SB457

SB457 sets a patient-care spending rule for Medicaid nursing-facility payments, requires more ownership disclosure and protects qualifying facilities from payment interruptions during an ownership change. It was signed June 20, 2025 and took effect September 1, 2025. Enrolled law; History.

The spending rule: HHSC must establish an annual ratio requiring at least 80% of the portion of a nursing facility’s Medicaid reimbursement attributable to patient-care expenses to be spent on reasonable and necessary patient-care expenses. This is not 80% of all facility revenue, nor a rule that 80% must go only to bedside nurses. Counted expenses include employee or contract direct-care staff, social-service and severe-cognitive-impairment care staff, specified nonprofessional administrative staff, supply/ancillary staff, housekeeping, laundry and food-service staff; specified medical supplies, equipment, drugs and therapy-consultant costs; and dietary/nutrition services. Other administrative/operational expenses and fixed capital assets are excluded. Patient-care definition and ratio.

Subject to federal law, HHSC may recover all or part of the affected payment if the facility misses the spending rule. It may not make that recovery when, during the relevant calculation period, the facility meets any one of three exceptions: at least four stars in three or more of the federal overall, health-inspection, staffing and long-stay quality-measure categories; average daily occupancy of 75% or less together with at least 70% spending of the patient-care payment component on qualifying care; or expenses related to a governor-declared disaster. These are repayment exceptions, not a general repeal of the ratio. HHSC must post a list of facilities from which it recovers payments. Recovery authority and exceptions.

The ratio and its provider-agreement provision exclude state-owned facilities. The law requires the ratio in applicable managed-care provider agreements but says HHSC may not make compliance with it a condition of Medicaid participation. Existing quality/performance standards are not repealed. The act removes specified statutory requirements for the older voluntary direct-care staff incentive/rate-enhancement framework; it does not set a new across-the-board dollar payment rate. Sections 2–3 and 6–7; Former incentive provisions; Existing performance standards.

Ownership transparency: License and renewal applications must identify each person with a direct or indirect ownership interest of at least 5% in the facility, including its parent or subsidiary, and in the real property on which it operates, including the specified owner, tenant and sublessee arrangements. Applicants must describe the exact interest; license holders must notify HHSC when that information changes. This adds detail to existing licensing review rather than eliminating the preexisting background and compliance checks. Sections 4–5; Existing application requirements.

Payments during an ownership change: HHSC must maintain uninterrupted Medicaid reimbursement while an application is pending if the new owner accepts the prior Medicaid provider agreement, satisfies applicable law and licensing requirements, assumes the services contract when its terms require and the parties agree, enters an HHSC-approved successor-liability agreement, and meets additional HHSC requirements. The agreement must cover identified outstanding liabilities under the earlier contract, including a prior owner’s liabilities regardless of service/claim date or whether HHSC or another authorized entity identified them. Supplemental and directed payment programs are excluded from this protection. The bill does not make a facility license automatically transferable. Section 532.0159; Existing licensing rules.

The act directs initial ratio compliance from September 1, 2025. HHSC contracts entered or renewed from that date must carry the new managed-care requirement; HHSC must seek amendments to earlier contracts, whose conflicting terms prevail. If needed federal approval is identified, the affected agency must request it and may delay that provision until approval arrives. HHSC must report to the legislature by November 1, 2027 on cost and care-quality effects during the preceding state fiscal biennium. These are statutory directions, not a claim here that every implementation step or predicted benefit has occurred. Implementation, report and federal-approval clauses.