In 2011, Senate Bill (SB) 7, 82nd Legislature, First Called Session, directed HHSC to preserve federal hospital funding historically received as supplemental payments under the upper payment level (UPL) program. UPL payments were supplemental payments made to offset the difference between what Medicaid pays for a service and what Medicare would pay for the same service. House Bill (HB) 1, 82nd Legislature, Regular Session, 2011, and Senate Bill (SB) 7, 82nd Legislature, First Called Session, 2011, also instructed HHSC to expand its use of Medicaid managed care.
Federal regulations issued by the Centers for Medicare and Medicaid Services (CMS) prohibit UPL payments to providers in managed care. Therefore, CMS advised the Health and Human Services Commission (HHSC) that, to continue the use of local funding to support supplemental payments to providers in managed care, the state should employ a waiver of the Medicaid state plan as provided by Section 1115 of the Social Security Act.
Accordingly, on July 15, 2011, HHSC submitted a proposal to CMS for a five-year Section 1115 demonstration waiver designed to build on existing Texas healthcare reforms and to redesign health care delivery in Texas consistent with CMS goals to improve the experience of care, improve population health, and reduce the cost of health care without compromising quality. CMS approved the Section 1115 Transformation Waiver on December 12, 2011. In December 2017, CMS approved a five-year extension of the waiver through September 30, 2022.
The Texas 1115 Transformation Waiver provides the federal authority for operations of most of the state’s Medicaid managed care programs, including STAR, STAR+PLUS, STAR Kids, and the Children’s Dental Program. Managed care directed payment programs—the Uniform Hospital Rate Increase Program (UHRIP) and the Quality Incentive Payment Program (QIPP)—both operate within the 1115 waiver under authority conferred in 42 Code of Federal Regulations (CFR) 438.6(c). These programs provide additional funding to hospitals and nursing homes through increases in managed care reimbursement for hospital and nursing home services.
A third managed care directed payment program, the Network Access Improvement Program (NAIP), provides pass-through payments to participating physician practices in health- related institutions and public hospitals through managed care. NAIP operates within the 1115 waiver under authority conferred in 42 CFR 438.6(d). Under federal law, pass-through payments to physicians must be phased out by July 1, 2022, and pass-through payments to hospitals must be phased out by July 1, 2027.
The non-federal share of each of these managed care directed payment programs is provided by local governmental entities.
The 1115 waiver also contains two funding pools: the Uncompensated Care (UC) and the Delivery System Reform Incentive Payment (DSRIP) pools.
For the first five years of the waiver, which began in State Fiscal Year 2012, combined UC and DSRIP funding totaled $29 billion All Funds (AF), with $17.6 billion allocated for UC and $11.4 billion allocated for DSRIP. For the first 2 years of the extension, the UC pool was $3.1 billion and $3.87 billion AF each year thereafter. This year, the DSRIP pool is $2.91 billion AF. However, in Federal Fiscal Year (FFY) 2021, the pool will be reduced to $2.49 billion, and the following FFY, to zero.
For each program, the non-federal share is provided by local governmental entities. In order to receive UC or DSRIP payments, providers must participate in one of the twenty Regional Health Partnerships (RHPs).
The waiver rules are available at the link provided below:
UC payments are cost-based and help offset the costs of uncompensated care provided by hospitals and other providers. Though previously defined as unreimbursed costs for Medicaid and uninsured patients incurred by hospitals, UC costs are currently federally defined as unreimbursed charity care costs. UC payments are based on each provider’s uncompensated care costs as reported to the state on a UC application.
Delivery System Reform Incentive Payment
The DSRIP program provided incentive payments to participating providers to improve health outcomes. Providers developed and implemented programs, strategies, and investments to enhance:
- Access to healthcare services
- Quality of health care and health systems
- Cost-effectiveness of services and health systems
- Health of the patients and families served
DY9-10 COVID-19 Protocol Changes
Significant changes in care delivery due to COVID-19 prevented Delivery System Reform Incentive Payment (DSRIP) program providers from achieving Category B goals for Medicaid and Low-Income or Uninsured (MLIU) Patient Population by Provider (PPP), improving Category C measures (pay-for-performance measures) of health care quality, and earning related incentive payments. CMS provided guidance to all DSRIP states regarding measurement flexibilities for Calendar Year (CY) 2020 due to COVID-19’s impact on providers’ ability to achieve goals.
- Attachment J – FINAL PFM DY9-10 COVID-19 Changes (PDF) (8/10/2020) – changes based on CMS discussion and stakeholder feedback are highlighted in green
- Summary of Stakeholder Feedback on Proposed DY9-10 PFM Changes (PDF) (8/10/2020)
- Category C Estimated Average Achievement Values by Measure or Bundle (Excel) (8/10/2020) - The estimated average achievement values by measure or bundle are provided for informational purposes. The actual average achievement value for an AM-9 milestone will be determined by all PY2 reporting as of the October DY9 Needs More Information (NMI) reporting period (February 2021).
- Attachment J – PFM DY9-10 Cat B and C COVID-19 Changes (PDF) (6/15/2020)
- COVID-19 DY9 Summary of Changes (PDF) (6/15/2020)
- Category C Estimated Average Achievement Values by Measure Class (Excel) (6/11/2020)
DY7-10 Measure Bundle Protocol (MBP)
The initial draft Demonstration Year (DY) 7-10 MBP, an accompanying Excel file of Related Strategies, the summary of stakeholder feedback on the initial draft DY7-10 MBP, and the revised DY7-10 MBP incorporating changes from stakeholder feedback is posted below. Also included below is the final, approved DY7-10 MBP and a final version of the Related Strategies Excel file. Unless specifically indicated in the DY7-10 MBP as only a DY7-8 or DY9-10 requirement, all requirements apply to DY7-10.
- Final DY7-10 MBP (PDF) - changes in response to stakeholder feedback are highlighted in yellow, and changes in response to negotiations with the Centers for Medicare and Medicaid Services (CMS) are highlighted in magenta (9/17/19)
- Final Related Strategies (Excel) (9/17/19)
- Summary of Stakeholder Feedback on the initial draft DY7-10 MBP (PDF) (8/1/19)
- Revised DY7-10 MBP (PDF) - changes in response to stakeholder feedback are highlighted in yellow (8/1/19)
- Draft DY7-10 MBP (PDF) (6/5/19)
- Draft Related Strategies (Excel) (6/5/19)
DY9-10 Program Funding and Mechanics Protocol (PFM)
The initial draft DY9-10 PFM along with a file showing a summary of proposed changes to the DY9-10 PFM is posted below. Also included below are the proposed changes to the DY9-10 PFM webinar along with the accompanying frequently asked questions documents, the summary of stakeholder feedback on the first draft DY9-10 PFM, and the revised DY9-10 PFM with changes made based on stakeholder feedback. The final, approved DY9-10 PFM and an accompanying file showing final provider DY9-10 valuations and Minimum Point Thresholds (MPTs) is also included below. Note that unless indicated specifically as a requirement only for DY7-8, all previous DY7-8 requirements also apply to DY9-10.
- Final DY9-10 PFM with Changes for Provisional Approvals (PDF) - paragraph 35 was updated to allow provisional approvals for COVID-19 (5/5/20)
- Summary of DY9-10 PFM Requirements (Excel) (1/10/20)
- Final DY9-10 PFM (PDF) - changes in response to stakeholder feedback are highlighted in blue, and changes in response to negotiations with CMS are highlighted in magenta (9/17/19)
- Final Provider DY9-10 Valuations and MPTs (Excel) (9/17/19)
- Revised DY9-10 PFM (PDF) - changes in response to stakeholder feedback are highlighted in blue (3/29/19)
- Summary of Stakeholder Feedback on the first draft DY9-10 PFM (PDF) (3/29/19)
- Draft DY9-10 PFM (PDF) (1/3/19)
- Summary of Proposed Changes to the DY9-10 PFM (PDF) (1/3/19)
- Proposed Changes to the DY9-10 PFM Webinar (1/18/19)
- DY9-10 PFM Webinar Frequently Asked Questions (Excel) (1/18/19)
DSRIP DY7-8 Protocols Approved
On Jan. 19, 2018, CMS approved the DSRIP Protocols - the Program Funding and Mechanics Protocol and the Measure Bundle Protocol. These protocols cover the requirements for participation in DSRIP for Demonstration Years 7-8, Oct. 1, 2017, through Sept. 30, 2019. HHSC will work with stakeholders to develop requirements for DY9-10.
The approved protocols are below. Also posted is a summary of DY7-8 requirements.
- DY7-8 Reporting Requirements (PDF)(9/4/18)
- Attachment R - Measure Bundle Protocol (PDF) (6/1/18 - updated with technical corrections)
- Attachment J - Program Funding and Mechanics Protocol (PDF) (6/1/18 - updated with technical corrections)
- Accessible Version of Summary of DY7-8 Requirements (PDF) (2/1218)
- Summary of DY7-8 Requirements (PDF) (2/12/18)
- CMS Approval Letter for DSRIP Protocols (PDF) (1/19/18)
Draft DY7-8 Measure Bundle Protocol and Value Based Purchasing Roadmap
HHSC has updated the draft DY7-8 Measure Bundle Protocol and submitted it to CMS for review and approval. The draft DY7-8 Measure Bundle Protocol contains proposed Category A Core Activities; the Category B system definition; Category C Measure Bundles for Hospitals and Physician Practices, Measures for Community Mental Health Centers, and Measures for Local Health Departments; and the Category D Statewide Reporting Measure Bundle for all provider types.
- Revised Draft DY7-8 Measure Bundle Protocol (PDF) (8/4/17)
- Summary of Stakeholder Feedback on first Draft DY7-8 Measure Bundle Protocol (PDF) (8/4/17)
- Revised Draft Value Based Purchasing Roadmap (PDF) (8/4/17)
- Draft DY7-8 Measure Bundle Protocol (PDF) (6/22/17)
- Presentation for 6/20/17 Webinar on Draft DY7-8 Protocols (PDF) (6/22/17)
- Draft Category C Measure Specifications (PDF) (6/22/17)
- Draft Category C Measures (Excel) (6/22/17)
- Draft Value Based Purchasing Roadmap (PDF) (6/22/17)
Draft DY7-8 Program Funding and Mechanics Protocol and Planning
HHSC has updated the draft DSRIP PFM that describes proposed requirements for DSRIP participation in DY 7-8. A summary of requirements in the revised draft and a summary of stakeholder feedback on the first draft of the DY7-8 PFM have also been posted. This draft PFM was submitted to CMS for approval. HHSC is still in negotiations with CMS on the request for an additional 21 months (Jan. 1, 2018, through Sept. 30, 2019). This draft is contingent on CMS negotiations and approval of the PFM and on any applicable actions by the Texas Legislature.
- Revised Draft DSRIP DY7-8 PFM (PDF) (updated 8/4/17 to reflect changes in the DY7-8 Measure Bundle Protocol)
- Summary of Proposed DY7-8 Requirements (PDF) (5/17/17)
- Accessible version of Summary of Proposed DY7-8 Requirements (PDF) (5/17/17)
- Summary of Stakeholder Feedback on the First Draft DY7-8 PFM (PDF) (5/17/17)
- Draft DSRIP DY 7-8 PFM (PDF) (1/31/17)
- Measure Bundle Overview (PDF) (1/31/17)
The current 1115 waiver was approved without DSRIP, and authority for the DSRIP pool expired September 30, 2021.
1115 Waiver Annual Reports
The 1115 Waiver's Standard Special Terms and Conditions require HHSC to submit an annual report on the waiver to the Centers for Medicare and Medicaid Services for each demonstration year.
- Demonstration Year 11 (October 2021–September 2022) Draft Annual Report (PDF)
- Demonstration Year 10 (October 2020–September 2021) Annual Report (PDF)
- Demonstration Year 9 (October 2019–September 2020) Annual Report (PDF)
- Demonstration Year 8 (October 2018–September 2019) Annual Report (PDF)
- Budget Neutrality Financial Summary 2019 (Excel)
- Demonstration Year 7 (October 2017–September 2018) Annual Report (PDF)
- Demonstration Year 6 (October 2016–September 2017) Annual Report (PDF)
- Demonstration Year 5 (October 2015–September 2016) Annual Report (PDF)
- Demonstration Year 4 (October 2014–September 2015) Annual Report (PDF) (8/17/16)
- Demonstration Year 3 (October 2013–September 2014) Annual Report (PDF)
- Demonstration Year 2 (October 2012–September 2013) Annual Report (PDF)
- Demonstration Year 1 (December 2011–September 2012) Annual Report (PDF)
1115 Waiver Evaluation
The 1115 Waiver's Special Terms and Conditions require HHSC to select an independent external evaluator to implement the approved Evaluation Design Plan for the Waiver renewal period. The independent external evaluator will be responsible for conducting the evaluation according to the approved Evaluation Design Plan and submitting the interim and final evaluation reports. The approved Evaluation Design Plan can be found here:
- 1115 Evaluation Design Plan for the demonstration authorized through September 2030 (PDF)
- 1115 Evaluation Design Plan Approval Letter (May 2022) (PDF)
- 1115 Evaluation Design Plan for the demonstration authorized through September 2022 (PDF)
- 1115 Approved Interim Evaluation Report (August 2022) (PDF)
- 1115 Evaluation Design Plan Approval Letter (August 2018) (PDF)
1115 Evaluation Documents - Initial Approval Period
- Final documents pertaining to the required 1115(a) Texas Demonstration Waiver Evaluation Report (posted 6/1/17):
- Guidance for Potential Collaborators on Evaluating the 1115(a) Demonstration Waiver - Healthcare Transformation Quality Improvement Program (PDF) (11/12/13)
- 1115 Waiver Evaluation Plan (PDF) (2/12/2013)
Medicaid/CHIP Quality and Efficiency Improvement Website
- HHSC has launched a Medicaid and CHIP Quality and Efficiency Improvement website to increase transparency and public reporting.