Health Care Advocate

THHSC, TMHP Move Forward with Medicaid Changes

by Jennifer Banda, J.D., Elizabeth Sjoberg, RN, J.D., Michelle Apodaca, J.D., and John Berta

Aug. 18, 2011 The Texas Health and Human Services Commission and the Texas Medicaid & Healthcare Partnership continue their efforts to redesign Texas Medicaid’s hospital payment structure. New information has been released regarding the development of Medicaid hospital inpatient rates, Medicaid obstetrical services, and the elimination of payment of outpatient deductibles and coinsurance for Medicare and Medicaid dual-eligible patients.

Medicaid Inpatient Hospital Rates
In a notice published earlier this week, TMHP provided a link for hospitals to download their expected Medicaid inpatient hospital rates and Medicaid MS-DRG weights that will be effective on Sept. 1. Hospitals are encouraged to download the Inpatient Hospitals Attachment file on the THHSC rate packet web page (look under the September 1, 2011 heading).

Medicaid Newborn Deliveries
As reported in last week’s Health Care Advocate, effective Oct. 1 TMHP will require physicians to include newly developed modifiers for specific newborn delivery procedure codes.
     Failure to include the required modifiers on the physician bill will result in the denial or recoupment of payment from both the physician and the hospital. In addition, any cesarean section, labor induction or any delivery following labor induction that is coded as non-medically necessary prior to 39 weeks of gestation will result in the denial or recoupment of payment from both the physician and the hospital.
     THHSC has informed the Texas Hospital Association that it will implement the new requirement for all Medicaid inpatient deliveries, including births covered under a Medicaid managed care arrangement.
     THA has submitted a list of questions to THHSC related to the new policy, including what happens to hospital claims that are presented for adjudication prior to the processing of the physician claim. Currently, it is unclear if these claims will be delayed, paid or denied. While delay in processing is not tenable, payment or denial of the hospital claim may result in appeal or recoupment once the physician bill is adjudicated. In addition, THA has asked THHSC to clarify that the policy applies only to the physician and delivery-related charges.
     Due to the short timeline for implementation, hospitals are encouraged to:

  • Coordinate education and training regarding the new requirement with medical staff;  
  • Coordinate and monitor medical staff claims processing operations;   
  • Evaluate existing hospital Medicaid managed care contracts; and
  • Contact each contracted Medicaid managed care organization to renegotiate, amend or clarify existing contracts in light of the new requirement.

     As detailed in the notice, the modifiers must be included for the following obstetric delivery procedure codes:

OB Delivery Code









     Modifiers to be added to the physician claim are provided below:



Claim Status


Medically necessary delivery prior to 39 weeks of gestation

Covered Service


Delivery at 39 weeks of gestation or later

Covered Service


Non-medically necessary delivery prior to 39 weeks of gestation

Claim Denied, payment subject to recoupment

Modifier Not Present


Claim Denied, payment subject to recoupment

     THHSC provided a document outlining criteria that should be considered in determining which modifier to use. THHSC indicates that its Office of the Medical Director will develop final guidelines using the criteria outlined in its development process.  
     THHSC is implementing the new requirement in response to House Bill 1983 passed by the Texas Legislature earlier this year. The legislation was developed to reduce the number of elective or non-medically indicated induced deliveries and cesarean sections.
Elimination of Medicaid Outpatient Deductible and Coinsurance Payments  
Within the next 10 days, THHSC is expected to publish an agenda for the Sept. 8 Medical Care Advisory Committee meeting. The agenda will include a rule eliminating payment by the Texas Medicaid program for Medicare and Medicaid dual-eligible patients. The rule still is under review by the agency and is not yet available to the public. It should be posted with the agenda at least one week prior to the MCAC meeting.