(a) The department shall:

(1) Supervise the administration of medical assistance for eligible recipients;

(2) Make uniform rules and regulations, not inconsistent with the law, for implementing, administering and enforcing this part in an efficient, economical and impartial manner;

(3)

(A) Establish, in consultation with the comptroller of the treasury, rules and regulations for the determination of payment for hospitals, and other health care providers who contract with the department for the care of persons eligible for assistance pursuant to this part;

(B) Establish, in consultation with the comptroller of the treasury and the Tennessee Health Care Association (THCA), rules for an acuity and quality-based reimbursement methodology for nursing facility services paid for by the bureau of TennCare under the rules of the department and as designated and certified by the department. Payment determination components shall include acuity adjusted direct care, non-acuity adjusted direct care, quality, administration, fair market value capital, a cost-based component, and an inflation index factor. The inflation index factor that shall be the most recent Skilled Nursing Facility without Capital Market Basket Index as published by IHS Global Insight (IHS Economics) or other index as may be agreed to by the bureau of TennCare and the comptroller of the treasury, in consultation with THCA, should this index cease to be produced. The commissioner may establish the maximum amount to be paid to nursing facilities, consistent with the requirements of federal law and § 71-5-124(b);

(4) Cooperate with the appropriate federal department in any reasonable manner as may be necessary to qualify for federal aid in connection with the medical assistance program;

(5) Within sixty (60) days after the close of each fiscal year, prepare and print an annual report, which shall be submitted to the governor and members of the general assembly. This report shall include a full account of the operations and the expenditures of all funds under this part, adequate and complete statistics divided by counties about all medical assistance within the state, rules and regulations of the department promulgated to carry out this part, and such other information as it may deem advisable;

(6) Prepare or have prepared and release a summary statement monthly showing by counties the amount paid under this part and the total number of persons assisted;

(7) Establish and enforce safeguards to prevent unauthorized disclosures or improper use of the information contained in applications, reports of investigations and medical examinations, and correspondence in the individual case records of recipients of medical assistance;

(8) Furnish information to acquaint needy persons and the public generally with the plan for medical assistance of this state;

(9) Cooperate with agencies in other states in establishing reciprocal agreements to provide for payment of medical assistance to recipients who have moved to another state, consistent with this part and of Title XIX as amended;

(10) Contract, to the extent feasible, with one (1) or more contractors or fiscal intermediaries, or both, to provide or arrange services under this part. All such contracts shall be procured in accordance with the requirements of title 12, chapter 4, part 1; provided, that the department shall be required to solicit competitive proposals for contracts with fiscal intermediaries;

(11) Increase the coverage under medicaid for inpatient hospital days from fourteen (14) days to twenty (20) days, as provided for in the public health regulations of the United States department of health and human services, health care financing administration (HCFA). Coverage for inpatient hospital days shall be unlimited for any infant under the age of one (1) year to the extent required by federal law or regulations. The commissioner is further directed to promulgate a rule establishing a system of prospective reimbursement, targeted reimbursement, diagnosis-related groups, other method of reimbursement related to diagnosis, or other method of reimbursement pursuant to any federal waiver that waives any or all of the provisions of Title XIX that the state may receive or pursuant to any other federal law as adopted by amendment to the required Title XIX state plan, at which time such mechanism shall be used to determine the number of inpatient hospital days instead of the twenty-day limitation provided in this subdivision (a)(11); and

(12) Notwithstanding any law to the contrary, assist the council on children's mental health care in developing a plan that will establish demonstration sites in certain geographic areas where children's mental health care is child-centered, family-driven, and culturally and linguistically competent and that provides a coordinated system of care for children's mental health needs in this state.

(b)

(1) The total number of beds in private for-profit and private not-for-profit intermediate care facilities for persons with mental retardation (ICF/MR) facilities shall not exceed a total maximum number of six hundred sixty-eight (668). In compliance with the certificate of need process, private for-profit and private not-for-profit ICF/MR beds may be transferred from one location to another but the total number of such beds shall not exceed six hundred sixty-eight (668).

(2) Beginning July 1, 2006, the total number of beds in ICF/MR facilities shall increase by forty (40) beds per year for the next four (4) years, resulting in a maximum of eight hundred twenty-eight (828) beds by July 1, 2009. Only providers that have been providing services to persons with developmental disabilities under contract with the state for at least five (5) years shall be eligible to apply for these new beds. These new beds shall be initially filled by persons exiting the developmental centers, and upon the death or discharge of the person who exited the developmental center, the bed may be filled by individuals currently enrolled in one of the home and community based services (HCBS) waivers for individuals with intellectual disabilities or the waiting list for individuals with intellectual disabilities, subject to the individual's freedom of choice and pursuant to a process established and administered by the department of intellectual and developmental disabilities (DIDD) in order to ensure that such placement is the most integrated and cost-effective setting appropriate. Providers may refuse persons based on needs compatibility with the total mix of persons in the facility. If fewer than four (4) persons transitioning from a developmental center as part of the developmental center closure have selected a provider, the remaining beds necessary to establish the four-person home may be filled by individuals currently enrolled in one of the HCBS waivers for individuals with intellectual disabilities or the waiting list for individuals with intellectual disabilities, subject to the individual's freedom of choice and pursuant to a process established and administered by DIDD in order to ensure that such placement is the most integrated and cost-effective setting appropriate. DIDD shall do everything possible to provide referrals for these new beds. DIDD shall demonstrate a commitment to ensuring the individual's freedom of choice and ensure that every eligible service recipient is fully informed of all services available to them, including community ICF/MR facilities and the specialized services they provide.

(3) DIDD is to appoint a nine-person taskforce to review oversight, utilization, and future need for ICF/MR services and make recommendations to the general assembly and governor by June 30, 2007. Three (3) of the members of the taskforce shall be appointed by the DIDD from a list of persons provided by Tennessee Community Organizations (TNCO), and three (3) of the members shall be appointed by DIDD from a list of persons provided by ARC of Tennessee. The remaining three (3) members shall be employees of DIDD or other state agencies. DIDD shall designate one (1) of the members as chair of the taskforce.

(c) Notwithstanding any authority to the contrary, DIDD public ICF/MR non-facility beds established pursuant to federal litigation settlements or orders arising out of the cases United States v. State of Tennessee, 798 F. Supp. 483; 1992 U.S. Dist. LEXIS 14004 (W.D. Tenn. 1992), or People First of Tennessee, et al., v. Clover Bottom Developmental Center, et al., NO. 00-5342 (Docket) (C.A.6 Mar. 22, 2000), shall be exempt from all requirements and processes for the application and granting of certificates of need as set forth in § 68-11-1607. The establishment of all private ICF/MR non-facility beds remains subject to certificate of need requirements and processes.