(a) Introduction. Reimbursement is available to a Local Education Agency (LEA) for providing certain direct medical and transportation services, known as SHARS, to a Medicaid-enrolled student with a disability age 20 years of age or younger. SHARS services are described in and must be prescribed in accordance with §354.1341 of this title (relating to Benefits and Limitations).
(b) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise.
  (1) Cost report--An annual report documenting the LEA's Medicaid-allowable costs for all SHARS delivered during the previous federal fiscal year. The cost report is due on or before April 1 of the year following the reporting period and must be certified in a manner specified by the Texas Health and Human Services Commission (HHSC). The primary purposes of the cost report are to:
    (A) document the LEA's total Medicaid-allowable costs for delivering SHARS, including direct costs and indirect costs, based on federally mandated cost allocation methodologies; and
    (B) reconcile interim payments to total Medicaid-allowable costs based on approved cost allocation methodology procedures.
  (2) Eligible student--A Medicaid-enrolled student with a disability age 20 years of age or younger that receives a direct medical or transportation service as prescribed by §354.1341 of this title.
  (3) Interim claim--A claim for a direct medical or transportation service paid at the interim rate that is provisional in nature pending the completion of a cost reconciliation and cost settlement for the cost reporting period.
  (4) Local Education Agency (LEA)--A Texas independent school district or public charter school.
  (5) Time study--A statistically valid random sampling method used to identify the percentage of time spent performing actual direct medical services irrespective of payer and administrative cost.
(c) Parental Consent. Prior to submitting its annual cost report, the LEA must meet the parental consent requirements in §354.1342 of this title (relating to Conditions for Participation) for each student included in the numerator of the following ratios required in the cost report.
  (1) IEP ratio--A comparison of the total number of students enrolled in Medicaid with individualized education programs (IEPs) requiring direct medical services to the total number of students with IEPs requiring direct medical services.
  (2) One-way trip ratio--A comparison of the total one-way trips for students enrolled in Medicaid with IEPs requiring specialized transportation services, who received direct medical services the same day, to the total one-way trips for all students with IEPs requiring specialized transportation services.
  (3) Section 504 Plan ratio--A comparison of the total number of students enrolled in Medicaid with Section 504 Plans requiring audiology services to the total number of students with Section 504 Plans requiring audiology services.
(d) Time study. The LEA must participate in the HHSC-administered time study in the manner prescribed by HHSC.
(e) Reimbursement methodology. LEAs are reimbursed for direct medical and transportation services provided under the SHARS program on a cost basis.
  (1) Interim rates. The interim rate is developed based on a percentage of the average per-unit cost for each SHARS service using actual cost data collected on cost reports and is subject to change under §355.109 of this chapter (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs). Interim rates are updated annually or as determined by HHSC.
  (2) Interim claims.
    (A) LEAs must submit:
      (i) at least one interim claim for each direct medical service that an eligible student receives within the cost report period;
      (ii) interim claims for all personal care services that an eligible student receives within the cost report period; and
      (iii) interim claims for all eligible specialized transportation trips provided within the cost report period.
    (B) Requirements for interim claims will be adjusted as needed based on direction from the Centers for Medicare and Medicaid Services.
    (C) Interim claims must be valid and reimbursed to meet the requirements in this paragraph.
  (3) Interim payment. LEAs are reimbursed for SHARS direct medical services and transportation services per unit of service at the lesser of:
    (A) the LEA's billed charges; or
    (B) the interim rate.
  (4) Final reimbursement. The LEA's final reimbursement amount is arrived at by a cost reconciliation and cost settlement process. As reported in the cost report, the LEA's total costs for both direct medical and transportation services are adjusted using the federally mandated allocation methodologies.
    (A) Direct medical services costs. Salary and contract costs must be reported in the manner prescribed by HHSC.
      (i) Direct costs. From the annual cost report, HHSC aggregates allowable costs for direct medical services, resulting in total direct costs. Direct costs for direct medical services include payroll costs and other costs that can be directly charged to direct medical services provided by contractors and LEA staff (i.e., salaries, benefits, and contract compensation). Direct medical services costs do not include transportation personnel costs.
      (ii) Indirect costs. Indirect costs are determined by applying the LEA's specific unrestricted indirect cost rate to its net direct costs. Texas LEAs use predetermined fixed rates for indirect costs. The Texas Education Agency (TEA) has, in cooperation with the United States Department of Education (USDE), developed an indirect cost plan to be used by LEAs in Texas. As authorized in 34 CFR §75.561(b), TEA approves unrestricted indirect cost rates for LEAs for the USDE, which is the cognizant agency for LEAs.
      (iii) Net allowable cost. Direct and indirect costs are added together and adjusted by the direct medical time study percentage, the IEP ratio, and the 504 Plan ratio, resulting in a net Medicaid allowable cost for direct medical services.
    (B) Transportation services. Salary and contract costs must be reported in the manner prescribed by HHSC.
      (i) Direct costs. From the annual cost report, HHSC aggregates allowable direct costs for transportation, resulting in total direct costs. Direct costs for covered transportation services include payroll costs and other costs that can be directly charged to covered transportation services. Direct payroll costs include total compensation (i.e., salaries, benefits, and contract compensation) of bus drivers and mechanics. Other direct costs include costs directly related to the delivery of covered transportation services, such as professional and contracted services, contracted transportation costs, gasoline and other fuels, other maintenance and repair costs, vehicle insurance, interest, rentals, and vehicle depreciation.
      (ii) Indirect costs. Indirect costs are determined by applying the LEA's specific unrestricted indirect cost rate to its net direct costs. Texas public LEAs use predetermined fixed rates for indirect costs. TEA has, in cooperation with the USDE, developed an indirect cost plan to be used by LEAs in Texas. As authorized in 34 CFR §75.561(b), TEA approves unrestricted indirect cost rates for LEAs for the USDE, which is the cognizant agency for LEAs.
      (iii) Net allowable cost. Net direct costs and indirect costs are added together and adjusted by the one-way trip ratio, resulting in a net Medicaid allowable cost for transportation services.
(f) Cost reporting requirements. HHSC excludes from reimbursement determinations any unallowable expenses included in the cost report and makes the appropriate adjustments to expenses and other information reported by LEAs.
  (1) Certification. Each LEA certifies through the cost report process its total actual federal and non-federal costs and expenditures.
  (2) Reimbursement determinations and allowable costs. LEAs are responsible for reporting only allowable costs on the cost report, except where HHSC prescribes that other costs are to be reported in specific lines or sections. Only allowable cost information is used to determine recommended reimbursement. All costs relating to Shared Service Arrangements and Co-operatives must be allocated to each respective LEA.
(g) Cost reconciliation. The Medicaid-allowable costs for direct medical and transportation services are added together and adjusted by the federal Medicaid assistance percentage (FMAP) to arrive at the federal share owed to the LEA. This amount is then reconciled with interim payments already made to the LEA.
(h) Cost settlement. HHSC uses a cost settlement process as follows.
Cont'd...