (2) The historical costs are derived from claims data for clients age 55 and older receiving nursing facility services or HCBS in the counties served by each PACE contract.
  (3) The historical costs include:
    (A) acute care services, including inpatient, outpatient, professional, and other acute care services;
    (B) prescriptions;
    (C) medical transportation;
    (D) nursing facility services;
    (E) hospice services;
    (F) long-term care specialized services, such as physical therapy, occupational therapy, and speech therapy;
    (G) HCBS;
    (H) Primary Home Care (including Family Care) services; and
    (I) Day Activity and Health Services.
  (4) Effective on and after January 1, 2006, the historical prescription costs from paragraph (3)(B) of this subsection that are used in the calculation of the upper payment limit, and as such the associated payment rate, for dual-eligible clients for each PACE contract will exclude the costs of any drug that is in a category covered by Medicare Part D.
  (5) To determine an average monthly historical cost for the counties served by each PACE contract, the total historical claims data for the counties served by each PACE contract are divided by the number of member months for the counties served by each PACE contract.
  (6) An adjustment for administrative costs is added to the average monthly historical cost per client. The per member month amount is added for:
    (A) processing claims, based on the state's cost to process claims under the managed care payment system; and
    (B) case management, based on the state's cost to provide case management under the managed care payment system for HCBS clients.
  (7) The sum of the average monthly historical cost per client for each PACE contract and the amounts from paragraph (5) of this subsection are projected from the claims data base period identified in paragraph (1) of this subsection to the rate period to account for anticipated changes in costs for each PACE contract. The methodology used for trending historical costs for calculating PACE Upper Payment Limits (UPLs) and rates is comparable to that used for trending costs in the managed care program.
  (8) The PACE Upper Payment Limit (UPL) method may be adjusted to account for statistical outliers, small populations, programmatic changes, catastrophic events, or other economic changes, as determined by HHSC to be actuarially appropriate. Data from sources other than those described in paragraphs (1) and (2) of this subsection may be used, if deemed by HHSC necessary to calculate an appropriate UPL. For example, HHSC may consider comparable data from other time periods.
(d) HHSC determines the UPL for Qualified Medicaid Beneficiaries (QMBs) on a statewide basis using the average cost incurred by Medicaid for Medicare co-insurance and deductibles.
(e) Payment rate determination. HHSC calculates three reimbursement rates for each PACE contract: one for clients eligible for Medicaid services (Medicaid Only rate), one for clients eligible for both Medicare and Medicaid services (Dual Eligible rate), and one for clients eligible for only Medicare services as QMBs. The payment rates for the three client categories for each PACE contract are determined by multiplying the UPLs calculated for each PACE contract by a factor less than 1.0. HHSC may reduce the factor as necessary to establish a rate consistent with available funds.
  (1) In setting the reimbursement rates under the PACE program, HHSC complies with Texas Human Resources Code §32.0532(b).
  (2) The PACE payment rate is less than the amount that would otherwise have been paid under the Texas State Plan if the participants were not enrolled under the PACE program.
(f) Reporting of cost. HHSC may require the PACE contractor to submit financial and statistical information on a cost report or in a survey format designated by HHSC. Cost report completion is governed by the requirements specified in Subchapter A of this chapter (relating to Cost Determination Process). HHSC may also require the PACE contractor to submit audited financial statements.

Source Note: The provisions of this §355.501 adopted to be effective August 14, 2003, 28 TexReg 6265; amended to be effective April 15, 2004, 29 TexReg 3611; amended to be effective January 1, 2006, 30 TexReg 8657; amended to be effective March 1, 2011, 36 TexReg 232; amended to be effective October 27, 2016, 41 TexReg 8283