By: Nelson  S.B. No. 7
         (In the Senate - Filed March 12, 2009; March 18, 2009, read
  first time and referred to Committee on Health and Human Services;
  April 15, 2009, reported adversely, with favorable Committee
  Substitute by the following vote:  Yeas 9, Nays 0; April 15, 2009,
  sent to printer.)
 
  COMMITTEE SUBSTITUTE FOR S.B. No. 7 By:  Nelson
 
 
A BILL TO BE ENTITLED
 
AN ACT
 
  relating to strategies for and improvements in quality of health
  care and care management provided through health care facilities
  and through the child health plan and medical assistance programs
  designed to improve health outcomes.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  CHILD HEALTH PLAN AND MEDICAID PILOT PROGRAMS.  
  Subchapter B, Chapter 531, Government Code, is amended by adding
  Sections 531.0993 and 531.0994 to read as follows:
         Sec. 531.0993.  OBESITY PREVENTION PILOT PROGRAM. (a)  The
  commission and the Department of State Health Services shall
  coordinate to establish a pilot program designed to:
               (1)  decrease the rate of obesity in child health plan
  program enrollees and Medicaid recipients;
               (2)  improve the nutritional choices and increase
  physical activity levels of child health plan program enrollees and
  Medicaid recipients; and
               (3)  achieve long-term reductions in child health plan
  and Medicaid program costs incurred by the state as a result of
  obesity.
         (b)  The commission and the Department of State Health
  Services shall implement the pilot program in one or more health
  care service regions in this state, as selected by the commission.
  In selecting the regions for participation, the commission shall
  consider the degree to which child health plan program enrollees
  and Medicaid recipients in the region are at higher than average
  risk of obesity.
         (c)  In developing the pilot program, the commission and the
  Department of State Health Services in consultation with the Health
  Care Quality Advisory Committee established under Section 531.0995
  shall identify measurable goals and specific strategies for
  achieving those goals.  The specific strategies may be
  evidence-based to the extent evidence-based strategies are
  available for the purposes of the program.
         (d)  Not later than November 1, 2011, the Health and Human
  Services Commission shall submit a report to the standing
  committees of the senate and house of representatives having
  primary jurisdiction over the child health plan and Medicaid
  programs regarding the results of the pilot program under this
  section. The report must include:
               (1)  a summary of the identified goals for the program
  and the strategies used to achieve those goals;
               (2)  an analysis of the data collected in the program
  and the capability of the data to measure achievement of the
  identified goals;
               (3)  a recommendation regarding the continued
  operation of the pilot program; and
               (4)  a recommendation regarding whether the program
  should be implemented statewide.
         (e)  The executive commissioner may adopt rules to implement
  this section.
         Sec. 531.0994.  MEDICAL HOME FOR CHILD HEALTH PLAN PROGRAM
  ENROLLEES AND MEDICAID RECIPIENTS. (a)  In this section, "medical
  home" means a primary care provider who provides preventive and
  primary care to a patient on an ongoing basis and coordinates with
  specialists when health care services provided by a specialist are
  needed.
         (b)  The commission shall establish a pilot program in one or
  more health care service regions in this state designed to
  establish a medical home for each child health plan program
  enrollee and Medicaid recipient participating in the pilot program.
  A primary care provider participating in the program may designate
  a care coordinator to support the medical home concept.
         (c)  The commission shall develop in consultation with the
  Health Care Quality Advisory Committee established under Section
  531.0995 the pilot program in a manner that bases payments made, or
  incentives provided, to a participant's medical home on factors
  that include measurable wellness and prevention criteria, use of
  best practices, and outcomes.
         (d)  Not later than January 1, 2011, the commission shall
  submit a report to the standing committees of the senate and house
  of representatives having primary jurisdiction over the child
  health plan and Medicaid programs regarding the status of the pilot
  program under this section. The report must include:
               (1)  recommendations regarding the continued operation
  of the pilot program or whether the program should be implemented
  statewide; or
               (2)  if the commission cannot make the recommendations
  described by Subdivision (1) due to an insufficient amount of data
  having been collected at the time of the report, statements
  regarding the time frames within which the commission anticipates
  collecting sufficient data and making those recommendations.
         SECTION 2.  HEALTH CARE QUALITY ADVISORY COMMITTEE.
  (a)  Subchapter B, Chapter 531, Government Code, is amended by
  adding Section 531.0995 to read as follows:
         Sec. 531.0995.  HEALTH CARE QUALITY ADVISORY COMMITTEE.
  (a)  The commission shall establish the Health Care Quality
  Advisory Committee to assist the commission as specified by
  Subsection (d) with defining best practices and quality performance
  with respect to health care services and setting standards for
  quality performance by health care providers and facilities for
  purposes of programs administered by the commission or a health and
  human services agency.
         (b)  The executive commissioner shall appoint the members of
  the advisory committee. The committee must consist of health care
  providers, representatives of health care facilities, and other
  stakeholders interested in health care services provided in this
  state.  At least one member must be a physician who has clinical
  practice expertise, and at least one member must be a member of the
  Advisory Panel on Health Care-Associated Infections and
  Preventable Adverse Events who meets the qualifications prescribed
  by Section 98.052(a)(4), Health and Safety Code.
         (c)  The executive commissioner shall appoint the presiding
  officer of the advisory committee.
         (d)  The advisory committee shall advise the commission on:
               (1)  measurable goals for the obesity prevention pilot
  program under Section 531.0993;
               (2)  measurable wellness and prevention criteria and
  best practices for the medical home pilot program under Section
  531.0994;
               (3)  quality of care standards, evidence-based
  protocols, and measurable goals for quality-based payment
  initiatives pilot programs implemented under Subchapter W; and
               (4)  any other quality of care standards,
  evidence-based protocols, measurable goals, or other related
  issues with respect to which a law or the executive commissioner
  specifies that the committee shall advise.
         (b)  The executive commissioner of the Health and Human
  Services Commission shall appoint the members of the Health Care
  Quality Advisory Committee not later than November 1, 2009.
         SECTION 3.  UNCOMPENSATED HOSPITAL CARE DATA.  (a)  The
  heading to Section 531.551, Government Code, is amended to read as
  follows:
         Sec. 531.551.  UNCOMPENSATED HOSPITAL CARE REPORTING AND
  ANALYSIS; HOSPITAL AUDIT FEE.
         (b)  Section 531.551, Government Code, is amended by
  amending Subsections (a) and (d) and adding Subsections (a-1),
  (a-2), and (m) to read as follows:
         (a)  Using data submitted to the Department of State Health
  Services under Subsection (a-1), the [The] executive commissioner
  shall adopt rules providing for:
               (1)  a standard definition of "uncompensated hospital
  care" that reflects unpaid costs incurred by hospitals and accounts
  for actual hospital costs and hospital charges and revenue sources;
               (2)  a methodology to be used by hospitals in this state
  to compute the cost of that care that incorporates the standard set
  of adjustments described by Section 531.552(g)(4); and
               (3)  procedures to be used by those hospitals to report
  the cost of that care to the commission and to analyze that cost.
         (a-1)  To assist the executive commissioner in adopting and
  amending the rules required by Subsection (a), the Department of
  State Health Services shall require each hospital in this state to
  provide to the department, not later than a date specified by the
  department, uncompensated hospital care data prescribed by the
  commission. Each hospital must submit complete and adequate data,
  as determined by the department, not later than the specified date.
         (a-2)  The Department of State Health Services shall notify
  the commission of each hospital in this state that fails to submit
  complete and adequate data required by the department under
  Subsection (a-1) on or before the date specified by the department.
  Notwithstanding any other law and to the extent allowed by federal
  law, the commission may withhold Medicaid program reimbursements
  owed to the hospital until the hospital complies with the
  requirement.
         (d)  If the commission determines through the procedures
  adopted under Subsection (b) that a hospital submitted a report
  described by Subsection (a)(3) with incomplete or inaccurate
  information, the commission shall notify the hospital of the
  specific information the hospital must submit and prescribe a date
  by which the hospital must provide that information.  If the
  hospital fails to submit the specified information on or before the
  date prescribed by the commission, the commission shall notify the
  attorney general of that failure.  On receipt of the notice, the
  attorney general shall impose an administrative penalty on the
  hospital in an amount not to exceed $10,000.  In determining the
  amount of the penalty to be imposed, the attorney general shall
  consider:
               (1)  the seriousness of the violation;
               (2)  whether the hospital had previously committed a
  violation; and
               (3)  the amount necessary to deter the hospital from
  committing future violations.
         (m)  The commission may require each hospital that is
  required under 42 C.F.R. Section 455.304 to be audited to pay a fee
  to offset the cost of the audit in an amount determined by the
  commission.  The total amount of fees imposed on hospitals as
  authorized by this subsection may not exceed the total cost
  incurred by the commission in conducting the required audits of the
  hospitals.
         (c)  As soon as possible after the date the Department of
  State Health Services requires each hospital in this state to
  initially submit uncompensated hospital care data under Subsection
  (a-1), Section 531.551, Government Code, as added by this section,
  the executive commissioner of the Health and Human Services
  Commission shall adopt rules or amendments to existing rules that
  conform to the requirements of Subsection (a), Section 531.551,
  Government Code, as amended by this section.
         SECTION 4.  MEDICAL TECHNOLOGY; ELECTRONIC HEALTH
  INFORMATION EXCHANGE PROGRAM.  (a)  Chapter 531, Government Code,
  is amended by adding Subchapter V to read as follows:
  SUBCHAPTER V. ELECTRONIC HEALTH INFORMATION EXCHANGE PROGRAM
         Sec. 531.901.  DEFINITIONS. In this subchapter:
               (1)  "Electronic health record" means an electronic
  record of health-related information concerning a person that
  conforms to nationally recognized interoperability standards and
  that can be created, managed, and consulted by authorized health
  care providers.
               (2)  "Health information exchange system" means the
  electronic health information exchange system created under this
  subchapter that electronically moves health-related information
  among entities according to nationally recognized standards.
               (3)  "Local or regional health information exchange"
  means a health information exchange operating in this state that
  securely exchanges electronic health information, including
  information for patients receiving services under the child health
  plan or Medicaid program, among hospitals, clinics, physicians'
  offices, and other health care providers that are not owned by a
  single entity or included in a single operational unit or network.
         Sec. 531.902.  ELECTRONIC HEALTH INFORMATION EXCHANGE
  SYSTEM. (a)  The commission shall develop an electronic health
  information exchange system to improve the quality, safety, and
  efficiency of health care services provided under the child health
  plan and Medicaid programs.  In developing the system, the
  commission shall ensure that:
               (1)  the confidentiality of patients' health
  information is protected and the privacy of those patients is
  maintained;
               (2)  appropriate information technology systems used
  by the commission and health and human services agencies are
  interoperable; and
               (3)  the system and external information technology
  systems are interoperable in receiving and exchanging appropriate
  electronic health information as necessary to enhance the
  comprehensive nature of the information contained in electronic
  health records.
         (b)  The commission shall implement the health information
  exchange system in stages as described by this subchapter, except
  that the commission may deviate from those stages if technological
  advances make a deviation advisable or more efficient.
         (c)  The health information exchange system must be
  developed in accordance with the Medicaid Information Technology
  Architecture (MITA) initiative of the Center for Medicaid and State
  Operations.
         Sec. 531.903.  ELECTRONIC HEALTH INFORMATION EXCHANGE
  SYSTEM ADVISORY COMMITTEE. (a)  The commission shall establish the
  Electronic Health Information Exchange System Advisory Committee
  to assist the commission in the performance of the commission's
  duties under this subchapter.
         (b)  The executive commissioner shall appoint to the
  advisory committee at least 12 and not more than 15 members who have
  an interest in health information technology and who have
  experience in serving persons receiving health care through the
  child health plan and Medicaid programs.
         (c)  The advisory committee must include the following
  members:
               (1)  Medicaid providers;
               (2)  child health plan program providers;
               (3)  fee-for-service providers;
               (4)  at least one representative of the Texas Health
  Services Authority established under Chapter 182, Health and Safety
  Code;
               (5)  at least one representative of each health and
  human services agency;
               (6)  at least one representative of a major provider
  association;
               (7)  at least one representative of a health care
  facility;
               (8)  at least one representative of a managed care
  organization;
               (9)  at least one representative of the pharmaceutical
  industry; and
               (10)  at least one representative of a local or
  regional health information exchange.
         (d)  The members of the advisory committee must represent the
  geographic and cultural diversity of the state.
         (e)  The executive commissioner shall appoint the presiding
  officer of the advisory committee.
         (f)  The advisory committee shall advise the commission on
  issues regarding the development and implementation of the
  electronic health information exchange system, including any issue
  specified by the commission and the following specific issues:
               (1)  data to be included in an electronic health
  record;
               (2)  presentation of data;
               (3)  useful measures for quality of service and patient
  health outcomes;
               (4)  federal and state laws regarding privacy and
  management of private patient information;
               (5)  incentives for increasing health care provider
  adoption and usage of an electronic health record and the health
  information exchange system; and
               (6)  data exchange with local or regional health
  information exchanges to enhance the comprehensive nature of the
  information contained in electronic health records.
         (g)  The advisory committee shall collaborate with the Texas
  Health Services Authority to ensure that the health information
  exchange system is interoperable with, and not an impediment to,
  the electronic health information infrastructure that the
  authority assists in developing.
         Sec. 531.904.  STAGE ONE:  ELECTRONIC HEALTH RECORD.
  (a)  In stage one of implementing the health information exchange
  system, the commission shall develop and establish a claims-based
  electronic health record for each person who receives medical
  assistance under the Medicaid program.  The electronic health
  record must be available through a browser-based format.
         (b)  The executive commissioner shall adopt rules specifying
  the information required to be included in the electronic health
  record. The required information may include, as appropriate:
               (1)  the name and address of each of the person's health
  care providers;
               (2)  a record of each visit to a health care provider,
  including diagnoses, procedures performed, and laboratory test
  results;
               (3)  an immunization record;
               (4)  a prescription history;
               (5)  a list of due and overdue Texas Health Steps
  medical and dental checkup appointments; and
               (6)  any other available health history that health
  care providers who provide care for the person determine is
  important.
         (c)  Information under Subsection (b) may be added to any
  existing electronic health record or health information technology
  and may be exchanged with local and regional health information
  exchanges.
         (d)  The commission shall make an electronic health record
  for a patient available to the patient through the Internet.
         Sec. 531.9041.  STAGE ONE: ENCOUNTER DATA. In stage one of
  implementing the health information exchange system, the
  commission shall require for purposes of the implementation each
  managed care organization with which the commission contracts under
  Chapter 533 for the provision of Medicaid managed care services to
  submit to the commission complete encounter data for each month
  that includes all paid and processed claims for the month not later
  than the 30th day after the last day of the month to which the data
  relates.
         Sec. 531.905.  STAGE ONE:  ELECTRONIC PRESCRIBING. (a)  In
  stage one of implementing the health information exchange system,
  the commission shall develop and coordinate electronic prescribing
  tools for use by health care providers and health care facilities
  under the child health plan and Medicaid programs.
         (b)  To the extent feasible, the electronic prescribing
  tools must:
               (1)  provide current payer formulary information at the
  time a health care provider writes a prescription; and
               (2)  support the electronic transmission of a
  prescription.
         (c)  The commission may take any reasonable action to comply
  with this section, including establishing information exchanges
  with national electronic prescribing networks or providing health
  care providers with access to an Internet-based prescribing tool
  developed by the commission.
         (d)  The commission shall apply for and actively pursue any
  waiver to the child health plan program or the state Medicaid plan
  from the federal Centers for Medicare and Medicaid Services or any
  other federal agency as necessary to remove an identified
  impediment to the implementation of electronic prescribing tools
  under this section. If the commission with assistance from the
  Legislative Budget Board determines that the implementation of
  operational modifications in accordance with a waiver obtained as
  required by this subsection has resulted in cost increases in the
  child health plan or Medicaid program, the commission shall take
  the necessary actions to reverse the operational modifications.
         Sec. 531.906.  STAGE TWO:  EXPANSION. Based on the
  recommendations of the advisory committee established under
  Section 531.903 and feedback provided by interested parties, the
  commission in stage two of implementing the health information
  exchange system may expand the system by:
               (1)  providing an electronic health record for each
  child enrolled in the child health plan program;
               (2)  including state laboratory results information in
  an electronic health record, including the results of newborn
  screenings and tests conducted under the Texas Health Steps
  program, based on the system developed for the health passport
  under Section 266.006, Family Code;
               (3)  improving data-gathering capabilities for an
  electronic health record so that the record may include basic
  health and clinical information in addition to available claims
  information, as determined by the executive commissioner;
               (4)  using evidence-based technology tools to create a
  unique health profile to alert health care providers regarding the
  need for additional care, education, counseling, or health
  management activities for specific patients; and
               (5)  continuing to enhance the electronic health record
  created under Section 531.904 as technology becomes available and
  interoperability capabilities improve.
         Sec. 531.907.  STAGE THREE:  EXPANSION. In stage three of
  implementing the health information exchange system, the
  commission may expand the system by:
               (1)  developing evidence-based benchmarking tools that
  can be used by health care providers to evaluate their own
  performances on health care outcomes and overall quality of care as
  compared to aggregated performance data regarding peers; and
               (2)  expanding the system to include state agencies,
  additional health care providers, laboratories, diagnostic
  facilities, hospitals, and medical offices.
         Sec. 531.908.  INCENTIVES. The commission and the advisory
  committee established under Section 531.903 shall develop
  strategies to encourage health care providers to use the health
  information exchange system, including incentives, education, and
  outreach tools to increase usage.
         Sec. 531.909.  REPORTS. (a)  The commission shall provide
  an initial report to the Senate Committee on Health and Human
  Services or its successor, the House Committee on Human Services or
  its successor, and the House Committee on Public Health or its
  successor regarding the health information exchange system not
  later than January 1, 2011, and shall provide a subsequent report to
  those committees not later than January 1, 2013. Each report must:
               (1)  describe the status of the implementation of the
  system;
               (2)  specify utilization rates for each health
  information technology implemented as a component of the system;
  and
               (3)  identify goals for utilization rates described by
  Subdivision (2) and actions the commission intends to take to
  increase utilization rates.
         (b)  This section expires September 2, 2013.
         Sec. 531.910.  RULES.  The executive commissioner may adopt
  rules to implement this subchapter.
         (b)  Subchapter B, Chapter 62, Health and Safety Code, is
  amended by adding Section 62.060 to read as follows:
         Sec. 62.060.  HEALTH INFORMATION TECHNOLOGY STANDARDS.  
  (a)  In this section, "health information technology" means
  information technology used to improve the quality, safety, or
  efficiency of clinical practice, including the core
  functionalities of an electronic health record, an electronic
  medical record, a computerized health care provider order entry,
  electronic prescribing, and clinical decision support technology.
         (b)  The commission shall ensure that any health information
  technology used in the child health plan program conforms to
  nationally recognized standards.
         (c)  Subchapter B, Chapter 32, Human Resources Code, is
  amended by adding Section 32.073 to read as follows:
         Sec. 32.073.  HEALTH INFORMATION TECHNOLOGY STANDARDS.
  (a)  In this section, "health information technology" means
  information technology used to improve the quality, safety, or
  efficiency of clinical practice, including the core
  functionalities of an electronic health record, an electronic
  medical record, a computerized health care provider order entry,
  electronic prescribing, and clinical decision support technology.
         (b)  The Health and Human Services Commission shall ensure
  that any health information technology used in the medical
  assistance program conforms to nationally recognized standards.
         (d)  As soon as practicable after the effective date of this
  Act, the executive commissioner of the Health and Human Services
  Commission shall adopt rules to implement the electronic health
  record and electronic prescribing system required by Subchapter V,
  Chapter 531, Government Code, as added by this section.
         (e)  The executive commissioner of the Health and Human
  Services Commission shall appoint the members of the Electronic
  Health Information Exchange System Advisory Committee established
  under Section 531.903, Government Code, as added by this section,
  as soon as practicable after the effective date of this Act.
         SECTION 5.  QUALITY-BASED PAYMENT INITIATIVES.  
  (a)  Chapter 531, Government Code, is amended by adding Subchapter
  W to read as follows:
  SUBCHAPTER W.  QUALITY-BASED PAYMENT INITIATIVES PILOT PROGRAMS FOR
  PROVISION OF HEALTH CARE SERVICES
         Sec. 531.951.  DEFINITIONS.  In this subchapter:
               (1)  "Pay-for-performance payment system" means a
  system for compensating a health care provider or facility for
  arranging for or providing health care services to child health
  plan program enrollees or Medicaid recipients, or both, that is
  based on the provider or facility meeting or exceeding certain
  defined performance measures.  The compensation system may include
  sharing realized cost savings with the provider or facility.
               (2)  "Pilot program" means a quality-based payment
  initiatives pilot program established under this subchapter.
         Sec. 531.952.  PILOT PROGRAM PROPOSALS; DETERMINATION OF
  BENEFIT TO STATE. (a)  Health care providers and facilities may
  submit proposals to the commission for the implementation through
  pilot programs of quality-based payment initiatives that provide
  incentives to the providers and facilities, as applicable, to
  develop health care interventions for child health plan program
  enrollees or Medicaid recipients, or both, that are cost-effective
  to this state and will improve the quality of health care provided
  to the enrollees or recipients.
         (b)  The commission shall determine whether it is feasible
  and cost-effective to implement one or more of the proposed pilot
  programs. In addition, the commission shall examine alternative
  payment methodologies used in the Medicare program and consider
  whether implementing one or more of the methodologies, modified as
  necessary to account for programmatic differences, through a pilot
  program under this subchapter would achieve cost savings in the
  Medicaid program while ensuring the use of best practices.
         Sec. 531.953.  PURPOSE AND IMPLEMENTATION OF PILOT PROGRAMS.
  (a)  If the commission determines under Section 531.952 that
  implementation of one or more quality-based payment initiatives
  pilot programs is feasible and cost-effective for this state, the
  commission shall establish one or more programs as provided by this
  subchapter to test pay-for-performance payment system alternatives
  to traditional fee-for-service or other payments made to health
  care providers or facilities participating in the child health plan
  or Medicaid program, as applicable, that are based on best
  practices, outcomes, and efficiency, but ensure high-quality,
  effective health care services.
         (b)  The commission shall administer any pilot program
  established under this subchapter.  The executive commissioner may
  adopt rules, plans, and procedures and enter into contracts and
  other agreements as the executive commissioner considers
  appropriate and necessary to administer this subchapter.
         (c)  The commission may limit a pilot program to:
               (1)  one or more regions in this state;
               (2)  one or more organized networks of health care
  facilities and providers; or
               (3)  specified types of services provided under the
  child health plan or Medicaid program, or specified types of
  enrollees or recipients under those programs.
         (d)  A pilot program implemented under this subchapter must
  be operated for at least one state fiscal year.
         Sec. 531.954.  STANDARDS; PROTOCOLS. (a)  In consultation
  with the Health Care Quality Advisory Committee established under
  Section 531.0995, the executive commissioner shall approve quality
  of care standards, evidence-based protocols, and measurable goals
  for a pilot program to ensure high-quality and effective health
  care services.
         (b)  In addition to the standards approved under Subsection
  (a), the executive commissioner may approve efficiency performance
  standards that may include the sharing of realized cost savings
  with health care providers and facilities that provide health care
  services that exceed the efficiency performance standards.
         Sec. 531.955.  QUALITY-BASED PAYMENT INITIATIVES. (a)  The
  executive commissioner may contract with appropriate entities,
  including qualified actuaries, to assist in determining
  appropriate payment rates for a pilot program implemented under
  this subchapter.
         (b)  The executive commissioner may increase a payment rate,
  including a capitation rate, adopted under this section as
  necessary to adjust the rate for inflation.
         (c)  The executive commissioner shall ensure that services
  provided to a child health plan program enrollee or Medicaid
  recipient, as applicable, meet the quality of care standards
  required under this subchapter and are at least equivalent to the
  services provided under the child health plan or Medicaid program,
  as applicable, for which the enrollee or recipient is eligible.
         Sec. 531.956.  TERMINATION OF PILOT PROGRAM; EXPIRATION OF
  SUBCHAPTER. The pilot program terminates and this subchapter
  expires September 2, 2013.
         (b)  Not later than November 1, 2012, the Health and Human
  Services Commission shall present a report to the governor, the
  lieutenant governor, the speaker of the house of representatives,
  and the members of each legislative committee having jurisdiction
  over the child health plan and Medicaid programs. For each pilot
  program implemented under Subchapter W, Chapter 531, Government
  Code, as added by this section, the report must:
               (1)  describe the operation of the pilot program;
               (2)  analyze the quality of health care provided to
  patients under the pilot program;
               (3)  compare the per-patient cost under the pilot
  program to the per-patient cost of the traditional fee-for-service
  or other payments made under the child health plan and Medicaid
  programs; and
               (4)  make recommendations regarding the continuation
  or expansion of the pilot program.
         SECTION 6.  QUALITY-BASED HOSPITAL PAYMENTS. Chapter 531,
  Government Code, is amended by adding Subchapter X to read as
  follows:
  SUBCHAPTER X. QUALITY-BASED HOSPITAL REIMBURSEMENT SYSTEM
         Sec. 531.981.  DEFINITIONS. In this subchapter:
               (1)  "Potentially preventable complication" means a
  harmful event or negative outcome with respect to a person,
  including an infection or surgical complication, that:
                     (A)  occurs after the person's admission to a
  hospital;
                     (B)  results from the care or treatment provided
  during the hospital stay rather than from a natural progression of
  an underlying disease; and
                     (C)  could reasonably have been prevented if care
  and treatment had been provided in accordance with accepted
  standards of care.
               (2)  "Potentially preventable readmission" means a
  return hospitalization of a person within a period specified by the
  commission that results from deficiencies in the care or treatment
  provided to the person during a previous hospital stay or from
  deficiencies in post-hospital discharge follow-up. The term does
  not include a hospital readmission necessitated by the occurrence
  of unrelated events after the discharge. The term includes the
  readmission of a person to a hospital for:
                     (A)  the same condition or procedure for which the
  person was previously admitted;
                     (B)  an infection or other complication resulting
  from care previously provided;
                     (C)  a condition or procedure that indicates that
  a surgical intervention performed during a previous admission was
  unsuccessful in achieving the anticipated outcome; or
                     (D)  another condition or procedure of a similar
  nature, as determined by the executive commissioner.
         Sec. 531.982.  DEVELOPMENT OF QUALITY-BASED HOSPITAL
  REIMBURSEMENT SYSTEM. (a)  Subject to Subsection (b), the
  commission shall develop a quality-based hospital reimbursement
  system for paying Medicaid reimbursements to hospitals. The system
  is intended to align Medicaid provider payment incentives with
  improved quality of care, promote coordination of health care, and
  reduce potentially preventable complications and readmissions.
         (b)  The commission shall develop the quality-based hospital
  reimbursement system in phases as provided by this subchapter. To
  the extent possible, the commission shall coordinate the timeline
  for the development and implementation with the implementation of
  the Medicaid Information Technology Architecture (MITA) initiative
  of the Center for Medicaid and State Operations and the ICD-10 code
  sets initiative and with the ongoing Enterprise Data Warehouse
  (EDW) planning process to maximize receipt of federal funds.
         Sec. 531.983.  PHASE ONE:  COLLECTION AND REPORTING OF
  CERTAIN INFORMATION. (a)  The first phase of the development of
  the quality-based hospital reimbursement system consists of the
  elements described by this section.
         (b)  The executive commissioner shall adopt rules for
  identifying potentially preventable readmissions of Medicaid
  recipients and the commission shall collect data on
  present-on-admission indicators for purposes of this section.
         (c)  The commission shall establish a program to provide a
  confidential report to each hospital in this state regarding the
  hospital's performance with respect to potentially preventable
  readmissions.  A hospital shall provide the information contained
  in the report provided to the hospital to health care providers
  providing services at the hospital.
         (d)  After the commission provides the reports to hospitals
  as provided by Subsection (c), each hospital will be afforded a
  period of two years during which the hospital may adjust its
  practices in an attempt to reduce its potentially preventable
  readmissions. During this period, reimbursements paid to the
  hospital may not be adjusted on the basis of potentially
  preventable readmissions.
         (e)  The commission shall convert the hospital Medicaid
  reimbursement system to a diagnoses-related groups (DRG)
  methodology that will allow the commission to more accurately
  classify specific patient populations and account for severity of
  patient illness and mortality risk.
         Sec. 531.984.  PHASE TWO:  REIMBURSEMENT ADJUSTMENTS.
  (a)  The second phase of the development of the quality-based
  hospital reimbursement system consists of the elements described by
  this section and must be based on the information reported, and the
  diagnoses-related groups (DRG) methodology implemented, during
  phase one of the development.
         (b)  Using the information reported and the
  diagnoses-related groups (DRG) methodology implemented during
  phase one of the development of the quality-based hospital
  reimbursement system, the commission shall adjust Medicaid
  reimbursements to hospitals based on performance in reducing
  potentially preventable readmissions. An adjustment:
               (1)  may not be applied to a hospital if the patient's
  readmission to that hospital is classified as a potentially
  preventable readmission, but that hospital is not the same hospital
  to which the person was previously admitted; and
               (2)  must be focused on addressing potentially
  preventable readmissions that are continuing, significant
  problems, as determined by the commission.
         Sec. 531.985.  PHASE THREE:  STUDY OF POTENTIALLY
  PREVENTABLE COMPLICATIONS. (a)  In phase three of the development
  of the quality-based hospital reimbursement system, the commission
  shall study the feasibility of:
               (1)  collecting data from hospitals concerning
  potentially preventable complications; and
               (2)  adjusting Medicaid reimbursements based on
  performance in reducing those complications.
         (b)  The commission shall provide a report to the standing
  committees of the senate and house of representatives having
  primary jurisdiction over the Medicaid program concerning the
  results of the study conducted under this section when the study is
  completed.
         SECTION 7.  PREVENTABLE ADVERSE EVENT REPORTING.  (a)  The
  heading to Chapter 98, Health and Safety Code, as added by Chapter
  359 (S.B. 288), Acts of the 80th Legislature, Regular Session,
  2007, is amended to read as follows:
  CHAPTER 98.  REPORTING OF HEALTH CARE-ASSOCIATED INFECTIONS AND
  PREVENTABLE ADVERSE EVENTS
         (b)  Subdivisions (1) and (11), Section 98.001, Health and
  Safety Code, as added by Chapter 359 (S.B. 288), Acts of the 80th
  Legislature, Regular Session, 2007, are amended to read as follows:
               (1)  "Advisory panel" means the Advisory Panel on
  Health Care-Associated Infections and Preventable Adverse Events.
               (11)  "Reporting system" means the Texas Health
  Care-Associated Infection and Preventable Adverse Events Reporting
  System.
         (c)  Section 98.051, Health and Safety Code, as added by
  Chapter 359 (S.B. 288), Acts of the 80th Legislature, Regular
  Session, 2007, is amended to read as follows:
         Sec. 98.051.  ESTABLISHMENT.  The commissioner shall
  establish the Advisory Panel on Health Care-Associated Infections
  and Preventable Adverse Events within [the infectious disease
  surveillance and epidemiology branch of] the department to guide
  the implementation, development, maintenance, and evaluation of
  the reporting system.
         (d)  Subsection (a), Section 98.052, Health and Safety Code,
  as added by Chapter 359 (S.B. 288), Acts of the 80th Legislature,
  Regular Session, 2007, is amended to read as follows:
         (a)  The advisory panel is composed of 18 [16] members as
  follows:
               (1)  two infection control professionals who:
                     (A)  are certified by the Certification Board of
  Infection Control and Epidemiology; and
                     (B)  are practicing in hospitals in this state, at
  least one of which must be a rural hospital;
               (2)  two infection control professionals who:
                     (A)  are certified by the Certification Board of
  Infection Control and Epidemiology; and
                     (B)  are nurses licensed to engage in professional
  nursing under Chapter 301, Occupations Code;
               (3)  three board-certified or board-eligible
  physicians who:
                     (A)  are licensed to practice medicine in this
  state under Chapter 155, Occupations Code, at least two of whom have
  active medical staff privileges at a hospital in this state and at
  least one of whom is an [a pediatric infectious disease physician
  with expertise and experience in pediatric health care
  epidemiology;
                     [(B)  are] active member [members] of the Society
  for Healthcare Epidemiology of America; and
                     (B) [(C)]  have demonstrated expertise in quality
  assessment and performance improvement or infection control in
  health care facilities;
               (4)  four additional [two] professionals in quality
  assessment and performance improvement[, one of whom is employed by
  a general hospital and one of whom is employed by an ambulatory
  surgical center];
               (5)  one officer of a general hospital;
               (6)  one officer of an ambulatory surgical center;
               (7)  three nonvoting members who are department
  employees representing the department in epidemiology and the
  licensing of hospitals or ambulatory surgical centers; and
               (8)  two members who represent the public as consumers.
         (e)  Subsections (a) and (c), Section 98.102, Health and
  Safety Code, as added by Chapter 359 (S.B. 288), Acts of the 80th
  Legislature, Regular Session, 2007, are amended to read as follows:
         (a)  The department shall establish the Texas Health
  Care-Associated Infection and Preventable Adverse Events Reporting
  System within the [infectious disease surveillance and
  epidemiology branch of the] department.  The purpose of the
  reporting system is to provide for:
               (1)  the reporting of health care-associated
  infections by health care facilities to the department;
               (2)  the reporting of health care-associated
  preventable adverse events by health care facilities to the
  department;
               (3)  the public reporting of information regarding the
  health care-associated infections by the department;
               (4)  the public reporting of information regarding
  health care-associated preventable adverse events by the
  department; and
               (5) [(3)]  the education and training of health care
  facility staff by the department regarding this chapter.
         (c)  The data reported by health care facilities to the
  department must contain sufficient patient identifying information
  to:
               (1)  avoid duplicate submission of records;
               (2)  allow the department to verify the accuracy and
  completeness of the data reported; and
               (3)  for data reported under Section 98.103 or 98.104,
  allow the department to risk adjust the facilities' infection
  rates.
         (f)  Subchapter C, Chapter 98, Health and Safety Code, as
  added by Chapter 359 (S.B. 288), Acts of the 80th Legislature,
  Regular Session, 2007, is amended by adding Section 98.1045 to read
  as follows:
         Sec. 98.1045.  REPORTING OF PREVENTABLE ADVERSE EVENTS.  
  (a)  Each health care facility shall report to the department the
  occurrence of any of the following preventable adverse events
  involving the facility's patient:
               (1)  a health care-associated adverse condition or
  event for which the Medicare program will not provide additional
  payment to the facility under a policy adopted by the federal
  Centers for Medicare and Medicaid Services; and
               (2)  subject to Subsection (b), an event included in
  the list of adverse events identified by the National Quality Forum
  that is not included under Subdivision (1).
         (b)  The executive commissioner may exclude an adverse event
  described by Subsection (a)(2) from the reporting requirement of
  Subsection (a) if the executive commissioner, in consultation with
  the advisory panel, determines that the adverse event is not an
  appropriate indicator of a preventable adverse event.
         (g)  Subsections (a), (b), and (g), Section 98.106, Health
  and Safety Code, as added by Chapter 359 (S.B. 288), Acts of the
  80th Legislature, Regular Session, 2007, are amended to read as
  follows:
         (a)  The department shall compile and make available to the
  public a summary, by health care facility, of:
               (1)  the infections reported by facilities under
  Sections 98.103 and 98.104; and
               (2)  the preventable adverse events reported by
  facilities under Section 98.1045.
         (b)  Information included in the [The] departmental summary
  with respect to infections reported by facilities under Sections
  98.103 and 98.104 must be risk adjusted and include a comparison of
  the risk-adjusted infection rates for each health care facility in
  this state that is required to submit a report under Sections 98.103
  and 98.104.
         (g)  The department shall make the departmental summary
  available on an Internet website administered by the department and
  may make the summary available through other formats accessible to
  the public.  The website must contain a statement informing the
  public of the option to report suspected health care-associated
  infections and preventable adverse events to the department.
         (h)  Section 98.108, Health and Safety Code, as added by
  Chapter 359 (S.B. 288), Acts of the 80th Legislature, Regular
  Session, 2007, is amended to read as follows:
         Sec. 98.108.  FREQUENCY OF REPORTING.  In consultation with
  the advisory panel, the executive commissioner by rule shall
  establish the frequency of reporting by health care facilities
  required under Sections 98.103, [and] 98.104, and 98.1045.  
  Facilities may not be required to report more frequently than
  quarterly.
         (i)  Section 98.109, Health and Safety Code, as added by
  Chapter 359 (S.B. 288), Acts of the 80th Legislature, Regular
  Session, 2007, is amended by adding Subsection (b-1) and amending
  Subsection (e) to read as follows:
         (b-1)  A state employee or officer may not be examined in a
  civil, criminal, or special proceeding, or any other proceeding,
  regarding the existence or contents of information or materials
  obtained, compiled, or reported by the department under this
  chapter.
         (e)  A department summary or disclosure may not contain
  information identifying a [facility] patient, employee,
  contractor, volunteer, consultant, health care professional,
  student, or trainee in connection with a specific [infection]
  incident.
         (j)  Sections 98.110 and 98.111, Health and Safety Code, as
  added by Chapter 359 (S.B. 288), Acts of the 80th Legislature,
  Regular Session, 2007, are amended to read as follows:
         Sec. 98.110.  DISCLOSURE AMONG CERTAIN AGENCIES [WITHIN
  DEPARTMENT].  Notwithstanding any other law, the department may
  disclose information reported by health care facilities under
  Section 98.103, [or] 98.104, or 98.1045 to other programs within
  the department, to the Health and Human Services Commission, and to
  other health and human services agencies, as defined by Section
  531.001, Government Code, for public health research or analysis
  purposes only, provided that the research or analysis relates to
  health care-associated infections or preventable adverse events.  
  The privilege and confidentiality provisions contained in this
  chapter apply to such disclosures.
         Sec. 98.111.  CIVIL ACTION.  Published infection rates or
  preventable adverse events may not be used in a civil action to
  establish a standard of care applicable to a health care facility.
         (k)  The commissioner of state health services shall appoint
  a person who meets the qualifications prescribed by Subdivision
  (3), Subsection (a), Section 98.052, Health and Safety Code, as
  amended by this section, to serve as a member of the advisory panel
  established under Section 98.051, Health and Safety Code, on each
  expiration date of the term of a member serving on that panel who
  met the qualifications prescribed by Subdivision (3), Subsection
  (a), Section 98.052, Health and Safety Code, as that section
  existed immediately preceding the effective date of this Act, and
  who was appointed before that date. In addition, as soon as
  possible after the effective date of this Act, the commissioner
  shall appoint two additional members to the advisory panel who meet
  the qualifications prescribed by Subdivision (4), Subsection (a),
  Section 98.052, Health and Safety Code, as amended by this section.
         (l)  Not later than February 1, 2010, the executive
  commissioner of the Health and Human Services Commission shall
  adopt rules and procedures necessary to implement the reporting of
  health care-associated preventable adverse events as required
  under Chapter 98, Health and Safety Code, as amended by this
  section.
         SECTION 8.  LONG-TERM CARE INCENTIVES.  (a)  Subchapter B,
  Chapter 32, Human Resources Code, is amended by adding Section
  32.0283 to read as follows:
         Sec. 32.0283.  PAY-FOR-PERFORMANCE INCENTIVES FOR CERTAIN
  NURSING FACILITIES.  (a)  In this section, "nursing facility" means
  a convalescent or nursing home or related institution licensed
  under Chapter 242, Health and Safety Code, that provides long-term
  care services, as defined by Section 22.0011, to medical assistance
  recipients.
         (b)  If feasible, the executive commissioner of the Health
  and Human Services Commission by rule shall establish an incentive
  payment program for nursing facilities that is designed to improve
  the quality of care and services provided to medical assistance
  recipients.  The program must provide additional payments in
  accordance with this section to the facilities that meet or exceed
  performance standards established by the executive commissioner.
         (c)  In establishing an incentive payment program under this
  section, the executive commissioner of the Health and Human
  Services Commission shall, subject to Subsection (d), adopt
  outcome-based performance measures.  The performance measures:
               (1)  must be:
                     (A)  recognized by the executive commissioner as
  valid indicators of the overall quality of care received by medical
  assistance recipients; and
                     (B)  designed to encourage and reward
  evidence-based practices among nursing facilities; and
               (2)  may include measures of:
                     (A)  quality of life;
                     (B)  direct-care staff retention and turnover;
                     (C)  recipient satisfaction;
                     (D)  employee satisfaction and engagement;
                     (E)  the incidence of preventable acute care
  emergency room services use;
                     (F)  regulatory compliance;
                     (G)  level of person-centered care; and
                     (H)  level of occupancy or of facility
  utilization.
         (d)  The executive commissioner of the Health and Human
  Services Commission shall:
               (1)  maximize the use of available information
  technology and limit the number of performance measures adopted
  under Subsection (c) to achieve administrative cost efficiency and
  avoid an unreasonable administrative burden on nursing facilities;
  and
               (2)  for each performance measure adopted under
  Subsection (c), establish a performance threshold for purposes of
  determining eligibility for an incentive payment under the program.
         (e)  To be eligible for an incentive payment under the
  program, a nursing facility must meet or exceed applicable
  performance thresholds in at least two of the performance measures
  adopted under Subsection (c), at least one of which is an indicator
  of quality of care.
         (f)  The executive commissioner of the Health and Human
  Services Commission may:
               (1)  determine the amount of an incentive payment under
  the program based on a performance index that gives greater weight
  to performance measures that are shown to be stronger indicators of
  a nursing facility's overall performance quality; and
               (2)  enter into a contract with a qualified person, as
  determined by the executive commissioner, for the following
  services related to the program:
                     (A)  data collection;
                     (B)  data analysis; and
                     (C)  reporting of nursing facility performance on
  the performance measures adopted under Subsection (c).
         (b)  Subsection (a), Section 32.060, Human Resources Code,
  as added by Section 16.01, Chapter 204 (H.B. 4), Acts of the 78th
  Legislature, Regular Session, 2003, is amended to read as follows:
         (a)  The following are not admissible as evidence in a civil
  action:
               (1)  any finding by the department that an institution
  licensed under Chapter 242, Health and Safety Code, has violated a
  standard for participation in the medical assistance program under
  this chapter; [or]
               (2)  the fact of the assessment of a monetary penalty
  against an institution under Section 32.021 or the payment of the
  penalty by an institution; or
               (3)  any information obtained or used by the department
  to determine the eligibility of a nursing facility for an incentive
  payment, or to determine the facility's performance rating, under
  Section 32.028(g) or 32.0283(f).
         (c)  The Health and Human Services Commission shall conduct a
  study to evaluate the feasibility of providing an incentive payment
  program for the following types of providers of long-term care
  services, as defined by Section 22.0011, Human Resources Code,
  under the medical assistance program similar to the incentive
  payment program established for nursing facilities under Section
  32.0283, Human Resources Code, as added by this section:
               (1)  intermediate care facilities for persons with
  mental retardation licensed under Chapter 252, Health and Safety
  Code; and
               (2)  providers of home and community-based services, as
  described by 42 U.S.C. Section 1396n(c), who are licensed or
  otherwise authorized to provide those services in this state.
         (d)  Not later than September 1, 2010, the Health and Human
  Services Commission shall submit to the legislature a written
  report containing the findings of the study conducted under
  Subsection (c) of this section and the commission's
  recommendations.
         (e)  As soon as practicable after the effective date of this
  Act, the executive commissioner of the Health and Human Services
  Commission shall adopt the rules required by Section 32.0283, Human
  Resources Code, as added by this section.
         SECTION 9.  PREVENTABLE ADVERSE EVENT REIMBURSEMENT.  
  (a)  Subchapter B, Chapter 32, Human Resources Code, is amended by
  adding Section 32.0312 to read as follows:
         Sec. 32.0312.  REIMBURSEMENT FOR SERVICES ASSOCIATED WITH
  PREVENTABLE ADVERSE EVENTS.  The executive commissioner of the
  Health and Human Services Commission shall adopt rules regarding
  the denial or reduction of reimbursement under the medical
  assistance program for preventable adverse events that occur in a
  hospital setting.  In adopting the rules, the executive
  commissioner:
               (1)  shall ensure that the commission imposes the same
  reimbursement denials or reductions for preventable adverse events
  as the Medicare program imposes for the same types of health
  care-associated adverse conditions and the same types of health
  care providers and facilities under a policy adopted by the federal
  Centers for Medicare and Medicaid Services;
               (2)  shall consult with the Health Care Quality
  Advisory Committee established under Section 531.0995, Government
  Code, to obtain the advice of that committee regarding denial or
  reduction of reimbursement claims for any other preventable adverse
  events that cause patient death or serious disability in health
  care settings, including events on the list of adverse events
  identified by the National Quality Forum; and
               (3)  may allow the commission to impose reimbursement
  denials or reductions for preventable adverse events described by
  Subdivision (2).
         (b)  Not later than September 1, 2010, the executive
  commissioner of the Health and Human Services Commission shall
  adopt the rules required by Section 32.0312, Human Resources Code,
  as added by this section.
         (c)  Rules adopted by the executive commissioner of the
  Health and Human Services Commission under Section 32.0312, Human
  Resources Code, as added by this section, may apply only to a
  preventable adverse event occurring on or after the effective date
  of the rules.
         SECTION 10.  PATIENT RISK IDENTIFICATION SYSTEM.  Subchapter
  A, Chapter 311, Health and Safety Code, is amended by adding Section
  311.004 to read as follows:
         Sec. 311.004.  STANDARDIZED PATIENT RISK IDENTIFICATION
  SYSTEM. (a)  In this section:
               (1)  "Department" means the Department of State Health
  Services.
               (2)  "Hospital" means a general or special hospital as
  defined by Section 241.003.  The term includes a hospital
  maintained or operated by this state.
         (b)  The department shall coordinate with hospitals to
  develop a statewide standardized patient risk identification
  system under which a patient with a specific medical risk may be
  readily identified through the use of a system that communicates to
  hospital personnel the existence of that risk. The executive
  commissioner of the Health and Human Services Commission shall
  appoint an ad hoc committee of hospital representatives to assist
  the department in developing the statewide system.
         (c)  The department shall require each hospital to implement
  and enforce the statewide standardized patient risk identification
  system developed under Subsection (b) unless the department
  authorizes an exemption for the reason stated in Subsection (d).
         (d)  The department may exempt from the statewide
  standardized patient risk identification system a hospital that
  seeks to adopt another patient risk identification methodology
  supported by evidence-based protocols for the practice of medicine.
         (e)  The department shall modify the statewide standardized
  patient risk identification system in accordance with
  evidence-based medicine as necessary.
         (f)  The executive commissioner of the Health and Human
  Services Commission may adopt rules to implement this section.
         SECTION 11.  FEDERAL AUTHORIZATION.  If before implementing
  any provision of this Act a state agency determines that a waiver or
  authorization from a federal agency is necessary for implementation
  of that provision, the agency affected by the provision shall
  request the waiver or authorization and may delay implementing that
  provision until the waiver or authorization is granted.
         SECTION 12.  EFFECTIVE DATE.  This Act takes effect
  September 1, 2009.
 
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