HHSC Plans Adoption of RUG Review Waiver Rule in April 2011

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On December 8, 2010, the Health and Human Services Commission("HHSC") Council approved proposed rule 1 Texas Administrative Code § 371.216, which is scheduled to be published in a January 2011 edition of the Texas Register. This new rule will allow long-term care providers that receive payment from the Texas Medicaid program to request that HHSC waive the use of extrapolation in HHSC's calculation of Medicaid overpayments to nursing facilities. The rule is scheduled for adoption in April 2011.

The HHSC's Office of Inspector General ("HHSC-OIG") conducts periodic utilization reviews of nursing facilities' level of care assessments of Medicaid residents to ensure that payments for Medicaid-covered services are appropriate. In 2008, HHSC converted from the Texas Index for Level of Effort ("TILE") to the federal Resource Utilization Group ("RUG") classification system and provider payment methodology. One aspect of the RUG methodology allows HHSC-OIG, in calculating overpayments to a facility, to extrapolate error rates for the sample population to the entire population of RUG classification groups found to be in error.

Conceding that neither HHSC-OIG nor providers were experienced in the use of extrapolation methodology, HHSC-OIG adopted rules allowing for — in HHSC-OIG's own words — a "phased, multi-year, graduated approach for implementing extrapolation." This approach, according to HHSC-OIG, was "designed to allow nurse reviewers and providers to acquaint themselves with the effects of the extrapolation methodology."

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