Texas Statutes
Subchapter A. General Provisions
Section 533.005. Required Contract Provisions

Sec. 533.005. REQUIRED CONTRACT PROVISIONS. (a) A contract between a managed care organization and the commission for the organization to provide health care services to recipients must contain:
(1) procedures to ensure accountability to the state for the provision of health care services, including procedures for financial reporting, quality assurance, utilization review, and assurance of contract and subcontract compliance;
(2) capitation rates that:
(A) include acuity and risk adjustment methodologies that consider the costs of providing acute care services and long-term services and supports, including private duty nursing services, provided under the plan; and
(B) ensure the cost-effective provision of quality health care;
(3) a requirement that the managed care organization provide ready access to a person who assists recipients in resolving issues relating to enrollment, plan administration, education and training, access to services, and grievance procedures;
(4) a requirement that the managed care organization provide ready access to a person who assists providers in resolving issues relating to payment, plan administration, education and training, and grievance procedures;
(5) a requirement that the managed care organization provide information and referral about the availability of educational, social, and other community services that could benefit a recipient;
(6) procedures for recipient outreach and education;
(7) a requirement that the managed care organization make payment to a physician or provider for health care services rendered to a recipient under a managed care plan on any claim for payment that is received with documentation reasonably necessary for the managed care organization to process the claim:
(A) not later than:
(i) the 10th day after the date the claim is received if the claim relates to services provided by a nursing facility, intermediate care facility, or group home;
(ii) the 30th day after the date the claim is received if the claim relates to the provision of long-term services and supports not subject to Subparagraph (i); and
(iii) the 45th day after the date the claim is received if the claim is not subject to Subparagraph (i) or (ii); or
(B) within a period, not to exceed 60 days, specified by a written agreement between the physician or provider and the managed care organization;
(7-a) a requirement that the managed care organization demonstrate to the commission that the organization pays claims described by Subdivision (7)(A)(ii) on average not later than the 21st day after the date the claim is received by the organization;
(8) a requirement that the commission, on the date of a recipient's enrollment in a managed care plan issued by the managed care organization, inform the organization of the recipient's Medicaid certification date;
(9) a requirement that the managed care organization comply with Section 533.006 as a condition of contract retention and renewal;
(10) a requirement that the managed care organization provide the information required by Section 533.012 and otherwise comply and cooperate with the commission's office of inspector general and the office of the attorney general;
(11) a requirement that the managed care organization's usages of out-of-network providers or groups of out-of-network providers may not exceed limits for those usages relating to total inpatient admissions, total outpatient services, and emergency room admissions determined by the commission;
(12) if the commission finds that a managed care organization has violated Subdivision (11), a requirement that the managed care organization reimburse an out-of-network provider for health care services at a rate that is equal to the allowable rate for those services, as determined under Sections 32.028 and 32.0281, Human Resources Code;
(13) a requirement that, notwithstanding any other law, including Sections 843.312 and 1301.052, Insurance Code, the organization:
(A) use advanced practice registered nurses and physician assistants in addition to physicians as primary care providers to increase the availability of primary care providers in the organization's provider network; and
(B) treat advanced practice registered nurses and physician assistants in the same manner as primary care physicians with regard to:
(i) selection and assignment as primary care providers;
(ii) inclusion as primary care providers in the organization's provider network; and
(iii) inclusion as primary care providers in any provider network directory maintained by the organization;
(14) a requirement that the managed care organization reimburse a federally qualified health center or rural health clinic for health care services provided to a recipient outside of regular business hours, including on a weekend day or holiday, at a rate that is equal to the allowable rate for those services as determined under Section 32.028, Human Resources Code, if the recipient does not have a referral from the recipient's primary care physician;
(15) a requirement that the managed care organization develop, implement, and maintain a system for tracking and resolving all provider appeals related to claims payment, including a process that will require:
(A) a tracking mechanism to document the status and final disposition of each provider's claims payment appeal;
(B) the contracting with physicians who are not network providers and who are of the same or related specialty as the appealing physician to resolve claims disputes related to denial on the basis of medical necessity that remain unresolved subsequent to a provider appeal;
(C) the determination of the physician resolving the dispute to be binding on the managed care organization and provider; and
(D) the managed care organization to allow a provider with a claim that has not been paid before the time prescribed by Subdivision (7)(A)(ii) to initiate an appeal of that claim;
(16) a requirement that a medical director who is authorized to make medical necessity determinations is available to the region where the managed care organization provides health care services;
(17) a requirement that the managed care organization ensure that a medical director and patient care coordinators and provider and recipient support services personnel are located in the South Texas service region, if the managed care organization provides a managed care plan in that region;
(18) a requirement that the managed care organization provide special programs and materials for recipients with limited English proficiency or low literacy skills;
(19) a requirement that the managed care organization develop and establish a process for responding to provider appeals in the region where the organization provides health care services;
(20) a requirement that the managed care organization:
(A) develop and submit to the commission, before the organization begins to provide health care services to recipients, a comprehensive plan that describes how the organization's provider network complies with the provider access standards established under Section 533.0061;
(B) as a condition of contract retention and renewal:
(i) continue to comply with the provider access standards established under Section 533.0061; and
(ii) make substantial efforts, as determined by the commission, to mitigate or remedy any noncompliance with the provider access standards established under Section 533.0061;
(C) pay liquidated damages for each failure, as determined by the commission, to comply with the provider access standards established under Section 533.0061 in amounts that are reasonably related to the noncompliance; and
(D) regularly, as determined by the commission, submit to the commission and make available to the public a report containing data on the sufficiency of the organization's provider network with regard to providing the care and services described under Section 533.0061(a) and specific data with respect to access to primary care, specialty care, long-term services and supports, nursing services, and therapy services on the average length of time between:
(i) the date a provider requests prior authorization for the care or service and the date the organization approves or denies the request; and
(ii) the date the organization approves a request for prior authorization for the care or service and the date the care or service is initiated;
(21) a requirement that the managed care organization demonstrate to the commission, before the organization begins to provide health care services to recipients, that, subject to the provider access standards established under Section 533.0061:
(A) the organization's provider network has the capacity to serve the number of recipients expected to enroll in a managed care plan offered by the organization;
(B) the organization's provider network includes:
(i) a sufficient number of primary care providers;
(ii) a sufficient variety of provider types;
(iii) a sufficient number of providers of long-term services and supports and specialty pediatric care providers of home and community-based services; and
(iv) providers located throughout the region where the organization will provide health care services; and
(C) health care services will be accessible to recipients through the organization's provider network to a comparable extent that health care services would be available to recipients under a fee-for-service or primary care case management model of Medicaid managed care;
(22) a requirement that the managed care organization develop a monitoring program for measuring the quality of the health care services provided by the organization's provider network that:
(A) incorporates the National Committee for Quality Assurance's Healthcare Effectiveness Data and Information Set (HEDIS) measures or, as applicable, the national core indicators adult consumer survey and the national core indicators child family survey for individuals with an intellectual or developmental disability;
(B) focuses on measuring outcomes; and
(C) includes the collection and analysis of clinical data relating to prenatal care, preventive care, mental health care, and the treatment of acute and chronic health conditions and substance abuse;
(23) subject to Subsection (a-1), a requirement that the managed care organization develop, implement, and maintain an outpatient pharmacy benefit plan for its enrolled recipients:
(A) that, except as provided by Paragraph (L)(ii), exclusively employs the vendor drug program formulary and preserves the state's ability to reduce waste, fraud, and abuse under Medicaid;
(B) that adheres to the applicable preferred drug list adopted by the commission under Section 531.072;
(C) that, except as provided by Paragraph (L)(i), includes the prior authorization procedures and requirements prescribed by or implemented under Sections 531.073(b), (c), and (g) for the vendor drug program;
(C-1) that does not require a clinical, nonpreferred, or other prior authorization for any antiretroviral drug, as defined by Section 531.073, or a step therapy or other protocol, that could restrict or delay the dispensing of the drug except to minimize fraud, waste, or abuse;
(C-2) that does not require prior authorization for a nonpreferred antipsychotic drug prescribed to an adult recipient if the requirements of Section 531.073(a-3) are met;
(D) for purposes of which the managed care organization:
(i) may not negotiate or collect rebates associated with pharmacy products on the vendor drug program formulary; and
(ii) may not receive drug rebate or pricing information that is confidential under Section 531.071;
(E) that complies with the prohibition under Section 531.089;
(F) under which the managed care organization may not prohibit, limit, or interfere with a recipient's selection of a pharmacy or pharmacist of the recipient's choice for the provision of pharmaceutical services under the plan through the imposition of different copayments;
(G) that allows the managed care organization or any subcontracted pharmacy benefit manager to contract with a pharmacist or pharmacy providers separately for specialty pharmacy services, except that:
(i) the managed care organization and pharmacy benefit manager are prohibited from allowing exclusive contracts with a specialty pharmacy owned wholly or partly by the pharmacy benefit manager responsible for the administration of the pharmacy benefit program; and
(ii) the managed care organization and pharmacy benefit manager must adopt policies and procedures for reclassifying prescription drugs from retail to specialty drugs, and those policies and procedures must be consistent with rules adopted by the executive commissioner and include notice to network pharmacy providers from the managed care organization;
(H) under which the managed care organization may not prevent a pharmacy or pharmacist from participating as a provider if the pharmacy or pharmacist agrees to comply with the financial terms and conditions of the contract as well as other reasonable administrative and professional terms and conditions of the contract;
(I) under which the managed care organization may include mail-order pharmacies in its networks, but may not require enrolled recipients to use those pharmacies, and may not charge an enrolled recipient who opts to use this service a fee, including postage and handling fees;
(J) under which the managed care organization or pharmacy benefit manager, as applicable, must pay claims in accordance with Section 843.339, Insurance Code;
(K) under which the managed care organization or pharmacy benefit manager, as applicable:
(i) to place a drug on a maximum allowable cost list, must ensure that:
(a) the drug is listed as "A" or "B" rated in the most recent version of the United States Food and Drug Administration's Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the Orange Book, has an "NR" or "NA" rating or a similar rating by a nationally recognized reference; and
(b) the drug is generally available for purchase by pharmacies in the state from national or regional wholesalers and is not obsolete;
(ii) must provide to a network pharmacy provider, at the time a contract is entered into or renewed with the network pharmacy provider, the sources used to determine the maximum allowable cost pricing for the maximum allowable cost list specific to that provider;
(iii) must review and update maximum allowable cost price information at least once every seven days to reflect any modification of maximum allowable cost pricing;
(iv) must, in formulating the maximum allowable cost price for a drug, use only the price of the drug and drugs listed as therapeutically equivalent in the most recent version of the United States Food and Drug Administration's Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the Orange Book;
(v) must establish a process for eliminating products from the maximum allowable cost list or modifying maximum allowable cost prices in a timely manner to remain consistent with pricing changes and product availability in the marketplace;
(vi) must:
(a) provide a procedure under which a network pharmacy provider may challenge a listed maximum allowable cost price for a drug;
(b) respond to a challenge not later than the 15th day after the date the challenge is made;
(c) if the challenge is successful, make an adjustment in the drug price effective on the date the challenge is resolved and make the adjustment applicable to all similarly situated network pharmacy providers, as determined by the managed care organization or pharmacy benefit manager, as appropriate;
(d) if the challenge is denied, provide the reason for the denial; and
(e) report to the commission every 90 days the total number of challenges that were made and denied in the preceding 90-day period for each maximum allowable cost list drug for which a challenge was denied during the period;
(vii) must notify the commission not later than the 21st day after implementing a practice of using a maximum allowable cost list for drugs dispensed at retail but not by mail; and
(viii) must provide a process for each of its network pharmacy providers to readily access the maximum allowable cost list specific to that provider; and
(L) under which the managed care organization or pharmacy benefit manager, as applicable:
(i) may not require a prior authorization, other than a clinical prior authorization or a prior authorization imposed by the commission to minimize the opportunity for waste, fraud, or abuse, for or impose any other barriers to a drug that is prescribed to a child enrolled in the STAR Kids managed care program for a particular disease or treatment and that is on the vendor drug program formulary or require additional prior authorization for a drug included in the preferred drug list adopted under Section 531.072;
(ii) must provide for continued access to a drug prescribed to a child enrolled in the STAR Kids managed care program, regardless of whether the drug is on the vendor drug program formulary or, if applicable on or after August 31, 2023, the managed care organization's formulary;
(iii) may not use a protocol that requires a child enrolled in the STAR Kids managed care program to use a prescription drug or sequence of prescription drugs other than the drug that the child's physician recommends for the child's treatment before the managed care organization provides coverage for the recommended drug; and
(iv) must pay liquidated damages to the commission for each failure, as determined by the commission, to comply with this paragraph in an amount that is a reasonable forecast of the damages caused by the noncompliance;
(24) a requirement that the managed care organization and any entity with which the managed care organization contracts for the performance of services under a managed care plan disclose, at no cost, to the commission and, on request, the office of the attorney general all discounts, incentives, rebates, fees, free goods, bundling arrangements, and other agreements affecting the net cost of goods or services provided under the plan;
(25) a requirement that the managed care organization not implement significant, nonnegotiated, across-the-board provider reimbursement rate reductions unless:
(A) subject to Subsection (a-3), the organization has the prior approval of the commission to make the reductions; or
(B) the rate reductions are based on changes to the Medicaid fee schedule or cost containment initiatives implemented by the commission; and
(26) a requirement that the managed care organization make initial and subsequent primary care provider assignments and changes.
(a-1) The requirements imposed by Subsections (a)(23)(A), (B), and (C) do not apply, and may not be enforced, on and after August 31, 2023.
(a-2) Except as provided by Subsection (a)(23)(K)(viii), a maximum allowable cost list specific to a provider and maintained by a managed care organization or pharmacy benefit manager is confidential.
(a-3) For purposes of Subsection (a)(25)(A), a provider reimbursement rate reduction is considered to have received the commission's prior approval unless the commission issues a written statement of disapproval not later than the 45th day after the date the commission receives notice of the proposed rate reduction from the managed care organization.
(b) In accordance with Subsection (a)(12), all post-stabilization services provided by an out-of-network provider must be reimbursed by the managed care organization at the allowable rate for those services until the managed care organization arranges for the timely transfer of the recipient, as determined by the recipient's attending physician, to a provider in the network. A managed care organization may not refuse to reimburse an out-of-network provider for emergency or post-stabilization services provided as a result of the managed care organization's failure to arrange for and authorize a timely transfer of a recipient.
(c) The executive commissioner shall adopt rules regarding the days, times of days, and holidays that are considered to be outside of regular business hours for purposes of Subsection (a)(14).
(d) For purposes of Subsection (a)(13), an advanced practice registered nurse may be included as a primary care provider in a managed care organization's provider network regardless of whether the physician supervising the advanced practice registered nurse is in the provider network. This subsection may not be construed as authorizing a managed care organization to supervise or control the practice of medicine as prohibited by Subtitle B, Title 3, Occupations Code.
(g) The commission shall provide guidance and additional education to managed care organizations with which the commission enters into contracts described by Subsection (a) regarding requirements under federal law to continue to provide services during an internal appeal, a Medicaid fair hearing, or any other review.
(h) In addition to the requirements specified by Subsection (a), a contract described by that subsection must contain language permitting a managed care organization to offer medically appropriate, cost-effective, evidence-based services from a list approved by the state Medicaid managed care advisory committee and included in the contract in lieu of mental health or substance use disorder services specified in the state Medicaid plan. A recipient is not required to use a service from the list included in the contract in lieu of another mental health or substance use disorder service specified in the state Medicaid plan. The commission shall:
(1) prepare and submit an annual report to the legislature on the number of times during the preceding year a service from the list included in the contract is used; and
(2) take into consideration the actual cost and use of any services from the list included in the contract that are offered by a managed care organization when setting the capitation rates for that organization under the contract.
Added by Acts 1997, 75th Leg., ch. 1262, Sec. 2, eff. June 20, 1997. Amended by Acts 1999, 76th Leg., ch. 493, Sec. 2, eff. Sept. 1, 1999; Acts 1999, 76th Leg., ch. 1447, Sec. 4, eff. June 19, 1999; Acts 1999, 76th Leg., ch. 1460, Sec. 9.04, eff. Sept. 1, 1999; Acts 2003, 78th Leg., ch. 198, Sec. 2.35, eff. Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch. 349 (S.B. 1188), Sec. 6(a), eff. September 1, 2005.
Acts 2011, 82nd Leg., 1st C.S., Ch. 7 (S.B. 7), Sec. 1.02(d), eff. September 28, 2011.
Acts 2013, 83rd Leg., R.S., Ch. 418 (S.B. 406), Sec. 20, eff. November 1, 2013.
Acts 2013, 83rd Leg., R.S., Ch. 1191 (S.B. 1106), Sec. 1, eff. September 1, 2013.
Acts 2013, 83rd Leg., R.S., Ch. 1261 (H.B. 595), Sec. 1, eff. September 1, 2013.
Acts 2013, 83rd Leg., R.S., Ch. 1310 (S.B. 7), Sec. 2.04, eff. September 1, 2013.
Acts 2013, 83rd Leg., R.S., Ch. 1311 (S.B. 8), Sec. 8, eff. September 1, 2013.
Acts 2015, 84th Leg., R.S., Ch. 1 (S.B. 219), Sec. 2.222, eff. April 2, 2015.
Acts 2015, 84th Leg., R.S., Ch. 1272 (S.B. 760), Sec. 4, eff. September 1, 2015.
Acts 2017, 85th Leg., R.S., Ch. 302 (S.B. 654), Sec. 1, eff. September 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 832 (H.B. 1917), Sec. 1, eff. June 15, 2017.
Acts 2019, 86th Leg., R.S., Ch. 619 (S.B. 1096), Sec. 3, eff. September 1, 2019.
Acts 2019, 86th Leg., R.S., Ch. 981 (S.B. 1177), Sec. 1, eff. September 1, 2019.
Acts 2019, 86th Leg., R.S., Ch. 1343 (S.B. 1283), Sec. 2, eff. September 1, 2019.
Acts 2021, 87th Leg., R.S., Ch. 348 (H.B. 2822), Sec. 2, eff. September 1, 2021.
Acts 2021, 87th Leg., R.S., Ch. 820 (H.B. 2658), Sec. 3, eff. September 1, 2021.
Acts 2021, 87th Leg., R.S., Ch. 915 (H.B. 3607), Sec. 21.001(34), eff. September 1, 2021.

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