(a) The executive commissioner by rule shall establish procedures for:
(1) controlling the number of Medicaid beds in nursing facilities;
(2) decertification of unused Medicaid beds in nursing facilities; and
(3) reallocation of nursing facility beds decertified under Subdivision (2) to other nursing facilities.
(b) The procedures established under this section must take into account the occupancy rate of the nursing facility.

(c) The executive commissioner may exempt a nursing facility from the procedures established under this section if the facility:
(1) is affiliated with a state-supported medical school;
(2) is located on land owned or controlled by the state-supported medical school; and
(3) serves as a teaching facility for physicians and related health care professionals.
(d) The executive commissioner by rule may require an applicant for Medicaid beds in a nursing facility under a Medicaid bed waiver application to provide a performance bond in the amount of $500,000 or other financial security as determined by the Department of Aging and Disability Services to ensure that the applicant provides the Medicaid beds granted to the applicant under the waiver within the time frame required by the Department of Aging and Disability Services. A performance bond provided under this subsection must:
(1) be executed by a corporate surety in accordance with Subchapter A, Chapter 3503, Insurance Code;
(2) be in a form approved by the Department of Aging and Disability Services; and
(3) clearly and prominently display on the face of the bond or on an attachment to the bond:
(A) the name, mailing address, physical address, and telephone number, including the area code, of the surety company to which any notice of claim should be sent; or
(B) the toll-free telephone number maintained by the Texas Department of Insurance under Subchapter B, Chapter 521, Insurance Code, and a statement that the address of the surety company to which any notice of claim should be sent may be obtained from the Texas Department of Insurance by calling the toll-free telephone number.
(e) The executive commissioner may not require an applicant for Medicaid beds in a nursing facility to obtain a performance bond from a specific insurance or surety agency, agent, or broker.
(f) The executive commissioner by rule shall adopt criteria to exempt certain applicants for Medicaid beds from the requirements of Subsection (d), including applicants that are licensed facilities with existing Medicaid bed allocations, criminal justice facilities, teaching facilities, and state veterans homes, and any other applicants that the executive commissioner finds good cause to exempt. The executive commissioner may modify the criteria for granting exemptions under this subsection as necessary to meet the objectives of Subsection (d).