(a) Reviews conducted under the TMRP, TEFRA, and facility-specific per diem methodology may result in denials of claims. HHSC notifies the hospital in writing of the denial decision and instructs the claims administrator to recoup payment. If a hospital claim is denied for lack of medical necessity or for being provided in an inappropriate setting, HHSC considers for denial physician and/or non-physician Medicaid provider claims associated with the hospital admission or service when such claims can be identified and are deemed to be the result of inappropriate admission orders. Physicians and/or non-physician providers are notified in writing if the claim for professional services is denied. The written notification of denial explains the appeal process. Types of denials are:
  (1) Admission and days of stay denials. A physician consultant under contract with HHSC makes all decisions regarding medical necessity, cause of readmission, and appropriateness of setting.
  (2) Technical denials. HHSC issues a technical denial when a hospital fails to make the complete medical record available for review within specified time frames. These services may not be rebilled on an outpatient basis.
    (A) For on-site reviews, if the complete medical record is not made available during the on-site review, HHSC issues a preliminary technical denial at that time. The hospital is allowed 60 calendar days from the date of the exit conference to provide the complete medical record to HHSC. If the complete medical record is not received by HHSC within this time frame, HHSC issues a final technical denial. If HHSC requests a copy of the medical record in writing, and the copy is not received within the specified time frame, HHSC issues a preliminary technical denial by certified mail or fax machine. The hospital has 60 calendar days from the date of the notice to submit the complete medical record. If the complete medical record is not received by HHSC within this time frame, HHSC issues a final technical denial.
    (B) For mail-in reviews, HHSC requests copies of medical records in writing. If HHSC does not receive the complete medical record within the specified time frame, HHSC issues a preliminary technical denial by certified mail or fax machine. The hospital has 60 calendar days from the date of the notice to submit the complete medical record. If HHSC does not receive the complete medical record within this specified time frame, HHSC issues a final technical denial.
  (3) Readmission denial. If it is determined that the services provided in the second or subsequent admissions were the direct result of a premature discharge or should have been provided in the first or previous admission, HHSC denies the admission in question.
  (4) Day outlier denial. If it is determined that any days qualifying as outlier days during the admission were not medically necessary, HHSC denies those days.
  (5) Cost outlier denial. If it is determined that services delivered were not medically necessary, not ordered by a physician and/or authorized non-physician, not rendered or billed appropriately, or not substantiated in the medical record, HHSC denies those services.
(b) When an admission denial or day of stay denial is issued, HHSC directs the claims administrator to recoup payment. If a hospital claim is denied for lack of medical necessity or for being provided in an inappropriate setting, HHSC considers for denial physician and/or non-physician Medicaid provider claims associated with the hospital admission or service when such claims can be identified and are deemed to be the result of inappropriate admission orders. HHSC makes an exception in the case of TMRP hospitals if the patient was placed in observation and HHSC notified the hospital that it may submit a revised outpatient claim solely for medically necessary outpatient services provided during the Texas Medicaid Provider Procedures Manual (TMPPM), or any subsequent provider manuals, defined observation period. A physician's order for observation must be present in the physician's orders to document that the patient was placed in outpatient observation. The hospital must submit the revised outpatient claim and a copy of HHSC's notification letter to the claims administrator at the address indicated in the notification letter. The claims administrator must receive the outpatient claim and copy of the notification letter within 120 calendar days of the date of the notification letter. The claims administrator may consider payment for the medically necessary services provided during the TMPPM-defined observation period. The hospital may provide observation services in any part of the hospital where a patient can be assessed, monitored, and treated.

Source Note: The provisions of this §371.206 adopted to be effective June 14, 1989, 14 TexReg 2624; amended to be effective February 1, 1991, 16 TexReg 232; amended to be effective January 1, 1993, 17 TexReg 8457; transferred effective September 1, 1993, as published in the Texas Register January 28, 1994, 19 TexReg 589; amended to be effective November 22, 1995, 20 TexReg 9274; amended to be effective March 25, 1996, 21 TexReg 2079; transferred effective September 1, 1997, as published in the Texas Register February 18, 2000,25 TexReg1308; amended to be effective March 30, 2003, 28 TexReg 2481; amended to be effective January 11, 2004, 29 TexReg 357; amended to be effective April 14, 2004, 29 TexReg 3611; amended to be effective January 1, 2014, 38 TexReg 9479; amended to be effective May 1, 2016, 41 TexReg 2941