(a) Introduction. HHSC uses the methodology described in this section to calculate a per diem reimbursement for covered inpatient hospital services in freestanding psychiatric facilities.
(b) Reimbursement to freestanding psychiatric facilities. HHSC reimburses freestanding psychiatric facilities using a prospective facility-specific per diem rate. The per diem rate will be determined based on the Medicare base per diem for inpatient psychiatric facilities with facility-based adjustments for wages, rural location, and length of stay as determined by Medicare, to the extent possible within available funds. HHSC or its designee will not cost settle for services provided to recipients admitted as inpatients to freestanding psychiatric facilities reimbursed under the prospective payment system. The freestanding psychiatric facility inpatient per diem rates are for Medicaid clients under 21 years of age. Per diem rates will be increased only if the Texas Legislature appropriates funds for this specific purpose.
(c) Reimbursement to children's freestanding psychiatric facilities. An in-state freestanding psychiatric facility that serves primarily individuals under the age of 21 will be exempt from the freestanding psychiatric facility prospective payment system methodology described in subsection (b) of this section and instead be reimbursed under methods and procedures described in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) described in subsection (d) of this section, if the facility meets the following requirements:
  (1) After a Medicaid participating freestanding psychiatric facility is recognized by Medicare as a freestanding psychiatric facility, it must request of HHSC or its designee that the facility be reimbursed as a children's psychiatric hospital. The hospital must submit its request on or after September 1, 2008, in writing, to HHSC or its designee's provider enrollment contact and include documentation showing that during the previous two hospital fiscal years, at least 95 percent of the hospital's total inpatient days were for services to individuals under the age of 21. HHSC will cost settle the annual cost report for the hospital fiscal year in which the request was submitted.
  (2) After a freestanding psychiatric facility has been recognized by HHSC as a children's psychiatric hospital, it must annually submit documentation with its annual cost report to HHSC or its designee responsible for receiving submitted cost reports for continued recognition as a children's psychiatric hospital. The documentation must show that at least 95 percent of its total inpatient days were for services to individuals under the age of 21. A hospital that does not meet this 95 percent threshold based on its annual cost report will be reimbursed based on the prospective facility-specific per diem rate described in subsection (b) of this section, effective the first day of the hospital fiscal year following the cost reporting period in which the hospital did not meet the 95 percent threshold.
(d) Children's psychiatric hospital TEFRA reimbursement.
  (1) HHSC or its designee reimburses in-state children's psychiatric hospitals under methods and procedures described in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA).
  (2) Interim payments are determined by multiplying a hospital's charges allowed under Medicaid by the interim rate effective on the date of admission. The interim rate is derived from the hospital's most recent tentative or final Medicaid cost report settlement.
  (3) The amount and frequency of interim payments will be subject to the availability of funds appropriated for that purpose. Interim payments are subject to settlement at both tentative and final audit of a hospital's cost report.
  (4) Cost Settlement.
    (A) The cost settlement process is limited by the TEFRA target cap set pursuant to the Social Security Act §1886(b) (42 U.S.C. §1395ww(b)).
    (B) Notwithstanding the process in subparagraph (A) of this paragraph, HHSC or its designee uses each hospital's final audited cost report, which covers a fiscal year ending during a base year period, for calculating the TEFRA target cap for a hospital.
    (C) HHSC or its designee selects a new base year period for calculating the TEFRA target cap at least every three years.
    (D) HHSC increases a hospital's TEFRA target cap in years in which the target cap is not reset under this paragraph, by multiplying the target cap by the CMS Prospective Payment System Hospital Market Basket Index adjusted to the hospital's fiscal year.
    (E) For a newly recognized children's psychiatric hospital, the base year period for calculating the TEFRA target cap is the hospital's first full 12-month cost reporting period occurring after the effective date of recognition. For each cost reporting period after the hospital's base year period, an increase in the TEFRA target cap will be applied as described in subparagraph (D) of this paragraph, until the TEFRA target cap is recalculated in subparagraph (C) of this paragraph.

Source Note: The provisions of this §355.8060 adopted to be effective September 1, 2010, 35 TexReg 6512; amended to be effective September 1, 2013, 38 TexReg 5436