as introduced - 81st Legislature (1999 - 2000) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to human services; modifying provisions in 1.3 long-term care; amending Minnesota Statutes 1998, 1.4 sections 256B.411, subdivision 2; and 256B.431, 1.5 subdivisions 1, 3a, 10, 11, 16, 18, 21, 22, and 25; 1.6 Minnesota Statutes 1999 Supplement, sections 1.7 256B.0913, subdivision 5; 256B.431, subdivisions 17 1.8 and 26; and 256B.434, subdivisions 3 and 4; repealing 1.9 Minnesota Statutes 1998, sections 256B.03, subdivision 1.10 2; 256B.431, subdivisions 2, 2a, 2f, 2h, 2m, 2p, 2q, 1.11 3, 3b, 3d, 3h, 3j, 4, 5, 7, 8, 9, 9a, 12, and 24; 1.12 256B.48, subdivision 9; 256B.50, subdivision 3; and 1.13 256B.74, subdivision 3. 1.14 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.15 Section 1. Minnesota Statutes 1999 Supplement, section 1.16 256B.0913, subdivision 5, is amended to read: 1.17 Subd. 5. [SERVICES COVERED UNDER ALTERNATIVE CARE.] (a) 1.18 Alternative care funding may be used for payment of costs of: 1.19 (1) adult foster care; 1.20 (2) adult day care; 1.21 (3) home health aide; 1.22 (4) homemaker services; 1.23 (5) personal care; 1.24 (6) case management; 1.25 (7) respite care; 1.26 (8) assisted living; 1.27 (9) residential care services; 1.28 (10) care-related supplies and equipment; 1.29 (11) meals delivered to the home; 2.1 (12) transportation; 2.2 (13) skilled nursing; 2.3 (14) chore services; 2.4 (15) companion services; 2.5 (16) nutrition services; 2.6 (17) training for direct informal caregivers; 2.7 (18) telemedicine devices to monitor recipients in their 2.8 own homes as an alternative to hospital care, nursing home care, 2.9 or home visits; and 2.10 (19) other services including direct cash payments to 2.11 clients, approved by the county agency, subject to the 2.12 provisions of paragraph (m). Total annual payments for other 2.13 services for all clients within a county may not exceed either 2.14 ten percent of that county's annual alternative care program 2.15 base allocation or $5,000, whichever is greater. In no case 2.16 shall this amount exceed the county's total annual alternative 2.17 care program base allocation. 2.18 (b) The county agency must ensure that the funds are used 2.19 only to supplement and not supplant services available through 2.20 other public assistance or services programs. 2.21 (c) Unless specified in statute, the service standards for 2.22 alternative care services shall be the same as the service 2.23 standards defined in the elderly waiver. Except for the county 2.24 agencies' approval of direct cash payments to clients, persons 2.25 or agencies must be employed by or under a contract with the 2.26 county agency or the public health nursing agency of the local 2.27 board of health in order to receive funding under the 2.28 alternative care program. 2.29 (d) The adult foster care rate shall be considered a 2.30 difficulty of care payment and shall not include room and 2.31 board. The adult foster care daily rate shall be negotiated 2.32 between the county agency and the foster care provider. The 2.33 rate established under this section shall not exceed 75 percent 2.34 of the state average monthly nursing home payment for the case 2.35 mix classification to which the individual receiving foster care 2.36 is assigned, and it must allow for other alternative care 3.1 services to be authorized by the case manager. 3.2 (e) Personal care services may be provided by a personal 3.3 care provider organization. A county agency may contract with a 3.4 relative of the client to provide personal care services, but 3.5 must ensure nursing supervision. Covered personal care services 3.6 defined in section 256B.0627, subdivision 4, must meet 3.7 applicable standards in Minnesota Rules, part 9505.0335. 3.8 (f) A county may use alternative care funds to purchase 3.9 medical supplies and equipment without prior approval from the 3.10 commissioner when: (1) there is no other funding source; (2) 3.11 the supplies and equipment are specified in the individual's 3.12 care plan as medically necessary to enable the individual to 3.13 remain in the community according to the criteria in Minnesota 3.14 Rules, part 9505.0210, item A; and (3) the supplies and 3.15 equipment represent an effective and appropriate use of 3.16 alternative care funds. A county may use alternative care funds 3.17 to purchase supplies and equipment from a non-Medicaid certified 3.18 vendor if the cost for the items is less than that of a Medicaid 3.19 vendor. A county is not required to contract with a provider of 3.20 supplies and equipment if the monthly cost of the supplies and 3.21 equipment is less than $250. 3.22 (g) For purposes of this section, residential care services 3.23 are services which are provided to individuals living in 3.24 residential care homes. Residential care homes are currently 3.25 licensed as board and lodging establishments and are registered 3.26 with the department of health as providing special services. 3.27 Residential care services are defined as "supportive services" 3.28 and "health-related services." "Supportive services" means the 3.29 provision of up to 24-hour supervision and oversight. 3.30 Supportive services includes: (1) transportation, when provided 3.31 by the residential care center only; (2) socialization, when 3.32 socialization is part of the plan of care, has specific goals 3.33 and outcomes established, and is not diversional or recreational 3.34 in nature; (3) assisting clients in setting up meetings and 3.35 appointments; (4) assisting clients in setting up medical and 3.36 social services; (5) providing assistance with personal laundry, 4.1 such as carrying the client's laundry to the laundry room. 4.2 Assistance with personal laundry does not include any laundry, 4.3 such as bed linen, that is included in the room and board rate. 4.4 Health-related services are limited to minimal assistance with 4.5 dressing, grooming, and bathing and providing reminders to 4.6 residents to take medications that are self-administered or 4.7 providing storage for medications, if requested. Individuals 4.8 receiving residential care services cannot receiveboth personal4.9care services and residential carehomemaking services. 4.10 (h) For the purposes of this section, "assisted living" 4.11 refers to supportive services provided by a single vendor to 4.12 clients who reside in the same apartment building of three or 4.13 more units which are not subject to registration under chapter 4.14 144D. Assisted living services are defined as up to 24-hour 4.15 supervision, and oversight, supportive services as defined in 4.16 clause (1), individualized home care aide tasks as defined in 4.17 clause (2), and individualized home management tasks as defined 4.18 in clause (3) provided to residents of a residential center 4.19 living in their units or apartments with a full kitchen and 4.20 bathroom. A full kitchen includes a stove, oven, refrigerator, 4.21 food preparation counter space, and a kitchen utensil storage 4.22 compartment. Assisted living services must be provided by the 4.23 management of the residential center or by providers under 4.24 contract with the management or with the county. 4.25 (1) Supportive services include: 4.26 (i) socialization, when socialization is part of the plan 4.27 of care, has specific goals and outcomes established, and is not 4.28 diversional or recreational in nature; 4.29 (ii) assisting clients in setting up meetings and 4.30 appointments; and 4.31 (iii) providing transportation, when provided by the 4.32 residential center only. 4.33 Individuals receiving assisted living services will not 4.34 receive both assisted living services and homemakingor personal4.35careservices. Individualized means services are chosen and 4.36 designed specifically for each resident's needs, rather than 5.1 provided or offered to all residents regardless of their 5.2 illnesses, disabilities, or physical conditions. 5.3 (2) Home care aide tasks means: 5.4 (i) preparing modified diets, such as diabetic or low 5.5 sodium diets; 5.6 (ii) reminding residents to take regularly scheduled 5.7 medications or to perform exercises; 5.8 (iii) household chores in the presence of technically 5.9 sophisticated medical equipment or episodes of acute illness or 5.10 infectious disease; 5.11 (iv) household chores when the resident's care requires the 5.12 prevention of exposure to infectious disease or containment of 5.13 infectious disease; and 5.14 (v) assisting with dressing, oral hygiene, hair care, 5.15 grooming, and bathing, if the resident is ambulatory, and if the 5.16 resident has no serious acute illness or infectious disease. 5.17 Oral hygiene means care of teeth, gums, and oral prosthetic 5.18 devices. 5.19 (3) Home management tasks means: 5.20 (i) housekeeping; 5.21 (ii) laundry; 5.22 (iii) preparation of regular snacks and meals; and 5.23 (iv) shopping. 5.24 Assisted living services as defined in this section shall 5.25 not be authorized in boarding and lodging establishments 5.26 licensed according to sections 157.011 and 157.15 to 157.22. 5.27 (i) For establishments registered under chapter 144D, 5.28 assisted living services under this section means the services 5.29 described and licensed under section 144A.4605. 5.30 (j) For the purposes of this section, reimbursement for 5.31 assisted living services and residential care services shall be 5.32 a monthly rate negotiated and authorized by the county agency 5.33 based on an individualized service plan for each resident. The 5.34 rate shall not exceed the nonfederal share of the greater of 5.35 either the statewide or any of the geographic groups' weighted 5.36 average monthly medical assistance nursing facility payment rate 6.1 of the case mix resident class to which the 180-day eligible 6.2 client would be assigned under Minnesota Rules, parts 9549.0050 6.3 to 9549.0059, unless the services are provided by a home care 6.4 provider licensed by the department of health and are provided 6.5 in a building that is registered as a housing with services 6.6 establishment under chapter 144D and that provides 24-hour 6.7 supervision. 6.8 (k) For purposes of this section, companion services are 6.9 defined as nonmedical care, supervision and oversight, provided 6.10 to a functionally impaired adult. Companions may assist the 6.11 individual with such tasks as meal preparation, laundry and 6.12 shopping, but do not perform these activities as discrete 6.13 services. The provision of companion services does not entail 6.14 hands-on medical care. Providers may also perform light 6.15 housekeeping tasks which are incidental to the care and 6.16 supervision of the recipient. This service must be approved by 6.17 the case manager as part of the care plan. Companion services 6.18 must be provided by individuals or organizations who are under 6.19 contract with the local agency to provide the service. Any 6.20 person related to the waiver recipient by blood, marriage or 6.21 adoption cannot be reimbursed under this service. Persons 6.22 providing companion services will be monitored by the case 6.23 manager. 6.24 (l) For purposes of this section, training for direct 6.25 informal caregivers is defined as a classroom or home course of 6.26 instruction which may include: transfer and lifting skills, 6.27 nutrition, personal and physical cares, home safety in a home 6.28 environment, stress reduction and management, behavioral 6.29 management, long-term care decision making, care coordination 6.30 and family dynamics. The training is provided to an informal 6.31 unpaid caregiver of a 180-day eligible client which enables the 6.32 caregiver to deliver care in a home setting with high levels of 6.33 quality. The training must be approved by the case manager as 6.34 part of the individual care plan. Individuals, agencies, and 6.35 educational facilities which provide caregiver training and 6.36 education will be monitored by the case manager. 7.1 (m) A county agency may make payment from their alternative 7.2 care program allocation for other services provided to an 7.3 alternative care program recipient if those services prevent, 7.4 shorten, or delay institutionalization. These services may 7.5 include direct cash payments to the recipient for the purpose of 7.6 purchasing the recipient's services. The following provisions 7.7 apply to payments under this paragraph: 7.8 (1) a cash payment to a client under this provision cannot 7.9 exceed 80 percent of the monthly payment limit for that client 7.10 as specified in subdivision 4, paragraph (a), clause (7); 7.11 (2) a county may not approve any cash payment for a client 7.12 who has been assessed as having a dependency in orientation, 7.13 unless the client has an authorized representative under section 7.14 256.476, subdivision 2, paragraph (g), or for a client who is 7.15 concurrently receiving adult foster care, residential care, or 7.16 assisted living services; 7.17 (3) any service approved under this section must be a 7.18 service which meets the purpose and goals of the program as 7.19 listed in subdivision 1; 7.20 (4) cash payments must also meet the criteria of and are 7.21 governed by the procedures and liability protection established 7.22 in section 256.476, subdivision 4,paragraph7.23 paragraphs (b) through (h), and recipients of cash grants must 7.24 meet the requirements in section 256.476, subdivision 10; and 7.25 (5) the county shall report client outcomes, services, and 7.26 costs under this paragraph in a manner prescribed by the 7.27 commissioner. 7.28 Upon implementation of direct cash payments to clients under 7.29 this section, any person determined eligible for the alternative 7.30 care program who chooses a cash payment approved by the county 7.31 agency shall receive the cash payment under this section and not 7.32 under section 256.476 unless the person was receiving a consumer 7.33 support grant under section 256.476 before implementation of 7.34 direct cash payments under this section. 7.35 Sec. 2. Minnesota Statutes 1998, section 256B.411, 7.36 subdivision 2, is amended to read: 8.1 Subd. 2. [REQUIREMENTS.] No medical assistance payments 8.2 shall be made to any nursing facility unless the nursing 8.3 facility is certified to participate in the medical assistance 8.4 program under title XIX of the federal Social Security Act and 8.5 has in effect a provider agreement with the commissioner meeting 8.6 the requirements of state and federal statutes and rules. No 8.7 medical assistance payments shall be made to any nursing 8.8 facility unless the nursing facility complies with all 8.9 requirements of Minnesota Statutes including, but not limited 8.10 to, this chapter and rules adopted under it that govern 8.11 participation in the program. This section applies whether the 8.12 nursing facility participates fully in the medical assistance 8.13 program or is withdrawing from the medical assistance program. 8.14 No future payments may be made to any nursing facility which has 8.15 withdrawn or is withdrawing from the medical assistance program 8.16 except as provided in section 256B.48, subdivision 1a; provided,8.17however, that, or federal law. Payments may also be made under 8.18 a court order entered on or before June 7, 1985, unless the 8.19 court order is reversed on appeal. 8.20 Sec. 3. Minnesota Statutes 1998, section 256B.431, 8.21 subdivision 1, is amended to read: 8.22 Subdivision 1. [IN GENERAL.] The commissioner shall 8.23 determine prospective payment rates for resident care costs.In8.24determining the rates, the commissioner shall group nursing8.25facilities according to different levels of care and geographic8.26location until July 1, 1985.For rates established on or after 8.27 July 1, 1985, the commissioner shall develop procedures for 8.28 determining operating cost payment rates that take into account 8.29 the mix of resident needs, geographic location, and other 8.30 factors as determined by the commissioner. The commissioner 8.31 shall consider whether the fact that a facility is attached to a 8.32 hospital or has an average length of stay of 180 days or less 8.33 should be taken into account in determining rates. The 8.34 commissioner shall consider the use of the standard metropolitan 8.35 statistical areas when developing groups by geographic 8.36 location.Until the commissioner establishes procedures for9.1determining operating cost payment rates, the commissioner shall9.2group all convalescent and nursing care units attached to9.3hospitals into one group for purposes of determining9.4reimbursement for operating costs. On or before June 15, 1983,9.5the commissioner shall mail notices to each nursing facility of9.6the rates to be effective from July 1 of that year to June 30 of9.7the following year. In subsequent years,The commissioner shall 9.8 provide notice to each nursing facility on or before May 1 of 9.9 the rates effective for the following rate year. If a statute9.10enacted after May 1 affects the rates, the commissioner shall9.11provide a revised notice to each nursing facility as soon as9.12possibleexcept that if legislation is pending on May 1 that may 9.13 affect rates for nursing facilities, the commissioner shall set 9.14 the rates after the legislation is enacted and provide notice to 9.15 each facility as soon as possible. 9.16The commissioner shall establish, by rule, limitations on9.17compensation recognized in the historical base for top9.18management personnel. For rate years beginning July 1, 1985,9.19the commissioner shall not provide, by rule, limitations on top9.20management personnel.Compensation for top management personnel 9.21 shall continue to be categorized as a general and administrative 9.22 cost and is subject to any limits imposed on that cost 9.23 category.The commissioner shall also establish, by rule,9.24limitations on allowable nursing hours for each level of care9.25for the rate years beginning July 1, 1983 and July 1, 1984. For9.26the rate year beginning July 1, 1984, nursing facilities in9.27which the nursing hours exceeded 2.9 hours per day for skilled9.28nursing care or 2.3 hours per day for intermediate care for the9.29reporting year ending on September 30, 1983, shall be limited to9.30a maximum of 3.2 hours per day for skilled nursing care and 2.69.31hours per day for intermediate care.9.32 Sec. 4. Minnesota Statutes 1998, section 256B.431, 9.33 subdivision 3a, is amended to read: 9.34 Subd. 3a. [PROPERTY-RELATED COSTS AFTER JULY 1, 1985.] (a) 9.35 For rate years beginning on or after July 1, 1985, the 9.36 commissioner, by permanent rule, shall reimburse nursing 10.1 facility providers that are vendors in the medical assistance 10.2 program for the rental use of real estate and depreciable 10.3 equipment. "Real estate" means land improvements, buildings, 10.4 and attached fixtures used directly for resident care. 10.5 "Depreciable equipment" means the standard movable resident care 10.6 equipment and support service equipment generally used in 10.7 long-term care facilities. 10.8 (b) In developing the method for determining payment rates 10.9 for the rental use of nursing facilities, the commissioner shall 10.10 consider factors designed to: 10.11 (1) simplify the administrative procedures for determining 10.12 payment rates for property-related costs; 10.13 (2) minimize discretionary or appealable decisions; 10.14 (3) eliminate any incentives to sell nursing facilities; 10.15 (4) recognize legitimate costs of preserving and replacing 10.16 property; 10.17 (5) recognize the existing costs of outstanding 10.18 indebtedness allowable under the statutes and rules in effect on 10.19 May 1, 1983; 10.20 (6) address the current value of, if used directly for 10.21 patient care, land improvements, buildings, attached fixtures, 10.22 and equipment; 10.23 (7) establish an investment per bed limitation; 10.24 (8) reward efficient management of capital assets; 10.25 (9) provide equitable treatment of facilities; 10.26 (10) consider a variable rate; and 10.27 (11) phase-in implementation of the rental reimbursement 10.28 method. 10.29(c) No later than January 1, 1984, the commissioner shall10.30report to the legislature on any further action necessary or10.31desirable in order to implement the purposes and provisions of10.32this subdivision.10.33(d)(c) For rate years beginning on or after July 1, 1987, 10.34 a nursing facility which has reduced licensed bed capacity after 10.35 January 1, 1986, shall be allowed to: 10.36 (1) aggregate the applicable investment per bed limits 11.1 based on the number of beds licensed prior to the reduction; and 11.2 (2) establish capacity days for each rate year following 11.3 the licensure reduction based on the number of beds licensed on 11.4 the previous April 1 if the commissioner is notified of the 11.5 change by April 4. The notification must include a copy of the 11.6 delicensure request that has been submitted to the commissioner 11.7 of health. 11.8(e) Until the rental reimbursement method is fully phased11.9in, a nursing facility whose final property-related payment rate11.10is the rental rate shall continue to have its property-related11.11payment rates established based on the rental reimbursement11.12method.11.13(f)(d) For rate years beginning on or after July 1, 1989, 11.14 the interest expense that results from a refinancing of a 11.15 nursing facility's demand call loan, when the loan that must be 11.16 refinanced was incurred before May 22, 1983, is an allowable 11.17 interest expense if: 11.18 (1) the demand call loan or any part of it was in the form 11.19 of a loan that was callable at the demand of the lender; 11.20 (2) the demand call loan or any part of it was called by 11.21 the lender through no fault of the nursing facility; 11.22 (3) the demand call loan or any part of it was made by a 11.23 government agency operating under a statutory or regulatory loan 11.24 program; 11.25 (4) the refinanced debt does not exceed the sum of the 11.26 allowable remaining balance of the demand call loan at the time 11.27 of payment on the demand call loan and refinancing costs; 11.28 (5) the term of the refinanced debt does not exceed the 11.29 remaining term of the demand call loan, had the debt not been 11.30 subject to an on-call payment demand; and 11.31 (6) the refinanced debt is not a debt between related 11.32 organizations as defined in Minnesota Rules, part 9549.0020, 11.33 subpart 38. 11.34 Sec. 5. Minnesota Statutes 1998, section 256B.431, 11.35 subdivision 10, is amended to read: 11.36 Subd. 10. [PROPERTY RATE ADJUSTMENTS AND CONSTRUCTION 12.1 PROJECTS.] A nursing facility's request for a property-related 12.2 payment rate adjustment and the related supporting documentation 12.3 of project construction cost information must be submitted to 12.4 the commissioner within 60 days after the construction project's 12.5 completion date to be considered eligible for a property-related 12.6 payment rate adjustment. Construction projects with completion 12.7 dates within one year of the completion date associated with the 12.8 property rate adjustment request and phased projects with 12.9 project completion dates within three years of the last phase of 12.10 the phased project must be aggregated for purposes of the 12.11 minimum thresholds in subdivisions 16 and 17, and the maximum 12.12 threshold in section 144A.071, subdivision 2. "Construction 12.13 project," and "project construction costs,"and "phased project"12.14 have the meanings given them in MinnesotaRules, part 4655.111012.15(Emergency)Statutes, section 144A.071, subdivision 1a. 12.16 Sec. 6. Minnesota Statutes 1998, section 256B.431, 12.17 subdivision 11, is amended to read: 12.18 Subd. 11. [SPECIAL PROPERTY RATE SETTING PROCEDURES FOR 12.19 CERTAIN NURSING FACILITIES.](a) Notwithstanding Minnesota12.20Rules, part 9549.0060, subpart 13, item H, to the contrary, for12.21the rate year beginning July 1, 1990, a nursing facility leased12.22prior to January 1, 1986, and currently subject to adverse12.23licensure action under section 144A.04, subdivision 4, paragraph12.24(a), or section 144A.11, subdivision 2, and whose ownership12.25changes prior to July 1, 1990, shall be allowed a12.26property-related payment equal to the lesser of its current12.27lease obligation divided by its capacity days as determined in12.28Minnesota Rules, part 9549.0060, subpart 11, as modified by12.29subdivision 3f, paragraph (c), or the frozen property-related12.30payment rate in effect for the rate year beginning July 1,12.311989. For rate years beginning on or after July 1, 1991, the12.32property-related payment rate shall be its rental rate computed12.33using the previous owner's allowable principal and interest12.34expense as allowed by the department prior to that prior owner's12.35sale and lease-back transaction of December 1985.12.36(b)Notwithstanding other provisions of applicable law, a 13.1 nursing facility licensed for 122 beds on January 1, 1998, and 13.2 located in Columbia Heights shall have its property-related 13.3 payment rate set under this subdivision. The commissioner shall 13.4 make a rate adjustment by adding $2.41 to the facility's July 1, 13.5 1997, property-related payment rate. The adjusted 13.6 property-related payment rate shall be effective for rate years 13.7 beginning on or after July 1, 1998. The adjustment in this 13.8 paragraph shall remain in effect so long as the facility's rates 13.9 are set under this section. If the facility participates in the 13.10 alternative payment system under section 256B.434, the 13.11 adjustment in this paragraph shall be included in the facility's 13.12 contract payment rate. If historical rates or property costs 13.13 recognized under this section become the basis for future 13.14 medical assistance payments to the facility under a managed 13.15 care, capitation, or other alternative payment system, the 13.16 adjustment in this paragraph shall be included in the 13.17 computation of the facility's payments. 13.18 Sec. 7. Minnesota Statutes 1998, section 256B.431, 13.19 subdivision 16, is amended to read: 13.20 Subd. 16. [MAJOR ADDITIONS AND REPLACEMENTS; EQUITY 13.21 INCENTIVE.] For rate years beginning after June 30, 1993, if a 13.22 nursing facility acquires capital assets in connection with a 13.23 project approved under the moratorium exception process in 13.24 section 144A.073 or in connection with an addition to or 13.25 replacement of buildings, attached fixtures, or land 13.26 improvements for which the total historical cost of those 13.27 capital asset additions exceeds the lesser of $150,000 or ten 13.28 percent of the most recent appraised value, the nursing facility 13.29 shall be eligible for an equity incentive payment rate as in 13.30 paragraphs (a) to (d). This computation is separate from the 13.31 determination of the nursing facility's rental rate. An equity 13.32 incentive payment rate as computed under this subdivision is 13.33 limited to one in a 12-month period. 13.34 (a) An eligible nursing facility shall receive an equity 13.35 incentive payment rate equal to the allowable historical cost of 13.36 the capital asset acquired, minus the allowable debt directly 14.1 identified to that capital asset, multiplied by the equity 14.2 incentive factor as described in paragraphs (b) and (c), and 14.3 divided by the nursing facility's occupancy factor under 14.4 subdivision 3f, paragraph (c). This amount shall be added to 14.5 the nursing facility's total payment rate and shall be effective 14.6 the same day as the incremental increase in paragraph (d) or 14.7 subdivision 17. The allowable historical cost of the capital 14.8 assets and the allowable debt shall be determined as provided in 14.9 Minnesota Rules, parts 9549.0010 to 9549.0080, and this section. 14.10 (b) The equity incentive factor shall be determined under 14.11 clauses (1) to (4): 14.12 (1) divide the initial allowable debt in paragraph (a) by 14.13 the initial historical cost of the capital asset additions 14.14 referred to in paragraph (a), then cube the quotient, 14.15 (2) subtract the amount calculated in clause (1) from the 14.16 number one, 14.17 (3) determine the difference between the rental factor and 14.18 the lesser of two percentage points above the posted yield for 14.19 standard conventional fixed rate mortgages of the Federal Home 14.20 Loan Mortgage Corporation as published in the Wall Street 14.21 Journal and in effect on the first day of the month the debt or 14.22 cost is incurred, or 16 percent, 14.23 (4) multiply the amount calculated in clause (2) by the 14.24 amount calculated in clause (3). 14.25 (c) The equity incentive payment rate shall be limited to 14.26 the term of the allowable debt in paragraph (a), not greater 14.27 than 20 years nor less than ten years. If no debt is incurred 14.28 in acquiring the capital asset, the equity incentive payment 14.29 rate shall be paid for ten years. The sale of a nursing 14.30 facility under subdivision 14 shall terminate application of the 14.31 equity incentive payment rate effective on the date provided in 14.32 subdivision414, paragraph (f), for the sale. 14.33 (d) A nursing facility with an addition to or a renovation 14.34 of its buildings, attached fixtures, or land improvements 14.35 meeting the criteria in this subdivision and not receiving the 14.36 property-related payment rate adjustment in subdivision 17, 15.1 shall receive the incremental increase in the nursing facility's 15.2 rental rate as determined under Minnesota Rules, parts 9549.0010 15.3 to 9549.0080, and this section. The incremental increase shall 15.4 be added to the nursing facility's property-related payment rate. 15.5 The effective date of this incremental increase shall be the 15.6 first day of the month following the month in which the addition 15.7 or replacement is completed. 15.8 Sec. 8. Minnesota Statutes 1999 Supplement, section 15.9 256B.431, subdivision 17, is amended to read: 15.10 Subd. 17. [SPECIAL PROVISIONS FOR MORATORIUM EXCEPTIONS.] 15.11 (a) Notwithstanding Minnesota Rules, part 9549.0060, subpart 3, 15.12 for rate periods beginning on October 1, 1992, and for rate 15.13 years beginning after June 30, 1993, a nursing facility that (1) 15.14 has completed a construction project approved under section 15.15 144A.071, subdivision 4a, clause (m); (2) has completed a 15.16 construction project approved under section 144A.071, 15.17 subdivision 4a, and effective after June 30, 1995; or (3) has 15.18 completed a renovation, replacement, or upgrading project 15.19 approved under the moratorium exception process in section 15.20 144A.073 shall be reimbursed for costs directly identified to 15.21 that project as provided in subdivision 16 and this subdivision. 15.22 (b) Notwithstanding Minnesota Rules, part 9549.0060, 15.23 subparts 5, item A, subitems (1) and (3), and 7, item D, 15.24 allowable interest expense on debt shall include: 15.25 (1) interest expense on debt related to the cost of 15.26 purchasing or replacing depreciable equipment, excluding 15.27 vehicles, not to exceed six percent of the total historical cost 15.28 of the project; and 15.29 (2) interest expense on debt related to financing or 15.30 refinancing costs, including costs related to points, loan 15.31 origination fees, financing charges, legal fees, and title 15.32 searches; and issuance costs including bond discounts, bond 15.33 counsel, underwriter's counsel, corporate counsel, printing, and 15.34 financial forecasts. Allowable debt related to items in this 15.35 clause shall not exceed seven percent of the total historical 15.36 cost of the project. To the extent these costs are financed, 16.1 the straight-line amortization of the costs in this clause is 16.2 not an allowable cost; and 16.3 (3) interest on debt incurred for the establishment of a 16.4 debt reserve fund, net of the interest earned on the debt 16.5 reserve fund. 16.6 (c) Debt incurred for costs under paragraph (b) is not 16.7 subject to Minnesota Rules, part 9549.0060, subpart 5, item A, 16.8 subitem (5) or (6). 16.9 (d) The incremental increase in a nursing facility's rental 16.10 rate, determined under Minnesota Rules, parts 9549.0010 to 16.11 9549.0080, and this section, resulting from the acquisition of 16.12 allowable capital assets, and allowable debt and interest 16.13 expense under this subdivision shall be added to its 16.14 property-related payment rate and shall be effective on the 16.15 first day of the month following the month in which the 16.16 moratorium project was completed. 16.17 (e) Notwithstanding subdivision 3f, paragraph (a), for rate 16.18 periods beginning on October 1, 1992, and for rate years 16.19 beginning after June 30, 1993, the replacement-costs-new per bed 16.20 limit to be used in Minnesota Rules, part 9549.0060, subpart 4, 16.21 item B, for a nursing facility that has completed a renovation, 16.22 replacement, or upgrading project that has been approved under 16.23 the moratorium exception process in section 144A.073, or that 16.24 has completed an addition to or replacement of buildings, 16.25 attached fixtures, or land improvements for which the total 16.26 historical cost exceeds the lesser of $150,000 or ten percent of 16.27 the most recent appraised value, must be $47,500 per licensed 16.28 bed in multiple-bed rooms and $71,250 per licensed bed in a 16.29 single-bed room. These amounts must be adjusted annually as 16.30 specified in subdivision 3f, paragraph (a), beginning January 1, 16.31 1993. 16.32(f) A nursing facility that completes a project identified16.33in this subdivision and, as of April 17, 1992, has not been16.34mailed a rate notice with a special appraisal for a completed16.35project, or completes a project after April 17, 1992, but before16.36September 1, 1992, may elect either to request a special17.1reappraisal with the corresponding adjustment to the17.2property-related payment rate under the laws in effect on June17.330, 1992, or to submit their capital asset and debt information17.4after that date and obtain the property-related payment rate17.5adjustment under this section, but not both.17.6(g)(f) For purposes of this paragraph, a total replacement 17.7 means the complete replacement of the nursing facility's 17.8 physical plant through the construction of a new physical plant 17.9 or the transfer of the nursing facility's license from one 17.10 physical plant location to another. For total replacement 17.11 projects completed on or after July 1, 1992, the commissioner 17.12 shall compute the incremental change in the nursing facility's 17.13 rental per diem, for rate years beginning on or after July 1, 17.14 1995, by replacing its appraised value, including the historical 17.15 capital asset costs, and the capital debt and interest costs 17.16 with the new nursing facility's allowable capital asset costs 17.17 and the related allowable capital debt and interest costs. If 17.18 the new nursing facility has decreased its licensed capacity, 17.19 the aggregate investment per bed limit in subdivision 3a, 17.20 paragraph(d)(c), shall apply. If the new nursing facility has 17.21 retained a portion of the original physical plant for nursing 17.22 facility usage, then a portion of the appraised value prior to 17.23 the replacement must be retained and included in the calculation 17.24 of the incremental change in the nursing facility's rental per 17.25 diem. For purposes of this part, the original nursing facility 17.26 means the nursing facility prior to the total replacement 17.27 project. The portion of the appraised value to be retained 17.28 shall be calculated according to clauses (1) to (3): 17.29 (1) The numerator of the allocation ratio shall be the 17.30 square footage of the area in the original physical plant which 17.31 is being retained for nursing facility usage. 17.32 (2) The denominator of the allocation ratio shall be the 17.33 total square footage of the original nursing facility physical 17.34 plant. 17.35 (3) Each component of the nursing facility's allowable 17.36 appraised value prior to the total replacement project shall be 18.1 multiplied by the allocation ratio developed by dividing clause 18.2 (1) by clause (2). 18.3 In the case of either type of total replacement as 18.4 authorized under section 144A.071 or 144A.073, the provisions of 18.5 this subdivision shall also apply. For purposes of the 18.6 moratorium exception authorized under section 144A.071, 18.7 subdivision 4a, paragraph (s), if the total replacement involves 18.8 the renovation and use of an existing health care facility 18.9 physical plant, the new allowable capital asset costs and 18.10 related debt and interest costs shall include first the 18.11 allowable capital asset costs and related debt and interest 18.12 costs of the renovation, to which shall be added the allowable 18.13 capital asset costs of the existing physical plant prior to the 18.14 renovation, and if reported by the facility, the related 18.15 allowable capital debt and interest costs. 18.16(h)(g) Notwithstanding Minnesota Rules, part 9549.0060, 18.17 subpart 11, item C, subitem (2), for a total replacement, as 18.18 defined in paragraph(g)(f), authorized under section 144A.071 18.19 or 144A.073 after July 1, 1999, the replacement-costs-new per 18.20 bed limit shall be $74,280 per licensed bed in multiple-bed 18.21 rooms, $92,850 per licensed bed in semiprivate rooms with a 18.22 fixed partition separating the resident beds, and $111,420 per 18.23 licensed bed in single rooms. Minnesota Rules, part 9549.0060, 18.24 subpart 11, item C, subitem (2), does not apply. These amounts 18.25 must be adjusted annually as specified in subdivision 3f, 18.26 paragraph (a), beginning January 1, 2000. 18.27(i)(h) For a total replacement, as defined in paragraph 18.28(g)(f), authorized under section 144A.073 for a 96-bed nursing 18.29 home in Carlton county, the replacement-costs-new per bed limit 18.30 shall be $74,280 per licensed bed in multiple-bed rooms, $92,850 18.31 per licensed bed in semiprivate rooms with a fixed partition 18.32 separating the resident's beds, and $111,420 per licensed bed in 18.33 a single room. Minnesota Rules, part 9549.0060, subpart 11, 18.34 item C, subitem (2), does not apply. The resulting maximum 18.35 allowable replacement-costs-new multiplied by 1.25 shall 18.36 constitute the project's dollar threshold for purposes of 19.1 application of the limit set forth in section 144A.071, 19.2 subdivision 2. The commissioner of health may waive the 19.3 requirements of section 144A.073, subdivision 3b, paragraph (b), 19.4 clause (2), on the condition that the other requirements of that 19.5 paragraph are met. 19.6 Sec. 9. Minnesota Statutes 1998, section 256B.431, 19.7 subdivision 18, is amended to read: 19.8 Subd. 18. [APPRAISALS;UPDATING APPRAISALS, ADDITIONS, AND 19.9 REPLACEMENTS.] (a) Notwithstanding Minnesota Rules, part 19.10 9549.0060, subparts 1 to 3, the appraised value, routine 19.11 updating of the appraised value, and special reappraisals are 19.12 subject to this subdivision. 19.13(1) For rate years beginning after June 30, 1993, the19.14commissioner shall permit a nursing facility to appeal its19.15appraisal. Any reappraisals conducted in connection with that19.16appeal must utilize the comparative-unit method as described in19.17the Marshall Valuation Service published by Marshall-Swift in19.18establishing the nursing facility's depreciated replacement cost.19.19Nursing facilities electing to appeal their appraised value19.20shall file written notice of appeal with the commissioner of19.21human services before December 30, 1992. The cost of the19.22reappraisal, if any, shall be considered an allowable cost under19.23Minnesota Rules, parts 9549.0040, subpart 9, and 9549.0061.19.24(2) The redetermination of a nursing facility's appraised19.25value under this paragraph shall have no impact on the rental19.26payment rate determined under subdivision 13 but shall only be19.27used for calculating the nursing facility's rental rate under19.28Minnesota Rules, parts 9549.0010 to 9549.0080, and this section19.29for rate years beginning after June 30, 1993.19.30(3)For all rate years after June 30, 1993, the 19.31 commissioner shall no longer conduct any appraisals under 19.32 Minnesota Rules, part 9549.0060, for the purpose of determining 19.33 property-related payment rates. 19.34 (b) Notwithstanding Minnesota Rules, part 9549.0060, 19.35 subpart 2, for rate years beginning after June 30, 1993, the 19.36 commissioner shall routinely update the appraised value of each 20.1 nursing facility by adding the cost of capital asset 20.2 acquisitions to its allowable appraised value. 20.3 The commissioner shall also annually index each nursing 20.4 facility's allowable appraised value by the inflation index 20.5 referenced in subdivision 3f, paragraph (a), for the purpose of 20.6 computing the nursing facility's annual rental rate. In 20.7 annually adjusting the nursing facility's appraised value, the 20.8 commissioner must not include the historical cost of capital 20.9 assets acquired during the reporting year in the nursing 20.10 facility's appraised value. 20.11 In addition, the nursing facility's appraised value must be 20.12 reduced by the historical cost of capital asset disposals or 20.13 applicable credits such as public grants and insurance 20.14 proceeds. Capital asset additions and disposals must be 20.15 reported on the nursing facility's annual cost report in the 20.16 reporting year of acquisition or disposal. The incremental 20.17 increase in the nursing facility's rental rate resulting from 20.18 this annual adjustment as determined under Minnesota Rules, 20.19 parts 9549.0010 to 9549.0080, and this section shall be added to 20.20 the nursing facility's property-related payment rate for the 20.21 rate year following the reporting year. 20.22 Sec. 10. Minnesota Statutes 1998, section 256B.431, 20.23 subdivision 21, is amended to read: 20.24 Subd. 21. [INDEXING THRESHOLDS.] Beginning January 1, 20.25 1993, and each January 1 thereafter, the commissioner shall 20.26 annually update the dollar thresholds in subdivisions 15, 20.27 paragraph(d)(e), 16, and 17, and in section 144A.071, 20.28 subdivisions 2 and 4a, clauses (b) and (e), by the inflation 20.29 index referenced in subdivision 3f, paragraph (a). 20.30 Sec. 11. Minnesota Statutes 1998, section 256B.431, 20.31 subdivision 22, is amended to read: 20.32 Subd. 22. [CHANGES TO NURSING FACILITY REIMBURSEMENT.] The 20.33 nursing facility reimbursement changes in paragraphs (a) 20.34 to(e)(d) apply to Minnesota Rules, parts 9549.0010 to 20.35 9549.0080, and this section, and are effective for rate years 20.36 beginning on or after July 1, 1993, unless otherwise indicated. 21.1 (a) In addition to the approved pension or profit sharing 21.2 plans allowed by the reimbursement rule, the commissioner shall 21.3 allow those plans specified in Internal Revenue Code, sections 21.4 403(b) and 408(k). 21.5 (b) The commissioner shall allow as workers' compensation 21.6 insurance costs under section 256B.421, subdivision 14, the 21.7 costs of workers' compensation coverage obtained under the 21.8 following conditions: 21.9 (1) a plan approved by the commissioner of commerce as a 21.10 Minnesota group or individual self-insurance plan as provided in 21.11 section 79A.03; 21.12 (2) a plan in which: 21.13 (i) the nursing facility, directly or indirectly, purchases 21.14 workers' compensation coverage in compliance with section 21.15 176.181, subdivision 2, from an authorized insurance carrier; 21.16 (ii) a related organization to the nursing facility 21.17 reinsures the workers' compensation coverage purchased, directly 21.18 or indirectly, by the nursing facility; and 21.19 (iii) all of the conditions in clause (4) are met; 21.20 (3) a plan in which: 21.21 (i) the nursing facility, directly or indirectly, purchases 21.22 workers' compensation coverage in compliance with section 21.23 176.181, subdivision 2, from an authorized insurance carrier; 21.24 (ii) the insurance premium is calculated retrospectively, 21.25 including a maximum premium limit, and paid using the paid loss 21.26 retro method; and 21.27 (iii) all of the conditions in clause (4) are met; 21.28 (4) additional conditions are: 21.29 (i) the costs of the plan are allowable under the federal 21.30 Medicare program; 21.31 (ii) the reserves for the plan are maintained in an account 21.32 controlled and administered by a person which is not a related 21.33 organization to the nursing facility; 21.34 (iii) the reserves for the plan cannot be used, directly or 21.35 indirectly, as collateral for debts incurred or other 21.36 obligations of the nursing facility or related organizations to 22.1 the nursing facility; 22.2 (iv) if the plan provides workers' compensation coverage 22.3 for non-Minnesota nursing facilities, the plan's cost 22.4 methodology must be consistent among all nursing facilities 22.5 covered by the plan, and if reasonable, is allowed 22.6 notwithstanding any reimbursement laws regarding cost allocation 22.7 to the contrary; 22.8 (v) central, affiliated, corporate, or nursing facility 22.9 costs related to their administration of the plan are costs 22.10 which must remain in the nursing facility's administrative cost 22.11 category and must not be allocated to other cost categories; 22.12 (vi) required security deposits, whether in the form of 22.13 cash, investments, securities, assets, letters of credit, or in 22.14 any other form are not allowable costs for purposes of 22.15 establishing the facilities payment rate; and 22.16 (vii) for the rate year beginning on July 1, 1998, a group 22.17 of nursing facilities related by common ownership that 22.18 self-insures workers' compensation may allocate its directly 22.19 identified costs of self-insuring its Minnesota nursing facility 22.20 workers among those nursing facilities in the group that are 22.21 reimbursed under this section or section 256B.434. The method 22.22 of cost allocation shall be based on the ratio of each nursing 22.23 facility's total allowable salaries and wages to that of the 22.24 nursing facility group's total allowable salaries and wages, 22.25 then similarly allocated within each nursing facility's 22.26 operating cost categories. The costs associated with the 22.27 administration of the group's self-insurance plan must remain 22.28 classified in the nursing facility's administrative cost 22.29 category. A written request of the nursing facility group's 22.30 election to use this alternate method of allocation of 22.31 self-insurance costs must be received by the commissioner no 22.32 later than May 1, 1998, to take effect July 1, 1998, or such 22.33 costs shall continue to be allocated under the existing cost 22.34 allocation methods. Once a nursing facility group elects this 22.35 method of cost allocation for its workers' compensation 22.36 self-insurance costs, it shall remain in effect until such time 23.1 as the group no longer self-insures these costs; 23.2 (5) any costs allowed pursuant to clauses (1) to (3) are 23.3 subject to the following requirements: 23.4 (i) if the nursing facility is sold or otherwise ceases 23.5 operations, the plan's reserves must be subject to an 23.6 actuarially based settle-up after 36 months from the date of 23.7 sale or the date on which operations ceased. The facility's 23.8 medical assistance portion of the total excess plan reserves 23.9 must be paid to the state within 30 days following the date on 23.10 which excess plan reserves are determined; 23.11 (ii) any distribution of excess plan reserves made to or 23.12 withdrawals made by the nursing facility or a related 23.13 organization are applicable credits and must be used to reduce 23.14 the nursing facility's workers' compensation insurance costs in 23.15 the reporting period in which a distribution or withdrawal is 23.16 received; 23.17 (iii) if reimbursement for the plan is sought under the 23.18 federal Medicare program, and is audited pursuant to the 23.19 Medicare program, the nursing facility must provide a copy of 23.20 Medicare's final audit report, including attachments and 23.21 exhibits, to the commissioner within 30 days of receipt by the 23.22 nursing facility or any related organization. The commissioner 23.23 shall implement the audit findings associated with the plan upon 23.24 receipt of Medicare's final audit report. The department's 23.25 authority to implement the audit findings is independent of its 23.26 authority to conduct a field audit. 23.27 (c) In the determination of incremental increases in the 23.28 nursing facility's rental rate as required in subdivisions 14 to 23.29 21, except for a refinancing permitted under subdivision 19, the 23.30 commissioner must adjust the nursing facility's property-related 23.31 payment rate for both incremental increases and decreases in 23.32 recomputations of its rental rate; 23.33 (d) A nursing facility's administrative cost limitation 23.34 must be modified as follows: 23.35 (1) if the nursing facility's licensed beds exceed 195 23.36 licensed beds, the general and administrative cost category 24.1 limitation shall be 13 percent; 24.2 (2) if the nursing facility's licensed beds are more than 24.3 150 licensed beds, but less than 196 licensed beds, the general 24.4 and administrative cost category limitation shall be 14 percent; 24.5 or 24.6 (3) if the nursing facility's licensed beds is less than 24.7 151 licensed beds, the general and administrative cost category 24.8 limitation shall remain at 15 percent. 24.9 (e)The care related operating rate shall be increased by24.10eight cents to reimburse facilities for unfunded federal24.11mandates, including costs related to hepatitis B vaccinations.24.12(f)For the rate year beginning on July 1, 1998, a group of 24.13 nursing facilities related by common ownership that self-insures 24.14 group health, dental, or life insurance may allocate its 24.15 directly identified costs of self-insuring its Minnesota nursing 24.16 facility workers among those nursing facilities in the group 24.17 that are reimbursed under this section or section 256B.434. The 24.18 method of cost allocation shall be based on the ratio of each 24.19 nursing facility's total allowable salaries and wages to that of 24.20 the nursing facility group's total allowable salaries and wages, 24.21 then similarly allocated within each nursing facility's 24.22 operating cost categories. The costs associated with the 24.23 administration of the group's self-insurance plan must remain 24.24 classified in the nursing facility's administrative cost 24.25 category. A written request of the nursing facility group's 24.26 election to use this alternate method of allocation of 24.27 self-insurance costs must be received by the commissioner no 24.28 later than May 1, 1998, to take effect July 1, 1998, or those 24.29 self-insurance costs shall continue to be allocated under the 24.30 existing cost allocation methods. Once a nursing facility group 24.31 elects this method of cost allocation for its group health, 24.32 dental, or life insurance self-insurance costs, it shall remain 24.33 in effect until such time as the group no longer self-insures 24.34 these costs. 24.35 Sec. 12. Minnesota Statutes 1998, section 256B.431, 24.36 subdivision 25, is amended to read: 25.1 Subd. 25. [CHANGES TO NURSING FACILITY REIMBURSEMENT 25.2 BEGINNING JULY 1, 1995.]The nursing facility reimbursement25.3changes in paragraphs (a) to (g) shall apply in the sequence25.4specified to Minnesota Rules, parts 9549.0010 to 9549.0080, and25.5this section, beginning July 1, 1995.25.6(a) The eight-cent adjustment to care-related rates in25.7subdivision 22, paragraph (e), shall no longer apply.25.8(b) For rate years beginning on or after July 1, 1995, the25.9commissioner shall limit a nursing facility's allowable25.10operating per diem for each case mix category for each rate year25.11as in clauses (1) to (3).25.12(1) For the rate year beginning July 1, 1995, the25.13commissioner shall group nursing facilities into two groups,25.14freestanding and nonfreestanding, within each geographic group,25.15using their operating cost per diem for the case mix A25.16classification. A nonfreestanding nursing facility is a nursing25.17facility whose other operating cost per diem is subject to the25.18hospital attached, short length of stay, or the rule 80 limits.25.19All other nursing facilities shall be considered freestanding25.20nursing facilities. The commissioner shall then array all25.21nursing facilities in each grouping by their allowable case mix25.22A operating cost per diem. In calculating a nursing facility's25.23operating cost per diem for this purpose, the commissioner shall25.24exclude the raw food cost per diem related to providing special25.25diets that are based on religious beliefs, as determined in25.26subdivision 2b, paragraph (h). For those nursing facilities in25.27each grouping whose case mix A operating cost per diem:25.28(i) is at or below the median minus 1.0 standard deviation25.29of the array, the commissioner shall limit the nursing25.30facility's allowable operating cost per diem for each case mix25.31category to the lesser of the prior reporting year's allowable25.32operating cost per diems plus the inflation factor as25.33established in paragraph (f), clause (2), increased by six25.34percentage points, or the current reporting year's corresponding25.35allowable operating cost per diem;25.36(ii) is between minus .5 standard deviation and minus 1.026.1standard deviation below the median of the array, the26.2commissioner shall limit the nursing facility's allowable26.3operating cost per diem for each case mix category to the lesser26.4of the prior reporting year's allowable operating cost per diems26.5plus the inflation factor as established in paragraph (f),26.6clause (2), increased by four percentage points, or the current26.7reporting year's corresponding allowable operating cost per26.8diem; or26.9(iii) is equal to or above minus .5 standard deviation26.10below the median of the array, the commissioner shall limit the26.11nursing facility's allowable operating cost per diem for each26.12case mix category to the lesser of the prior reporting year's26.13allowable operating cost per diems plus the inflation factor as26.14established in paragraph (f), clause (2), increased by three26.15percentage points, or the current reporting year's corresponding26.16allowable operating cost per diem.26.17(2) For the rate year beginning on July 1, 1996, the26.18commissioner shall limit the nursing facility's allowable26.19operating cost per diem for each case mix category to the lesser26.20of the prior reporting year's allowable operating cost per diems26.21plus the inflation factor as established in paragraph (f),26.22clause (2), increased by one percentage point or the current26.23reporting year's corresponding allowable operating cost per26.24diems; and26.25(3) For rate years beginning on or after July 1, 1997, the26.26commissioner shall limit the nursing facility's allowable26.27operating cost per diem for each case mix category to the lesser26.28of the reporting year prior to the current reporting year's26.29allowable operating cost per diems plus the inflation factor as26.30established in paragraph (f), clause (2), or the current26.31reporting year's corresponding allowable operating cost per26.32diems.26.33(c) For rate years beginning on July 1, 1995, the26.34commissioner shall limit the allowable operating cost per diems26.35for high cost nursing facilities. After application of the26.36limits in paragraph (b) to each nursing facility's operating27.1cost per diems, the commissioner shall group nursing facilities27.2into two groups, freestanding or nonfreestanding, within each27.3geographic group. A nonfreestanding nursing facility is a27.4nursing facility whose other operating cost per diems are27.5subject to hospital attached, short length of stay, or rule 8027.6limits. All other nursing facilities shall be considered27.7freestanding nursing facilities. The commissioner shall then27.8array all nursing facilities within each grouping by their27.9allowable case mix A operating cost per diems. In calculating a27.10nursing facility's operating cost per diem for this purpose, the27.11commissioner shall exclude the raw food cost per diem related to27.12providing special diets that are based on religious beliefs, as27.13determined in subdivision 2b, paragraph (h). For those nursing27.14facilities in each grouping whose case mix A operating cost per27.15diem exceeds 1.0 standard deviation above the median, the27.16commissioner shall reduce their allowable operating cost per27.17diems by two percent. For those nursing facilities in each27.18grouping whose case mix A operating cost per diem exceeds 0.527.19standard deviation above the median but is less than or equal to27.201.0 standard deviation above the median, the commissioner shall27.21reduce their allowable operating cost per diems by one percent.27.22(d) For rate years beginning on or after July 1, 1996, the27.23commissioner shall limit the allowable operating cost per diems27.24for high cost nursing facilities. After application of the27.25limits in paragraph (b) to each nursing facility's operating27.26cost per diems, the commissioner shall group nursing facilities27.27into two groups, freestanding or nonfreestanding, within each27.28geographic group. A nonfreestanding nursing facility is a27.29nursing facility whose other operating cost per diems are27.30subject to hospital attached, short length of stay, or rule 8027.31limits. All other nursing facilities shall be considered27.32freestanding nursing facilities. The commissioner shall then27.33array all nursing facilities within each grouping by their27.34allowable case mix A operating cost per diems. In calculating a27.35nursing facility's operating cost per diem for this purpose, the27.36commissioner shall exclude the raw food cost per diem related to28.1providing special diets that are based on religious beliefs, as28.2determined in subdivision 2b, paragraph (h). In those nursing28.3facilities in each grouping whose case mix A operating cost per28.4diem exceeds 1.0 standard deviation above the median, the28.5commissioner shall reduce their allowable operating cost per28.6diems by three percent. For those nursing facilities in each28.7grouping whose case mix A operating cost per diem exceeds 0.528.8standard deviation above the median but is less than or equal to28.91.0 standard deviation above the median, the commissioner shall28.10reduce their allowable operating cost per diems by two percent.28.11(e) For rate years beginning on or after July 1, 1995, the28.12commissioner shall determine a nursing facility's efficiency28.13incentive by first computing the allowable difference, which is28.14the lesser of $4.50 or the amount by which the facility's other28.15operating cost limit exceeds its nonadjusted other operating28.16cost per diem for that rate year. The commissioner shall28.17compute the efficiency incentive by:28.18(1) subtracting the allowable difference from $4.50 and28.19dividing the result by $4.50;28.20(2) multiplying 0.20 by the ratio resulting from clause28.21(1), and then;28.22(3) adding 0.50 to the result from clause (2); and28.23(4) multiplying the result from clause (3) times the28.24allowable difference.28.25The nursing facility's efficiency incentive payment shall28.26be the lesser of $2.25 or the product obtained in clause (4).28.27(f) For rate years beginning on or after July 1, 1995, the28.28forecasted price index for a nursing facility's allowable28.29operating cost per diems shall be determined under clauses (1)28.30to (3) using the change in the Consumer Price Index-All Items28.31(United States city average) (CPI-U) or the change in the28.32Nursing Home Market Basket, both as forecasted by Data Resources28.33Inc., whichever is applicable. The commissioner shall use the28.34indices as forecasted in the fourth quarter of the calendar year28.35preceding the rate year, subject to subdivision 2l, paragraph28.36(c). If, as a result of federal legislative or administrative29.1action, the methodology used to calculate the Consumer Price29.2Index-All Items (United States city average) (CPI-U) changes,29.3the commissioner shall develop a conversion factor or other29.4methodology to convert the CPI-U index factor that results from29.5the new methodology to an index factor that approximates, as29.6closely as possible, the index factor that would have resulted29.7from application of the original CPI-U methodology prior to any29.8changes in methodology. The commissioner shall use the29.9conversion factor or other methodology to calculate an adjusted29.10inflation index. The adjusted inflation index must be used to29.11calculate payment rates under this section instead of the CPI-U29.12index specified in paragraph (d). If the commissioner is29.13required to develop an adjusted inflation index, the29.14commissioner shall report to the legislature as part of the next29.15budget submission the fiscal impact of applying this index.29.16(1) The CPI-U forecasted index for allowable operating cost29.17per diems shall be based on the 21-month period from the29.18midpoint of the nursing facility's reporting year to the29.19midpoint of the rate year following the reporting year.29.20(2) The Nursing Home Market Basket forecasted index for29.21allowable operating costs and per diem limits shall be based on29.22the 12-month period between the midpoints of the two reporting29.23years preceding the rate year.29.24(3) For rate years beginning on or after July 1, 1996, the29.25forecasted index for operating cost limits referred to in29.26subdivision 21, paragraph (b), shall be based on the CPI-U for29.27the 12-month period between the midpoints of the two reporting29.28years preceding the rate year.29.29(g) After applying these provisions for the respective rate29.30years, the commissioner shall index these allowable operating29.31costs per diems by the inflation factor provided for in29.32paragraph (f), clause (1), and add the nursing facility's29.33efficiency incentive as computed in paragraph (e).29.34(h)(1)A nursing facility licensed for 302 beds on 29.35 September 30, 1993, that was approved under the moratorium 29.36 exception process in section 144A.073 for a partial replacement, 30.1 and completed the replacement project in December 1994, is 30.2 exempt from Minnesota Statutes 1998, section 256B.431, 30.3 subdivision 25, paragraphs (b) to (d) for rate years beginning 30.4 on or after July 1, 1995. 30.5(2)For the rate year beginning July 1, 1997, after 30.6 computing this nursing facility's payment rate according to 30.7 section 256B.434, the commissioner shall make a one-year rate 30.8 adjustment of $8.62 to the facility's contract payment rate for 30.9 the rate effect of operating cost changes associated with the 30.10 facility's 1994 downsizing project. 30.11(3)For rate years beginning on or after July 1, 1997, the 30.12 commissioner shall add 35 cents to the facility's base property 30.13 related payment rate for the rate effect of reducing its 30.14 licensed capacity to 290 beds from 302 beds and shall add 83 30.15 cents to the facility's real estate tax and special assessment 30.16 payment rate for payments in lieu of real estate taxes. The 30.17 adjustments in this clause shall remain in effect for the 30.18 duration of the facility's contract under section 256B.434. 30.19(i) Notwithstanding Laws 1996, chapter 451, article 3,30.20section 11, paragraph (h), for the rate years beginning on July30.211, 1996, July 1, 1997, and July 1, 1998, a nursing facility30.22licensed for 40 beds effective May 1, 1992, with a subsequent30.23increase of 20 Medicare/Medicaid certified beds, effective30.24January 26, 1993, in accordance with an increase in licensure is30.25exempt from paragraphs (b) to (d).30.26 Sec. 13. Minnesota Statutes 1999 Supplement, section 30.27 256B.431, subdivision 26, is amended to read: 30.28 Subd. 26. [CHANGES TO NURSING FACILITY REIMBURSEMENT 30.29 BEGINNING JULY 1, 1997.] The nursing facility reimbursement 30.30 changes in paragraphs (a) to(f)(e) shall apply in the sequence 30.31 specified in Minnesota Rules, parts 9549.0010 to 9549.0080, and 30.32 this section, beginning July 1, 1997. 30.33 (a) For rate years beginning on or after July 1, 1997, the 30.34 commissioner shall limit a nursing facility's allowable 30.35 operating per diem for each case mix category for each rate year. 30.36 The commissioner shall group nursing facilities into two groups, 31.1 freestanding and nonfreestanding, within each geographic group, 31.2 using their operating cost per diem for the case mix A 31.3 classification. A nonfreestanding nursing facility is a nursing 31.4 facility whose other operating cost per diem is subject to the 31.5 hospital attached, short length of stay, or the rule 80 limits. 31.6 All other nursing facilities shall be considered freestanding 31.7 nursing facilities. The commissioner shall then array all 31.8 nursing facilities in each grouping by their allowable case mix 31.9 A operating cost per diem. In calculating a nursing facility's 31.10 operating cost per diem for this purpose, the commissioner shall 31.11 exclude the raw food cost per diem related to providing special 31.12 diets that are based on religious beliefs, as determined in 31.13 subdivision 2b, paragraph (h). For those nursing facilities in 31.14 each grouping whose case mix A operating cost per diem: 31.15 (1) is at or below the median of the array, the 31.16 commissioner shall limit the nursing facility's allowable 31.17 operating cost per diem for each case mix category to the lesser 31.18 of the prior reporting year's allowable operating cost per diem 31.19 as specified in Laws 1996, chapter 451, article 3, section 11, 31.20 paragraph (h), plus the inflation factor as established in 31.21 paragraph (d), clause (2), increased by two percentage points, 31.22 or the current reporting year's corresponding allowable 31.23 operating cost per diem; or 31.24 (2) is above the median of the array, the commissioner 31.25 shall limit the nursing facility's allowable operating cost per 31.26 diem for each case mix category to the lesser of the prior 31.27 reporting year's allowable operating cost per diem as specified 31.28 in Laws 1996, chapter 451, article 3, section 11, paragraph (h), 31.29 plus the inflation factor as established in paragraph (d), 31.30 clause (2), increased by one percentage point, or the current 31.31 reporting year's corresponding allowable operating cost per diem. 31.32 For purposes of paragraph (a), if a nursing facility 31.33 reports on its cost report a reduction in cost due to a refund 31.34 or credit for a rate year beginning on or after July 1, 1998, 31.35 the commissioner shall increase that facility's spend-up limit 31.36 for the rate year following the current rate year by the amount 32.1 of the cost reduction divided by its resident days for the 32.2 reporting year preceding the rate year in which the adjustment 32.3 is to be made. 32.4 (b) For rate years beginning on or after July 1, 1997, the 32.5 commissioner shall limit the allowable operating cost per diem 32.6 for high cost nursing facilities. After application of the 32.7 limits in paragraph (a) to each nursing facility's operating 32.8 cost per diem, the commissioner shall group nursing facilities 32.9 into two groups, freestanding or nonfreestanding, within each 32.10 geographic group. A nonfreestanding nursing facility is a 32.11 nursing facility whose other operating cost per diem are subject 32.12 to hospital attached, short length of stay, or rule 80 limits. 32.13 All other nursing facilities shall be considered freestanding 32.14 nursing facilities. The commissioner shall then array all 32.15 nursing facilities within each grouping by their allowable case 32.16 mix A operating cost per diem. In calculating a nursing 32.17 facility's operating cost per diem for this purpose, the 32.18 commissioner shall exclude the raw food cost per diem related to 32.19 providing special diets that are based on religious beliefs, as 32.20 determined in subdivision 2b, paragraph (h). For those nursing 32.21 facilities in each grouping whose case mix A operating cost per 32.22 diem exceeds 1.0 standard deviation above the median, the 32.23 commissioner shall reduce their allowable operating cost per 32.24 diem by three percent. For those nursing facilities in each 32.25 grouping whose case mix A operating cost per diem exceeds 0.5 32.26 standard deviation above the median but is less than or equal to 32.27 1.0 standard deviation above the median, the commissioner shall 32.28 reduce their allowable operating cost per diem by two percent. 32.29 However, in no case shall a nursing facility's operating cost 32.30 per diem be reduced below its grouping's limit established at 32.31 0.5 standard deviations above the median. 32.32 (c) For rate years beginning on or after July 1, 1997, the 32.33 commissioner shall determine a nursing facility's efficiency 32.34 incentive by first computing the allowable difference, which is 32.35 the lesser of $4.50 or the amount by which the facility's other 32.36 operating cost limit exceeds its nonadjusted other operating 33.1 cost per diem for that rate year. The commissioner shall 33.2 compute the efficiency incentive by: 33.3 (1) subtracting the allowable difference from $4.50 and 33.4 dividing the result by $4.50; 33.5 (2) multiplying 0.20 by the ratio resulting from clause 33.6 (1), and then; 33.7 (3) adding 0.50 to the result from clause (2); and 33.8 (4) multiplying the result from clause (3) times the 33.9 allowable difference. 33.10 The nursing facility's efficiency incentive payment shall 33.11 be the lesser of $2.25 or the product obtained in clause (4). 33.12 (d) For rate years beginning on or after July 1, 1997, the 33.13 forecasted price index for a nursing facility's allowable 33.14 operating cost per diem shall be determined under clauses (1) 33.15 and (2) using the change in the Consumer Price Index-All Items 33.16 (United States city average) (CPI-U) as forecasted by Data 33.17 Resources, Inc. The commissioner shall use the indices as 33.18 forecasted in the fourth quarter of the calendar year preceding 33.19 the rate year, subject to subdivision 2l, paragraph (c). 33.20 (1) The CPI-U forecasted index for allowable operating cost 33.21 per diem shall be based on the 21-month period from the midpoint 33.22 of the nursing facility's reporting year to the midpoint of the 33.23 rate year following the reporting year. 33.24 (2) For rate years beginning on or after July 1, 1997, the 33.25 forecasted index for operating cost limits referred to in 33.26 subdivision 21, paragraph (b), shall be based on the CPI-U for 33.27 the 12-month period between the midpoints of the two reporting 33.28 years preceding the rate year. 33.29 (e) After applying these provisions for the respective rate 33.30 years, the commissioner shall index these allowable operating 33.31 cost per diem by the inflation factor provided for in paragraph 33.32 (d), clause (1), and add the nursing facility's efficiency 33.33 incentive as computed in paragraph (c). 33.34(f) For rate years beginning on or after July 1, 1997, the33.35total operating cost payment rates for a nursing facility shall33.36be the greater of the total operating cost payment rates34.1determined under this section or the total operating cost34.2payment rates in effect on June 30, 1997, subject to rate34.3adjustments due to field audit or rate appeal resolution. This34.4provision shall not apply to subsequent field audit adjustments34.5of the nursing facility's operating cost rates for rate years34.6beginning on or after July 1, 1997.34.7(g)(f) For the rate years beginning on July 1, 1997, July 34.8 1, 1998, and July 1, 1999, a nursing facility licensed for 40 34.9 beds effective May 1, 1992, with a subsequent increase of 20 34.10 Medicare/Medicaid certified beds, effective January 26, 1993, in 34.11 accordance with an increase in licensure is exempt from 34.12 paragraphs (a) and (b). 34.13(h)(g) For a nursing facility whose construction project 34.14 was authorized according to section 144A.073, subdivision 5, 34.15 paragraph (g), the operating cost payment rates for the new 34.16 location shall be determined based on Minnesota Rules, part 34.17 9549.0057. The relocation allowed under section 144A.073, 34.18 subdivision 5, paragraph (g), and the rate determination allowed 34.19 under this paragraph must meet the cost neutrality requirements 34.20 of section 144A.073, subdivision 3c. Paragraphs (a) and (b) 34.21 shall not apply until the second rate year after the settle-up 34.22 cost report is filed. Notwithstanding subdivision 2b, paragraph 34.23 (g), real estate taxes and special assessments payable by the 34.24 new location, a 501(c)(3) nonprofit corporation, shall be 34.25 included in the payment rates determined under this subdivision 34.26 for all subsequent rate years. 34.27(i)(h) For the rate year beginning July 1, 1997, the 34.28 commissioner shall compute the payment rate for a nursing 34.29 facility licensed for 94 beds on September 30, 1996, that 34.30 applied in October 1993 for approval of a total replacement 34.31 under the moratorium exception process in section 144A.073, and 34.32 completed the approved replacement in June 1995, with other 34.33 operating cost spend-up limit under paragraph (a), increased by 34.34 $3.98, and after computing the facility's payment rate according 34.35 to this section, the commissioner shall make a one-year positive 34.36 rate adjustment of $3.19 for operating costs related to the 35.1 newly constructed total replacement, without application of 35.2 paragraphs (a) and (b). The facility's per diem, before the 35.3 $3.19 adjustment, shall be used as the prior reporting year's 35.4 allowable operating cost per diem for payment rate calculation 35.5 for the rate year beginning July 1, 1998. A facility described 35.6 in this paragraph is exempt from paragraph (b) for the rate 35.7 years beginning July 1, 1997, and July 1, 1998. 35.8(j)(i) For the purpose of applying the limit stated in 35.9 paragraph (a), a nursing facility in Kandiyohi county licensed 35.10 for 86 beds that was granted hospital-attached status on 35.11 December 1, 1994, shall have the prior year's allowable 35.12 care-related per diem increased by $3.207 and the prior year's 35.13 other operating cost per diem increased by $4.777 before adding 35.14 the inflation in paragraph (d), clause (2), for the rate year 35.15 beginning on July 1, 1997. 35.16(k)(j) For the purpose of applying the limit stated in 35.17 paragraph (a), a 117 bed nursing facility located in Pine county 35.18 shall have the prior year's allowable other operating cost per 35.19 diem increased by $1.50 before adding the inflation in paragraph 35.20 (d), clause (2), for the rate year beginning on July 1, 1997. 35.21(l)(k) For the purpose of applying the limit under 35.22 paragraph (a), a nursing facility in Hibbing licensed for 192 35.23 beds shall have the prior year's allowable other operating cost 35.24 per diem increased by $2.67 before adding the inflation in 35.25 paragraph (d), clause (2), for the rate year beginning July 1, 35.26 1997. 35.27 Sec. 14. Minnesota Statutes 1999 Supplement, section 35.28 256B.434, subdivision 3, is amended to read: 35.29 Subd. 3. [DURATION AND TERMINATION OF CONTRACTS.] (a) 35.30 Subject to available resources, the commissioner may begin to 35.31 execute contracts with nursing facilities November 1, 1995. 35.32 (b) All contracts entered into under this section are for a 35.33 term of one year. Either party may terminate a contract at any 35.34 time without cause by providing 90 calendar days advance written 35.35 notice to the other party. The decision to terminate a contract 35.36 is not appealable. Notwithstanding section 16C.05, subdivision 36.1 2, paragraph (a), clause (5), the contract shall be renegotiated 36.2 for additional one-year terms, unless either party provides 36.3 written notice of termination. The provisions of the contract 36.4 shall be renegotiated annually by the parties prior to the 36.5 expiration date of the contract. The parties may voluntarily 36.6 renegotiate the terms of the contract at any time by mutual 36.7 agreement. 36.8 (c) If a nursing facility fails to comply with the terms of 36.9 a contract, the commissioner shall provide reasonable notice 36.10 regarding the breach of contract and a reasonable opportunity 36.11 for the facility to come into compliance. If the facility fails 36.12 to come into compliance or to remain in compliance, the 36.13 commissioner may terminate the contract. If a contract is 36.14 terminated, the contract payment remains in effect for the 36.15 remainder of the rate year in which the contract was terminated, 36.16 but in all other respects the provisions of this section do not 36.17 apply to that facility effective the date the contract is 36.18 terminated. The contract shall contain a provision governing 36.19 the transition back to the cost-based reimbursement system 36.20 established under section 256B.431, subdivision 25,and 36.21 Minnesota Rules, parts 9549.0010 to 9549.0080. A contract 36.22 entered into under this section may be amended by mutual 36.23 agreement of the parties. 36.24 Sec. 15. Minnesota Statutes 1999 Supplement, section 36.25 256B.434, subdivision 4, is amended to read: 36.26 Subd. 4. [ALTERNATE RATES FOR NURSING FACILITIES.] (a) For 36.27 nursing facilities which have their payment rates determined 36.28 under this section rather than section 256B.431,subdivision 25,36.29 the commissioner shall establish a rate under this subdivision. 36.30 The nursing facility must enter into a written contract with the 36.31 commissioner. 36.32 (b) A nursing facility's case mix payment rate for the 36.33 first rate year of a facility's contract under this section is 36.34 the payment rate the facility would have received under section 36.35 256B.431, subdivision 25. 36.36 (c) A nursing facility's case mix payment rates for the 37.1 second and subsequent years of a facility's contract under this 37.2 section are the previous rate year's contract payment rates plus 37.3 an inflation adjustment. The index for the inflation adjustment 37.4 must be based on the change in the Consumer Price Index-All 37.5 Items (United States City average) (CPI-U) forecasted by Data 37.6 Resources, Inc., as forecasted in the fourth quarter of the 37.7 calendar year preceding the rate year. The inflation adjustment 37.8 must be based on the 12-month period from the midpoint of the 37.9 previous rate year to the midpoint of the rate year for which 37.10 the rate is being determined. For the rate years beginning on 37.11 July 1, 1999, and July 1, 2000, this paragraph shall apply only 37.12 to the property-related payment rate. In determining the amount 37.13 of the property-related payment rate adjustment under this 37.14 paragraph, the commissioner shall determine the proportion of 37.15 the facility's rates that are property-related based on the 37.16 facility's most recent cost report. 37.17 (d) The commissioner shall develop additional 37.18 incentive-based payments of up to five percent above the 37.19 standard contract rate for achieving outcomes specified in each 37.20 contract. The specified facility-specific outcomes must be 37.21 measurable and approved by the commissioner. The commissioner 37.22 may establish, for each contract, various levels of achievement 37.23 within an outcome. After the outcomes have been specified the 37.24 commissioner shall assign various levels of payment associated 37.25 with achieving the outcome. Any incentive-based payment cancels 37.26 if there is a termination of the contract. In establishing the 37.27 specified outcomes and related criteria the commissioner shall 37.28 consider the following state policy objectives: 37.29 (1) improved cost effectiveness and quality of life as 37.30 measured by improved clinical outcomes; 37.31 (2) successful diversion or discharge to community 37.32 alternatives; 37.33 (3) decreased acute care costs; 37.34 (4) improved consumer satisfaction; 37.35 (5) the achievement of quality; or 37.36 (6) any additional outcomes proposed by a nursing facility 38.1 that the commissioner finds desirable. 38.2 Sec. 16. [REPEALER.] 38.3 Minnesota Statutes 1998, sections 256B.03, subdivision 2; 38.4 256B.431, subdivisions 2, 2a, 2f, 2h, 2m, 2p, 2q, 3, 3b, 3d, 3h, 38.5 3j, 4, 5, 7, 8, 9, 9a, 12, and 24; 256B.48, subdivision 9; 38.6 256B.50, subdivision 3; and 256B.74, subdivision 3, are repealed 38.7 effective July 1, 2000. 38.8 Sec. 17. [REVISOR INSTRUCTIONS.] 38.9 In the next and subsequent editions of Minnesota Statutes 38.10 and Minnesota Rules, the revisor of statutes shall make any 38.11 necessary statutory cross-reference changes required as a result 38.12 of the provisions in this bill. 38.13 Sec. 18. [EFFECTIVE DATE.] 38.14 Sections 1 to 16 are effective July 1, 2000.