1115 Demonstration Waiver Extension Summary Health and Human Services Commission January 23, 2018

Tentative Timeline January 16 – February 1: Conference Call/Meeting with provider groups February 2: Begin drafting initial protocol February 12: Share draft with stakeholders February 14 – March 21: Review and revise draft March 30: Draft submitted to CMS

Uncompensated Care Pool & Payments Payment Protocol & Rules development timeline Draft UC protocol is due to CMS by March 30, 2018. Approval expected in 90 days. Draft Texas Administrative Code rule on UC payments to be published by July 31, 2018. Revised draft UC applications to CMS by May 1, 2019. Approval required by August 31, 2019. Revised UC protocol to be implemented by October 1, 2019. Final Texas Administrative Code rule on UC payments to be published by January 30, 2019, and effective by September 30, 2019. Failure to meet any of these deadlines will result in a 20% reduction in expenditure authority from the UC pool for the program year. The reductions are cumulative.

Charity Care Cost Principles (Allowable Costs) Distribution: For reimbursement from the UC pool, claimed costs must be: Uncompensated For Medicaid-covered services (i.e., meet the definition of “medical assistance” in §1905(a) of the Social Security Act) Be provided to uninsured individuals as charity care May include full or partial discounts provided to uninsured patients when The patient meets the provider’s charity care policy; and The charity care policy adheres to the principles of the Healthcare Financial Management Association STC 33

Charity Care Cost Principles (Allowable Costs) The UC Payment Protocol must include precise definitions of eligible uncompensated provider charity care costs (consistent with the Medicare cost reporting principles and revenues that must be included in the calculation of uncompensated charity care cost for purpose of reconciling UC payments to unreimbursed charity care cost). STC 33(b)

Charity Care Cost Principles (Allowable Costs) Hospitals Inpatient hospital costs Outpatient hospital costs Physician, mid-level, and pharmacy costs incurred by hospitals STCs do not specifically allow these costs. HHSC believes they are allowable based on verbal statements by CMS during negotiations and because they are referenced in STC 33(a)(iv)(“UC Payments for physicians, non-physician professionals, pharmacy, and clinic costs are not considered inpatient or outpatient Medicaid payments for the purpose of annual hospital specific DSH limits and the DSH audit rule”)

Charity Care Cost Principles (Allowable Costs) Non-hospital providers (physician practice groups, government ambulance providers, government dental providers) Uninsured costs only (consistent with the definition for hospital providers). HHSC will work with providers and CMS to define eligible costs for these provider groups.

Charity Care Cost Principles (Allowable Costs) Resizing the UC Pool: For resizing the UC Pool for DYs 9- 11, allowable costs are: Based on information reported by hospitals for 2017 on schedule S-10 of the CMS 2552-10; and For non-S-10 hospitals, based on CMS-approved “cost reports.” Non-allowable costs are: Non-hospital provider costs Hospitals’ uninsured charity costs that are not captured on the S-10

Questions from Providers Regarding distribution: Question: Will individual hospital UC payments be capped based on uninsured charity care cap or by HSL (or HSL + PCP)? At this time, we anticipate it will be based on uninsured charity care costs incurred by the hospital for providing inpatient services, outpatient services, physician and mid-level professional direct-patient care, and eligible pharmacy costs. The HSL will no longer be used for the purpose of distributing the UC pool.

Questions from Providers Regarding distribution: Question: Will the distribution of UC be blended over two hospital years that comprise the Federal Fiscal Year? We are discussing whether to do this for distribution/interim payments. At this time, we anticipate that we will blend the data for reconciliation purposes. We welcome your feedback on this issue.

Questions from Providers Regarding distribution: Question: What does CMS require be included in the protocol? Does the specific distribution methodology need to be included? The protocol must include: Precise definitions of eligible costs; Allowable source documents to support costs; Detailed instructions regarding the calculation and documentation of eligible costs; A timetable and reconciliation of payments; The twelve-month period for which costs will apply; and The methodology used to ensure that payments are distributed based on uncompensated cost, without any relationship to the source of the non-federal share. HHSC interprets this to mean that a specific distribution methodology must be included.

Questions from Providers Regarding resizing the pool: Question: For resizing, will the state and CMS use S- 10s for hospital fiscal years ending in 2017? Beginning in 2017? Or pro-rating S-10 data for hospitals with FYs spanning the 2017 federal fiscal year? HHSC would like to take the approach that will best capture eligible costs incurred by UC hospitals. We do not know which approach CMS would allow. We anticipate talking with CMS about this question.

Questions from Providers Regarding resizing the pool: Question: Could STC 33 (a)(iii) be used as the basis for negotiating adjustments to the S-10 reported UC for the DY 9 Pool Level determination? (For example, does STC 33 apply only to the UC application; or might CMS agree to allow providers to update their 2017 S-10s related to charity care policies?) We can ask, but at this time, we anticipate that the adjustments a hospital can request under STC 33(a)(iii) are for purposes of calculating interim payments (i.e., distribution) only. We believe CMS will allow us to use S-10s that have been amended and accepted by the hospital’s Medicare intermediary.

Information we need from you To help us develop a precise definition of eligible UC charity care costs, HHSC would like your help in better understanding the parameters of hospitals’ charity care policies. For example, it would help for us to know Does your hospital currently have a charity care policy in place? Does your policy adhere to HMFA guidelines? If based on FPL, what range does your hospital include for uninsured individuals? Is your charity care policy limited to Medicaid-covered services? If not, can you identify those costs within your greater charity-care costs? Do you consider a patient “uninsured” if they have insurance that does not cover the service provided? If not, can you identify those costs from your “insured” charity care costs?

Reportable Population Uninsured Charity Care

Information we need from you HHSC has not yet determined whether the source of the data that will be used for calculating payment amounts should be: A hospital’s S-10 attached to the cost report for the HFYE two years before the demonstration year A non-S-10 hospital would be required to submit its data on a form developed by HHSC for that purpose; or A UC application very similar to the current application, except that it limits self-reported costs to uninsured charity care (i.e., it excludes Medicaid shortfall, bad debt, and uninsured costs that don’t meet the hospital’s charity-care policy). In considering the source, HHSC will take into consideration multiple factors including administrative burden, continuity of established processes, ability to verify data, and maximizing the state’s ability to draw down federal matching funds. We welcome your feedback on this issue.

Information we need from you HHSC does not currently have the information we believe we need to estimate potential shifts in UC payments as a consequence of implementing the distribution methodology beginning in DY 9. We welcome your thoughts on the following questions: Based on the STC definitions as we now understand them, what changes in total eligible UC costs do you anticipate for your hospital? Please share projections or estimates you may have. Should HHSC place additional parameters around eligible uninsured charity-care costs? For example, for consistency of eligible UC costs among providers, should HHSC limit costs to services provided to uninsured individuals with income levels no greater than a particular FPL threshold? Are there any unintended consequences of implementing such a requirement?

Questions?